Growth Stocks Continue to Outperform Value Stocks

By Tom Burnett CFA

As we near the close of the first half of 2020, we are updating our comparison of the returns provided by the Growth and Value styles of the stock market. For this comparison, we will look at two Vanguard ETF securities with data from Morningstar. The returns are based on closing prices on June 18, 2020.

For the value style, we use the VTV fund which has assets of $49 billion. Value stocks trade at comparatively lower multiples of revenue, earnings, and book value than growth stocks. They also offer generally higher dividend yields. The current yield on the VTV fund is 2.98%, well above the 0.90% yield on the VUG fund. The VUG fund has assets of $56 billion, so both funds are large enough to represent valid proxies for the two styles.

Looking at the performance of the two ETF securities, the superior record of of the growth style is clear and obvious. So far in 2020, the VUG has returned a positive 10.6% while the VTV return is a negative 13.9%. We have looked at the performance data for the three-year, five-year, ten-year and 15-year periods ending on June 18, 2020. In every case, the VUG returns are higher than the VTV returns. For example, the ten-year annual rate of return for VTV is 10.6%, compared to 15.7% for the VUG. We also note that the VUG returns are better than those earned by the overall market as represented by the SPY fund which is tied to the S/P 500 Index. The general market SPY is down 2.5% so far this year, compared to the positive return of 10.6% for the VUG fund. Future returns may reverse this trend, but for now the record is clear. Over the past 15-years, continuing this year, the growth investing style is superior to the value style.

Tom Burnett CFA is Director of Research