Value stocks are again gaining some attention as the group rebounds, perhaps giving investors reasons to believe this time will be different. For example, the SPDR S&P 500 Value ETF (NYSEArca: SPYV) is higher by almost 10% over the past month.

SPYV’s underlying index – the S&P 500 Value Index – “contains stocks that exhibit the strongest value characteristics based on book value to price ratio, earnings to price ratio, and sales to price ratio,” according to State Street.

Value recently enjoyed a bullish stretch against growth, but it’s important to consider the low base from which the former previously traded.

“These strong returns originated from a position of weakness, as growth had been leading value for some time,” said Matthew Bartolini, Head of SPDR Americas Research, State Street Global Advisors, in a recent note. “Overall, growth outperformed for the full month of May as end-of-month strength was not enough to overcome the 8% lead built by growth during the first 15 days of the month.”

Sizing up SPYV

Value’s problem and that of ETFs like SPYV hasn’t been a pure performance, but rather performance when measured against growth stocks and the related funds.

“The rolling three-month performance dispersion between growth and value is currently 22%, which corresponds to the 96th percentile,” notes Bartolini. “Interestingly, however, this high level of dispersion is still 63% less than the all-time high dispersion of 53%, reached in 1999.”

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 trend reversed in a big way during the 2010s decade.

“The value recovery is a sight for sore value-investor eyes, but it may be on wobbly legs,” writes Bartolini. “The value recovery has coincided with a rally in high short interest stocks, which portends to the notion of a short cover rally.”

Value stocks usually trade at lower prices relative to fundamental measures of value, like earnings and the book value of assets. On the other hand, growth-oriented stocks tend to run at higher valuations since investors expect the rapid growth in those company measures, but more are growing wary of high valuations.

The $5.12 billion SPYV allocates more than 39% of its combined weight to healthcare and financial services stocks. No other sector has a double-digit weight in the fund.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.