High growth stocks and shift from growth to value

[moneymaker]

Since late Feb 2021, growth stocks, particularly small and micro cap have gotten crushed. Many down 40-50% from highs. Now from oct 20 to feb 21, they had gotten out of control too so a correction is healthy but we are 6-7 months into this and they are still bleeding out.

I know I hear a lot of folks say it was the shift from growth to value that has been causing this.

Just wondered your thoughts, if anyone has experienced the same, and If anyone that’s lived this before can share some insight into how long these can go on and when some of these small and micro cap stocks may trend up again.
Thanks!

 

[38Chevy454]

In my individual stock play account (but it is real money) I was doing really good, then lately not so good. I did take some profits earlier and so am not as bad as the recent results would indicate. Playing with the house's money on some. But it still is tough environment lately. Small caps tend to do better in a rising market, which overall has been slowing down lately. Upsurge in covid is not helping market confidence, and that gets to the emotional aspect of the larger investment pool. The market seems to always overreact to news, bad news especially.


As to why the downturn in small caps is happening, I think part is due to the overrun and correcting, but also inflation concerns is a big factor. That hurts the small caps more since they don't have the capital resources of the big guys. Now throw in the emotional concerns that are more negative than positive on top of the inflation. As to my plans? Just holding on and waiting for a hoped for reversal on the small caps. Most of my money is in index funds and they are doing fine, as the saying goes slow and steady wins the race. True for now, although it is nice to ride the wave of a hot stock into a big increase.

 

[Koolau]

Mentioned elsewhere, I currently own only one individual stock, so don't listen to me. My only thinking on this subjects is: Whatever is down this year is likely to be up next year and vice versa. Over the years, I've been tossed by the waves of fear and greed but have now decided on a strategy. I plan to stick to it. My suggestion would be the same to others. Pick your strategy based on your own research and then stick to it until you've proven to yourself that it doesn't work anymore. A few months seems too short a time to decide that but YMMV.

 

[Lsbcal]

Here is a chart I maintain which tracks US asset classes using Vanguard funds. These are shown relative to the SP500 return. I don't think one can predict the short term winner but maybe trend following over many months can roughly work in your favor.

There were some nice periods of strong performance like large growth (LG) in the late 1990's and last year. Value had it's years from 2000 to about 2007. Note even when there were nice multiyear trends there were many down months.

SV=small value
MV=midcap value
LV=large cap value
SG= small growth
MG=midcap growth
LG=large cap growth

 

[Qs Laptop]

I think there was a rotation into value stocks a couple of months ago. When it looked like the pandemic was behind us the high flying growth stocks, especially the stay at home stocks lost favor.

I don't think the flight to value will last too long though, so I've hardly made any moves into value. (Meaning: I missed it and it's too late now!) I think the financial sector might be warming up with all the talk of rising interest rates.

 

[Montecfo]

I think value is still a good bet, but I own many growth and many value stocks. I think you want the best ideas from each flavor.

We are getting to a more typical stock market now, so you can't just say it's time for growth or time for value.

But I do position for somewhat higher rates with financials for example, low duration bonds, and floating rate securities.

Growth is usually welcomed by investors but higher rates will punish the ones with the most growth projects into the future (due to discount rates).