The traditional distinction between “growth” and “value” continues to evolve. This was clear during a recent roundtable discussion with Matt Moberg, Portfolio Manager at Franklin Equity Group; Sam Peters, Portfolio Manager at ClearBridge Investments; and Steve Lipper, Senior Investment Strategist at Royce Investment Partners and President of Royce Fund Services.
- As a growth manager, Matt is focused on five innovation platforms that are shifting society into what has been called the Fourth Industrial Revolution. The platforms that are creating titans of future leadership include: disruptive commerce, genomic advancements, intelligent machines, new finance, and exponential data.
- Innovation is one of the most mispriced parts of equity markets as the intangible nature of their advantages are often difficult to quantify. Innovation will often multiply market sizes and create new investment ecosystems.
- Sam leans toward the value end of the investor spectrum where his process focuses on how the investment environment is driven by cycles. For example, the transition away from traditional energy creates dislocations that create opportunities to invest in innovation at prices that can be justified by traditional valuation metrics.
- Small- and mid-cap stocks are typically where the next leading companies are found, and the pandemic highlighted the resilience of the highest quality businesses.
- Steve highlighted that small caps tend to outperform large caps in periods of high economic growth, rising interest rates, and modestly increasing inflation. Digging a bit deeper, small cap value tends to outperform small cap growth in these types of environments.
While each of these investors start with different approaches, they found common ground in principle: invest where you are rewarded for improving fundamentals of the underlying business. Active management, thoughtful diversification, and strategic reallocation can prepare portfolios for shifts when environments and catalysts change.
Stephen Dover, CFA
Chief Market Strategist,
Franklin Templeton Investment Institute