Value & Growth: Going Deeper
As part of the 2016 Investment Outlook Seminar, advisors Marc Amateis and Brian Kilb dug into value-oriented and growth-oriented stock investing.
As Marc explained, by the classic definition, value stocks tend to have lower price-earnings ratios and pay higher dividends than the overall market.
“Typically, value stocks pay higher dividends than the overall stock market, and they do so with less volatility,” Marc said. “With us, it’s all about getting a deal on what we buy, but understand it’s not always that simple.
“Investors have moved into the value stocks for their dividends and for their low volatility. As a result, in some of the areas, specifically utilities and telecommunication stocks, they’ve driven the prices up and the price-earning ratios up to a point where it really begs the question, are those even value stocks anymore?”
On the other hand, growth-oriented investing traditionally suggests higher price-earnings ratios, Brian said, with a tendency to plow earnings back into the company’s longer-term development rather than dividends.
As both Brian and Marc explained, the differences between growth and value have become more complicated and may shift over time.
“I think as we look forward it’s not going to be about one asset class necessarily over another, Brian said. “You aren’t going to outperform necessarily by leaning a little bit into value or leaning into growth, but I think you’re going to have to go a little bit deeper into sectors and into industries and perhaps even the good versus the bad companies within those industries.”
Stock mutual funds with prudent active management can help, Marc said.
To view Marc’s and Brian’s presentations in a Money Talk Video, please click the video player above.
“When you’re setting up a portfolio – and you want a balanced portfolio, you’ve got to keep watch and make sure that you don’t own something that you think is still growth and has become value or vice versa,” Marc said. “It’s all about asset allocation and balanced portfolios.”
To view the main presentation by Bob Landaas at the 2016 Investment Outlook Seminar, please click here. To learn more about business cycles, go to our glossary: Talking Money: Business Cycle, by Peter May.
Brian Kilb is executive vice president and chief operating officer of Landaas & Company.
Marc Amateis is vice president and investment advisor at Landaas & Company.
(initially posted Oct. 21, 2016)