Looking at their recent track records does little to settle the debate. Over the past decade, value stocks as a whole have not performed as well as growth stocks. However, when examining a broader body of data dating back to 1926, this has not always been the case. Let’s take a closer look.1
Investing for Value
Value investors look for bargains. In other words, they seek stocks that are trading below the value of the companies they represent. If they believe a stock is underpriced, it may present a buying opportunity. If they believe it is overpriced, it may be a candidate for sale. Once a stock is purchased, value investors seek to benefit as the price rises toward what they consider its fair market value, often selling when that objective is reached.
Most value investors rely on detailed analysis to identify stocks that may be undervalued. They examine a company’s balance sheet, financial statements, and cash flow statements to gain a clear understanding of its assets, liabilities, revenues, and expenses.
One of the key tools value investors use is the analysis of financial ratios. For example, to determine a company’s book value, an analyst subtracts the company’s liabilities from its assets. This figure can then be divided by the number of outstanding shares to calculate book value per share. The resulting ratio can be compared with those of similar companies in the same industry or with the broader market.
Investing for Growth
Growth investors use current information to identify tomorrow’s strongest companies. They seek stocks of businesses operating in industries that are expected to experience substantial growth. Their goal is to find companies capable of generating revenue or earnings that exceed market expectations. When growth investors identify a promising opportunity, they may purchase the stock even after significant price appreciation, believing the company’s continued growth will attract additional investors and drive prices higher.
Where value investors emphasize analysis, growth investors focus on characteristics. They are more concerned with whether a company exhibits traits that suggest it could become a future market leader and less concerned with its current valuation.
For example, growth investors may favor companies with sustainable competitive advantages, strong revenue growth potential, effective cost management, and experienced leadership teams.
Conclusion
Value and growth investing are often viewed as opposing strategies. A stock prized by a value investor may be overlooked by a growth investor, and vice versa. Which approach is right? The answer depends on your individual goals, time horizon, and risk tolerance. In practice, many investors incorporate elements of both strategies when building a diversified portfolio.
At SHJ Wealth Advisors, we have been constructing diversified portfolios for more than 30 years, continually evaluating the balance between value and growth investments to help clients pursue their financial goals. Please reach out to Info@shjwealthadvisors.com if you would like to find a time to meet with one of our CFP® Professionals and thanks for reading!
- Forbes.com, 2025
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.
