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Letter From The Editor Opinion

Growing Season

In this week’s issue of the Flyer, I wrote about Matt Vinson and Iris Valenzuela-Vinson’s mobile plant store, Viva La Plant Bus. To prepare for the piece, I also spoke with Amanda Willoughby and Eso Tolson, two Memphians making moves in the local art scenes, who are also well-known for their plant person status. For me, it was an absolute delight, and I hope our readers will feel the same.

I can’t remember my first “green thumb” moment. My mother, my dad, and my grandmother (we always called her Grannie) all kept houseplants and were all gardeners.

I can remember my mother darting over to some houseplant on a shelf in a restaurant and quickly snipping off a cutting to propagate it at home. Houseplants were more her forte; whereas, Grannie and my dad preferred to tend an outdoor garden. I remember picking blackberries at Grannie’s house, plucking green worms off the tomato vines, and shucking corn or snapping peas while sitting on the floor in her living room. She didn’t grow the latter two, but she traded with her neighbors.

My dad, meanwhile, turned the area around his little white house out in rural West Tennessee into something out of a storybook. That was after we lost our house in Midtown Memphis and around the time that my sister and I spent the school year in Phoenix, Arizona, with my mother. I think Dad wanted to give us something to look forward to, to transform the loss of stability into an excess of constantly transforming natural fireworks. So moss and lichen covered rocks in the yard, and dogwood trees and wildflowers blossomed between tall pine trees.

The lessons I took from my time bouncing between Memphis, Phoenix, and a little house out “in the country” are strangely similar to the lessons we, as a society at large, are refusing to learn from the last 20 months or so. The first and foremost lesson — that any community is only as healthy as its least-protected member — is not where I want to focus today. No, that’s a subject for another column; rather, I think we need to take a step back and remember that we are not separate from nature. We tend to think in binaries, to look at the world as the realm of the natural, distinct from the human-made world of cities and social hierarchies. But what we do affects the world, and the opposite is just as true.

More specifically, we’ve forgotten that all things operate in cycles. There is a growing season, but just as important is the time when a field lies fallow. Nutrients in the soil will be depleted, and quickly, if it’s made to overproduce. And the same hardy cacti that thrive in the arid Sonoran Desert will rot in Tennessee humidity. Plants are not one-size-fits-all. Nor are we meant to operate at the same capacity every day, but that’s what has been expected of nearly everyone during a global pandemic. We’ve seen mass death, but we haven’t allowed ourselves time to grieve.

Of course, these issues impact everyone to a different degree. Remote work isn’t always ideal, but it’s possible in the field of journalism. The same can’t be said for every job. And it seems to me to be one of our greatest failings that we demanded the economy to operate as usual, that goods and services should be as readily available as ever. We have built a system unable to tolerate the slightest disruption, and one that serves very few of us.

Many of the individual problems we’re struggling to address are symptomatic of this larger ailment, this refusal to admit that humans need time in which they aren’t required to be productive. I hope we can, instead of returning to normal, find a way to be better, to shape our economic system and social structures to benefit each of us.

In short, I hope we grow.

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News News Feature

Terms of Confusion: Value vs. Growth

Question: I see a lot of articles about value vs. growth and which stock will do better over time, but I’m not sure what that means. What should an average investor know about value and growth? 

Answer: This is a confusing topic because there are many definitions and they are used loosely and interchangeably. Here are a few examples of what value and growth mean to different people: 

Professors Eugene Fama and Kenneth French did research into factors that drive investment returns. Dividing the overall market value of a company by the value of assets they own creates a metric called the “price-to-book” (p/b) ratio. This is one way of considering whether a company is cheap or expensive. Famously, the Fama-French research found that cheap stocks (low p/b) tend to outperform expensive stocks (high p/b). They called the cheap stocks “value” and the expensive stocks “growth.” It’s unfortunate that they decided to use these terms because “growth” sounds much more alluring than “expensive,” which is what the authors really meant by growth in this context. 

There’s a category of active investment managers known as value investors, and they don’t give a darn how a couple of finance professors define value and growth. Value investors simply like to try to buy a dollar for less than a dollar by finding undervalued, underpriced, misunderstood opportunities. Their picks might often have a low p/b ratio but just as easily might not. For example, Alphabet (Google) is a position widely held by value investors today. They likely choose it not because it is cheap by traditional valuation metrics, but rather because they believe there are aspects of the company the market doesn’t fully understand or appreciate. A value investor could easily buy an “expensive” stock like Google if their calculations suggest it’s worth more than its market price today. Note that expensive and cheap have nothing to do with the share price. In this context, it doesn’t matter if the share price is $5 or $5,000. 

A more informal definition of value vs. growth has to do with earnings.  Companies that are growing quickly might not pay a dividend today, but the promise of big future dividends or an eventual payout due to the company being acquired is enough to draw investors in. These are often referred to as growth companies. Mature companies that are not growing quickly attract investors through things like dividends, share buybacks, and mergers and are considered value companies. This is probably the least clearly defined facet of value vs. growth, and is probably best summarized as young companies (growth) vs. mature companies (value). There’s no widely accepted definition here, but most people know it when they see it. 

To further confuse things, there is the matter of mutual fund regulation. Each fund is required to state a prospectus objective. A pure bond fund with the goal of generating investment income from bond coupons is likely to have an income objective. A stock fund targeting share price appreciation with little or no dividend yield tends to state growth as an objective. Funds targeting a mix of the two often declare they are “growth and income” funds. Here, growth means “stuff we hope will increase in price over time,” or just stock exposure. It has nothing to do with the specific qualities of the companies being purchased. 

When an average person chooses funds in a 401k, they probably aren’t applying any of these definitions. Sadly, it can end up being like a Rorschach test — does value or growth define you as a person? (Side note: Don’t pick funds like this!) 

There’s a deep desire in our reductionist culture to simplify complex concepts into single numbers or labels, which is the reason why the investment community has tried to cram a wide variety of concepts into these two simple terms. There’s no simple answer that will always work perfectly in every market environment; otherwise, everyone would be doing it and we wouldn’t be having this conversation.  

Whether you choose your own investments or use an advisor, always make investment decisions deliberately and with full understanding of how investments are picked by the fund manager and why.  A mistake compounded over time can have profound negative implications, just as good choices can pave the long-term path to a secure financial future, whether those choices are labeled value, growth, or something else entirely.
Gene Gard is Co-Chief-Investment Officer at Telarray, a Memphis-based wealth management firm that helps families navigate investment, tax, estate, and retirement decisions.