Growth and Value Stocks : Differences, Trends and Historic Performance

Abstract

The author interned at Arcadia Investment Management Corporation. Arcadia is small private investment firm, concentrating on long term Growth Stock portfolios. He was responsible for research on the company Heartland Payment Systems and the electronic payment industry. The author discusses the main differences between Growth and Value Stocks. Typically Growth Stocks have proven enlargement in their industry and have a positive future in terms of growth. High Price to Earnings Ratios are a common characteristic of Growth Stocks and generally they are often looked at as a long term investment. Value Based Stocks typically take form in companies that are underrated when compared to their core values. Historically Value Stocks have outperformed Growth Stocks. However, methodology in defining Value and Growth Stocks is still an issue that further research and consensus needs to be reached upon.