Value stocks refer to those stocks which are priced lower than their intrinsic value or relative to the company’s fundamentals. For more than a decade, these have been trailing in the wake of ‘growth’ stocks, namely those showing high pace of earnings growth. Value stocks should not be confused with cheap stocks. The latter are priced low owing to weak fundamentals whereas value stocks usually pertain to businesses that show potential but face temporary issues. After a long time, value stocks have seen a sharp turnaround amid shift in market preferences away from growth stocks. ET Wealth analyses how this value rotation is playing out.Investors around the world have taken favourably to value stocks since October last year.
The emergence of value stocks has been more pronounced in the local stock market
Laggards over many years, value funds have also witnessed a turnaround in fortunes.
Value basket has fetched higher return than other investing styles.
Mid and small-caps have delivered smart gains even as metals stocks have benefited from an up-tick in commodity prices.
After a long hiatus, value stocks are dominating charts of pacesetters in the domestic market.
Growth stocks still command a hefty premium over value from a historical perspective.
Expensive, quality stocks continue to enjoy premium valuations.
51% of NSE200 universe has a negative Z-score on PB ratio which is significantly higher than in previous bull markets.
Negative Z-score indicates lower-than-average valuations for a stock compared to its long-term history. Stocks with negative PB Z-score and robust fundamentals are the best bets in an environment of ‘value rotation’ and economic growth revival. Data as on 12 Apr | Source: ICICI Securities(Graphics by Sadhana Saxena/ET Prime)
from Economic Times https://ift.tt/3am60hr
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