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$\begingroup$ Thank you for your answer. To be honest with you, I am even more confused now. So you buy "expensive" stocks expecting them to rise? Wouldn't that make them relatively "cheap" again?!? $\endgroup$– vonjdCommented Jul 3 at 7:20
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$\begingroup$ @vonjd Sorry for the confusion but you're right. It can make sense to buy expensive stocks if they turn out to massively go up in value. NVIDIA and Google were expensive (relative to its fundamentals) five years ago, but investing in them has paid off anyway. On average, cheap value stocks outperform expensive growth stocks. Hence the famous value premium. But that does not mean that every growth stock is a sucker. Indeed, amongst the generally poor performing expensive growth stocks there are some great stocks. Identifying them is difficult but pays off. Growth investors try to do this. $\endgroup$– KevinCommented Jul 3 at 20:59
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$\begingroup$ I accepted your answer. I, of course, understand the metrics but I think the whole concept is flawed. Value has now underperformed growth for several years which means that in this timespan "expensive" was cheaper than "cheap". Obviously, the market (which is still the master of us all) "thought" that those stocks were mispriced. In the end, it all boils down to finding stocks that are mispriced relative to the only metric that really counts: future returns. Thoughts? $\endgroup$– vonjdCommented Jul 4 at 7:51
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$\begingroup$ @vonjd Thanks! I wouldn't quite agree with everything you said. In particular, I disagree with the word "mispricing". There are just as many rational/risk-based explanations why value stocks might outperform growth stocks than there are mispricing/behavioural stories. So you could just earn a high return because you take on more risk, which is totally fine $\endgroup$– KevinCommented Jul 5 at 9:33
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