DCIO Insights: The Value of Growth
Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.
The Russell 3000® Growth Index measures the performance of those Russell 3000 ® Index companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 3000® Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. The stocks in this index are also members of either the Russell 1000® Value or the Russell 2000® Value indexes.
Book value is the value of common equity on a company’s balance sheet. It is equal to assets minus liabilities and preferred stock.
Price-to-book ratio is to compare the market value of a stock to its book value. Stocks with high price-to-book ratios may be overpriced. Stocks with low price-to-book ratios may be underpriced.
Dividend yield is equal to the dividend divided by the stock price. Dividend yield is one measure of a stock’s value. A high dividend yield may indicate that a stock is relatively inexpensive.
Price-to-earnings ratio is the ratio of the share price to the earnings per share. This ratio is one measure of valuation.
IBES long-term growth forecasts are growth estimates provided by analysts and published by the Institutional Brokers’ Estimate System.
A Note about Risk:
The value of investments in equity securities will fluctuate in response to general economic conditions and to changes in the prospects of particular companies and/or sectors in the economy. Small cap stocks tend to be more volatile and can be less liquid than other types of stocks. Small cap companies may also have more limited product lines, markets, or financial resources and typically experience a higher risk of failure than large companies. Larger companies may have slower rates of growth than smaller companies. Investments in foreign (including emerging market) companies generally pose greater risks than those of domestic companies, including market, liquidity, currency, and political risks. While growth stocks are subject to the daily ups and downs of the stock market, their long-term potential as well as their volatility can be substantial. Value investing involves the risk that the market may not recognize that securities are undervalued, and they may not appreciate as anticipated. No investing strategy can overcome all market volatility or guarantee future results.
Dividends are not guaranteed and may be increased, decreased, or suspended altogether at the discretion of the issuing company.
The opinions in the preceding commentary are as of the date of publication and subject to change based on subsequent developments and may not reflect the views of the firm as a whole. This material is not intended to be legal or tax advice and is not to be relied upon as a forecast, or research or investment advice regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment. The securities mentioned may or may not be held by any Lord Abbett fund. Investors should not assume that investments in the securities and/or sectors described were or will be profitable. This document is prepared based on information Lord Abbett deems reliable; however, Lord Abbett does not warrant the accuracy or completeness of the information. Investors should consult with a financial advisor prior to making an investment decision.