The long-awaited return of value stocks

For a few years we’ve been wondering when the gulf in valuation between “growth” stocks and “value” stocks will close. It might finally be happening, says Merryn Somerset Webb.

Nuclear power station
Nuclear power: the only way to oust fossil fuels fast
(Image credit: © Alamy)

It’s finally happening. For a few years we’ve been looking at the valuation gulf between “growth” and “value” stocks and wondering when it might close. This distinction is silly in some ways – presumably everyone who buys a growth stock thinks they are buying for less than it is worth, and thus getting value. But it’s still a reasonable way to divide up stocks if you want to explain the last few years – everything offering excitement, a good story and potential for fast growth has been bought pretty much regardless of price. Everything a bit staid, old hat or out of fashion has been ignored – again pretty much regardless of price.

This week things look a little different. In the last six weeks or so value has beaten growth by around 10%, the Nasdaq has been more often in the red than not, and 40% of shares in the index are 50% off their one-year highs, with those that aren’t profitable doing the worst. For a hint of just how bad things are for believers in speculative tech investment, look to ARK Invest’s flagship exchange-traded fund (ETF). It’s down 15% this year alone. Confidence seems to be falling even among the management of the stocks it holds: “insider sales in these companies have been... well above historic norms” in recent months, reports the Financial Times.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.