The Growth vs. Value Game

Growth is what the market favors now, and value guys shouldn't make the mistake of scorning that.
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The value matrix vs. the growth matrix, an age-old claymation death match, has always had its partisans on either side.

The trick as a trader, I find, is never to be so arrogant as to be a value guy in a growth market or a growth stalwart in a value era. (Here's a Freudian slip: The first time around, I spelled the word "traitor.")

In the mid-80s, I was value personified. In fact, when I was a columnist for the late and lamented

Seven Days

, I wrote a piece that praised

Honeywell

(HON) - Get Report

for being a terrible company and wrote that the worse it got, the more I liked it. I called it "bizarro investing." That pre-

Cisco

(CSCO) - Get Report

market loved value so much that I spent all my time looking through annuals for the stodgiest, most sleepy management with the most corporate jets and golf courses. I bought position limit calls on the worst ones and made a fortune in takeouts.

No more. Now those companies do nothing but sit on the new low list, waiting to die. The only lift they have is when they get rebalanced in some index.

Growth, on the other hand, is loved now. Hypergrowth is extremely loved. To pretend that growth is not the matrix is, in my opinion, not naive, but arrogant. What you are saying is that the market is wrong. I can't afford to make that judgment.

Rich people, those who don't need to make any money, can afford to be arrogant. Performance managers and those who are in the market not to preserve capital but to make money can't be arrogant.

When we hear people sniff at the Net, what we don't like is the arrogance of it, the notion that, "Heck, you go play. I've seen it all before, and I know how it ends -- badly." We feel we should be trying to explain and beat the relevant matrix, whatever the matrix is at the time. Our duty is not to question the matrix; it is to beat it.

What has made the death match seem so

Thunderdome

-like is that the growth matrix has lasted longer than it has in the past. Much, much longer. It is driving the value guys into levels of anger that make the attacks on the growth champs seem almost ad hominem.

How does the death match end? Oddly, I believe it ends in the conversion of the arrogant value guys into Web heads. When that happens, the match is over and it will be time to switch sides.

Random musings:

Here's a sign of the times. I recently overheard in my office this bit: "It's trading at 210 bid, 212 offered." There was a time when I would have known exactly what stock

Jeff Berkowitz

and

Mark Kantor

were talking about. Now, there are a half-dozen stocks I follow in that price range!

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Cisco, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

letters@thestreet.com.