William Nygren, CFA, Partner and Chief Investment Officer-US at Harris | Oakmark, joined Keith Black, Managing Director of RIA Channel, to discuss value and growth investing.
Nygren has been with Harris | Oakmark since 1983 and has witnessed a number of value/growth cycles in the US equity market. The firm is a long-term value investor seeking to hold investments for five to seven years in companies where the management team thinks and acts like owners. Nygren believes that it is more difficult to define value stocks today using measures of GAAP accounting.
Oakmark seeks to invest in companies where the stock price is cheap relative to the business’s intrinsic value, where a high-quality management team thinks and acts like owners, and where the combination of dividend yield and growth in business value exceeds expectations for the S&P 500.
The 2024 market is characterized by a wide gap between companies selling at low vs high P/E multiples. While the typical P/E multiple of growth stocks is two to three times that of value stocks, that premium grew to four to five times in 2024. Nygren’s portfolio has a P/E ratio of roughly half of today’s S&P 500 valuation levels, with some holdings trading at single-digit P/E ratios.
Today’s S&P 500 looks like a growth fund highly concentrated in technology, with half of the weight coming from just 25 stocks. In the past, half of the weight in the S&P 500 has come from as many as 200 companies.
WEBCAST – Value versus Growth – or Cheap versus Expensive?
Investors today seemingly have no shortage of headlines to digest with potential rate changes, disparity of economic growth, and the upcoming election cycle. While market timing may be top of mind for many, at Harris | Oakmark we don’t make our investment decisions based on short-term macro dynamics.
Join us as we share our perspectives on today’s market and how we steer our investment approach with a long-term view by identifying stocks priced below our estimate of intrinsic value. We’ll also uncover why market performance could shift from growth to value stocks and the implications to portfolios.
Key topics we’ll address:
- Evolving market dynamics: Interest rates, GDP growth, market uncertainty and an election – how investors can put short-term stock price volatility to work for long-term results.
- Understanding growth versus value: Today the style box lines have blurred; growth can be cheap or expensive and value is not the opposite of growth. We look across the P/E continuum to select stocks that meet our criteria.
- The value of intangible assets: Buying high-quality businesses requires a deeper evaluation beyond balance sheets. Examine the investing criteria for companies expected to grow per share value over time.
- Where to invest for value: Explore where we are seeing opportunity – and how we are positioning portfolios given today’s market environment.
Accepted for 1 CFP® / IWI / CFA CE Credit
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