• Introduction: Part 1 Recap
  • The Case for Kailash Value Picks
  • The Case for Kailash Growth Picks
  • The Compelling History of our Top Ranked Value vs. Bottom Ranked Growth
  • Conclusion
  • Exhibits

Introduction: Part I Recap

In Growth vs. Value Part 1 Kailash discussed the degree to which growth stocks had outperformed their value peers and recounted the historical record of value vs. growth subsequent to such periods. We highlighted that over the last three years both the Russell 1000 Growth (R1G) and Russell 2000 Growth (R2G) indices had outperformed the Russell 1000 Value (R1V) and Russell 2000 Value (R2V) respectively by amounts that have historically resulted in subsequent mean reversion.

Figure 1 below is republished from part 1 and breaks the growth vs. value story into 3 stages over the last 3 decades. Stage 1 saw growth trounce value by 319% in the 1990’s only to give all of it back in the first 6 months of Stage 2. What is remarkable about this is that in the first 6 months of Stage 2 growth was cut in half while value stocks stood still (this time period is represented by the bracket). From the peak of August 2000 to the trough of May 2007, value outperformed growth by 280%. What stands out to us about the reversal from the trough of 2007 is that it took over 10 years for growth to return to breakeven. However, since December 2016 growth has outperformed value by 2.5x annually, a level that closely approximates the outperformance seen in the subsequent three-year period prior to the peak of the tech bubble.

  1. As a reminder for our Financial Advisors: our models are available on a continuous basis, and most have been in production for over a decade.  If you are looking for simple, concentrated, low turnover, and tax efficient model portfolios we would like to talk with you.  KCR also offers a wide range of easy-to-use but sophisticated tools.  Our toolkits can help identify mispriced stocks with the best and worst risk/reward characteristics, estimate a stock’s duration and warn you when a company is engaging in low-quality accounting. Over the last 12 years, KCR has built and offers time-tested and class-leading products built by experienced and proven money managers for fixed to low prices.
  2. Kailash Capital’s sister company, L2 Asset Management, runs market neutral, long/short, large-cap, and mid-cap long-only portfolios with a value and quality bias.  L2 employs a highly disciplined investment process characterized by moderate concentration, low turnover, high tax efficiency, and low fees. While nobody can predict the future, we believe the recent resurgence in risk-adjusted returns seen across all products is the beginning of what may be a long period where speculation is punished, and prudence and patience rewarded.
The topics discussed in this article are aimed at seasoned professionals, as such, we have included some extra reading for anyone seeking out more information related to the topics above.

  1. Click the following to read more about fast growing stock, Mean Reversion Strategy, Small Cap Vs Large Cap

Disclaimer

The information, data, analyses, and opinions presented herein (a) do not constitute investment advice, (b) are provided solely for informational purposes and therefore are not, individually or collectively, an offer to buy or sell a security, (c) are not warranted to be correct, complete or accurate, and (d) are subject to change without notice. Kailash Capital, LLC and its affiliates (collectively, “Kailash Capital”) shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information herein may not be reproduced or retransmitted in any manner without the prior written consent of Kailash Capital. In preparing the information, data, analyses, and opinions presented herein, Kailash Capital has obtained data, statistics, and information from sources it believes to be reliable. Kailash Capital, however, does not perform an audit or seeks independent verification of any of the data, statistics, and information it receives. Kailash Capital and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your tax, legal, and accounting advisors before engaging in any transaction. © 2021 Kailash Capital, LLC – All rights reserved.

Nothing herein shall limit or restrict the right of affiliates of Kailash Capital, LLC to perform investment management or advisory services for any other persons or entities. Furthermore, nothing herein shall limit or restrict affiliates of Kailash Capital, LLC from buying, selling or trading securities or other investments for their own accounts or for the accounts of their clients. Affiliates of Kailash Capital, LLC may at any time have, acquire, increase, decrease or dispose of the securities or other investments referenced in this publication. Kailash Capital, LLC shall have no obligation to recommend securities or investments in this publication as result of its affiliates’ investment activities for their own accounts or for the accounts of their clients.

June 17, 2019 |

Categories: White Papers

June 17, 2019

Categories: White Papers

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