Some Wall Street investors are looking for deals in traditional stock markets amid the AI craze.
Value equities, which trade at a discount on book value or price-to-earnings, have lagged as AI boosts growth-focused counterparts.
However, value-heavy sectors like industrials and materials have gained faster. That suggests that the S&P 500 index (.SPX), opens new tab rise is expanding beyond tech and growth stocks.
Que Nguyen, Research Affiliates' chief investment officer of equities, said value stocks are a long-term investment. “These companies are still very, very cheap and many have already restructured their businesses and balance sheets.”
The S&P 500 reached a record high in 2024, up 7.7%. The S&P 500 Value Index (.IVX), opens new tab, is up 3.3% year-to-date, trailing the 11.6% increase in the Growth Index (.IGX). However, certain value-heavy sectors have shown life in recent weeks.
Last month, General Electric (GE.N) and Howmet Aerospace (HWM.N) rallied 7.1% to lift the S&P 500 industrial sector (.SPLRCI). The broader index rose 5.8%.
Vulcan Materials (VMC.N) and Ecolab (ECL.N) led the materials sector (.SPLRCM) to a 6.7% increase in February. Consumer discretionary (.SPLRCD), home to recent gainers Chiptole Mexican Grill (CMG.N) and Ralph Lauren (RL.N), climbed over 9%.
Value stocks are cheap compared to the market, a big draw. After a rebound increased the S&P 500 42% from its October 2022 lows, it trades at 20.8 forward earnings, while health care trades at 18.9 and energy at 12.2.
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