“The distinction between growth investors and value investors is appropriate over shorter-term time horizons but almost irrelevant long-term.”

Eric J. Weigel, Global Focus Capital


 

On a recent trip to Boston, Eric J. Weigel, Managing Director of Global Focus Capital, shared expert perspectives on Mean Reversion of Returns on Equity.  Additionally, Eric graciously shared personal wisdom accumulated from nearly three-decades of industry experience — his observation below is terrific!

While working at Pioneer Investments (1998-2004), I used to run Large Cap Growth, Mid Cap Growth, and Small Cap Growth Funds. I had a good friend who ran Mid Cap Value and Large Cap Value Funds.

 

I found that at lot of times we would end up owning the same type of stocks just at slightly different points in time — there might have been a six-month gap between when I sold this stock or when he bought that stock and so forth.

 

What I found was that just our starting points were different. He would fish around for low valuation companies. That was his starting point and then, out of those inexpensive stocks, he would figure out where he could see the multiple being higher two or three years down the road. My starting point was looking at the growth and profitability profile of a company — and then looking at valuation, second.

 

My conclusion was that the distinction between growth investors and value investors is appropriate over shorter-term time horizons but almost irrelevant long-term.  The winners tend to be companies that have grown, are profitable, and you bought without paying too much for them.

 

If you think about those attributes of the winners — it has a little bit of value, a little bit of growth, and a little bit of GARP. So, I think, at the end of the day, if you look long-term you end up in a lot of very, very similar areas.

 

(Slightly edited for readability)