The Russell 1000 Value Index is beating the Russell 1000 Growth Index on a day when the market is tanking.

Value investors have had to be patient for a long time, watching growth stocks surge ahead for years.

But value stocks are outperforming Monday, amid the brutal coronavirus-linked market sell off.

The Russell 1000 Value Index was down 2.5% in afternoon trading. The Russell 1000 Growth Index had fallen 3.1%. The Dow Jones Industrial Average, for comparison, is off 3.1%, and the S&P 500 fell 2.9%. The Nasdaq Composite has dropped 3.3%.

The keepers of the Russell growth and value indexes use a few variables to distinguish between a growth stock and a value stock. Value stocks, for the most part, are low price-to-book ratio. Growth stocks, on the other hand, have higher than average forecasted sales growth.

There is really only one factor accounting for the Monday moves: valuation. The Russell 1000 Growth Index trades for about 24 times estimated 2020 earnings, while the value index trades for 15 times. Both indexes have travel and energy stocks, which are getting hit hard, as well as more defensive sectors like health care and financial services.

Monday’s trading action is probably cold comfort for value investors, who seek out investment opportunities among the market’s cheapest, most unloved stocks. They have been waiting for a long time for a reversal to come. Over the past five years, the Russell 1000 Growth Index has returned about 13.6% a year on average, 6.5 percentage points better than its value counterpart.

The consistent outperformance by growth has left the value stocks at a historically large discount. Growth stocks are more expensive, relatively speaking, than at any time over the past decade. Value stocks haven’t been this cheap, relative to growth, since before the bubble burst around the turn of the century.

The long-term catalyst to reverse the trend is hard to call. Growth investors don’t feel like they are overpaying and point out there is a lot of disruption in the economy, with business models for energy and entertainment companies threatened by factors such as climate change and streaming, respectively. Value investors counter with the fact that new business models have always been evolving. Eventually, of course, growth becomes expensive enough, and value cheap enough, to close some of the performance gap.

Both growth and value investors hope it doesn’t take a global crisis to change the growth-versus-value performance dynamic though. Losing less money than another group of investors is a Pyrrhic victory.

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