Value stocks have been getting less valuable.
Based on a comparison between the S&P 500 value index and the S&P 500, value stocks are actually underperforming the broad market by the widest margin since 2000.
Value stocks have been getting less valuable.
Based on a comparison between the S&P 500 value index and the S&P 500, value stocks are actually underperforming the broad market by the widest margin since 2000.
“This is a trend that goes all the way back to 2007, and it’s gotten much worse,” Eddy Elfenbein, editor of the Crossing Wall Street blog, said Friday on CNBC’s “Trading Nation.”
“Value’s supposed to be safety during the storm, and the policies of the Federal Reserve have made the benefit of taking on growth a lot more attractive for investors than the safety of value, and that’s left a lot of stocks behind,” he said.
Value, of course, is a relative term. But S&P Dow Jones Indices generates the value index by selecting those stocks in the S&P 500 that have some combination of a high book-value-to-price ratio, a high earnings-to-price ratio and a high sales-to-price ratio.
This brings up a more prosaic reason why value may be lagging. The opposite index, S&P 500 growth, is largely composed of information technology stocks, with a healthy showing from the market-leading consumer discretionary sector, and hardly any energy names. Meanwhile, energy stocks make up 12.5 percent of the S&P 500 valueindex. Indeed, the single-largest weighting is enjoyed by Exxon Mobil.