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Seeking High Yield

Value stocks (a market segment that includes high-yield stocks) are outperforming growth stocks in 2022 for the first time since 2016. Indeed, for the past decade, the performance record has favored growth. But that hasn't always been the case. In the 2000-2010 decade, including the Great Recession, value stocks were better performers than growth stocks, advancing an admittedly low 8%. But that was still better than growth, which declined 15% during the decade. Value investors trace their roots to the famous "Security Analysis" textbook written by Ben Graham, an economics professor at Columbia University. Warren Buffett was one of his students. Why the recent deviation in performance? There are several reasons, including changes in the make-up of the economy, growth in intangible assets, and the current low level of interest rates. The rollout of COVID-19 vaccines has given a lift to some of the cyclical companies (energy and regional banks) that have lagged in recent quarters, and value stocks have kept up the pace with growth stocks in the past year. As well, the Federal Reserve is lifting interest rates to fend off inflation, which will likely cap multiple expansion for growth companies. ...  the famous "Security Analysis" textbook written by Ben Graham, an economics professor at Columbia University. Warren Buffett was one of his students. Why the recent deviation in performance? There are several reasons, including changes in the make-up of the economy, growth in intangible assets, and the current low level of interest rates. The rollout of COVID-19 vaccines has given a lift to some of the cyclical companies (energy and regional banks) that have lagged in recent quarters, and value stocks have kept up the pace with growth stocks in the past year. As well, the Federal Reserve is lifting interest rates to fend off inflation, which will likely cap multiple expansion for growth companies.   more

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