Are value stocks finally back for good?

The Covid-19 vaccine might give value investors the lift they’ve been waiting for, says John Stepek. And the UK is a good hunting ground.

Lloyds Bank sign
Lloyds: a vaccine beneficiary
(Image credit: © ISABEL INFANTES/AFP via Getty Images)

That was quick. In last week’s issue, Jim Mellon told Merryn that investors should buy Lloyds Bank (watch the interview at moneyweek.com/videos). Between that issue coming out on Friday, and Wednesday lunchtime, the share price had risen by 20%. Much as we’d like to claim the credit, the main driver was of course the surging hopes for a vaccine (see page 6). Lloyds was just one of many “value” stocks (companies that look cheap on their “fundamentals”, as measured by various financial ratios) to have rallied sharply on the news that we might soon be able to put the misery of intermittent lockdowns behind us.

Value stocks have lagged growth stocks since at least March 2009 (when they had a short-lived blip of outperformance) and we’ve heard many a call that “this must be the turn”. So is this just another false alarm? Or did poor Ted Aronson, who closed his $10bn value-focused hedge fund AJO Partners only last month, actually call the bottom of this cycle when he threw in the towel?

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.