In his recent interview on ValueWalk, Rich Pzena discussed why earnings growth rates are higher for value stocks than growth stocks for the next two years. Here’s an excerpt from the interview (H/T Forbes):
“A typical value cycle that’s tied to an economic cycle lasts for quite some time,” Pzena said. “… The momentum stocks in the market become the same stocks as the value stocks.
It’s what people don’t really understand when you’re late in an economic cycle. It’s the growth stocks that are the momentum stocks.
But today, if we look forward over the next two years, and you took a universe of cheap stocks of value, and looked at what their earnings growth forecasts, not even ours, the consensus forecasts, but the next couple of years, the growth rates are higher than they are for growth stocks. And so as that plays out, you tend to get an extended cycle.”
You can read additional excerpts from the interview on Forbes here:
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