Value Stocks Beat Growth in July

According to Investment Metrics, all value subfactors outperformed their benchmarks last month.


Illustration by II

Growth stocks have outperformed value for most of 2023, but that turned around in July.

In the U.S., all value subfactors outperformed their benchmarks by at least 0.30 percent in July, according to the latest factor performance report by Investment Metrics, which is owned by Confluence. Subfactors are alternative measurements — as defined by Investment Metrics — of broader investing factors, such as style, size, and risk. Value subfactors include book-to-price ratio, earnings, and other metrics to identify underpriced stocks.

Value stocks have also had a good run in the U.K. and Europe more broadly. According to the report, value stocks measured by earnings yield beat the benchmark by 1 percent in the U.K., the highest excess return across all factors in the country. In Europe, all value subfactors beat their benchmarks in July, which was due in part to the outperformance of the returns generated by Dutch automaker Stellantis, Italian banking group Intesa Sanpaolo, and German shipping firm Hapag-Lloyd.

Growth stocks showed mixed performance globally, after beating value from the beginning of March to the end of June. In July, all growth subfactors underperformed their benchmarks in the U.S., except sales growth, according to the report. Companies with robust sales growth — and outsized returns — last month were in the technology sector, including Nvidia, Alphabet, Meta, and Adobe.

The outperformance of value relative to growth comes at a time when investors are debating whether large-cap growth stocks in particular will lose steam after big gains this year. Investors have pushed up the prices of some of these stocks on hopes for their work in artificial intelligence.

The volatility factor also outperformed the market last month. According to Investment Metrics, high-beta stocks — those that move more than the market — delivered an outsized return of 1 percent in the U.S., 0.80 percent in the U.K., and 0.80 percent in Europe. In general, high volatility stocks have delivered solid returns in 2023, after a prolonged period of underperformance last year.