Historically, value stocks have outperformed growth stocks in the US, and the outperformance in a given year has often been striking.
- Data covering nearly a century backs up the notion that value stocks—those with lower relative prices—have higher expected returns.
- Value premiums have often shown up quickly and in large magnitudes. For example, while the average annual value premium since 1927 has been 4.1%, in years when value outperformed growth, the average premium was over 14%.
- There is no evidence investors can reliably predict when value premiums will show up. Rather, a consistent focus on value stocks is essential to capturing these outsize value premiums when they do appear.
Logic and history argue for a commitment to value stocks, so investors can be positioned to take part when those shares outperform in the future.