Saul's criteria confirmed by Morgan & MF

Lately here debate seems to be raging (almost literally) about the validity of this board’s reliance on growth and margins when choosing stocks. In a recent video, Tom Gardner of Motley Fool discussed research done by Morgan Stanley which shows that gain in stocks selected for growth results far outperform stocks selected for value. The study looks at one to 10 years. In the first year, value investing actually leads to better results. But by three years, stocks selected for growth far outperform stocks picked for value. After 10 years, the difference is remarkable. After 10 years, 75% of the gain in stocks is based on selecting stocks on growth results in 75% gain. When profitability (margins) is factored in, the result is 90%. Of course, growth and margins are two important criteria for Saul.

It’s difficult to replicate the table used by Gardner, but here’s a link to the video which contains it.…


research done by Morgan Stanley which shows that gain in stocks selected for growth results far outperform stocks selected for value. – MQ

My. Imagine getting paid to discover the obvious.

Growth is irresistible.

Rule Breaker Home Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.


Since 1926, value investing has returned 1,344,600%, according to Bank of America. During that same time growth investing returned just 626,600%. – mark

A lot can be “proved”… if you’re the one developing the criteria and analyzing the data.

I’m not signing up to do it, but I imagine a motivated “growth” investor could show the opposite results. :slight_smile:

Rule Breaker Home Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.


I guess I’m not really sure what the point is — except to say that if we were investing in the 1900s we should do something different than we are doing today? This whole thread is off-topic and should be deleted— but so long as it is still here—

Comparing indexes “value” “growth” etc is irrelevant.

There is only one requirement for a stock to fit into the “growth” category— and that is growth— it says nothing about the other criteria this board considers— gross margins, cash and debt, addressable market, etc.

Growth companies 50 years ago didn’t have 80% gross margins, Subscription revenue, or year over year growth anywhere remotely close to the companies today— many of our companies are growing at 70%, 80%, 90%, 100% or more per year—

Do you know what it takes to be considered a “growth” stock? 15%!

This Board’s philosophy isn’t to invest in companies with 15% annual growth— it’s to invest in great companies (Primarily SaaS), with hyperGrowth, Acceleration , ARR, TAM, High Gross Margins, and a crowd-shared vetting process.

Sorry!! Off my short soapbox—



Since 1926, value investing has returned …growth investing returned…


If you are so in love with Value stock investing, why are you wasting your time on a board for growth stock investing? There are plenty of boards who would welcome posts on Value investing. Just not this one.

And did you not realize that there was something suspicious about that starting date? 1926? Making sure to not capture the big surge of growth after WW1, but making sure to capture the years of the Depression. Whoever did that study picked that odd starting date out very carefully to get the results they were looking for.

And what does the performance of value stocks in the 1920’s and 30’s have to do with our SaaS cloud companies growing at 70% or 80% a year now, with recurring revenue, anyway?

Go back to a value board, unless you are willing to stay here and learn.



A lot can be “proved”… if you’re the one developing the criteria and analyzing the data.

A starting date of 1926 screams at selective criteria.


From the article Mark posted:

"Final Thoughts

Value investing has a tradition of outperforming growth investing over the long run. Indeed, over the past 100 years, value has significantly outperformed growth. Over shorter periods of time that are more relevant to investors, however, the case for value is less clear. Even over several decades, growth investing has outperformed value investing. From a practical standpoint, this may suggest that a blended approach to investing that includes both value and growth companies is best."

Now my thoughts:

Over the past 20 years or so - most of new and successful companies are from tech world + different types of platforms/tech. The main characteristic of the most successful companies nowadays can be put in 1 word - INTANGIBLES. It’s about intangible assets - brands, platform, software code, algorithm etc. Usually such intangibles are not “properly” reflected on the balance sheet. So, I’m coming closer to the widespread but IMHO WRONG definition of value investing - buying LOW P/B and P/E companies - and waiting for reversion to the mean taking place and selling when that happens. Low P/B company by definition should have big balance sheet. But modern successful companies with intangibles dominating balance sheet by definition will be excluded from that.

Second category - “low P/E companies”. The problem is the same - for digital modern companies EPS/accounting earnings have little value. There are many studies confirming that - check this out…

Here is one of the studies:

“In another study, we show that earnings explains only 2.4% of variation in stock returns for a 21st century company — which means that almost 98% of the variation in companies’ annual stock returns are NOT explained by their annual earnings.” This means that P/E is pretty much worthless for modern companies.

To bottom line is - the methodologies from 19th and 20th century for low P/B and low P/E strategies over the long term to outperform “other” strategies plainly don’t work in 21st century. Folks, rules of the games changed, reality changed. Investors need to adjust to new realities. Even Buffett bought Apple and Snowflake. He is not a buyer for many decades “low P/B” and “low P/E” companies.

So, Mark can look smart throwing to our board these kind of articles but I pretty much am confident that in 21st century the investors who apply these low P/B and low P/E strategies are underperforming other investors who understand CURRENT reality and how the economy and market functions NOW and not 70 years ago and base their investment approaches on this current reality and not how reality was in the past.



A starting date of 1926 screams at selective criteria.<?i>

The S&P index was created in 1926. So it is a date that a lot of analysis starts from.