| NEW YORK, March 12
NEW YORK, March 12 It's a debate as old as
iconic investor Ben Graham himself: Are you a value investor,
attracted to stocks that have been unfairly overlooked and are
selling at a bargain? Or are you a growth investor, willing to
pay a healthy price to ride the momentum of a hot business?
Here's a little secret, according to Lipper's winning fund
shops: Growth versus value isn't always an either/or
"I've never really been a fan of those labels," says George
Sertl, a portfolio manager at Artisan Partners, whose Artisan
Value fund took home top honors in the large-cap value
category on Thursday from Lipper, a Thomson Reuters company. "We
actually love growth stocks too, with great balance sheets and
return on capital. We just like to buy them at value prices."
Exhibit A: Apple, the sizzling tech name that's
usually classified as a growth stock. Because of its
still-modest price/earnings ratio, though - barely above 11 for
2012 - it can also reasonably be termed a value play, which is
why it pops up in Artisan portfolios as well.
In fact, neither growth nor value had a knockout year. In
the one-year period leading up to mid-February, value and growth
strategies were locked in a virtual dead heat, according to
Lipper data. Each strategy had its moments in 2011: An economic
recovery tentatively took hold, but enormous risks still loomed
in the form of euro zone debt, which meant that investors
couldn't decide whether to load up on risk or to back away from
"The year had so many twists and turns that it's hard to
declare a clear winner," says Jeff Tjornehoj, head of Lipper
Americas Research. "There were moments when the value side was
outperforming growth, but in the end a lot of growth strategies
were starting to assert themselves. When all's said and done,
value probably ended up slightly ahead for 2011."
That's music to the ears of fund managers at Artisan. The
secret to the firm's success? Sertl singles out Artisan Value's
concentrated portfolio - only about 35 high-quality,
cherry-picked companies with low debt, robust return-on-equity
and affordable valuations. The result is what Sertl calls a
"conglomerate" that he's comfortable with, even in the toughest
of economic times.
Artisan Value wasn't the only value-oriented Lipper honoree,
though. Other winners: Huber Capital Small Cap Value,
Flex-funds Quantex Fund for midcaps, and Oceanstone
Fund for multi-caps.
GROWTH IS GOOD, TOO
As solid as those winning results were, though, it would be
unwise to overlook growth investing. In fact, so far in 2012,
the strategy has been outpacing value and already racked up
double-digit gains, according to Lipper.
That's gratifying to Tim Paulin, who helps lead Touchstone
Investments, another Lipper winner. (Its winning fund,
Touchstone Sands Capital Institutional Growth, is
sub-advised by Arlington, Va.-based Sands Capital Management.)
Ironically, the large-cap fund boasts a similar approach to
value-conscious Artisan: Owning companies that are strong enough
to withstand whatever wicked economic storms may be brewing.
"In difficult environments, the only things that hold up are
companies perceived to be of lasting value," says Paulin,
Touchstone's vice president of investment research. "If there's
any sign of weakness, investors run away from those firms in
droves. But a company like Apple just continues to churn along,
no matter what's going on in the world."
Rather than obsessing over daily price movements, it's the
health of the underlying business that really interests Paulin.
That's what led the team to winning picks like Illumina,
a genome-mapping firm that was recently approached by Roche
Holding as a takeover target.
Other standout growth funds that landed atop the Lipper
board: Alliance Bernstein Small Cap Growth Portfolio I (QUAIX),
Delaware Focus Smid-Cap Growth Equity Portfolio, and
the multicap Berkshire Focus Fund.
But the question remains: Which strategy will reign supreme
in 2012, growth or value? Just like the fund managers
themselves, Lipper's Tjornehoj warns against getting trapped
within a style box. "The lines between growth and value have
been blurred considerably over the last several years," he says.
"We haven't seen growth names get out of reach. There aren't too
many stocks with price/earnings ratios over 50, the way we used
to see in the dot-com boom.
"But whatever your approach, growth or value, keep in mind
that it's not just about large-cap stocks. This current recovery
is actually being led by small-caps: So instead of just focusing
on Apple, start thinking about who the next Apple will be."