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My Growth Stock Dilemma - Our American Beauty Roses At Peak

Years ago, I’d subway down to Chinatown in the Big Apple AAPL +0.88% to play tic-tac-toe, paired against a chicken encased in a glass box. The chicken got first move so you couldn’t ever beat her, just tie. She was trained with birdseed dishes at the corners, so this chick went for corners straight out.

The market dwells in negative ground excepting Russell Growth, the NASDAQ Composite and NASDAQ 100. If playing in the S&P 500 space or Russell Value, you’re playing tic-tac-toe against my nemesis, Chinatown’s programmed bird. Can’t win for losing, no matter the quarters inserted into the change slot.

The gap still widens in the growth vs. value game. Try over 900 basis points between Russell Growth versus Russell Value. Variance between the value index and NASDAQ is even greater, 10 percentage points. Value dwells in negative territory while NASDAQ remains positive.

Historically, the value index edges out growth – so this 10 percentage point gap favoring growth happens just a couple of times over say 30 years. Past 15 years, only in 2009, with the huge market recovery from the financial world’s meltdown growth outperformed value by 1,000 basis points.

I remember buying Walt Disney DIS -0.99% in the teens, spring of 2009, and Bank of America BAC +0.00% for a 5 dollar bill. JPMorgan Chase JPM +0.00% swallowed Bear Stearns and Bank of America took over Merrill Lynch. Airline debentures sold for a song. Continental Airlines ticked at 50 cents on the dollar, maturing in 3 years, for a yield to maturity of 41%.

I left out one other metric – high yield bonds and preferred stocks this year easily earn their coupon and dividends. Preferred stocks yield 6% while 5-year duration Baa bonds give you around 5% – competitive even with NASDAQ 100.

What says our financial markets? With the exception of some utility stocks, the typical big capitalization industrial, whether United Technologies, Union Pacific or Caterpillar Tractor, carries losses year-to-date ranging up to 25%. Energy properties like Chevron and Conoco Phillips, negative by 30%. Contrast this with...