• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Every Dog Has Its Day and So Will Value Stocks, but Just Not Yet

Growth indices soundly trounced value indices in 2019 and it's starting the same way this year, but that trend can't last forever.
By JONATHAN HELLER
Jan 22, 2020 | 11:00 AM EST
Stocks quotes in this article: AMZN, GOOGL, FB, TSLA, NFLX

It has been a bit rough at times being a value investor, or at least that's what the return numbers will tell you. Last year, growth trounced value in a big way. The large-cap Russell 1000 Growth Index (up 33.49%) beat the Russell 1000 Value Index (up 19.78%) by a huge 1,371 basis points. Interestingly, the further down the market cap spectrum you go, the narrower the spread was between growth and value. 

The small-cap-oriented Russell 2000 Growth Index (up 19.77%) beat the Russell 2000 Value Index (up 10.83) by 894 basis points, which is still a huge spread but considerably narrower than that of large-cap growth and value indices. In microcap land, the Russell Microcap Growth Index (up 14.89%) outdistanced Russell Microcap Value (up 9.62%) by 527 basis points. 

Now consider the shellacking the Russell 1000 Growth Index gave the Russell Microcap Value Index -- an astounding 2,387 basis points, or a difference of nearly 24 percentage points -- and it makes this value investor believe that type of performance difference can't continue.

Yet, three weeks into 2020, large growth continues to dominate. Through Tuesday the Russell 1000 Growth Index was up 4.8% while the Russell 1000 Value Index is up just 1%. Likewise, the Russell 2000 Growth Index (up 2.81%) is well ahead of Russell 2000 Value Index (down 0.71%), while the Russell Micro Growth Index (up 2.66%) is outpacing the Russell Micro Value Index (down 0.92%).

Considering that large growth and small growth (again, measured by the Russell 1000 and Russell 2000) have also beaten value in the two- through 10-year periods (annualized), it could lead you to believe that value might just be dead. That would not be the first time that argument has been made, and it's likely not the last.

I am not there yet. Growth has rallied for much of the past 10 years in what primarily has been a huge bull market as investors have rewarded the large, shiny objects, including all the usual suspects -- Amazon.com Inc. (AMZN) , Alphabet Inc. (GOOGL) , Facebook Inc. (FB) , Tesla Inc. (TSLA) and Netflix Inc (NFLX) among them -- while ignoring more value oriented names.

Don't get me wrong, I am not likening the current environment to the technology boom of the 2000 era; there are major differences. Many of the above-mentioned names are raking in huge revenue and, in some cases, profits. In addition, many of them have changed our lives and habits (for better or worse). That was not true during the tech boom, where the rally was not as concentrated and speculation in any name that contained ".com" led investors down a dangerous path of buying anything and everything despite lack of revenue, let alone a positive bottom line.

Still, valuations matter, and value's day is coming; ditto small value, which has historically outperformed large-caps but has been taking a backseat in recent years. At some point there's a mean reversion coming -- I'm just not sure when. As a footnote, unlike small and large caps, microcap value has outperformed microcap growth (annualized) in the four- through 10-year periods.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Heller had no positions in the stocks mentioned.

TAGS: Indexes | Investing | Micro cap stocks | Small Cap | Stocks | Real Money

More from Stocks

Canopy Growth Has Corrected but Needs More Accumulation

Bruce Kamich
Mar 3, 2021 9:46 AM EST

Let's review the charts and indicators.

XL Fleet's Charts Show Potential for a Future Purchase

Bruce Kamich
Mar 3, 2021 8:49 AM EST

A new base pattern needs to develop before taking a long position.

Hopping on a Couple Compelling Opportunities in a Market That Isn't

Bret Jensen
Mar 3, 2021 8:30 AM EST

Dips in the shares of Redhill Biopharma and FibroGen Inc. provided the chance for the author to employ his covered call strategy.

The Foundation for the Next Major Market Cycle Is Developing Now

James "Rev Shark" DePorre
Mar 3, 2021 7:55 AM EST

This corrective phase may go deeper, but we see some good support.

China's Rubber-Stamp Congress Set to Kick Off

Alex Frew McMillan
Mar 3, 2021 7:45 AM EST

Cracking down on Hong Kong and outlining plans for future growth are two key items on the agenda in Beijing.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:50 AM EST PAUL PRICE

    Michael's - Close to a deal?

    It appears that a deal could be announced soon. ...
  • 08:34 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 3/3/2021

    SPX (Long-Term View) The 20 DMA @ 3889 with the ...
  • 06:05 PM EST PAUL PRICE

    Michael's (MIK) Up on Takeover Rumors

    The NYT says talks are underway regarding a buyout...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login