Nicholas - Thank you for your feedback, we have some sympathy, but we are not entirely convinced by your comments (or more precisely Buffett/Munger’s comments). Theoretically, it is possible to distinguish ‘value’ and ‘growth’. Historically, stocks have been assigned as ‘value’ or ‘growth’ dependent upon their book-to-market ratio (i.e. the inverse of the price-to-book ratio) as outlined by the work of French & Fama in the 20th century. Other modern definitions include other fundamental factors such as recent EPS growth rates, dividend yields, and sales per share growth rates (full definitions are available on index providers’ websites). Whilst the terms ‘value’ and ‘growth’ may be misleading and some investors may not feel they are appropriate, they do refer to clear, well laid out fundamental screens that are widely used by equity fund managers. Indeed the chart we show in the blog shows that different ‘styles’ appear to perform well in different macro environments; specifically, as we illustrate, with those different environments dictated by the trend in the nominal risk free rate (i.e. US bond yields). Whilst we appreciate that one may take issue with the concepts’ labels, the relative performance resulting from their different fundamental characteristics is relevant to equity investing.

On Value vs. growth -