Investing for performance coming out of a recession

Value investors look for the sleepers in the marketplace—those companies that are believed to be undervalued but poised for growth. The result can be an opportunity to profit by buying stocks when their price is deflated and holding them until they recover.

Performance of Value Stocks

Value stocks have outperformed growth stocks 60 percent of the time over the past 20 calendar years (1990-2009).^* As indicated in the table below, they've done particularly well after periods of recession. Why? Because value companies generally cut their costs and assets to generate more operating leverage during economic downturns. This sets the stage for a greater acceleration in earnings as market conditions improve.

INDEX PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
This illustration is for illustrative purposes only, and does not represent the performance of The Hartford Mutual Funds, The Hartford variable annuities, or any particular investment. The Russell 1000 Value and Growth Indices are unmanaged; you cannot invest directly in these indices. Assumes reinvestment of income and no transaction cost.

*Data Source: Morningstar Direct, 10/09.

It's important to note that recessions vary in length and it's not possible to determine in advance when the current recession might end or that there is any assurance that the pattern shown above will be repeated.

Value Funds vs. Growth Funds

While value funds invest in companies that are believed to be undervalued, growth funds invest in companies whose earnings are expected to increase substantially over time.

The evolution from a growth company to a value company can be a natural part of a company’s life cycle. Microsoft, for example, is considered a value company today because its revenue has stabilized after years of rapid growth. Google, on the other hand, is a younger company whose products and services continue to grow at a rapid rate with earnings that coincide.

Growth companies can also move into the value category temporarily due to market conditions or other factors. Before investing in a fallen growth stock, a value manager must decide if a company’s problems are temporary or permanent.

Invest in Value with The Hartford Mutual Funds

The Hartford Mutual Funds offers a wide variety of value-oriented funds to help meet investors’ different needs. Learn more about The Hartford Mutual Funds' value suite »

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