Análisis numérico de concentración de tensiones

Another big distinction among equities is between value-oriented stocks andgrowth stocks. As we discussed earlier, value-oriented investors are those who

shop for investments based on price. Growth stock investors care more about the earnings and sales potential for the company down the road. Where a value in- vestor might be willing to buy a broken-down company so long as its shares are priced cheaper than the company itself is worth, a growth investor only cares about performance. And growth investors are willing to pay for it.

A growth company is one whose earnings and sales growth exceed that of the overall market. Historically, the overall earnings growth rate for com- panies in the S&P 500 has been about 7 percent a year. So one would expect the annual earnings growth rate for a growth stock to exceed that. Indeed, the three-year average growth rate for growth stocks, according to Morningstar, was more than 20 percent a year through the first quarter of 2004. Compare that to the 4.4 percent annual earnings growth rate for value stocks. Clearly, growth stocks are the best performers, in terms of profits and sales, in the equity universe (Figure 5-7).

But keep in mind that there is a big difference between earnings per- formance and stock performance in the short term. While there is in fact a longer-term correlation between overall earnings growth and stock price ap- preciation, in the short run there could be a huge disconnect. In fact, stocks will often times run-up in anticipation of future earnings improvement. So there are going to be many periods when value stocks outperform growth, even though growth may be outearning value stocks at a particular moment in time.

Consider the performance of growth and value in the past ten years (Fig- ure 5-8). As you can see, they take turns leading the equity markets.

This raises an interesting question: Why would anyone want to own a beaten down or overlooked company as opposed to one that’s firing on all cylinders?

Fig. 5-6. Periods of Small Stock Leadership.

Years Length in Years

Excess Annualized Returns* 1932–1937 4.8 16.0% 1940–1945 6.0 13.9% 1963–1968 6.0 10.8% 1975–1983 8.5 14.5% 1991–1994 3.3 11.3% 1999–2004 5.0 11.7%

*Reflects additional annualized total returns small stocks delivered over large stocks during these periods in time.

Again, it goes back to the price you’re willing to pay for an asset, and at what stage of that growth you want to be a buyer.

Equity investing is all about anticipation. There’s an old saying in the markets: ‘‘Buy on the rumor and sell on the news.’’ Well, value investors buy in anticipation of a potential turnaround in a company and sell once the company gets its act together and starts to perform. In this sense, value in- vestors are like contractors who are willing to buy dilapidated houses if the prices are right. They then step in, fix them, and sell them at far higher prices once the homes are in good working condition. A growth investor, on the other hand, only wants stocks that are already in pristine condition.

This tells us a couple of things about value stocks and value investors: First, just as there is a continuum of sorts between small and large stocks—with

Fig. 5-8. Annual Performance: Value vs. Growth Stocks.

Year Value Stocks Growth Stocks

2003 32.06% 34.66% 2002 15.93% 27.48% 2001 2.02% 17.92% 2000 13.12% 8.26% 1999 5.97% 51.29% 1998 7.74% 21.73% 1997 27.78% 22.64% 1996 20.51% 18.77% 1995 31.55% 33.06% 1994 0.76% 1.51% Source: Morningstar

Fig. 5-7. Growth Characteristics: Value versus Growth Stocks.*

As this table indicates, value-oriented stocks exhibit slower growth rates when it comes to both earnings and revenues.

Type of Income Value Stocks Growth Stocks

1-year revenue: 1.4% 30.7%

1-year net income: 29.7% 61.0%

1-year EPS: 24.4% 51.6%

3-year revenue: 2.3% 36.8%

3-year net income: 7.4% 29.3%

3-year EPS: 4.4% 21.1%

*As of March 31, 2004.

small stocks eventually growing into large ones—value stocks, if success- ful, will eventually turn into growth stocks if management can turn things around.

This means value investors, like growth stock investors, enjoy capital ap- preciation based on earnings. The only difference is, value stock investors find earnings growth potential early and profit as the stock price appreciates in anticipation of that turn. Growth investors find growth stocks well after they’ve already shown signs of earnings performance—and as a result, they pay higher prices.

Going back to an earlier chapter, we discussed a couple of favorite ways that investors gauge the relative price of a stock. One is to judge its price based on the underlying company’s earnings. This is called a stock’s P/E ratio. The other is to consider a stock’s price relative to the company’s book value, which is referred to as a stock’s P/B ratio. Consider how much cheaper value stocks can be, relative to growth, as shown in Figure 5-9.

Value investors tend to make money on this gap—buying something when it’s down and out and getting out once the company is back on its feet. Value investors also tend to make money in a couple of different ways:

1. On dividend income. Value stocks, because they are down and out, often need to prove their worth to skeptical investors. One way they do that is by returning a greater portion of their profits back to shareholders in the form of dividend income. The average dividend yield of value stocks at the start of 2004 was 1.4 percent, while the average dividend yield of large-cap value stocks was 2.4. (Large stocks, because they are estab- lished, also tend to pay out higher dividend yields than small stocks.) In contrast, the average dividend payout for growth stocks of all sizes is a paltry 0.3 percent. For large-cap growth stocks, it’s still a tiny 0.8 per- cent. The payout ratio for value stocks—the percentage of profits that

Fig. 5-9. Valuations: Value vs. Growth stocks.*

As this table indicates, growth stocks are far more expensive than value stocks when it comes to traditional valuation measures, such as price/earnings and price/book value ratios.

Value Stocks Growth Stocks

5-year average price/earnings ratio 18.6 36.1

5-year average price/book ratio 1.8 5.0

5-year average price/sales ratio 1.8 6.3

*As of March 31, 2004.

gets returned to shareholders—is about 50 percent. For growth stocks, it’s barely 11 percent, since growth companies tend to want to reinvest profits back into the firm to fund expansion.

2. During troubled markets. Typically, when the markets or economy are wobbly, investors naturally gravitate to value stocks. This is because value stocks pay dividends—and investors like to be paid to wait out a market storm. But in addition, it’s because investors regard value stocks as having already been beaten down or overlooked. If times should get bad, then these stocks, in theory, would have less room to fall than high- flying growth stocks. After all, they tend to trade at deep discounts to growth stocks on a P/E and P/B and even price-to-sales ratio basis. Value stocks tend to do particularly well, relative to growth, when the so-called equity risk premium—the extra returns that investors demand from stocks during periods of high economic, geopolitical, or market risks— is high.

Figure 5-10 lists the traditional value and growth sectors of the economy.

Fig. 5-10. Traditional Growth and Value Sectors of the Economy.

Classic Value Sectors Percentage of S&P 500* Financial services 20.0% Industrials 11.9% Consumer staples 10.5% Energy 6.8% Materials 3.2% Utilities 3.1% Total 55.5% Classic Growth Sectors Percentage of S&P 500* Technology 16.4% Health care 13.2% Consumer cyclicals 11.7% Telecommunications 3.1% Total 44.4%

*Reflects sector weightings in the S&P 500 as of July 9, 2004.