The resurgence in value that we've seen over the past year continues to move forward, at least within smaller names. Within large-caps, however, growth and value continue to fight it out, and growth again has taken the lead.
The Russell 1000 Growth Index (up 42.98%) is now ahead of Russell 1000 Value (up 37%) over the past year, courtesy of their performance over the last three months. During that time the Russell 1000 Growth (up 10.5%) trounced the Russell 1000 Value (up 2.78%) by 772 basis points. Year to date, the Russell 1000 Growth (up 18.23%) is now ahead of its value sibling (up 17.28%) by 95 basis points.
Within small-caps, however, it is a much different story. Over the past year, the Russell 2000 Value Index (up 59.82%) is well ahead of the Russell 2000 Growth Index (up 40.35%). The year-to-date performance may be even more interesting, with the Russell 2000 Value (up 20.51%) outperforming the Russell 2000 Growth (up 4.82%). What is curious in this case is the Russell 2000 Growth's muted performance. Somewhere along the line, markets decided that small growth stocks were too expensive and gave that part of the market a massive haircut.
In microcap land -- the most interesting area to this value investor -- value is winning by a wide margin over the past year, with the Russell Microcap Value Index (up 72.42%) outperforming the Russell Microcap Growth (up 48.79%) by 2,363 basis points. The margin is narrower year to date yet still pronounced, with the Russell Microcap Value (up 28.36%) beating Russell Micro Growth (up 12.97%) by 1,539 basis points.
However, microcaps remain the Wild West and a potentially interesting place to deploy some capital provided you have an iron stomach and like to do your own research as analyst coverage of names in this space can be sparse. Looking back over the past two years, the Russell Microcap Growth (up 31.34% annually) handily beats the Russell Microcap Value (up 22.95%). Growth also wins in each of the three- through 10-year periods, though the 10-year annualized returns are very close with Russell Microcap Growth (up 12.04%) narrowly edging its value rival (up 11.98%).
Within large-caps, returns are not even close over the 10-year period, with the Russell 1000 Growth (up 18.04% annually) far exceeding the 11.55% annualized gains for the Russell 1000 Value. It makes me wonder whether large growth is due for some mean reversion in order to even the score. A value investor can dream...