Displaying items by tag: value

(New York)

Walmart has taken a pounding this year. The stock is down 8.4% even though it has seen solid earnings performance. The reason why? Shares first got beat up early in 2018 when investors worried its digital strategy wasn’t taking hold. Then in the middle of the year worries about margins cropped up. Finally, in November, shares saw losses even though Walmart beat earnings and raised payouts. Interestingly, the shares were a counterpoint to the rest of retail, which saw gains for much of the year.

FINSUM: We think Walmart is a great buy. It has good same store sales momentum and its ecommerce operation is growing rapidly. This seems like a good buying opportunity to us, especially as the brand sells consumer staples, which will hold up even in an economic downturn.

(New York)

How do you know when the market is bad? When the safest stocks are also the best performing. It sounds like an old market joke, but it couldn’t be more true right now. Stocks are down around 10% this month, the worst December since the Great Depression. A good sample of these low volatility stocks can be found in Invesco’s S&P 500 Low Volatility ETF (SPLV). That ETF has fallen just 7% from the market’s September peak, while the S&P 500 has fallen 16%. Looking at correlations, the majority of stocks with the best 90-day momentum are also those with the lowest volatility.

FINSUM: The market is playing defense, and with good reason.

(Portland)

A lot of investors may be looking for stocks with good value at the moment. Stocks that are badly beaten up, but have good underlying businesses, can be prime buys during adverse market conditions. With that in mind, take a look at Nike. The sportswear giant has shed 16% this quarter and will release earnings later today. Investors’ skepticism will either be proven correct, or wrong. The thing is, the core business looks compelling. The company gave guidance in September that it was expecting currency-neutral revenue to grow 9%. One analyst summarized the stock this way, saying “buy Nike into earnings. Nike sales are gaining momentum and the company is gaining market share across channels and geographies.”

FINSUM: Nike has done an admirable job catching up to rivals recently, as well as in passing on rising costs to consumers. Our instinct is that this is a good buy.

(New York)

Something interesting has been happening for value stock investors lately—value stocks have been outperforming. Value investing as a discipline has been suffering for at least a decade as growth stocks won out. The malaise has been so poor that many have given up on the philosophy altogether. So with the recent turnaround, should that be reconsidered? Barron’s says the answer is a firm “no”. The recent outperformance of value may just be an aberration related to movements in particular sectors. The reality is that most value indexes have little exposure to the sectors that are suffering, like tech and consumer discretionary. Therefore, their outperformance is more a coincidence than a turn in the market.

FINSUM: We’d have to agree with this view. It does not seem like there has been some fundamental change in investors’ thinking, more that anxiety has just struck the most growth-oriented sectors.

(New York)

Value investing has been dead for a long time. So long in fact that many of its strongest disciples are even starting to wonder if it will ever return. Well, something interesting has happened this month. The broader market was down 8.9%, but the S&P Value Index only fell 5%, showing that value stocks have actually been outperforming the market during the recent turmoil. BlackRock is sticking to value stocks, with the head of factor-based investment strategy commenting that “We find the economic rationale still holds … We’re comforted by 90 years of long-run data, where value time and time again outperforms growth”. One of the issues for investors is that there is no clear way to define value, as each index uses its own metrics.

FINSUM: Value stocks do seem interesting right now, as this is the kind of environment where they would thrive. But do you determine value based on price to book, P/E ratio, returns, or something else?