A different take on growth vs. value
03 mins 43 secs
Capital Group video transcript: “A different take on growth vs. value”
Apu Sikri: Brad, we’ve had a long streak where growth stocks have outperformed the more dividend-oriented value stocks. What about that trend? Do you see that turning anytime soon, as everyone starts to worry, “Are we sort of in the late stages of the global economic cycle” — and economies around the world start to slow down a little bit?
Brad Vogt: What we know is that we've been in a very long up cycle. And past is not prologue, but we know this is one of the longer expansions in the last hundred years economically in terms of upmarket — particularly in the U.S., the duration of the market. So on a general spectrum of aspirational to careful, you're always somewhere on that spectrum as an investor, generally, with the markets. And personally, I think we're toward the careful side. I don't know whether it will be a quarter from now or a year from now or three years from now, but we're quite likely to go through some normal, significant correction.
We had a bit of that recently, not quite, around 20% correction that quickly was reversed.
Apu Sikri: You’re thinking of December 2018.
Brad Vogt: Right. And we're probably due for something that's either a little bit more deep than that and/or is longer. That would be very normal for the market.
So having said that, we're not investing in the whole market, and there are two dimensions to that point. One is, you really want to think about what type of fund you're in, because our funds are built for different purposes. Some of our funds are quite aspirational. They own essentially all growth, capital appreciation stocks. They're going to own them at the beginning of an expansion. They're going to own them at the middle; they're going to own them at the end. However, as active managers, we're going to be very conscious about which growth companies and which capital appreciation stocks we're investing in, rather than just buying all of them in rank order, the way an index fund does.
For our middle-of-the-road, more core growth-and-income — either individual funds or solutions — again, there's a mix there: some growth companies, some more stable dividend-oriented companies. And again, when you say dividend companies, there's a huge range. There are everything from very fast-growing companies who have a dividend payout that's relatively low — but the company's growing, and the dividend is growing quite fast — all the way to a slower moving utility or telephone company that is paying out most of its earnings in its dividend, and it might be growing 2%, 3%, 4%. So there's a massive spectrum of dividend-paying companies, but we tailor the type of companies we invest in to those solutions or their funds.
So the investor sort of knows what they're getting. We're not flexing all over the map, and one time the fund is in all growth stocks and two years later it's completely in low-volatility utility stocks. So we think that's a very important distinction, that people invest in a program that they have a sense of which way it's leaning, and then you don't have to be quite as tactical predicting the market.
Past results are not predictive of results in future periods.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
American Funds Distributors, Inc., member FINRA.
Any reference to a company, product or service does not constitute endorsement or recommendation for purchase and should not be considered investment advice.
© 2019 Capital Group. All rights reserved.Transcript
With the global economy in late cycle, should stock investors expect to see growth’s longstanding dominance give way to value? Portfolio manager Brad Vogt concedes it’s possible but proposes a more nuanced approach to the market.