Displaying items by tag: value

Wednesday, 20 November 2019 12:18

Don’t Buy These “Bargain” Stocks

(New York)

Many media outlets love to publish stories about bargain stocks (us included). However, there is a group of shares being pushed as a “great value” that are definitely not such, at least according to UBS. The bank says that the wide group of retail shares that have been mauled lately, including Macy’s, JC Penney, Kohl’s, TJ Maxx, and Ross are not a good value. These stocks have been hurt badly because of weak earnings and the general decline in brick and mortar, which falsely lead some to think they are a “buy”. “We think ongoing e-commerce disruption, plus tariffs, could cause not only these, but also many other public and private retailers to close stores in 2020 and beyond” says UBS, clearly showing that they don’t think the industry is out of the woods yet.


FINSUM: Retail has some juicy yields, but you really have to understand each stocks’ specific characteristics to know which ones to choose. This is an expert’s game. The cheat sheet is to lean towards discount retailers.

Published in Eq: Value
Wednesday, 30 October 2019 12:05

How to React to Recession Worries

(New York)

There is a lot of investor anxiety about a recession right now. The big economic expansion of the last decade does have the feel of an ending coming, but even if that is true, how should one react? According to Barron’s the answer is to employ a long-term buy and hold strategy. That said, many don’t have the stomach or cash for such a strategy. A better way to think about allocation is to consider the type of recession we might have: will it be driven by a real economic downturn, a policy error, or a crisis—each have highly different return profiles? In this instance, a recession seems more likely to come from a real economic slowdown, which is good news for investors. Such recessions generally have significantly lesser falls in stock prices than the other varieties.


FINSUM: The reality is that we are likely having a “soft landing” type of recession where the economy slows gradually. That means we might not have a bear market at all.

Published in Eq: Value
Friday, 04 October 2019 09:13

Goldman’s Best Stocks for a Recession

(New York)

The likelihood of a recession is growing. Weak manufacturing data this week accompanied by poor jobs data this morning is once again driving fears that the economy may be headed for a downturn. Accordingly, Goldman has put out a recommendation for the best stocks to hold for the forthcoming recession. According to the bank, stable growth stocks fare best in an environment of slowing growth and rising uncertainty. As a reminder, stable growth stocks are those on the less risky end of the growth curve, a group which has been underperforming fast-growing stocks by a considerable margin. Some names to look at include Fiserv, Autozone, Amdocs, Omnicom, Johnson & Johnson, and Walmart.


FINSUM: We quite like Autozone and Walmart for their consumer-staple characteristics and unique abilities to hold up well in a recession.

Published in Eq: Growth
Tuesday, 17 September 2019 12:09

BAML Says Value Stocks are Finally Back

(New York)

For some reason, there is a great deal of glee about the return of value stocks this month. Even though we are only on the 17th day of September, seemingly ever research department on Wall Street is ready to proclaim that value stocks are back. BAML fits the bill perfectly, saying that value stocks are like a tightly wound spring that is finally uncoiling. In their defense, value stocks have outperformed growth stocks by 9 percentage points this month, the biggest divergence since 2010. Morgan Stanley also notes that there is currently “a massive rotation away from growth-style factors toward value-style”.


FINSUM: It has been a great start to the autumn for value stocks, but they have been in a funk so long that it is hard to believe they have suddenly shed their shackles.

Published in Eq: Value
Friday, 13 September 2019 12:48

Dividend Payers Seeing Gains

(New York)

Over the last few weeks, value stocks have been seeing a comeback. The Russell 1000 Value is up 4.15% this month versus just 1% for the corresponding growth index. This has proved a big boost to dividend paying stocks as they tend to be the most undervalued. That means investors are not only seeing good payout, but also nice capital appreciation. According to Evercore ISI, “The rebound in Value represents a buying opportunity [for income investors] following the rout in August”. Interestingly, the stocks with the lowest dividends have been outperforming higher payers.


FINSUM: If you think rates are headed lower than it is definitely a good time to buy dividend payers, as they will offer nice relative yields and good capital appreciation.

Published in Eq: Dividends
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