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Zacks Value Investor Highlights: Micron, Magna International, KB Home, and Boot Barn
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For Immediate Release
Chicago, IL – October 27, 2017 – Zacks Value Trader is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life. To listen to the podcast, click here: (https://www.zacks.com/stock/news/280222/is-david-einhorn-right-that-value-investing-is-dead)
Is David Einhorn Right that Value Investing Is Dead?
Welcome to Episode #65 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
You might have seen the recent headlines about Greenlight Capital’s hedge fund manager David Einhorn’s latest investor letter.
Einhorn invests in value stocks and bets against the overvalued stocks. He’s a well-known figure in the value investing community.
His fund, however, has struggled in 2017 using this strategy.
Greenlight has retuned just 3.3% through September 2017 compared to the S&P 500’s return of 14.2% during the same period.
He writes that the persistent over performance by growth versus value leads to the question as to whether value investing is a “viable strategy.”
It hasn’t helped that his bets against those companies he considers overvalued, such as Amazon and Tesla, haven’t worked out so far in 2017 either. Tesla is up 52% year-to-date while Amazon is up about 29%.
Is Einhorn right?
Is value investing all but dead?
Small Cap Value v. Small Cap Growth
Historically, small cap value stocks have been the best performing stocks.
But throughout 2017, growth has dominated. Taking a look at the iShares Russell 2000 growth and value ETFs:
1. Small cap value: up 4.8% year-to-date
2. Small cap growth: up 17% year-to-date
The 5-year returns aren’t much better for value investors with growth up 96% versus 71% for value.
Betting Against Growth in a Bull Market
One of the reasons for Einhorn’s under performance, however, is that he’s taking bets against some of the big tech names.
He’s not just buying value stocks. He’s actually betting against growth at the same time.
Judging when a bull market will end is difficult. They almost always go on far longer than you think. That seems to be the case right now with growth stocks.
Is There Still Value in the Market?
If you were a long-only value investor, things don’t look so bad. Leaving aside growth stocks, there are still value stocks out there to invest in.
Tracey has mentioned Micron (MU - Free Report) many times on the Value Investor Podcast. It’s been a value stock all year long and is now up 84%, which isn’t too shabby.
She ran a screen to look for other value stocks with Zacks Ranks of #1 (Strong Buy) or #2 (Buy). This Rank should mean they have rising earnings estimates.
She also screened for all the classic value fundamentals including low P/E, PEG, P/B and P/S ratios.
This is a very narrow screen because it is looking for all the classic values instead of just one like P/E. It’s difficult to have ALL of the fundamentals.
And even with that narrowness, it returned 10 stocks.
3 Classic Value Stocks
1. KB Home (KBH - Free Report) , one of the large home builders, has a PEG of 0.8 and a P/S ratio of 0.6. With the economy so strong, and low home inventories, its backlog keeps growing along with its average sales price.
2. Magna International (MGA - Free Report) is one of the largest auto parts suppliers in North America. Investors have been worried about peak auto so the stock is dirt cheap, with a forward P/E of 9.3 and a P/B ratio of only 1.9.
3. Boot Barn (BOOT - Free Report) is in the dreaded retail sector. Is all retail dead? Investors think so. They have fled this small cap maker of western boots and apparel. But it’s now trading with a forward P/E of 14.3 and has a P/S ratio of only 0.3. As an extra bonus, you can get shares for under $10 each.
What else should you know about value stocks in this growth stock era?
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Value Investor Highlights: Micron, Magna International, KB Home, and Boot Barn
For Immediate Release
Chicago, IL – October 27, 2017 – Zacks Value Trader is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life. To listen to the podcast, click here: (https://www.zacks.com/stock/news/280222/is-david-einhorn-right-that-value-investing-is-dead)
Is David Einhorn Right that Value Investing Is Dead?
Welcome to Episode #65 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
You might have seen the recent headlines about Greenlight Capital’s hedge fund manager David Einhorn’s latest investor letter.
Einhorn invests in value stocks and bets against the overvalued stocks. He’s a well-known figure in the value investing community.
His fund, however, has struggled in 2017 using this strategy.
Greenlight has retuned just 3.3% through September 2017 compared to the S&P 500’s return of 14.2% during the same period.
He writes that the persistent over performance by growth versus value leads to the question as to whether value investing is a “viable strategy.”
It hasn’t helped that his bets against those companies he considers overvalued, such as Amazon and Tesla, haven’t worked out so far in 2017 either. Tesla is up 52% year-to-date while Amazon is up about 29%.
Is Einhorn right?
Is value investing all but dead?
Small Cap Value v. Small Cap Growth
Historically, small cap value stocks have been the best performing stocks.
But throughout 2017, growth has dominated. Taking a look at the iShares Russell 2000 growth and value ETFs:
1. Small cap value: up 4.8% year-to-date
2. Small cap growth: up 17% year-to-date
The 5-year returns aren’t much better for value investors with growth up 96% versus 71% for value.
Betting Against Growth in a Bull Market
One of the reasons for Einhorn’s under performance, however, is that he’s taking bets against some of the big tech names.
He’s not just buying value stocks. He’s actually betting against growth at the same time.
Judging when a bull market will end is difficult. They almost always go on far longer than you think. That seems to be the case right now with growth stocks.
Is There Still Value in the Market?
If you were a long-only value investor, things don’t look so bad. Leaving aside growth stocks, there are still value stocks out there to invest in.
Tracey has mentioned Micron (MU - Free Report) many times on the Value Investor Podcast. It’s been a value stock all year long and is now up 84%, which isn’t too shabby.
She ran a screen to look for other value stocks with Zacks Ranks of #1 (Strong Buy) or #2 (Buy). This Rank should mean they have rising earnings estimates.
She also screened for all the classic value fundamentals including low P/E, PEG, P/B and P/S ratios.
This is a very narrow screen because it is looking for all the classic values instead of just one like P/E. It’s difficult to have ALL of the fundamentals.
And even with that narrowness, it returned 10 stocks.
3 Classic Value Stocks
1. KB Home (KBH - Free Report) , one of the large home builders, has a PEG of 0.8 and a P/S ratio of 0.6. With the economy so strong, and low home inventories, its backlog keeps growing along with its average sales price.
2. Magna International (MGA - Free Report) is one of the largest auto parts suppliers in North America. Investors have been worried about peak auto so the stock is dirt cheap, with a forward P/E of 9.3 and a P/B ratio of only 1.9.
3. Boot Barn (BOOT - Free Report) is in the dreaded retail sector. Is all retail dead? Investors think so. They have fled this small cap maker of western boots and apparel. But it’s now trading with a forward P/E of 14.3 and has a P/S ratio of only 0.3. As an extra bonus, you can get shares for under $10 each.
What else should you know about value stocks in this growth stock era?
Find out on this week’s podcast.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec and she also hosts the Zacks Market Edge Podcast on iTunes.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.