Two traders’ acronyms have dominated the past five years. The first, of course, is FAANG. The large-cap technology growth stocks Facebook, Amazon, Apple, Netflix, and Google (Alphabet).
And the second is BTFD, which stands for “buy the…” ahem… “dip.”
For the past five years, a strategy of aggressively BTFD on the FAANGs has been a winner. And, more broadly, growth stocks in general have utterly crushed value stocks over that same period.
A dollar invested in in the S&P 500 Growth ETF in April of 2013 would be worth $1.86 today. That same dollar invested in the S&P 500 Value ETF would be worth only $1.48 today.
But growth doesn’t always outperform, and most studies have shown value investing to be the better strategy over time.
As a case in point, consider the four and a half years corresponding with the bottoming of the tech bust in early 2003 and the pre-meltdown top in 2007. You would have doubled your money in value stocks but only made 63% in growth stocks.
Now ask yourself the following question: What are the next five years more likely to look like?
In the late 1990s, large-cap tech stocks were the only game in town. But their overvaluation by 2000, and the subsequent crash, set the stage for value stocks to enjoy a fantastic run.
I see a similar situation unfolding today, and I’m positioning my portfolios accordingly.
In fact, I launched a new service – Peak Profits – specifically to seek out high-quality value stocks that are trending higher. Stay tuned for more details on how to subscribe.