Making the Case for Growth
"Time is everything," Viscount Horatio Nelson once said. "Five minutes makes the difference between victory and defeat."
The famous British admiral could have been a money manager. Indeed, there is no better way to make money in stocks than to correctly time the market. Even so, the global landscape is littered with investors who have lost bundles because they prematurely called one turn or another.
Ready to try again? Some people are. Currently, the big-money question is whether it is time for growth stocks to shine, following five years in which they have been thumped by value-style investing.
Value stocks are companies that, by various measures, yield more than the market average, yet trade at a discount to the market.
Defining growth is harder. Since the Internet bubble popped, the Nasdaq maxed out on March 10, 2000, and its European counterpart, Germany's Neuer Markt, subsequently shut down, analysts have changed how they define growth.
Morgan Stanley's Morgan Stanley Capital International, for instance, used to have a single, simple measure for equities included in its growth indexes. Now it uses a multifactor approach involving at least eight criteria. Calculating growth, "isn't something you can do in your head," says Ben Funnell, co-head of European equity strategy at Morgan Stanley.
At its core, a growth company is one whose earnings have increased at a faster-than-average pace in the past and is expected to deliver high profit growth in the future.
Advocates for investing in growth stocks offer several rationales to buy now. Traditionally, growth outperforms when the economy decelerates, which is what is happening. Some contend that value stocks have risen too far and are due for a reversal.
Others note parallels with a decade ago. Like 2005, 1995 was the midpoint in an economic cycle, when both the world economy and company-earnings growth slowed in the wake of rising interest rates. Value-investment strategies outperformed strongly in the earnings recovery of 1993 and 1994, just as they did in 2003 and 2004. What's more, 1995 marked the start of the late-1990s growth rally.
"The last time that growth appeared this attractive relative to value was in the mid-1990s," says Robert Buckland, head of European equity strategy at Citigroup Smith Barney. "This was a great buying opportunity for investors to raise exposure to growth."
Also, value stocks may have finished their winning streak. Since March 2000, value stocks have outperformed growth stocks by 76%, as measured by the MSCI World Value and Growth indexes. That is more than twice the 33% that growth stocks bested value stocks by during the 1998-2000 technology, media and telecommunications bubble. The comparable numbers for Europe are, respectively, 78% and 39%.
"Unsurprisingly, many fund managers are now asking whether this pro-value trade has gone too far," Mr. Buckland says.
More supporting ballast: Valuation measures for growth stocks and value stocks have come together. For instance, five years ago, the MSCI World Growth index was selling at 46.2 times (trailing) earnings, the MSCI USA Growth index at 44.7 times and the MSCI Europe Growth index at 40.1 times. Those multiples have since shrunk to 22.9, 24.7 and 19.4, respectively.
Meanwhile, the world value index currently sports a price-earnings ratio of 15.4, the USA value index a P/E of 15.6 and the Europe value index a P/E of 14.1. In March 2000, those respective ratios were 23.5, 18.4 and 20.
"The gap between growth and value has converged dramatically," notes Nick Nelson -- no relation to the admiral -- a strategist at Credit Suisse First Boston. "The dispersion between the highest and lowest price-earnings ratios in Europe is the lowest it's been in 20 years."
That, adds Morgan Stanley's Mr. Funnell, means that "higher growth in earnings should equate to higher growth in shareholder returns." In a report to clients on Monday, the firm said it expects growth to outperform value over the next year. It also noted that nearly all of the stocks added to its European model portfolio this year were "growth names," including U.K. cruise-ship company Carnival PLC, Spain's Banco de Sabadell SA, Anglo-Irish Bank and Anglo-Australian pallet supplier Brambles Industries.
Strategists at Citigroup also advise placing more emphasis on growth factors within equity portfolios but caution against ignoring value traits altogether. Seeking a compromise between growth and value strategies, they preach growth at a reasonable price. So they recommend companies that exhibit strong sales growth, improving profit margins and whose dividend payments absorb less than 50% of company profits. Examples include Franco-Spanish tobacco company Altadis SA, BMW AG, Dutch postal company TPG NV and Spanish food company Ebro Puleva SA.
James Montier, a global equity strategist at Dresdner Kleinwort Wasserstein, acknowledges that if investors had bought shares in those companies that would have delivered the highest growth in earnings in the next 12 months, they could have outperformed the market by about 7.5 percentage points a year since 1975.
Nice fact. But how many people can accurately predict the future? Few, if any, including stock analysts. Globally, analysts' growth forecasts would have captured a meager 24% of that perfect return, European analysts 41% and U.S. analysts a respectable 70%. Meanwhile, in Japan, "you could have made money by shorting the stocks with high forecast earnings growth," Mr. Montier notes.
Bottom line: Chasing growth can be a sucker's game where investors too often end up buying expensive stocks. History, Mr. Montier says, shows that value generally outperforms and buying cheap shares offers protection against mistakes. For instance, he says that if an investor bought the bottom fifth of the MSCI World index, ranked by price-earnings ratios, he would have outperformed the market by six percentage points per annum, over the past 30 years.
成长类股或将时来运转
霍雷肖?纳尔逊(Horatio Nelson)曾说过，“把握时机至关重要，有时5分钟之差就能决定战争的胜负。”
这位伟大的英国海军上将如果还活著，完全有可能成为一名出色的理财经理。确实，没有比正确把握市场脉搏更容易从投资股票中获利了。环顾全球各国股市，因为没能准确把握住行情反转的机会而损失惨重的投资者比比皆是。
还愿意再试试么？有一些投资者确实跃跃欲试。眼下一个十分重要的问题是，5年来一直生活在价值类股背影后面的成长类股是否迎来了翻身的机会？
价值类股指的是从各种指标的角度来衡量它们的回报率均超过市场的平均水平，但估价却低于市场平均水平。
相比之下，对成长类股做出界定就不那么容易了。自从互联网泡沫破灭、2000年3月10日那斯达克综合指数升至历史高点，德国新兴市场(Neuer Markt)关门之后，分析师们对于何谓成长类股的定义已经发生了转变。
例如，摩根士丹利(Morgan Stanley)旗下的摩根士丹利资本国际公司(Morgan Stanley Capital International)原先用一个简单的指标来判断某一只股票是否属于成长型股票，但现在用一套综合考虑多种因素、至少包括8项指标的方案来进行评估。摩根士丹利旗下欧洲股票策略部门联席主管本?芬内尔(Ben Funnell)表示，判断一只股票是否属于成长股不能仅靠凭空想象。
一条根本的判断标准是，一家成长型企业在过去的收益增幅必须超过市场平均水平，而且在将来也能实现利润的高增长。成长型股票的推崇者给出了几个现在应买入成长型股票的理由。从以往的经验来看，在经济增长放缓时成长类股往往有强于大盘的表现，现在正是这种情况。一些人士则认为，价值类股的涨幅已经过大，即将出现回调。
还有一些人士把现在的情况和10年前相比。与2005年的情形一样，1995年也处于经济周期的中点，全球经济和企业界收益的增长率在利率上升之后都呈下降之势。在1993年和1994年企业盈利回升期间，价值投资策略获得了丰厚的回报，这一幕在2003年和2004年再次上演。而且，上世纪90年代末期的大牛市行情就始于1995年。
花旗集团(Citigroup)旗下欧洲股票策略部门的主管罗伯特?巴克兰(Robert Buckland)表示，上次成长类股的魅力压倒价值类股便是出现在上世纪90年代中期。他认为，眼下是投资成长类股的大好时机。另一方面，巴克兰表示，价值类股的涨势或许已走到了尽头，一些基金经理眼下正在思考追捧价值类股的操作是否已走得太远了。
衡量成长类股和价值类股估价的本益比指标值正在靠拢。5年前，MSCI全球成长型股票指数的往绩本益比为46.2倍，MSCI美国成长型股票指数的往绩本益比为44.7倍，MSCI欧洲成长型股票指数的往绩本益比为40.1倍，但如今这三个本益比分别收缩至22.9倍、24.7倍和19.4倍。
瑞士信贷第一波士顿(Credit Suisse First Boston)的策略师尼克?纳尔逊(Nick Nelson)表示，成长类股和价值类股本益比之间的差异正在急剧收缩。欧洲股市目前最高本益比和最低本益比之间的差距是20年来最低的。
摩根士丹利在周一写给客户的报告中预计，未来1年内成长类股的走势将强于价值类股。它还表示，其欧洲模型投资组合中今年新增的股票基本上都属于成长类股，例如英国的游轮公司Carnival PLC、西班牙的Banco de Sabadell SA以及Anglo-Irish Bank和Brambles Industries。
花旗集团的策略师也建议增持成长类股，但他们同时认为也不妨考虑一下价值类股。
Dresdner Kleinwort Wasserstein的全球股票策略师詹姆斯?蒙蒂尔(James Montier)承认，如果投资者有幸买入了在未来12个月里收益增幅最为可观的股票，那么自1975年其年回报率将比大盘高出约7.5个百分点。
多么可观的回报率呀。但又有多少投资者能够准确地预见到未来呢？即使把股票分析师考虑在内，也少得可怜。结果是：追捧成长类股有可能聪明反被聪明误，因为投资者往往买进的是股价已经偏高的股票。
