Value investing has seen a resurgence this year, with the Russell 1000 Value index outperforming the Russell 1000 growth index by 8.4 percentage points. Some value stocks, however, are better than others as BofA Securities U.S. quantitative strategist Savita Subramanian emphasized in a Friday research report titled Don’t Catch the Falling Knife.
These value screens have been effective in recent months. Interactive Media and Services companies, a sector that includes Meta platforms Inc. and Alphabet, have been classified as value traps since November 2021. The sector has dropped 11 per cent during the period. U.S. independent utilities also screen as value traps.
I’ve focused on U.S. stocks here because of the greater depth in terms of sectors and companies. It’s not difficult, however, to see how BofA’s bullishness on energy stocks is positive for the domestic equity market. The S&P/TSX Energy sector has rallied 26.7 per cent since the end of last June, far outpacing the 9.1 per cent gain of the TSX Composite Index . Energy stocks make up a far larger percentage of the index than is the case south of the border.
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