Growth Stocks Show Stronger Fundamentals Than Value

Core Viewpoint - Growth stocks are exhibiting stronger fundamentals compared to value stocks, with higher earnings growth and healthier balance sheets despite concerns over tariffs and deficits [1] Group 1: Earnings Growth and Financial Health - Growth indices show a projected long-term earnings per share growth of 14.4%, while value indices show only 10.2% [1] - Growth companies maintain healthier debt levels, with net debt at 0.4 times earnings before interest, taxes, depreciation, and amortization, compared to 2.2 times for value companies [1] - Approximately $10 trillion in announced private fixed investment in the U.S. supports these fundamentals, enhancing productivity and industrial capacity [1] Group 2: Investment Cycle and Valuation Metrics - The $10 trillion investment pipeline spans various sectors, including artificial intelligence infrastructure and manufacturing capacity, expected to boost productivity and industrial capacity in the coming years [1] - Traditional valuation metrics may become less effective in assessing companies whose value is increasingly driven by intangible assets, such as software and intellectual property [1] - A research-driven approach is essential to identify companies positioned for long-term innovation-led growth, as modern growth businesses often do not fully reflect their value in traditional accounting measures [1] Group 3: Growth Investing Strategy - The Alger 35 ETF takes a focused approach to growth investing, holding 35 companies identified through fundamental research as having promising growth potential [1] - The fund, launched in May 2021, currently has assets of $124 million and carries a 0.55% expense ratio [1] - The combination of superior earnings growth, stronger balance sheets, and a developing capital investment cycle suggests that growth stocks may be better positioned than traditional metrics indicate [1]