Dilok Klaisataporn
Value stocks have continued to underperform as appetite for growth remains high.
But this “underperformance should not prompt investors to stay away from all value stocks entirely … as more pointed, valuation-based strategies can still deliver favorable price returns for investors,” BMO strategist Brian Belski wrote in a note.
Analysis “shows that an investment strategy which focuses solely on stocks with NTM P/E multiples less than 15x has produced attractive risk-adjusted returns over the longer-term, and we believe this type of value-oriented strategy can outperform in the coming months given the current market conditions and performance trends,” Belski said.
“Forward price multiples have been expanding all throughout this bull market with the current levels now exceeding 20x, which has been a relatively rare phenomenon since 1990,” he added.
“We would argue that this is precisely the type of environment that should benefit a value-focused investment strategy because when the majority of stocks are expensive, investors should be seeking lower-cost alternatives.”
“While the Financials sector currently makes up more than a quarter of this value strategy, most other sectors still have relatively decent representation with at least 10 stocks from seven other sectors comprising the current list,” Belski said. “In addition, despite common perceptions that a low P/E investment strategy would only provide exposure to the beaten-down names and groups, Technology – the best performing sector since 2023 – is one of the sectors that have at least 10 stocks within the current list.”
S&P 500 (NYSEARCA:SPY) (IVV) (VOO) Stocks With NTM P/E Below 15x Rated Outperform By BMO:
- AbbVie (ABBV)
- American International Group (AIG)
- Bunge Global (BG)
- Biogen (BIIB)
- Baker Hughes (BKR)
- CF Industries (CF)
- ConocoPhillips (COP)
- Corpay (CPAY)
- Chevron (CVX)
- Devon Energy (DVN)
- EOG Resources (EOG)
- Exelon (EXC)
- Gilead (GILD)
- Mosaic (MOS)
- Marathon Petroleum (MPC)
- Merck (MRK)
- Morgan Stanley (MS)
- Pfizer (PFE)
- PPG Industries (PPG)
- Phillips 66 (PSX)
- SLB (SLB)
- Travelers (TRV)
- Valero Energy (VLO)