For many ASX investors, much of their excitement of the stock market comes from picking a winning growth share and (hopefully) watching it do its thing.
But have ASX growth shares had their moment? One expert is going against the grain to declare the time has come to turn away from growth shares and towards more established investments.
Are they right? Here are some arguments for and against investing in growth shares in 2022.
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ASX growth shares: the bulls and the bears
Epoch Global Equity Shareholder Yield portfolio manager, John Tobin has come out swinging against growth shares today. He believes they will suffer in a rising interest rates environment.
According to Tobin, growth stocks have been outperforming established shares since 2020 due to a period of "artificially low interest rates".
"Our argument is [growth stocks] are going to face stronger headwinds when rates rise," he said.
"It's about the math, you can't get around it … for a given increase in interest rates, the impact on present value is greater for cash flows in the distant future."
However, other experts counter Tobin's bearish outlook with their own bullish arguments.
Montgomery Investment Management chair and chief investment officer, Roger Montgomery claims the pull-back experienced by the S&P/ASX 200 Index (ASX: XJO) in 2022 has left many growth shares trading for bargain prices.
In a piece published to Livewire, Montgomery said, "the current equity correction has taken a lot of the froth out of the market.
"But caught up in the carnage have been a number of high-quality companies with years of growth ahead."
Among them, are tech shares Megaport Ltd (ASX: MP1) and Pro Medicus Limited (ASX: PME). Each has had their price-to-earnings (P/E) ratios fall between 31% and 33% since the start of 2022, according to the expert.
Meanwhile, those of Transurban Group (ASX: TCL) and Reece Ltd (ASX: REH) have fallen between 25% and 29%.
Montgomery says now is the time to get in on "some of the highest quality names in the market". He continued:
This is … a plain vanilla correction that will see investors who have taken on too much risk in the quest for returns suffer more than those who have been disciplined about quality and value.
