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.


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.
Meanwhile, shares in companies that many have dismissed as being in long-term structural decline have been rising. Shell is up nearly 6% year-to-date and 23% in the last six months. The great rotation might actually be upon us. There are many implications to this – not least the fact that we will, I think, all turn out to own many more growth (“long duration”) stocks than we know: having performed so well for so long, they dominate most passive and active portfolios. But one interesting effect might be on the environmental, social and governance (ESG) bandwagon.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

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
Bad news for ESG
The great bull market in exciting stories has been fabulous for stocks that it’s easy to justify holding in any ESG portfolio – and not so fabulous for anything a bit grubby that is harder to make excuses for. So you will have heard plenty about how ESG portfolios at best outperform non-ESG ones and at worst perform much the same (the do-goodery comes for free). That reassurance has been one driver behind the shift into funds with an ESG bent: 75% of the money flowing into funds in the UK last November went into some kind of responsible fund, according to the Investment Association.
But what will happen now? As JPMorgan notes, much of the ESG difference came from renewable energy stocks outperforming old energy stocks. If traditional energy now outperforms, do-goodery will no longer come for free. Indeed, 2022 might be the year we find out that the main driver of long-term returns is not stories, greenwash, or feelings – but the price you pay. The lower the better. Luckily, there are still some investments you can buy at what looks like a bit below the right price. In this week's magazine, Luke Hyde-Smith (who’ll be on the podcast soon) looks at assets to hold in a negative real interest-rate world. We also look at some investment trusts trading on a discount (one is Temple Bar – whose managers discuss their top picks on this week’s podcast). Finally, uranium – if anything can oust fossil fuels quickly, it’ll be nuclear power. You may want to invest while the rest of the market is getting used to the idea.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
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.
-
Annual house price growth halves to 3.5% – ONS
Average UK house prices rose by just 3.5% in the 12 months to April, as stamp duty changes deterred buyers. What’s the outlook for the rest of 2025?
-
Nationwide pays £100 to millions of people – have you received the payment?
Nationwide has started paying its £100 Fairer Share bonus and expects to complete payments by 4 July. We look at who will get it and when.
-
The British railway industry is in rude health – here's why investors should jump aboard
The railway industry has bounced back from the devastating impact of the pandemic and is entering a new phase of development – and profitability
-
AGMs: a unique selling point for investment trusts that investors should capitalise on
Opinion Shareholder meetings aren’t just a regulatory requirement – they are a way to communicate with investors
-
A cyclical case for UK stocks
Opinion Depressed margins and relatively low valuations mean the UK market could rally strongly as conditions improve, says Cris Sholto Heaton.
-
Infrastructure investing: a haven of stable growth amid market turmoil
From booming construction in emerging markets to digital and green transitions, the infrastructure sector offers security, returns and long-term opportunities
-
The costly myth of “sell in May”
Opinion May 2025's strong returns for US stocks have once again shown that putting too much weight on seasonal patterns will only make investors poorer, says Max King
-
Who’s driving Tesla?
As Elon Musk steps back from government with his eyes on the stars, investors ask if he’s still behind the wheel at his electric-car maker.
-
Investment opportunities in the world of Coca-Cola
There is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?
Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn