Don’t box me in – is style vs growth still relevant?
June 12, 2026
-
8 min
Patrick Lee
Vice President, Strategy Distribution, Vaughan Nelson Investment Management
For decades, the investment industry has organized equity portfolios into two dominant categories: growth and value. These labels, popularized largely by the mutual fund industry in the 1990s and later institutionalized by the Russell and S&P indices, provided investors with a simple framework for understanding what they owned and why. “Growth” stocks were those exhibiting above-average earnings expansion, typically with premium valuations; “Value” stocks were identified by low price-to-earnings and price-to-book ratios, often accompanied by dividend payments. The two camps were treated as opposing, binary poles of the investment universe.
While useful in a simpler era, this framework has not kept pace with the structural transformations reshaping global capital markets. The rise of tech-dominant mega caps, the volatility of interest rate cycles, and the proliferation of algorithmic and factor-based investing has rendered the classic growth-versus-value dichotomy not merely imprecise, but misleading.
The origins and logic of style-box investing
The empirical foundation for value investing traces back to Benjamin Graham and David Dodd’s Security Analysis (1934) and was reinforced by decades of academic research, most notably the Fama-French three-factor model. Growth investing, meanwhile, drew from Philip Fisher and later Peter Lynch, who argued that identifying companies with durable competitive advantages and long runways for expansion would reward patient investors far more than bargain-hunting.
The growth-versus-value framework was born of practical necessity. As mutual funds proliferated in the 1980s and 1990s, investors and advisors needed a shorthand for comparing funds and constructing diversified portfolios. Introduced in 1992, Morningstar’s style box became the industry standard, placing funds on a grid of market capitalization and valuation characteristics. The intuition was sound: companies with low current valuations and steady cash flows – the so-called value stocks – would tend to behave differently from high-multiple, rapidly expanding growth companies.
Both philosophies had merit and could coexist because they described genuinely distinct types of businesses operating in a relatively stable, industry-defined competitive landscape.
Why the framework has broken down
The most fundamental challenge to the classic framework is the emergence of companies that are simultaneously the fastest-growing, most profitable, and most cash-generative entities – ‘mature growth’ companies. This cohort of companies – formerly FAANG and more recently dubbed the “Magnificent 7” – often defy categorization.
Take, for example, Alphabet (née Google), a company that generates more than $100 billion in annual free cash flow, issues investment-grade bonds at sub-market rates, pays dividends, and repurchases stock aggressively – all behaviors traditionally associated with mature value companies – while also growing its core cloud and AI businesses at double-digit annual rates. Forcing such a company into either a “growth” or “value” box produces a distorted picture of its core fundamental attributes.
Perhaps unsurprisingly, this has led to overlap between index constituents. As of May 2026, there were 248 companies listed in both the Russell 1000 Value and Russell 1000 Growth index. If nearly 30% of the Russell 1000 Value and 60% of the Russell 1000 Growth is in this “mixed” camp, there’s clearly confusion on category constitution. Perhaps we should question category relevance, as well.
The AI disruption variable
No force has more thoroughly scrambled traditional categorization than artificial intelligence. AI is not merely a tech sector phenomenon; it is a cross-industry disruptor. AI rapidly transforms a stable, cash-generating “value” business into an obsolescence story. Alternatively, it can supercharge the productivity (and margins) of a company already classified as “classic” growth.
Nvidia is an instructive example: initially a cyclical semiconductor manufacturer – a borderline value candidate during downturns – Nvidia became the most valuable company in the world in a span of two years, driven by AI demand that no conventional valuation framework had predicted nor priced. Meanwhile, traditional media, software and data companies – many that recently seemed to be reliable value investments – suddenly faced existential threats from large language models. In this environment, the growth-versus-value labels tell investors virtually nothing useful about future return, risk, or long-term viability.
Should we replace the style box?
Abandoning the growth-versus-value framework does not mean abandoning analytical discipline. It means replacing a blunt two-category system with a richer set of variables that better reflect how value is created and destroyed in the modern economy. This adaptation also helps diminish the style-driven, mean-reversion performance whipsaw many have experienced in the post-COVID years.
Professional investors need latitude to organize their approach around business quality and durability. Attractive return on invested capital and return on equity (ROIC & ROE); strong free cash flow conversion; resilient competitive moats; management teams who allocate future capital to return-accretive projects: these are hallmarks of successful companies.
Meanwhile, factor analysis helps pinpoint exposure to momentum, profitability, and volatility drivers, among others. A keen focus on disruption risk – a qualitative, yet increasingly quantifiable assessment of a business’s exposure to tech shifts, regulatory change, or structural demand swings – helps managers attain more consistent and reliable predictive power than simply a “growth” vs. “value” paradigm. These are crucial research inputs in the modern economy.
Conclusion
The growth/value framework served a generation of investors well. It provided structure, enabled comparison, and introduced millions of retail participants to the concept of assessing “price vs. anticipated return.” But frameworks are tools, not truths, and tools must evolve as the work they perform changes.
In today’s economy, the most consequential investment decisions cannot be made through a binary lens. Whether to own AI infrastructure, how to evaluate and price cyclical industries like Energy, whether a dividend-paying technology giant belongs in an income portfolio or growth portfolio – these are nuanced and complex topics. The companies that generate the greatest wealth over the next decade will be those who combine growth, profitability, and resilience in ways that the classic framework was never designed to capture.
Investors who cling to the style box do so at their own peril. The future belongs not to those who ask, “is this a growth stock or a value stock?” but rather “is this a superior business trading at a sensible price? And can this company withstand the inevitable disruptions ahead?”
Subscribe to our newsletter
Sign up to receive all the latest insights
Related insights
How Aziz Hamzaogullari and his team generate long-term alpha
Aziz Hamzaogullari from Loomis Sayles discusses his team’s alpha thesis and AI, sell discipline, and the US election.
Caution amidst a concentrated equity market and contentious elections
Although the US equity market is very expensive and its first-half performance very concentrated, it still offers opportunities for a value and conviction-based investor like Harris Associates, who is convinced of the value of its investment process and able to avoid the political uncertainties that can affect the markets.
How AI megacaps are creating investment opportunities
The AI tech megacaps have distorted the market and created investment opportunities that active managers can capitalise on.
This material has been provided for information purposes only to investment service providers or other Professional Clients, Qualified or Institutional Investors. Where required by local regulation, this material is only provided upon written request from such investors. This material must not be used with Retail Investors.
In the E.U.: Provided by Natixis Investment Managers International or one of its Branch offices listed below. Natixis Investment Managers International is a portfolio management company authorized by the Autorité des Marchés Financiers (French Financial Markets Authority - AMF) under no. GP 90-009, and a simplified joint-stock company (société par actions simplifiée - SAS) registered in the Paris Trade and Companies Register under no. 329 450 738, Registered office: 43 avenue Pierre Mendès France, 75013 Paris. Germany: Natixis Investment Managers International, Zweigniederlassung Deutschland (Registration number: HRB 129507). Registered office: Senckenberganlage 21, 60325 Frankfurt am Main. Italy: Natixis Investment Managers International Succursale Italiana (Registration number: MI-2637562). Registered office: Via Adalberto Catena, 4, 20121 Milan, Italy. Netherlands: Natixis Investment Managers International, Dutch Branch (Registration number: 000050438298), Registered office: Amsterdam WTC, Zuidplein 36, WTC, Tower 1, 4th Floor, 1077XV Amsterdam, The Netherlands. Spain: Natixis Investment Managers International S.A., Sucursal en España (Registration number: NIF W0232616C), Registered office: Serrano n°90, 6th Floor, 28006 Madrid, Spain. Luxembourg: Natixis Investment Managers International, Luxembourg Branch (Registration number: B283713), Registered office: 2, rue Jean Monnet, L-2180 Luxembourg, Grand Duchy of Luxembourg. Belgium: Natixis Investment Managers International, Belgian Branch (Registration number: 1006.931.462), Gare Maritime, Rue Picard 7, Bte 100, 1000 Bruxelles, Belgium.
In Switzerland: Provided for information purposes only by Natixis Investment Managers, Switzerland Sàrl (Registration number: CHE-114.271.882), Rue du Vieux Collège 10, 1204 Geneva, Switzerland or its representative office in Zurich, Schweizergasse 6, 8001 Zürich.
In the British Isles: Provided by Natixis Investment Managers UK Limited which is authorised and regulated by the UK Financial Conduct Authority (FCA firm reference no. 190258) - registered office: Natixis Investment Managers UK Limited, Level 4, Cannon Bridge House, 25 Dowgate Hill, London, EC4R 2YA. When permitted, the distribution of this material is intended to be made to persons as described as follows: in the United Kingdom: this material is intended to be communicated to and/or directed at investment professionals and professional investors only; in Ireland: this material is intended to be communicated to and/or directed at professional investors only; in
Guernsey: this material is intended to be communicated to and/or directed at only financial services providers which hold a license from the Guernsey Financial Services Commission; in Jersey: this material is intended to be communicated to and/or directed at professional investors only; in the Isle of Man: this material is intended to be communicated to and/or directed at only financial services providers which hold a license from the Isle of Man Financial Services Authority or insurers authorised under section 8 of the Insurance Act 2008.
In the DIFC: Provided in and from the DIFC financial district by Natixis Investment Managers Middle East (DIFC Branch) which is regulated by the DFSA. Related financial products or services are only available to persons who have sufficient financial experience and understanding to participate in financial markets within the DIFC, and qualify as Professional Clients or Market Counterparties as defined by the DFSA. No other Person should act upon this material. Registered office: Unit L10-02, Level 10 ,ICD Brookfield Place, DIFC, PO Box 506752, Dubai, United Arab Emirates
In Japan: Provided by Natixis Investment Managers Japan Co., Ltd. Registration No.: Director-General of the Kanto Local Financial Bureau (kinsho) No.425. Content of Business: The Company conducts investment management business, investment advisory and agency business and Type II Financial Instruments Business as a Financial Instruments Business Operator.
In Taiwan: Provided by Natixis Investment Managers Securities Investment Consulting (Taipei) Co., Ltd., a Securities Investment Consulting Enterprise regulated by the Financial Supervisory Commission of the R.O.C. Registered address: 34F., No. 68, Sec. 5, Zhongxiao East Road, Xinyi Dist., Taipei City 11065, Taiwan (R.O.C.), license number 2020 FSC SICE No. 025, Tel. +886 2 8789 2788.
In Singapore: Provided by Natixis Investment Managers Singapore Limited (NIM Singapore) having office at 5 Shenton Way, #22-05/06, UIC Building, Singapore 068808 (Company Registration No. 199801044D) to distributors and qualified investors for information purpose only. NIM Singapore is regulated by the Monetary Authority of Singapore under a Capital Markets Services Licence to conduct fund management activities and is an exempt financial adviser. Mirova Division (Business Name Registration No.: 53431077W) and Ostrum Division (Business Name Registration No.: 53463468X) are part of NIM Singapore and are not separate legal entities. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
In Hong Kong: Provided by Natixis Investment Managers Hong Kong Limited to professional investors for information purpose only.
In Australia: Provided by Natixis Investment Managers Australia Pty Limited (ABN 60 088 786 289) (AFSL No. 246830) and is intended for the general information of financial advisers and wholesale clients only.
In New Zealand: This document is intended for the general information of New Zealand wholesale investors only and does not constitute financial advice. This is not a regulated offer for the purposes of the Financial Markets Conduct Act 2013 (FMCA) and is only available to New Zealand investors who have certified that they meet the requirements in the FMCA for wholesale investors. Natixis Investment Managers Australia Pty Limited is not a registered financial service provider in New Zealand.
In Korea: Provided by Natixis Investment Managers Korea Limited (Registered with Financial Services Commission for General Private Collective Investment Business) to distributors and qualified investors for information purpose only.
In Latin America: Provided by Natixis Investment Managers International.
In Colombia: Provided by Natixis Investment Managers International Oficina de Representación (Colombia) to professional clients for informational purposes only as permitted under Decree 2555 of 2010. Any products, services or investments referred to herein are rendered exclusively outside of Colombia. This material does not constitute a public offering in Colombia and is addressed to less than 100 specifically identified investors.
In Chile: Esta oferta privada se inicia el día de la fecha de la presente comunicación. La presente oferta se acoge a la Norma de Carácter General N° 336 de la Superintendencia de Valores y Seguros de Chile. La presente oferta versa sobre valores no inscritos en el Registro de Valores o en el Registro de Valores Extranjeros que lleva la Superintendencia de Valores y Seguros, por lo que los valores sobre los cuales ésta versa, no están sujetos a su fiscalización. Que por tratarse de valores no inscritos, no existe la obligación por parte del emisor de entregar en Chile información pública respecto de estos valores. Estos valores no podrán ser objeto de oferta pública mientras no sean inscritos en el Registro de Valores correspondiente.
In Mexico: Provided by Natixis IM Mexico, S. de R.L. de C.V., which is not a regulated financial entity, securities intermediary, or an investment manager in terms of the Mexican Securities Market Law (Ley del Mercado de Valores) and is not registered with the Comisión Nacional Bancaria y de Valores (CNBV) or any other Mexican authority. Any products, services or investments referred to herein that require authorization or license are rendered exclusively outside of Mexico. While shares of certain ETFs may be listed in the Sistema Internacional de Cotizaciones (SIC), such listing does not represent a public offering of securities in Mexico, and therefore the accuracy of this information has not been confirmed by the CNBV. Natixis Investment Managers is an entity organized under the laws of France and is not authorized by or registered with the CNBV or any other Mexican authority. Any reference contained herein to “Investment Managers” is made to Natixis Investment Managers and/or any of its investment management subsidiaries, which are also not authorized by or registered with the CNBV or any other Mexican authority.
In Uruguay: Provided by Natixis IM Uruguay S.A.. Office: San Lucar 1491, Montevideo, Uruguay, CP 11500. The sale or offer of any units of a fund qualifies as a private placement pursuant to section 2 of Uruguayan law 18,627.
In Brazil: Provided to a specific identified investment professional for information purposes only by Natixis Investment Managers International. This communication cannot be distributed other than to the identified addressee. Further, this communication should not be construed as a public offer of any securities or any related financial instruments. Natixis Investment Managers International is a portfolio management company authorized by the Autorité des Marchés Financiers (French Financial Markets Authority - AMF) under no. GP 90-009, and a simplified joint-stock company (société par actions simplifiée – SAS) registered in the Paris Trade and Companies Register under no. 329 450 738. Registered office: 43 avenue Pierre Mendès France, 75013 Paris.
The above referenced entities are business development units of Natixis Investment Managers, the holding company of a diverse line-up of specialised investment management and distribution entities worldwide. The investment management subsidiaries of Natixis Investment Managers conduct any regulated activities only in and from the jurisdictions in which they are licensed or authorized. Their services and the products they manage are not available to all investors in all jurisdictions.
Although Natixis Investment Managers believes the information provided in this material to be reliable, including that from third party sources, it does not guarantee the accuracy, adequacy, or completeness of such information.
This document may contain references to copyrights, indexes and trademarks that may not be registered in all jurisdictions. Third party registrations are the property of their respective owners and are not affiliated with Natixis Investment Managers or any of its related or affiliated companies. Such third party owners do not sponsor, endorse or participate in the provision of any Natixis Investment Managers services, funds or other financial products.
The index information contained herein is derived from third parties and is provided on an “as is” basis. The user of this information assumes the entire risk of use of this information. Each of the third party entities involved in compiling, computing or creating index information, disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to such information.
The provision of this material and/or reference to specific securities, sectors, or markets within this material does not constitute investment advice, or a recommendation or an offer to buy or to sell any security, or an offer of any regulated financial activity. Investors should consider the investment objectives, risks and expenses of any investment carefully before investing. The analyses, opinions, and certain of the investment themes and processes referenced herein represent the views of the individual(s) as of the date indicated. These, as well as the portfolio holdings and characteristics shown, are subject to change and cannot be construed as having any contractual value. There can be no assurance that developments will transpire as may be forecasted in this material. The analyses and opinions expressed by external third parties are independent and does not necessarily reflect those of Natixis Investment Managers. Any past performance information presented is not indicative of future performance.
This material may not be distributed, published, or reproduced, in whole or in part.
All amounts shown are expressed in USD unless otherwise indicated.
DR-80194