This paper provides a comprehensive firm level analysis of the relation between a firm's capital investment and its equity return. We find that firm capital investment is negatively associated with future equity returns in the time-series. In the cross-section, portfolios of firms with low investment growth rates or low investment capital ratios have significantly higher expected returns than portfolios of firms with high investment growth rates or investment capital ratios. With a stochastic discount factor, a standard investment model can generate the same predictive patterns of investments as in the data. Furthermore, an investment growth factor, which is the return difference between low investment stocks and high investment stocks, contains similar information as HML and can explain the value effect as well as HML.