By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer and Marchello Holditch, CFA, Vice-President and Portfolio Manager CI Multi-Asset Management
I’ve written in the past about an extreme divergence between the performance of value and growth styles of investing. In brief, value style investing is the selection of securities that are underpriced or undervalued based on an analysis of the operations and finances of the company issuing the securities. Growth investing focuses on companies whose earnings are expected to grow at a rate above the market average. By definition, growth stocks trade at a premium price, but by some metrics, the current valuation premium on growth has not been at this level since the height of the tech bubble in 2000. To understand whether or not the September revival of the value style is sustainable, we must first review what caused the divergence in the first place.