Growth Stocks v Value Stocks 2022

There is much debate amongst financial advisers, commentators and investors.  The debate is about global recovery from the pandemic and where to invest.  With that in mind, we offer our views and stance for 2022 on growth stocks v values stocks, or in position as fund advisers, growth funds v value funds.

What are growth stock funds?

Equity funds that invest in company shares that have the potential for outperforming markets due to their potential currently.  For example, pharmaceutical stocks during covid-19 lockdown.

What are value stock funds?

Equity funds that invest in companies shares that are currently undervalued i.e., trading at values below what they are worth.  For example, this may be because their market has been suppressed or they may have significant cash stockpiles.  For example, the many travel and hospitality companies that are able, hopefully, to get back to normal trading in a post covd-19 period.

Our position

We have generally always preferred value stocks, as does Warren Buffet.  Buy at a lower than market value will, in many cases, be a good thing if you hold.

We are starting to favour Japan over the US.  Japanese businesses, over the last 25 years have been stock piling cash reserves to meet new capital requirements after the very difficult 1990s where deflation took hold.  Likewise, many European and to a lesser extent UK businesses, have benefitted from government support through covid-19, meaning they did not spend much, have received support themselves and furlough type pay, not had to spend much and have suppressed development plans that can now be released for expansion and innovation. 

If we invest in funds that are buying cheaply into firms that will benefit from increased economic activity and innovation leaps globally.  Added to this, when the World economy expands, Japan expands as does Europe and the UK.  Why are we looking to Japan (as well as UK and Europe)?  Because, as at last week, the Nikkei Dow was still 8% off its year high and Hong Kong was 21% off its high and is starting to slowly come back. 

Japan, UK and Europe are also far ahead compared to the rest of the planet on vaccinations, the omicron wave and economies returning to normal.

Whilst not our total focus, there will certainly be more focus in 2022 on the geographical sectors.