Why Growth Stocks Have Beaten Value - and Bernie Sanders' and Elizabeth Warren's Day Has Come

[Uncle Joe]

(snip)

It is easy, of course, to attribute that to the emergence of the tech behemoths that have risen in the last decade to be among the most valuable companies in the world.

But that isn’t what Gait found has been pushing earnings higher. “The single largest contributor to the earnings growth seen on the S&P since the early 2000s has been a redistribution of wealth away from Labour and to Capital,” he wrote. “This amounts to one half of the growth in earnings seen over this period and one third of current US corporate profits.”

In dollar figures, the redistribution amounts to about $419 billion per year or around $1,300 per capita, according to Gait.

(snip)

“Fundamentally, growth in earnings that is a share of a productive increase is sustainable; growth in earnings arising from redistribution is utterly unsustainable,” Gaits wrote. “The current period of earnings growth on the S&P is the strongest period in history for which we have data, stronger than the Gilded Era of Carnegie, Rockefeller and Guggenheim; than that seen during the Golden Era of Capitalism and post-WW2 reconstruction.”

(snip)

https://www.barrons.com/articles/elizabeth-warren-bernie-sanders-growth-stocks-value-51574894365

[rickford66]

1. Can someone explain this in layman's terms ?

When I try the link the tab crashes. I'm sure the article would be just as hard for me to understand. Their day has come. Is this good or bad and why ?

[Uncle Joe]

4. Fascinating, when I first clicked on this link to start the OP, I was able to read

the entire article, now it only gives me a paragraph or so unless I sign in or subscribe which I am not doing.

Growth stocks are higher gambles that the price of the stock will escalate, it's more of a Las Vegas thing where the house (or the in case of Wall Street the big money players) ultimately win.

Value stocks are more geared to the long view, perhaps not as spectacular in short term gains but generally they have less risk.

[rickford66]

5. "Their day has come." Is this good or bad and why ?

[Uncle Joe]

6. I believe it's because their policies are geared more toward the long view, instead of just

the next quarters' earnings.

Here is a little more information on the differences between growth stocks and value stocks.

(snip)

Which Is Better?

When it comes to comparing the historical performances of the two respective sub-sectors of stocks, any results that can be seen must be evaluated in terms of time horizon and the amount of volatility, and thus risk that was endured in order to achieve them.

Value stocks are at least theoretically considered to have a lower level of risk and volatility associated with them because they are usually found among larger, more established companies. And even if they don’t return to the target price that analysts or the investor predict, they may still offer some capital growth, and these stocks also often pay dividends as well.

Growth stocks, meanwhile, will usually refrain from paying out dividends and will instead reinvest retained earnings back into the company to expand. Growth stocks' probability of loss for investors can also be greater, particularly if the company is unable to keep up with growth expectations.

For example, a company with a highly touted new product may indeed see its stock price plummet if the product is a dud or if it has some design flaws that keep it from working properly. Growth stocks, in general, possess the highest potential reward, as well as risk, for investors.

(snip)


https://www.investopedia.com/articles/professionals/072415/value-or-growth-stocks-which-best.asp

I'm of the mind that the price of growth stocks can be more easily manipulated either up or down with a major purchase or sell by the big money people.

[Uncle Joe]

7. P.S. I also believe the two bolded paragraphs in the OP

also explain why this analyst believes long view policies as proposed by Bernie and Elizabeth are overdue, there has been a "massive transfer of wealth in the stock market at least since 2000 from labor to capital" aka; the wealthiest among us and this is "unsustainable."

[George II]

2. Reminder: According to his most recent Senate Personal Financial Disclosure...

...Sanders had more than half his net worth (not including real estate, which isn't reported) is invested in mutual funds, i.e., "Wall Street", including S&P and NYSE stocks.

[zaj]

3. Actually Andrew Yang's time has come...

That's all just another way of saying automation, AI and machine learning.

[Uncle Joe]

8. I view the massive transfer of wealth

more as stock manipulation by the wealthiest individuals or institutions and Bernie's policies ie; Financial Transaction Tax for one would go a long way toward correcting this problem.