Equities

Is now an unusually attractive time for value stocks?

June 25, 2025 - 5 min read

Partner, Portfolio Manager and Chief Investment Officer – U.S. – Harris | Oakmark

Bill Nygren: I think today's a really interesting time for value stocks, really because it's been such a poor time for them for most of the past decade. The result of that is that valuation spreads today are unusually large. And the percentage of the S&P 500^® multiple you have to pay to buy good businesses, especially outside the technology sector, is unusually low.

Sometimes people think when you buy value stocks that means you have to sacrifice on quality. What we try to do at Harris Oakmark is to buy good businesses that are high-quality businesses when they're out of favor and cheap. And I think that's especially important when the economy is as uncertain as it is today. You need to make sure that the business that you're buying, that you think is cheap, is high enough quality, that it's going to survive most any economic environment we could be forced to endure over the next several years.

One of the exciting things about the opportunity set for value investing today is how broad based it is. A lot of times value is just in one or two sectors. But today, if you move away from technology, most everything in the market looks unusually attractive. So we're finding value not just in some of the traditional value sectors, like financials or oil and gas, but also in media, in technology, consumer nondurables, consumer durables.

Even today, some health care names are also starting to look attractive to us. So you can put together a pretty well-diversified portfolio and not have to pay anything like the S&P 500^® multiple.

I think one of the most interesting things about today's market has been how much the character of the S&P 500® Index has changed in just the past couple of years. Investors have gotten used to the idea that a passive investment in the S&P 500^® is a very well-diversified investment and relatively low risk. And it has been through most of the past couple decades.

But the dominance today of a handful of mega-cap growth technology companies has dramatically increased the risk profile in the S&P 500^® and I think has made it a much less appropriate benchmark for individuals trying to figure out whether they are on track or not to meeting their long-term financial goals.

I think an investor today, who has some of their assets in the S&P 500®, be well served by taking advantage of the opportunity to add to the diversified value component in their portfolio and potentially is not only decreasing risk but could be increasing the return potential of their portfolios.

Harris l Oakmark CIO-U.S. and Portfolio Manager Bill Nygren shares why value stocks abound in many sectors and how they may help investors reduce overall portfolio risk and increase returns, even in today’s uncertain markets.

Key highlights:

Today, valuation spreads are unusually large for value stocks, while the percentage of the S&P 500^® Index multiple you pay to buy good businesses is unusually low.
This means the opportunity set for value investing is now broad based, with almost everything outside the technology sector looking unusually attractive – including financials, oil and gas, media, consumer nondurables, consumer durables and healthcare.
The risk profile of the S&P 500^® Index has dramatically increased due to the dominance of a handful of mega-cap technology companies, making it a much less appropriate benchmark for investors who are trying to gauge if they are on track to meet their long-term financial goals.
Investors who add to the diversified value component of their portfolios may not only help decrease overall risk but also could potentially help increase returns.

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This material is for informational purposes only and should not be construed as investment advice. All investing involves risk, including the risk of loss. The views and opinions expressed may change based on market and other conditions. They are subject to change at any time based on market and other conditions. There can be no assurance that developments will transpire as forecasted. Past performance is no guarantee of future results.

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Investing in value stocks presents the risk that value stocks may fall out of favor with investors and underperform growth stocks during given periods.

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