Value stocks and ETFs showed some signs of life against their growth rivals last month, but despite that modest resurgence, value still remains historically inexpensive.
Value investing is a popular long-term investment strategy. Value stocks have historically outperformed growth stocks, or companies with high earnings expectations, in almost every market over the long-haul, but that has not been the case for more than a decade.
Well-known value ETFs include the iShares Russell 1000 Value ETF (IWD), iShares MSCI USA Value Factor ETF (CBOE: VLUE), Vanguard Value Index Fund ETF Shares (NYSEArca: VTV) and the Vanguard Small-Cap Value ETF (VBR).
It’s common to see secular-growth stocks outperform during periods when broad economic growth is slipping or during the late economic cycle. However, some observers argued that investors are simply joining the crowd in the most popular stocks this time around.
“A measure of value versus growth across developed markets just slumped to its lowest since 1975,” reports Justina Lee for Bloomberg. “That marks more than four decades since shares dubbed inexpensive traded at such depressed levels versus those with the best earnings growth.”
Rare Opportunity in Value Investing
Obviously, value stocks are classified that way because they trade at discounts relative to other factors, such as growth, size, etc., but the current valuation anomaly is extremely rare by historical standards.