As laggard value stocks have come back into favor over the past two quarters, it has given a boost to a number of struggling mutual funds with deep-value strategies. Meanwhile, funds that land in the value Morningstar Categories but tend to hold stocks with stronger earnings-growth profiles have seen their fortunes turn for the worse.
We drilled down into Morningstar s large-value category to look for funds that have had significant swings higher or lower in their category rankings. To do so, we compared funds one-year return rankings as of Sept. 30, 2020, with their rankings six months later.
These time frames featured two distinct periods in the dynamic between value and growth stocks. From Oct. 1, 2019, through Sept. 30, 2020, we captured some of the worst performance on record for value stocks when compared with growth stocks. During this period, the Morningstar US Large Value Index declined 7.1% and was left far in the dust by the Morningstar US Large Growth Index s 40.5% r
U.S. equity markets finished up in 2021’s first quarter but not without some bumps. The Morningstar US Market Index rose 6.0% for the year through March, with value leading the way for a change. The Morningstar US Small, Mid, and Large Value indexes gained 20.8%, 16.5%, and 9.3%, respectively, through March 31. Growth stocks across the market-cap spectrum, on the other hand, posted losses for the period. High-flying large-growth companies from 2020 faced challenges. Zoom Video Communications (ZM), ServiceNow (NOW), Tesla (TSLA), and MercadoLibre (MELI) each fell in the first quarter, though they still sit miles ahead of their prepandemic levels.
The year had a volatile start. The Morningstar US Market Index fell in January as titans gave back 2020 gains. A social-media-fueled frenzy launched GameStop (GME) from about $17 on Jan. 5 to a $348 Jan. 28 peak, squeezing professional investors who had been shorting the moribund retailer. Then good vaccine news, dovish interest-rate signa
As you make your investing plans for 2021 and beyond, bolstering the value side of your portfolio is worth considering. Value stocks appear to be one of the few underpriced areas of the U.S. equity market, as Morningstar s Dave Sekera and Amy Arnott have recently noted in separate articles. The extreme value-growth spread has been a noted feature of the market for a number of years, for reasons not fully understood, but believers in mean-reversion would expect that pattern to shift at some point, perhaps in an extreme fashion. GMO s Ben Inker, for instance, argued in a recent letter to investors that no matter where you look, no matter how you slice it, value looks cheap, while DFA s Gerard O Reilly made a similar case for value on a recent episode of Morningstar s