Opportunity in Growth, Value, or Both?
Defining Growth & Value
For many, the growth and value styles of investing
may be foreign terms. Let’s begin with defining
Growth companies tend to be those with revenues
growing faster than their broader markets. They do
not typically pay dividends and historically have
been more volatile. Growth stocks are usually
priced higher than the broader market because
investors are willing to bet on their potential for
continued earnings growth. In other words, pay up
now for higher earnings later.
In contrast, value stocks are generally considered
cheap compared to the broader market or their
own intrinsic value. They tend to be more mature
companies with less opportunity for earnings
growth and compensate investors with dividend
payments and the opportunity for the stock price to
“correct” back to its perceived true value.