Aug 2018
During the 2010 – 15 period “growth” stocks typically traded at P/Es that were about 7.5 points higher than “value” stocks. We think that’s probably too much, because it’s difficult to sustain higher growth indefinitely. Ask General Electric, Cisco Systems, Digital Equipment and many other former favorites. Nevertheless, we find it interesting that the difference between growth and value P/Es has itself grown from about 7.5 points to over 13 points today. Either growth stocks are now “growthier” than they were a few years ago, or we’re in some sort of growth stock bubble today. Simply put, we don’t buy the “growthier” explanation.