Value stocks are stocks that are relatively under-valued in the market - their stock price has been suppressed. It could be that the company is not as profitable temporarily. It could be profitable but doesn’t have a compelling story. Like many things in life, the stock market is all about “hype”.
Growth stocks are the opposite. They are potentially over-valued because they are profitable or predicted to become more profitable. Their stock price has been “bid up” in the stock market.
There is technical background information left out here to be brief and feel free to call us to learn more.
The long term data shows that value stocks outperform growth stocks. This advantage like any long term trend, can go as long as 10-15 years out of favor, then come roaring back. That is exactly what has been happening. It appears that we will soon see value come roaring back.
Gerard O’Reilly, DFA’s CEO talks about value in two brief 2 minute videos below.