It Appears To Be Time For Value Stocks To Shine Again

Johnny HopkinsValue Investing News Comments

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Recent article at The Street says, it appears to be time for value stocks to shine again. The trend reversal is likely to last for years, rather than weeks or months.

Here’s an excerpt from that article:

Traditional “value” investing used to mean buying near the bottom of a stock’s yearly price range and when its price/earnings multiple was depressed. It often also went along with collecting a nice yield.

“Growth” investors were more focused on rapidly rising sales and profits. They were usually willing to pay above-average multiples while chasing shares at or near the top of their recent annual peaks.

Neither technique is always best. There are occasional periods when both do well, or badly. However, traders most of the time seem focused on one style to the detriment of the other. The graph below illustrates the mood swings in place from near the top of 2000’s Internet/tech bubble through last Friday, June 9.

Tech stocks imploded after March 2000, triggering around a seven-year pivot toward more mundane issues. Lots of money was made in value-priced stocks even as technology shares were contracting.

Last week saw the value/growth relationship fall to near its lowest level in 17 years. Contrarian thinkers with reasonable time horizons should take it as a signal to be shunning high-fliers and loading up on out-of-favor names.

You can read the full article here.


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