Sunday, August 26, 2007

Value vs Growth

We are looking at this again after a short gap. Given the disaster in the financial sector and the dominance of financials in the value fund, the value fund hasnt done too badly.

The chart below shows how value, blend (sp500) and growth compare in the large cap arena. The chart below shows the iShares ETFs - IVE, IVV and IVW.
The top stocks in IVE (value etf) are:
JP Morgan Chase,
Conoco Phillips

The top five stocks in IVW ( growth ETF) are:
Exxon Mobil,
Proctor and Gamble,
Cisco Systems,
Johnson and Johnson and

The difference between value and growth is not wide with iShares ETFs.

The second chart compares the vanguard funds in the same category. The vanguard funds of interest are VTV, VV and VUG respectively. The mix of stocks in vanguard funds is different than the iShares funds - so the difference in performance is also different. As an example, Berkshire is in vanguard growth fund but not in the value fund. Comparing to iShares ETFs, the stocks and their weights are also different.

The top holdings in VUG are:

Proctor and Gamble
Johnson and Johnson

The top holdings in VTV are:

Exxon Mobil,
Citigroup and
Bank of America

While the companies in both the lists are good, citigroup and BAC may have to take some charges on the buy out transactions still pending for which commitments are made. While this is a good time to buy - it may be in the doldrums for some time.

The differentiation of stocks to value and growth is quite arbitrary and one should do ones due diligence before selecting one sector over the other. It also depends on which funds one selects and what cost advantages an ETF or a bunch of ETFs provide over the other.

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