Value Gap in US Equities Is Widening Once Again
Why the value opportunity is as good as or better than it was at the end of 2021 is highlighted by Bill Nygren, CIO-US, Harris Associates.
- High price-to-earnings (P/E) US stocks surprisingly outperformed during a time of rising interest rates in late 2022 and the first half of 2023. As a result, the value opportunity may be as good as it was at the end of 2021.
- The P/E dispersion among US equities is trending wider than normal – creating the potential for significant value in low P/E stocks.
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P/E Ratio or Price/Earnings multiple: The "price to earnings ratio" compares a company's current share price to its per-share earnings. May also be known as the "price multiple" or "earnings multiple". Investors should not base investment decisions on P/E alone, as the denominator (earnings) is based on an accounting measure that is susceptible to forms of manipulation. The quality of a P/E ratio is only as good as the quality of the underlying earnings number.
Dispersion is a measure of the variability in performance of individual components in a portfolio, compared to the average.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions are as of October 18, 2023 and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.
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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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