Growth vs. Value Investing: Which Strategy Wins?

#What Is Value Investing?

Value investing means buying stocks that trade below their intrinsic worth. Value investors look for:

• Low P/E ratios
• Low price-to-book (P/B) ratios
• High dividend yields
• Low price-to-cash flow

The philosophy: pay less than a business is worth, and eventually the market will recognize the true value.

Pioneers: Benjamin Graham, Warren Buffett, Joel Greenblatt

Deep dive: P/E Ratio →

#What Is Growth Investing?

Growth investing means buying stocks with above-average revenue and earnings growth, even if they appear "expensive" on traditional metrics. Growth investors look for:

• High revenue growth (20%+)
• Expanding profit margins
• Large addressable markets
• Competitive advantages (moats)

The philosophy: a fast-growing company is worth paying up for, because future earnings will make today's price look cheap.

Pioneers: Thomas Rowe Price, Philip Fisher, Peter Lynch

#Historical Performance

Over the full period (1927–present), value has outperformed growth by approximately 3–5% per year (Fama & French data). But growth's decade-long dominance in the 2010s was unprecedented.

#Why Value Works (Usually)

Mean Reversion

Companies going through tough times (low valuations) tend to recover. Companies at peak performance (high valuations) tend to mean-revert.

Overreaction

Investors overreact to bad news, pushing prices below fair value. Value investing capitalizes on this overreaction.

Margin of Safety

Buying cheap provides a buffer if things go wrong. A stock at 8x earnings can tolerate a lot of bad news before losing money.

#Why Growth Sometimes Wins

Winner-Take-All Markets

In technology, network effects create monopoly-like businesses. The winners (Google, Amazon, Apple) grew into their valuations and then some.

Low Interest Rates

When rates are low, future cash flows are worth more in present value terms. This disproportionately benefits growth stocks whose value is in future earnings.

Secular Trends

Digital transformation, cloud computing, and AI created genuine structural growth that rewarded growth investors handsomely.

#The Multi-Factor Solution

Rather than choosing one style, multi-factor investing combines value, growth (momentum), quality, and stability. This approach:

• Captures the value premium when it works
• Participates in momentum-driven moves
• Holds quality companies that compound
• Provides stability during downturns

Academic research (Asness et al., 2013) shows that combining factors delivers better risk-adjusted returns than any single factor alone.

Read: Factor Investing Explained →

#Which Style Fits You?

#Our Approach

At Blank Capital Research, we use a 6-factor model that includes both value and momentum (a proxy for growth trends), along with profitability, stability, growth, and short interest. This multi-factor approach avoids the growth-vs-value debate entirely by capturing the best of both worlds.

Explore our methodology →

See factor-ranked stocks →