With the recent market volatility, investors may be looking for more stability in their portfolios. One way to do this is to think of value investing. Value investing is an approach that seeks to find stocks that the market may have underestimated.
The Federal Reserve recently released minutes from its December meeting, which included discussions about performance of equity markets, and the potential impact the Fed’s policies may have on asset prices. It appears investors are taking these words to heart, as more investors are turning to value stocks.
Value stocks are defined as companies trading for lower prices than their intrinsic value. This is due to a number of factors, including: low price-to-earnings (P/E) ratios, low price-to-sales (P/S) ratios, low price-to-book (P/B) ratios, low price-to-cash flow (P/CF) ratios, and rising book values. Value stocks often trade below the broader market’s average price-to-earnings ratio, which indicates that investors believe the company’s stock is undervalued.
In addition to the market talking, some investors believe that the recession and market volatility favor value investing. Over the past year or so, riskier asset categories such as technology have seen large price drops, while value stocks have more or less held their ground. Thus, while the overall market was down, value stocks offered some insulation.
Additionally, certain industries are performing well within the value category. Stocks in industries like energy, banks, and REITs are currently doing very well, providing investors with a nice way to capitalize on current macroeconomic conditions.
Ultimately, the Fed’s discussions about markets have reminded investors that there are still a lot of unknowns out there. By focusing on value stocks, investors can potentially benefit from the uncertain times. Although it may involve more research and time, value investing could be the key to a more stable portfolio.
With the recent market volatility, investors may be looking for more stability in their portfolios. One way to do this is to think of value investing. Value investing is an approach that seeks to find stocks that the market may have underestimated.
The Federal Reserve recently released minutes from its December meeting, which included discussions about performance of equity markets, and the potential impact the Fed’s policies may have on asset prices. It appears investors are taking these words to heart, as more investors are turning to value stocks.
Value stocks are defined as companies trading for lower prices than their intrinsic value. This is due to a number of factors, including: low price-to-earnings (P/E) ratios, low price-to-sales (P/S) ratios, low price-to-book (P/B) ratios, low price-to-cash flow (P/CF) ratios, and rising book values. Value stocks often trade below the broader market’s average price-to-earnings ratio, which indicates that investors believe the company’s stock is undervalued.
In addition to the market talking, some investors believe that the recession and market volatility favor value investing. Over the past year or so, riskier asset categories such as technology have seen large price drops, while value stocks have more or less held their ground. Thus, while the overall market was down, value stocks offered some insulation.
Additionally, certain industries are performing well within the value category. Stocks in industries like energy, banks, and REITs are currently doing very well, providing investors with a nice way to capitalize on current macroeconomic conditions.
Ultimately, the Fed’s discussions about markets have reminded investors that there are still a lot of unknowns out there. By focusing on value stocks, investors can potentially benefit from the uncertain times. Although it may involve more research and time, value investing could be the key to a more stable portfolio.
