Value shares still pay off outside the US

Globally, growth stocks outperform the competition by a wide margin. But if the U.S. is excluded, the picture reverses, and value stocks come out on top.

Value or growth— which stocks have performed better over the past 12 months? Were investors mainly focused on growth, or was a stable income stream with dividends and share buybacks also important? The answer is obvious. Thanks to the AI boom, technology and growth stocks have outperformed globally by a wide margin.

However, the picture changes dramatically when the U.S. is excluded. Take Europe: a good gauge for the value segment of the European market is the iShares Edge MSCI Europe Value Factor ETF. Over the past 12 months, it has returned more than 25%, while the Amundi MSCI Europe Growth ETF only manages 8%!

It’s not very different in emerging markets. There, too, growth indices are outperformed by value indices—though both are at very high levels (growth and value both delivered strong returns).

Large differences within value


Investors outside the U.S., in other words, seem to have a preference for value stocks. You could also say they are more defensively oriented. Fund manager Marius Bakker of Van Lanschot Kempen adds something to that.

According to him, there are significant differences within the value sectors. “Not all defensive sectors show the same trend. Financial institutions, for example, have been an important source of returns this year, supported by strong balance sheets and predictable earnings growth. The industrial sector, which often benefits from infrastructure investments, has also made a strong contribution in some regions.”

“But defensive sectors such as utilities and basic consumer goods lag behind, which, in our view, reflects their sensitivity to interest rate changes. So, it’s not just a rotation between investment styles (value and growth), but investors also have different assessments of where value can be found.”

Active or passive?


Given the diffuse picture within the value spectrum, Bakker makes a case for active management. According to him, active fund managers have proven over the past year that they can outperform their benchmarks.

Some large and well-performing European active funds over the last 12 months include: JPMorgan Europe Strategic Value, M&G European Strategic Value, and BlackRock European Value.

Globally and in emerging markets, there are many more active value funds. Some well-known examples are those from Vanguard and JPMorgan. Kempen also offers its own Global Value Fund.


Sources: iexprofs.nl, Riccardo Annandale (picture), ChatGPT (translation)