Since the early days of the housing crisis, the glamour of value's opposite — growth investing — has reigned. The growth approach focuses on stocks with rapid price appreciation, often but not always accompanied by surging earnings and epitomized by tech firms. The so-called FANG stocks (Facebook, Amazon, Netflix and Google, which is now called Alphabet) are growth's leading lights.
At least for the moment, the performance difference between value and growth has flipped. Thus far this year, the Russell 1000 Growth Index is up 2.3 percent, and the Russell 1000 Value Index leads with 4.4 percent. And the FANG stocks, which romped in 2015, have underwhelmed lately: Three of them are down in 2016, with only Facebook ahead.
Value's last heyday was from 2000 through 2006, in the wake of the tech bubble. The best time for value is when there's decent economic activity. With gross domestic product rising nowadays at a meager 2 percent yearly, the fuel to ignite a new era of value investing is not present. Corporate revenue expansion is slowing, so companies turn to cost-cutting, stock buybacks and financial engineering.