Types of stocks

• Growth stocks
• Value stocks
• Yield stocks

Details

Growth Stocks

• Earnings from growth of stock, not dividend yield
• High P/E
• Often tech stocks
  • low inflation -> cheap capital -> more R+D

Value Stocks

• Underpriced long-term, reasonable P/E
  • S+P 500 ‘Value’ - lower P/E, P/S, P/B
    • P/E -> price to earnings - how expensive is company’s earnings
    • P/S -> price to sales - how expensive is company’s revenue
    • P/B -> price to book - how expensive is company’s assets
• Perform better in high interest rate environments
• ex. often utilities, energy, banking

Yield Stocks

• High dividends and consistent dividend growth
• Companies that generate cash and can increase payouts

Historical Perspective

• In the 1990’s and the last 15 years growth stocks did better
• In the 1980’s and first years of 21st century (after dotcom crash) value did better
• Over the last 100 years value has outperformed growth by 4% with less risk