Value Has a Ways to Go

Stock prices change far more rapidly than does intrinsic business value. - Bill Miller (investor)

On Tuesday, I wrote that value stocks are outperforming growth stocks year-to-date.

That’s still true.

When you look at the top 50 best-performing companies in the S&P 500 so far this year, several are coming from what many would call “boring” sectors.

Source: Source: FactSet, FTSE Russell, Standard & Poor’s, J.P. Morgan Asset Management. Growth is represented by the Russell 1000 Growth Index and value is represented by the Russell 1000 Value Index. (Top right) Graph was made by ranking the S&P 500 constituents by total return. Guide to the Markets – U.S. Data are as of January 30, 2026. The chart is for illustrative purposes only and not intended as a recommendation. The data is believed to be accurate, but there is no guarantee of its accuracy, completeness, or timeliness. Past performance is not a guarantee of future results. All investments carry risk, including potential loss of principal, and no investment strategy can guarantee a profit or completely protect against loss.

Twelve are from Industrials (think Caterpillar). A handful are from Energy (think Exxon Mobil), Consumer Staples (think PepsiCo), and Materials (think Southern Copper).

But when we zoom out, we see that these undervalued winners have been losers for a long time.

The S&P 500 Value Index has beaten the S&P 500 Growth Index only three times in the last 10 years. In several of those years, growth beat value by more than 20%.

Since 2010, the cumulative gap has been huge. Growth has outperformed value by over 420% (see chart below):

So, while value has had a good start to the year, it is coming off a very long stretch of underperformance.

Valuation tells a similar story.

Many investors say value always trades at a discount to growth.

The idea here is that investors are willing to pay more for companies expected to grow quickly than for companies growing at a steady pace.

Over the last 28 years, the Russell 1000 Value Index has traded at a 30% discount to the Russell 1000 Growth Index. But over the last five years, that discount widened to nearly 50%.

As of the end of January, value is still trading at about a 36% discount, which is above its long-term average (see chart below):

Source: Source: FactSet, FTSE Russell, Standard & Poor’s, J.P. Morgan Asset Management. Growth is represented by the Russell 1000 Growth Index and value is represented by the Russell 1000 Value Index. Long-term averages are calculated monthly since December 1997. Past performance is no guarantee of future results. Guide to the Markets – U.S. Data are as of January 30, 2026. The chart is for illustrative purposes only and not intended as a recommendation. The data is believed to be accurate, but there is no guarantee of its accuracy, completeness, or timeliness. Past performance is not a guarantee of future results. All investments carry risk, including potential loss of principal, and no investment strategy can guarantee a profit or completely protect against loss.

This investing style leadership often rotates in extended cycles.

The late 1990s favored growth. The early 2000s favored value. The 2010s heavily favored growth again.

These shifts tend to unfold over years (see chart below):

From a return perspective, value has a lot of ground to make up.

From a valuation perspective, value still has room to run.

And, if this is value’s cycle, history suggests it may still have a ways to go.

Keep learning. Keep growing. Keep going.

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Now here’s what I’ve been reading, listening, and watching:

• Marc Andreessen: The real AI boom hasn’t even started yet by a16z

• Listened to the following earnings calls: Merck, AMD, Alphabet, Chubb, The Cigna Group, Blue Owl Capital, Illumina, Amazon, Philip Morris International plus Cisco’s AI Summit

• The Valuation Treadmill by James Park

• Children’s Books (I have a 6-year old and a newborn): What If You Had Animal Teeth? by Sandra Markle (Author), Howard McWilliam (Illustrator)

Here’s what I’ve been writing:

• It’s a Midterm Election Year

• So Goes January

• Wisdom From Brent Beshore’s Annual Investor Letter