Berkshire Hathaway’s Dual S&P 500 Growth/Value Classification Raises Style Index Criticism

A 2025-12-02 Reddit post [3] brought attention to unusual S&P 500 style index classifications, prompting scrutiny of the index’s methodology. According to the Wall Street Journal [1], Berkshire Hathaway (BRK) is indeed classified in both the S&P 500 Growth and Value Indices. Advanced Micro Devices (AMD), despite a trailing P/E ratio of ~115 [0] (a metric typically associated with growth stocks), was claimed to be exclusively in the Value Index in the Reddit post.

The S&P Dow Jones Indices methodology for style classification uses a combination of 5 growth factors (e.g., sales growth, earnings change) and 5 value factors (e.g., P/E, P/B) [0]. Unlike many mutual fund classifications, S&P allows stocks to be in both Growth and Value indices if they exhibit a mix of both characteristics—a segment known as “core.” This explains BRK’s dual placement: the company has value traits (trailing P/E ~16 [0], $381B in cash on its balance sheet [2]) and growth traits (stable earnings growth, ~121% 5-year total shareholder return [0]). For AMD, while its high P/E suggests growth, other value factors in the S&P methodology may have influenced its classification.

1. Binary Growth/Value Labels Are Inadequate
   : The dual classification of BRK and AMD’s unexpected Value placement highlight that many stocks exhibit mixed characteristics, making strict binary labels misleading.
2. S&P Methodology Transparency Is Critical
   : Investors relying on style indices may not fully understand the overlapping membership rule, leading to potential portfolio construction confusion.
3. Alternative Index Concepts Gain Relevance
   : Criticisms of traditional style indices, such as the “diworsification” mentioned in the Reddit post, may increase demand for fundamental index funds (like Arnault’s concept) that weight stocks by fundamental metrics (sales, earnings, dividends) instead of style labels.

• Risks
  :
  • Investor Misallocation
    : Misinterpretation of style classifications could lead investors to build portfolios that do not align with their intended growth/value strategies.
  • Index Fund Inefficiencies
    : Overlapping holdings in S&P Growth and Value indices may reduce diversification benefits and impact fund performance.
• Opportunities
  :
  • Methodology Improvements
    : The scrutiny may prompt S&P to enhance transparency or refine its style classification metrics.
  • Alternative Index Adoption
    : Demand for fundamental or smart beta indices could grow as investors seek more meaningful classification systems.

• BRK: Trailing P/E ~16, market cap ~$1.1T, 5-year return ~121% [0]; classified in both S&P 500 Growth and Value Indices [1].
• AMD: Trailing P/E ~115, market cap ~$358B, YTD return ~82% [0]; claimed to be in only S&P 500 Value Index [3].
• S&P Style Methodology: Allows overlapping memberships based on 10 combined growth/value factors [0].
• Arnault’s Fundamental Index: Weights stocks by fundamental metrics (sales, earnings, dividends) to avoid style-related inefficiencies [3].