It seems that finally, after several years of dismal performance, value is starting to make a comeback.
Value has underperformed growth since 2012 and almost every year since there have been calls from analysts and investment professionals predicting that value is set to make a comeback. This year these calls are finally turning out to be on the money.
Year-to-date the iShares S&P 500 Value ETF is up by 8.98% excluding dividends, beating the iShares S&P 500 Growth ETF by 3.18%. Year-to-date the iShares S&P 500 Growth ETF has returned 5.83% excluding dividends.
Outside the S&P 500 value is also beating growth. Year-to-date the iShares Russell 1000 Value ETF is beating its growth counterpart by 3.5% excluding dividends and the Vanguard Value ETF has gained 8.23% year-to-date beating the Dow Jones Industrial Average and S&P 500 by 1.52% and 1.23% respectively.
All in all, it is clear value stocks are making a comeback, and if you are looking for ways to get in on the action, Société Générale’s Graham & Rea deep value screen is a great place to find ideas.
Some value stock for consideration
The SocGen value screen is a strategy developed by Benjamin Graham and James Rea. It uses a set of ten basic investment criteria used to identify deep value opportunities. These criteria are also known as Graham’s last will and the Benjamin Graham deep value checklist.
As SocGen describes:
“Graham & Rea deep value screen: This includes companies that score 2.5 or better with both Graham and Rea value and risk criteria. The screen was developed by Benjamin Graham and James Rea. It is a set of ten basic investment criteria, with the first five focusing on value and second five on risk.”
For a more detailed of Graham’s deep value strategy, check out part five of Value Walk’s exclusive series on Benjamin Graham: Benjamin Graham — Part Five: Benjamin Graham’s “Last Will & Testament”.
SocGen’s analysts’ note that during the past 18 years, only 21 stocks have satisfied all of the criteria, so it’s clear the bank’s analysts aren’t cutting any corners when it comes to following Graham’s advice.
The screen’s returns are highly impressive. From inception during 2002 to date, the stocks qualifying for the screen have returned 14.4% per annum, outperforming the wider universe of FTSE World Developed and FTSE 350 stocks by 4.7%. Returns are calculated on a total return $US basis and the portfolio is rebalanced monthly.
Here’s the list of developed market stocks that currently meet the Graham & Rea screening criteria as of 05 July 2016. As you can see from the list below, only a few companies currently score above five.
This should not be interpreted as investment advice and should only be used as a starting point for further research.