Value Sneaks Past Growth

Even a vast shift can be hard to see. A sea change or metamorphosis starts slowly and then takes hold. By the time the change takes place, you can almost have missed it. Such a stealth transition is taking hold in investing styles, where value is finally beating growth over the past few years basis—after a long dry spell of underperformance. As a value investor, I welcome this change, but I’ll admit that it’s still hard to discern.

On a three-year basis, large-cap value has returned 12.66% versus 7.17% for large-cap growth. This would surprise most market watchers, given that growth outperformed in both 2021 and, to date, this year. But 2022 made the difference: growth got clobbered. It’s tempting to say that, since value has outperformed only one of the past three calendar years, growth is still in the lead. But, statistically, three-year periods are the minimum time range that should be used for performance comparisons. After all, a calendar year is just an artifact—and a relatively small one at that. Three-year periods offer a more accurate window into investor psychology. And the three-year differential here cannot be denied.