After reliably and consistently beating growth companies for decades, lower-priced stocks have lost their edge. Since the mid-1990s, value stocks have roughly matched growth stocks' returns, and during the trailing 10-year period they have lagged.

In his most recent quarterly letter, Jeremy Grantham, co-founder of the money-management firm GMO, discusses why value investing has struggled. The letter is unusual in that Grantham is himself a value investor, and his organization's funds are suffering net redemptions. Fund executives who find themselves on the wrong side of the financial markets tend to defend their investment approach, not question it.

Instead, Grantham grants that this time might indeed be different. In particular, corporate profits have transformed. Grantham provides the return-on-sales figures for the S&P 500, dating back to 1970. For the first half of the period, the ROS hovers between 4% and 6%. It's artificial to draw a line at 5%, which Grantham does, as if that number represents the sequence's natural midpoint. However, such an exercise does capture the previous spirit of the ROS' behavior.