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By Andrew Leckey
The battle of growth versus value investing rages on in 2010.
Growth stocks represent companies whose better-than-average earnings gains raise the expectation they'll continue to deliver high profit growth.
Value stocks are out-of-favor stocks considered bargains based on their book value or liquidation value. They're cheap because they've struggled but may have better days ahead.
These distinct investment personalities move in cycles, one dominating for a period before being overtaken by the other. And then it starts all over again.
"There was a 'dash to trash' in which the lower-quality stocks that
had blown up in 2008 came back the most in 2009," observed Tom
Forester, founder and portfolio manager of the $102
Over the past 12 months, large-cap growth mutual funds are up 34
percent, while large-cap value funds gained 30 percent, according to
All good numbers, though admittedly coming off a low beginning base. Technology was the prime mover in growth, and growth investors expect that party to continue.
"Technology was really good and I believe it can continue to be good
in 2010," predicted Robert Bartolo, portfolio manager
of the $20.8 billion
Even stocks of high-growth tech firms such as
The proliferation of smart phones and wireless data will benefit
companies such as
Financials will hopefully enjoy a better overall economy and improved
consumer confidence as the employment picture brightens, he expects.
The "no-load" (no sales charge)
"The stuff that works one year tends not to work the next year," said value investor Forester, whose only real concern in value stocks is that he's not so sure bank problems have been solved. "Quality names with lower p/e (price to earnings) ratios right now will do well."
In pharmaceuticals that fit in the "quality-at-the-right-price" value
category, he likes
He puts giant techs Microsoft (MSFT), Oracle Corp.(ORCL) and HP in the value category price-wise and expects further price gains ahead.
"People are going to look at what the value benchmark did and compare it to the growth benchmark," contends Forester. "The value benchmark is going to get hit because of the banks and the tech companies have already had a run-up, but I give the edge to value."
Those firms that could obtain financing have done fine and those that couldn't continue to have trouble this year, he said. He predicts the overall market will be up 5 to 10 percent this year but it's going to be an "all-over-the-place" kind of year.
"A lot has been happening in value stocks, which are typically
dominated by financials," said Paul Nolte, managing
"As we start to see some semblance of earnings recovery, growth will be the better place to be," Nolte predicted. "So as you look at companies you want to see top-line growth, not everything coming from just cost-cutting."
In growth, Nolte likes Google, Cisco, General Dynamics Corp. (GD), Qualcomm Inc (QCOM) and IBM.
During the 1990s, technology was the rage in a growth-dominated market and value took a back seat, Nolte said. "But then value did very well starting in 2000 up until 2003-2004," he added. "Now it's back to growth again."
Maybe so, but value investors have no intention of conceding just yet.
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Investing - Growth Vs. Value Investing: 2010 Promises to be An Exciting Year
© Andrew Leckey
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