It’s just saying that it doesn’t reflect how managers actually design their portfolios/pick securities because its arbitrarily placing certain categories onto their decisions and classifying them from there.
If we take the specific buckets:
· Value vs. Growth – High P/E = growth, low P/E high dividend = value, Average = market-oriented
· Earnings Per Share Growth – High growth rate = growth investor
· Earnings Volatility – Higher earnings volatility = value investor (more cyclical stocks)
· Industry Representation –Value investors concentrated in utilities/financials. Growth investors in healthcare & technology
A portfolio manager isn’t sitting there saying I’m a growth investor therefore I must only invest in stocks with higher earnings volatility..