“Value stocks are nearly the cheapest they’ve ever been compared with growth companies,” writes Jason Zweig in his WSJ column Intelligent Investor referencing a study by Research Affiliates. The study finds that value stocks aren’t necessarily inexpensive relative to their own earnings and assets, but they are when compared to growth companies. It looks like this is another example of an emotionally charged market. When it will end? Nobody knows, but it may not be pretty when it does. Zweig writes:
Financial logic says cheap stocks should ultimately earn higher returns than expensive ones; the less you pay for a piece of the future, the more you will earn in the end. Emotional logic, however, says investors will often overpay for excitement.
Therefore, you should always be prepared for value to lag growth in the short run, even though cheap stocks have earned higher returns over the full sweep of decades. And “the short run” can mean many years.
Read more here.
E.J. Smith - Your Survival Guy
Latest posts by E.J. Smith - Your Survival Guy (see all)
- Your Survival Guy Felt Like a U.N. Worker in Rome - May 31, 2023
- Social Security: Declining Italy Needs a Bambino Boom - May 31, 2023
- The Future of the American City is This… - May 30, 2023
- Happy Memorial Day: Your Survival Guy: Proud To Be an American - May 29, 2023
- Your Survival Guy in Rome 30-Years A.B. (After Babson) - May 26, 2023