Is This Time Different for Value?
December 02, 2020 at 08:00 AM EST
By Debbie Carlson The value factor has been beaten up for years, so much so that some market analysts were beginning to wonder if the factor has lost its usefulness. Then value stocks started to look alive in the later part of 2020. Using Vanguard Value ETF ( VTV A ) for value and Vanguard Growth ETF ( VUG A- ) for growth, Tom Essaye, editor of The Sevens Report newsletter notes from Aug. 31 to Nov. 30, value outperformed growth, 6.4% to 2.1%. But year-to-date, growth still outperforms value, 33.6% to -3.6% Those numbers have market participants buzzing if this is finally value’s time and strong arguments for and against it. “This is such a good topic,” says Robert Wyrick, Jr., chief investment officer for Post Oak Wealth Advisors. But you can put Wyrick in the disbelievers camp when it comes to value. “My view is that this is a growth market and it has been since 2008,” he says. “We get these head-fakes for a year or shorter periods of time.” He says the big growth-stock names such as Alphabet, Amazon, Apple and Microsoft are still projecting earnings growth of 20% or 25%. “It’s just impossible to find that growth anywhere else,” he says. Robert Reid, senior equity analyst at Briefing.com, counters that there is shift to value happening after so many years of lagging growth. “A lot of people are kicking themselves for getting out of the market in March,” he says, especially after index rebounded. However, Reid points out that it hasn’t been a uniform rally, but one led by tech stocks and high-growth names, the ones benefitting from the work-from-home phenomenon. He’s starting to see some rotation out of those names and into sectors and companies that were hit hard by the pandemic, the “reopening stocks.” And he believes those names are going to have “a nice move over the next few months.” So is value making a comeback? Maybe. Wyrick seems to think that the recent bounce is all value stocks have in them. Yet Reid and other analysts and advisors say don’t overlook this style going into 2021. They have a few sectors and exchange-traded funds to consider for advisors wanting add a little more value to their holdings.