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Growth vs. Value: Is Microsoft Stealing Google’s Investors?

Ashraf Eassa
March 27, 2014

Microsoft (NASDAQ: MSFT) had long been blasted as being a stale technology company that "missed mobile" and couldn't innovate. While long-suffering shareholders for the past 10 years dealt with a frustratingly range-bound stock in owning Microsoft, shareholders of names like Apple and Google (NASDAQ: GOOG) have been very richly rewarded over that timeframe. However, something interesting has been happening in the markets over the past few weeks -- is Microsoft getting Google's money, or is something bigger going on? 

What's been happening?
Over the past month, shares of Google are down 7.23%. Over that same period, shares of Microsoft are up a respectable 6.2%. Now, one could reasonably say that these moves aren't related -- it's just that Microsoft is breaking out to multi-year highs and Google is seeing a healthy pullback after such a massive run. While the direct Microsoft/Google inverse correlation may not exist, the past month has seen a general bias toward value rather than growth.

The following chart is split into two columns. On the left, we have the one-month returns of a number of household "value" technology stocks (all with price-to-earnings ratios under 15), and on the right, we have the 1-month returns of a number of household "growth" names. The trend is, for lack of a better word, interesting:

Value Tech

1-Month Returns

Growth Tech

1-Month Returns















ARM Holdings




3D Systems


Notice a trend? The high-growth names that have done so well over the past year are starting to pretty severely underperform. What's going on here? Why is growth suddenly out of vogue and why is value now in?

Could it be buyer exhaustion?
Keep in mind that while the "growth" names in the right column have underperformed over the short term, they're still wildly outperforming almost all of their value brethren. Facebook is still up a whopping 172% from its 52-week low, and 3D Systems is still up 81% over the past year. While value name HP has performed quite well, up 40% over the past year, and while Microsoft has been a surprisingly potent performer, up 40.85% over the past year, the growth names have done better.

Could this be a case of buyer exhaustion? No matter how many companies Facebook manages to buy with its stock, there's still no escaping the