Since many investors sell their poorest performers, they have tended to dump value stocks
(especially deep value stocks
), accelerating these stocks' decline and sending them into something like a free fall.
This will no doubt sort itself out when the Fed raises interest rates, but what happens to value stocks
in the meantime?
Another investor who has felt the chill of the stealth bear market is Tom Bartkoski, whose diversified portfolio is weighted toward so-called value stocks
, or those whose prices are low relative to earnings, assets and sales.
These ideas, dating back to Graham and Dodd,(1) state that investing in value stocks
- defined as stocks with low prices relative to some measures of their current fundamentals, such as earnings or dividends - is more attractive than investing in growth stocks, those with high prices relative to measures of fundamentals.
Today the Turner Funds is introducing two no-load stock mutual funds, the Turner International Core Growth Fund, which invests in large and mid-cap growth stocks from markets around the world, and the Turner Midcap Equity Fund, which invests in both growth and value stocks
with market capitalizations represented in the Russell Midcap Index.
And if you zoom in a little further, you'll see that small cap value stocks
outperform small cap growth stocks.
After all, large-capitalization stocks usually aren't cheap, while value stocks
are supposed to be inexpensive based on key measures such as their price-to-earnings ratio.
In past years, he said, the flows of cash into mutual funds concentrating on value stocks
and those concentrating on growth stocks were about even.
One often hears how value stocks
outperform growth stocks; hence the value stock
Market leadership is likely to shift to large-capitalization value stocks
in an economic slowdown, Eley predicts.
That the shift away from the Nifty Fifty and into value stocks
has been accomplished as the broader indexes are rising is just another case of history being made by this prolonged bull market.
CHICAGO -- Richard Moroney says a diversified basket of small and midcap value stocks
is a winning strategy.