In this article, we will take a detailed look at the 11 Best Value Penny Stocks To Invest In Now. For a quick overview of such stocks, read our article 5 Best Value Penny Stocks To Invest In Now.
When 2024 started many analysts were ringing warning bells regarding valuations of mega-cap technology stocks that touched their new highs in the last quarter of 2023 amid the AI boom. These analysts were right about some names (Apple, Tesla, among others) that failed to sustain their bull run, but proved wrong about the leaders in the AI domain (Nvidia, for example). During all this, many experts are also talking about a possible return of value stocks.
The Return of Value in 2024?
In March, a Bloomberg report talked in detail about how many investment firms were pouring money into value stocks from sectors like financials, energy, materials and utilities. Among the investors preferring these sectors included Nanette Abuhoff Jacobson, global investment strategist of Hartford Funds, who liked stocks from these “unloved sectors.” The Bloomberg report also mentioned Presilium Private Wealth, which said it found value investing attractive in the current environment.
BlackRock’s Pivot Towards Value
Another pivot towards value investing came in January 2024 when BlackRock initiated a massive reshuffle to its model portfolios to reflect its preference for value versus growth. According to a Bloomberg report, Michael Gates, who leads Model Portfolio Solutions in the Americas within BlackRock’s Multi-Asset Strategies & Solutions group, said that the company was switching to value from growth style to reflect a “bullish view on the economy and a soft landing.”
Indicating confidence in value investing, Franklin Templeton said in a December 2023 report that value stocks were looking more “promising” for 2024 and beyond amid volatility in the financial markets. The report said comparing trailing P/E multiples for global growth and value stocks with their return over the next 10 years shows that “lower P/E stocks achieved higher future returns over the next decade, based on data from FactSet and MSCI. As such, with growth stocks’ stretched valuations, we see many opportunities to find compelling value opportunities with significant future return potential.”
David Einhorn’s Comments About Value Investing During The 2024 Sohn Conference
Billionaire David Einhorn said during The 2024 Sohn Investment Conference that it’s a great time to be a value investor. But at the same time he’s been saying that value investing as an industry is dead (we covered Einhorn’s thoughts on the demise of value investing industry here). When asked about these apparently contradictory opinions during a program on CNBC, Einhorn said that value investing industry and value investing as an investing strategy are two different things. He said many fund managers who were paid heavily by people to research undervalued stocks for them have lost their jobs and assets under management amid a shift to index funds where “millions of dollars were redeemed” out of those conventional strategies. But Einhorn said that this development has decreased the competition in the industry and people like him are now in a unique position to find undervalued stocks.
Performance of Value Stocks
Vanguard Value Index Fund ETF (NYSEARCA:VTV) is up by 3.9% year to date through April 14, while Schwab US Large-Cap Value ETF (NYSEARCA:SCHV) is up 3.3% in the same period, compared to the S&P 500’s gain of 8%. Russell 1000 Index (INDEXRUSSELL:RUI) is up 7.7% in 2024 through April 13 while the index has gained about 23% over the past one year. RUI tracks mid-cap and large-cap US companies that have value characteristics.
Value Investor Seth Klarman’s Prediction from 2000
Legendary value investor Seth Klarman in his 2000 letter to investors bemoaned the market’s irrational behavior and said that sooner or later investors would come back to the traditional ways of valuing companies:
“I sometimes joke about the new market valuation rules of thumb: stocks that fail to meet earnings expectations all seem to trade at 10 times reduced earnings, while formerly profitable companies that report losses all seem to trade at five dollars per share. Many investors avoid these stocks precisely because others are staying away. Why would those kind of stocks ever go up, they wonder. Even those of us with value investing in our DNA generally prefer situations with catalysts for the realization of underlying value. Over time, this will change. At some unknowable future point, the undervaluation of small capitalization stocks lacking exciting growth characteristics will become so gaping that investors will once again be attracted. The…
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