SSGA: Investors overlooking Eurozone value stocks miss opportunities
There is a perception among many investors that Value Investing is a byword for underperformance and growth investing is the only winning strategy.
This perception is largely shaped by the experience of Value Investing in the United States, where growth stocks, and the so-called Magnificent 7 in particular, have dominated market performance. However, for eurozone investors, the reality is quite different, with a more balanced sector composition (see Figure 2) that has allowed value stocks to hold their ground, according to Laura Jordan, Research Analyst at State Street Global Adviors.
For investors focused on the eurozone, dismissing Value Investing based on a global or US-centric narrative could mean missing out on substantial opportunities, Jordan says. Data demonstrates that value stocks have outperformed their core index over the last 1, 3 and 5 years. But what’s behind value’s strong performance in the eurozone? Many value stocks in the eurozone were, and still are, trading at significant discounts to historic averages, in both absolute and relative terms.
'A recovery in the eurozone economy could help to further close this valuation gap. The potential for the ending of the Ukraine/Russia war, in addition to the substantial spend on infrastructure and defense proposed by Germany, is likely to accelerate an economic recovery and favor value stocks,' Jordan explains.
