A different take on growth vs. value | Capital Group Canada | Insights



A different take on growth vs. value

With the global economy in late cycle, should stock investors expect to see growth’s longstanding dominance give way to value? Portfolio manager Brad Vogt concedes it’s possible but proposes a more nuanced approach to the market.


Apu Sikri: Brad, we’ve had a long streak where growth stocks have outperformed the more dividend-oriented value stocks. What about that trend? Do you see that turning anytime soon, as everyone starts to worry, “Are we sort of in the late stages of the global economic cycle” — and economies around the world start to slow down a little bit?

Brad Vogt: What we know is that we've been in a very long up cycle. And past is not prologue, but we know this is one of the longer expansions in the last hundred years economically in terms of upmarket — particularly in the U.S., the duration of the market. So on a general spectrum of aspirational to careful, you're always somewhere on that spectrum as an investor, generally, with the markets. And personally, I think we're toward the careful side. I don't know whether it will be a quarter from now or a year from now or three years from now, but we're quite likely to go through some normal, significant correction.

We had a bit of that recently, not quite, around 20% correction that quickly was reversed.

Apu Sikri: You’re thinking of December 2018.

Brad Vogt: Right. And we're probably due for something that's either a little bit more deep than that and/or is longer. That would be very normal for the market.

So having said that, we're not investing in the whole market, and there are two dimensions to that point. One is, you really want to think about what type of fund you're in, because our funds are built for different purposes. Some of our funds are quite aspirational. They own essentially all growth, capital appreciation stocks. They're going to own them at the beginning of an expansion. They're going to own them at the middle; they're going to own them at the end. However, as active managers, we're going to be very conscious about which growth companies and which capital appreciation stocks we're investing in, rather than just buying all of them in rank order, the way an index fund does.

For our middle-of-the-road, more core growth-and-income — either individual funds or solutions — again, there's a mix there: some growth companies, some more stable dividend-oriented companies. And again, when you say dividend companies, there's a huge range. There are everything from very fast-growing companies who have a dividend payout that's relatively low — but the company's growing, and the dividend is growing quite fast — all the way to a slower moving utility or telephone company that is paying out most of its earnings in its dividend, and it might be growing 2%, 3%, 4%. So there's a massive spectrum of dividend-paying companies, but we tailor the type of companies we invest in to those solutions or their funds.

So the investor sort of knows what they're getting. We're not flexing all over the map, and one time the fund is in all growth stocks and two years later it's completely in low-volatility utility stocks. So we think that's a very important distinction, that people invest in a program that they have a sense of which way it's leaning, and then you don't have to be quite as tactical predicting the market.



Brad Vogt Portfolio manager

Brad is chairman of Capital Research Company, serves on the Capital Group Management Committee and the Portfolio Oversight Committee and is a portfolio manager on Capital Group Capital Income BuilderTM (Canada). He has 31 years of investment experience, all with Capital. Earlier in his career, as an equity investment analyst at Capital, he covered environmental services, U.S. telecommunications and cable & satellite TV companies. He holds a bachelor’s degree in international politics and economics from Wesleyan University.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

Unless otherwise indicated, the investment professionals featured do not manage Capital Group‘s Canadian mutual funds.

References to particular companies or securities, if any, are included for informational or illustrative purposes only and should not be considered as an endorsement by Capital Group. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds or current holdings of any investment funds. These views should not be considered as investment advice nor should they be considered a recommendation to buy or sell.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not be comprehensive or to provide advice. For informational purposes only; not intended to provide tax, legal or financial advice. We assume no liability for any inaccurate, delayed or incomplete information, nor for any actions taken in reliance thereon. The information contained herein has been supplied without verification by us and may be subject to change. Capital Group funds are available in Canada through registered dealers. For more information, please consult your financial and tax advisors for your individual situation.

Forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made herein. We encourage you to consider these and other factors carefully before making any investment decisions and we urge you to avoid placing undue reliance on forward-looking statements.

The S&P 500 Composite Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2020 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC.

FTSE source: London Stock Exchange Group plc and its group undertakings (collectively, the "LSE Group"). © LSE Group 2020. FTSE Russell is a trading name of certain of the LSE Group companies. "FTSE®" is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under licence. All rights in the FTSE Russell indices or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indices or data and no party may rely on any indices or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company's express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication. The index is unmanaged and cannot be invested in directly.

Bloomberg® is a trademark of Bloomberg Finance L.P. (collectively with its affiliates, "Bloomberg"). Barclays® is a trademark of Barclays Bank Plc (collectively with its affiliates, "Barclays"), used under licence. Neither Bloomberg nor Barclays approves or endorses this material, guarantees the accuracy or completeness of any information herein and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

MSCI does not approve, review or produce reports published on this site, makes no express or implied warranties or representations and is not liable whatsoever for any data represented. You may not redistribute MSCI data or use it as a basis for other indices or investment products.

Capital believes the software and information from FactSet to be reliable. However, Capital cannot be responsible for inaccuracies, incomplete information or updating of the information furnished by FactSet. The information provided in this report is meant to give you an approximate account of the fund/manager's characteristics for the specified date. This information is not indicative of future Capital investment decisions and is not used as part of our investment decision-making process.

Indices are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment.

All Capital Group trademarks are owned by The Capital Group Companies, Inc. or an affiliated company in Canada, the U.S. and other countries. All other company names mentioned are the property of their respective companies.

Capital Group funds and Capital International Asset Management (Canada), Inc. are part of Capital Group, a global investment management firm originating in Los Angeles, California in 1931. The Capital Group companies manage equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

The Capital Group funds offered on this website are available only to Canadian residents.

Related Insights