Investors Have Conviction, But Disagree: Some Like Value And Some Like Growth, But Few Like Core

Monday, September 10, 2012 09:17
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Investors Have Conviction, But Disagree: Some Like Value And Some Like Growth, But Few Like Core

Tags: core | growth investing | style classification | value investing

It’s like Goldilocks without the middle bed. Could it be a reflection of the upcoming election?

 

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I define “Core” as the stuff in the middle, in between value and growth. See Surz Style Pure Indexes. Only one other index provider, Morningstar, tracks this version of core.

 

Core usually performs in between value and growth, with risk in the middle as well, but not so in the year to date, through August 2012. See the graph below.

My interpretation of this phenomenon is that investors have split into two camps – value and growth – leaving the stuff in the middle in the dust. Core has stood still while the rest of the market has been in play. This situation usually corrects itself as investors discover that core stocks have become a relative bargain. There is a tendency for regression toward the mean.

 

Why the split into two camps? What are your thoughts? It could be that some are fearful of the next president, whomever that may be, so they are defending with value stocks. Others may see a brighter future, dominated by growth companies. Time will tell who is right.

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