If you don’t remember how to buy value S&P 500 stocks, don’t feel bad. It hasn’t worked in years. But now investors are scrambling to add value stocks to their portfolios, and showing which are their favorites.
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Namely, 13 S&P 500 stocks considered to be purely value plays, including consumer discretionary Ford Motor (F) plus a raft of financials like Wells Fargo (WFC) and People’s United (PBCT), are already up more than 10% just this year so far after topping growth stocks in 2020, too, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. The S&P 500, in comparison, is down more than 2% this year so far.
And value stocks are pulling ahead as investors grow more cautious about other corners of markets that’ve gotten more attention up until now.
“The broad market indices are vulnerable, and tech is the largest weighting in those broad market indices, but bottom-up selectivity still offers ample opportunities of value in this environment,” said David Bahnsen, chief investment officer of the Bahnsen Group. “The rotation into value is the better trend in 2022.”
Shift To S&P 500 Value Is Already Happening
Signs of investor’s preference for value abounds.
The Invesco S&P 500 Pure Value ETF (RPV) is nearly 7% this year. That not only tops the 2.1% year-to-date loss by the SPDR S&P 500 ETF Trust (SPY), it’s miles ahead of the 7.1% decline by the Invesco S&P 500 Pure Growth ETF (RPG). The Invesco pure value ETF is the top-performing major diversified ETF this year so far, says Morningstar Direct. In fact, all ten of the top-performing diversified ETFs this year are value funds.
And it’s not just this year, either. The pure value ETF jumped 31.5% in 2021. That, too, topped the 29.4% gain by growth stocks in the S&P 500 and the 27% rise by the S&P overall.
But don’t make the mistake that all S&P 500 value stocks are winning. Less than a third of the pure value stocks in the S&P 500 beat growth stocks both this year and in 2020. What kind of value plays are investors buying?
Ford: A Shining Value In The S&P 500
If you’re wondering what kind of value stocks investors are buying, look no further than Ford.
Ford, alone, is up more than 21% this year. That’s a remarkable run, as it’s now outperforming its chief electric vehicle competitor: Tesla (TSLA). Shares of Tesla, firmly a growth-stock play, are down nearly 1% this year. And Ford, again, isn’t just having a lucky 2022. Shares of the automaker jumped more than 136% in 2021. That, too, topped growth darling Tesla’s 49.8% rise last year. Should you buy Ford stock now?
Investors seem to be responding to the better value in Ford vs. growth plays like Tesla. Ford stock, even following this year’s rally, only trades for 35-times adjusted profit in the past 12 months. It yields 1.6% on top of that. Meanwhile, Tesla trades for more than 340 times trailing adjusted profit. And its dividend yield is nil.
S&P 500 Financials: Like Putting Money In The Bank
Financials continue to be where S&P 500 investors are finding the most value.
Nearly half of the 13 pure value S&P 500 stocks up 10% or more this year, which also topped growth stocks in 2021, hail from the financials sector. Just look at Wells Fargo as an example. Shares of the money-center bank are already up 21% this year. And that’s after turning in a growth-stock-beating 59% jump in 2021. Its yield of 0.7% is tiny, but it’s still more than most S&P 500 growth companies pay.
Investors looking for a solid yield on top of S&P 500 beating performance are finding it with financials like People’s United. The Bridgeport, Conn.-based bank is yielding 3.4%, which is roughly double that of the S&P 500. But on top of that, the stock this year is up more than 20%. And that’s coming off a 37.8% gain in 2021.
Growth stocks may have ruled the S&P 500 for years. But lately, value is perking up and giving investors a crash course in what to buy.
Top Value S&P 500 Stocks Do It Again
Pure S&P 500 up 10% or more this year, after outperforming growth in 2021, too
| Company | Ticker | 2021 % ch. | Stock YTD % ch. | Yield % | Sector |
|---|---|---|---|---|---|
| Ford Motor | (F) | 136.3% | 21.3% | 1.6% | Consumer Discretionary |
| Wells Fargo | (WFC) | 59.0 | 21.0 | 0.7 | Financials |
| People’s United Financial | (PBCT) | 37.8 | 20.2 | 3.4 | Financials |
| Citizens Financial Group | (CFG) | 32.1 | 19.3 | 2.8 | Financials |
| Marathon Oil | (MRO) | 146.2 | 18.6 | 1.3 | Energy |
| Exxon Mobil | (XOM) | 48.4 | 17.5 | 5.0 | Energy |
| Marathon Petroleum | (MPC) | 54.7 | 16.8 | 3.2 | Energy |
| KeyCorp | (KEY) | 41.0 | 16.8 | 2.9 | Financials |
| Fifth Third Bancorp | (FITB) | 58.0 | 15.8 | 2.4 | Financials |
| Valero Energy | (VLO) | 32.8 | 13.4 | 4.7 | Energy |
| Hewlett Packard Enterprise | (HPE) | 33.1 | 11.4 | 2.7 | Information Technology |
| PNC Financial Services | (PNC) | 34.6 | 10.8 | 2.2 | Financials |
| Mosaic | (MOS) | 70.8 | 10.0 | 1.1 | Materials |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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Source: https://www.investors.com/etfs-and-funds/sectors/sp500-investors-are-scrambling-to-own-cheap-value-stocks-like-ford/?src=A00220&yptr=yahoo