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Growth Vs. Value Confusion as Apple, GE Treated Equally
CNBC.com | August 11, 2010 | 02:16 PM EDT

Investors are no longer paying more for the earnings of so-called growth companies, treating the group the very same as their slower-growing value counterparts as macroeconomic uncertainties cause them to paint the whole market with the same brush.

General Electric, the largest holding in the S&P 500 Value Index Fund , has a forward price-earnings ratio of fourteen. Apple , the quintessential growth stock and largest member in the S&P 500 Growth Index Fund, sports a P-E based on forward 12-month estimates of just 15.5 right now.

“Investors are so depressed that they can’t be bothered to put a higher valuation multiple on growth stocks relative to value stocks,” wrote Ed Yardeni, president of Yardeni Research, in a note to clients today. “The growth indexes generally outperformed value in 2009 in a stunning recovery from the ashes of 2008.”

Growth stocks are trading at a forward P-E ratio of 13.2, while value stocks are trading at an 11.4 forward multiple, according to Yardeni’s figures. The value index ETF took over the performance lead at the start of 2010 as investors jumped off the hot momentum plays and sought out larger, more stable stocks for a shaky, yet maturing recovery. But since the recent confusion this quarter, perpetuated most recently by the Federal Reserve’s statement Tuesday, both indexes have closed their gap and have started to trade nearly in tandem.

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