Displaying items by tag: value
The U.S. economy could be running as hot as ever, particularly when it comes to price pressure…see the full story on our partner Magnifi’s site
Markets have been turbulent over the last month but overall 2021 couldn’t be…see the full story on our partner Magnifi’s site
An asset manager at Applied Finance Capital Management told market watch of…see the full story on our partner Magnifi’s site
Bank of America put out a very refreshing outlook today, reminding investors of an asset that has traditionally thrived in times of high inflation. And no, it isn’t gold or other commodities. That asset is…small caps. BAML says that small caps, and value stocks as well, have traditionally performed well in high inflation environments, such as in the 1960s. According to the firm, “Our US Regime Indicator has shifted to Mid-Cycle, a phase where inflation is typically strongest. In this phase, small caps and Value have typically outperformed large caps and Growth - further supported by the profits recovery and economic rebound we expect this year. Small caps and Value stocks were also some of the best-performing assets during the inflationary period of the late 60s”.
FINSUM: History aside, we cannot really agree about the idea that small caps will thrive. Relative to large caps, small caps have a higher employment cost base because their employees are more often in the US. Their supply chains are more domestic too. That means all their costs will rise alongside their revenue. Take a larger multinational—Apple for example—most of its manufacturing and supply chain costs are offshore, which means it can enjoy rising inflation-driven revenue, but take advantage of lower inflation rates in its cost base.
Let’s be clear, value stocks have been doing great over the last six months as growth stocks have started to fizzle. Accordingly, a lot of the small cap value stocks you could have found at the end of last summer have already risen strongly. However, there are a number of them that still look great buys according to fund managers. Here are a few names to explore: Citizens Financial Group, a strong regional bank; United Community Banks, a quick-growing regional bank; Sunstone Hotel Investors, a REIT that owns hotel buildings and leases them to big hotel chains; Herc Holdings, a construction and earth-moving equipment rental company; Marriott Vacations Worldwide Corp, a timeshare operator; and Ultra Clean Holdings, which makes chemicals and equipment for the semiconductor industry.
FINSUM: A bounce back in leisure travel is quite an interesting play for us, so Sunstone and Marriott Vacations look interesting, but all of these are worth a deeper dive.