When it’s value vs. growth, history is on value’s side
Logic and history support a commitment to value stocks so investors can be positioned to take part when those shares outperform in the future.
Historically, value stocks have outperformed growth stocks in
Australia, and the outperformance in a given year has often
been striking.
- Data covering nearly half a century backs up the notion that
value stocks—those with lower relative prices—have higher
expected returns. - Value premiums have often shown up quickly and in large
magnitudes. For example, while the average annual value
premium since 1977 has been 5.8%, in years when value
outperformed growth, the average premium was over 17%. - There is no evidence investors can reliably predict when
value premiums will show up. Rather, a consistent focus on
value stocks is essential to capturing these outsize value
premiums when they do appear.
