By Philip van Doorn, MarketWatch
After shares of Netflix and Facebook took a beating late last month, there has been buzz about this being the right time for investors to move at least some of their money from growth stocks to value stocks.
Consider these stories:
Netflix /zigman2/quotes/202353025/composite NFLX +1.39% and Facebook /zigman2/quotes/205064656/composite FB +6.49% are two of the FAANG stocks — a group that also includes Apple /zigman2/quotes/202934861/composite AAPL +3.49% , Amazon.com /zigman2/quotes/210331248/composite AMZN +0.62% and Google holding company Alphabet /zigman2/quotes/205453964/composite GOOG +1.80% /zigman2/quotes/202490156/composite GOOGL +1.75% . These companies together have a market value of $3.6 trillion, making up an astonishing 13% of the S&P 500 Index’s total market value. Their rapid sales growth has been a major driver for increasingly popular index funds in recent years. So arguments for moving away from growth stocks often center on the FAANGs.
The simplest way to divide stocks into growth and value camps is to divide the market in half by price-to-book-value ratios. The Russell 1000 Index /zigman2/quotes/210598144/delayed RUI +0.54% is divided into the Russell 1000 Growth Index /zigman2/quotes/210598136/delayed RLG +0.97% and the Russell 1000 Value Index /zigman2/quotes/210598148/delayed RLV +0.07% using price/book as well as earnings growth forecasts and five years of sales per share.
There’s no question that during this bull market that began in March 2009, the growth approach has been a better performer for investors. Here are how the Russell 1000 Index, the Russell 1000 Growth Index and the Russell 1000 Value Index have performed over various periods:
Three years through Aug. 6: