The Great Divide: Growth vs. Value
In the ever-evolving world of stocks, the dichotomy between growth and value has become more apparent over the past year. Growth stocks have significantly outperformed their value counterparts by 20 percentage points. This gap has widened even further over the last seven years, now standing at an astounding nearly 100 percentage points difference. The divergence is unmistakable.
The underperformance of value stocks can be traced back to the absence of major tech players and industry leaders from their portfolios. The iShares Russell 1000 Value ETF proudly boasts Berkshire Hathaway Inc., JPMorgan Chase & Co., and ExxonMobil Corp. as its top three holdings. In contrast, the iShares Russell 1000 Growth ETF shines with Microsoft Corp., Apple Inc., and Nvidia Corp. at the helm.
The Tale of Two Strategies
The growth ETF is heavily concentrated in technology, consumer discretionary, and communication services sectors, accounting for over 70% of its composition. Its top 10 holdings make up more than half of the portfolio. On the other hand, the value ETF shows greater diversification across financials, industrials, and healthcare sectors, collectively making up 50% of its portfolio. The top 10 holdings represent just 17% of the value ETF’s portfolio.
Technical Insight: Value vs. Growth
From a technical perspective, Bank of America’s analysis suggests that the iShares Russell 1000 Growth ETF has strong support levels at 312 and 287-285, with potential breakout points at 370 and 420. The ETF has shown bullish momentum following a triangle completion in 2022-2023, reaching new all-time highs.
On the flip side, the iShares Russell 1000 Value ETF has breakout support at 171-169 and in the low 160s, with targets set at 195 and 208. While both ETFs show promise for gains, Growth stocks continue to lead the market, with Value stocks lagging behind the S&P 500 index.
Despite some resistance, Growth stocks maintain their upward trajectory above moving averages, while Value stocks struggle below declining moving averages. The battle between the two styles of investing continues, with Growth holding onto its position at the forefront.
