After a years-long bull market in growth stocks, the beleaguered value strategy has outperformed this year, as rising interest rates apply pressure on equities. Below is a screen of large-cap value stocks that have growth characteristics. This may serve as a starting point for your own stock-selection research in a difficult market environment.
First, let’s look at the this year’s performance of the S&P 500
and two of its subsets, the S&P 500 Value Index and the S&P 500 Growth Index, through Sept. 9:
You can see that the S&P500 Value Index has held up much better than the S&P 500 Growth Index during 2022. Companies in the value camp generally are expected to grow less rapidly than those in the growth camp, while the value stocks also tend to trade lower to expected earnings and sales. Mature companies might seem more likely to be considered value stocks. However, there are plenty of examples of mature companies that continue to grow rapidly. The S&P 500 Value Index is made up of 446 companies drawn from the full S&P 500 that rank highest in a composite score developed by S&P Dow Jones Indices that encompasses valuations to book value, earnings and sales. You can read more about S&P Dow Jones Indices’ value/growth “style basket” methodology here.Screening value stocks for growth potential Beginning with the 446 constituents of the S&P 500 Value Index, the initial screen reduced the list of stocks to 432 for which consensus sales and earnings-per-share estimates are available through calendar 2024 among at least five analysts polled by FactSet. We used calendar-year estimates because many companies have fiscal years that don’t match the calendar. We then went further to screen out any company expected to show a net loss for calendar 2022, 2023 or 2024. This brought the screen down to 422 companies. Among those 422 companies in the S&P 500 Value Index, here are the 20 with the highest expected two-year compound annual growth rates (CAGR) for sales through 2024:
Two-year estimated sales CAGR through 2024
Estimated sales – 2022 ($bil.)
Estimated sales – 2023 ($bil.)
Estimated sales – 2024 ($b …