Are ASX 200 value shares still good value? Why these experts are at loggerheads

ASX 200 growth shares or ASX 200 value shares? Investors looking towards the next stage of the pandemic recovery may need to reposition.
The post Are ASX 200 value shares still good value? Why these experts are at loggerheads appeared first on The Motley Fool Australia. –

close up of man's eye looking through magnifying glass representing asx 200 share price on watch

The comeback of the S&P/ASX 200 Index (ASX: XJO) from the record breaking COVID-19 market meltdown last February and March has been nothing short of stellar.

Since the March 2020 lows, the ASX 200 has soared 42%. If you’ve never witnessed anything like it, don’t worry. No one has.

ASX 200 shares sprinted to record gains

While most shares gained strongly during the rebound, it was the ASX 200 growth shares that led the charge. Think of companies like ASX buy now, pay later (BNPL) darling, and Afterpay Ltd (ASX: APT).

Although down 34% since its 10 February 2021 highs, the Afterpay share price is still up 740% since 20 March 2020.

Other ASX 200 shares have underperformed the index and far underperformed growth shares like Afterpay.

With international and even most domestic air travel locked down for much of the past 12 months, the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price has only gained 28% since 20 March 2020. While that may not sound like a small gain (and it’s not), the Sydney Airport share price is still down 32% since 27 December 2019.

With these kinds of figures in mind, investors are increasingly wondering about the outlook for value shares.

For that answer, we turn to the experts.

Why these investment experts disagree on the outlook for value shares

If you were hoping for a unified answer, those months appear behind us.

As Bloomberg reports:

Societe Generale SA and JPMorgan Chase & Co. say value shares will keep outperforming at this stage of the market cycle. Prudential Financial Inc. and AlphaOmega Advisors LLC say the sector is due for a pullback.

Solomon Tadesse is Societe Generale’s head of North American equity quant research in New York. According to Tadesse:

Value (and more generally cyclicals) still command significant valuation advantage to the rest of the market. Distressed out-of-favour assets tend to gain from potential multiple expansion at this point of the market cycle.

And JPMorgan Chase strategists led by Dubravko Lakos-Bujas write that:

Value remains an outsized beneficiary of reopening, which is still in its early stages… [W]hile we believe value and reopening trade still has room for upside, we would emphasize focusing on higher quality companies with greater staying power, for example retail and energy.

On the other side of the value share debate is Peter Cecchini, founder and chief strategist of AlphaOmega Advisors. According to Cecchini:

It’s time to take money off the table now. Perhaps the latest round of stimulus will keep the cyclicals trade alive a bit longer, but I just don’t see the cycle turning for good as we might expect after a normal recession. Staying tactical and nimble seems prudent.

As for Prudential Financial, as Bloomberg reports, Quincy Krosby, chief market strategist says, “The reflation trade is ‘frothy’ and ‘waiting for a pullback is prudent’.”

Krosby believes investors have been too optimistic about the massive new infrastructure cash splash proposed by United States President Joe Biden. She said that if investors sense issues within Congress that could delay or derail the package, shares could sell-off. Which, she says, could be the right time to buy the dip.

Foolish takeaway

So what’s an ASX 200 investor to do?

I believe Peter Cecchini, quoted above, has it right. “Staying tactical and nimble seems prudent.”

Happy investing.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Are ASX 200 value shares still good value? Why these experts are at loggerheads appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!