Daily Spotlight: Value Versus Growth Investing

Argus

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Aug 21, 2025

Summary

Value stocks took an early lead over growth stocks this year. But for the past decade-plus, the performance record favored growth. Since 2015, the Russell 1000 Growth Index has climbed more than 400%, compared to an advance of almost 200% for the Russell 1000 Value Index. In 11 of the past 14 years, growth stocks have topped value. But growth has not always been the leader. In the 2000-2010 decade, including the Great Recession, value stocks were better performers. Value investors have an illustrious history, tracing their roots to the famous "Security Analysis" textbook written by Ben Graham, an economics professor at Columbia University. Warren Buffett was one of his students. "Security Analysis" was published in 1934, the same year that Argus Research was founded. So why has the recent deviation in performance favored growth? For one thing, the make-up of the economy has changed. Decades ago, when the U.S. economy was manufacturing-based, tangible capital offered a key signal of value. But in a service economy, intangible assets are much more important. Another factor, in our view, has been interest rates. Analysts put a value on stocks using discounted cash flow models. If interest rates are low, discount rates will be low and future profits will be worth more, favoring growth stocks. The tide turned for a while back in 2022. The rollout of COVID-19 vaccines gave a lift to some cyclical com