How one 10-stock value portfolio has soared 20% this year
The long bull market rewarded tech and growth stocks in particular. But as investors try to counter inflation and rising interest rates, value stocks may be worth a look. This portfolio shows why.
While the major indexes have pulled away from correction territory, 2022 has been a rough one for many investors. But something goes up even in bad markets.
One example: A 10-stock portfolio called Acquirer’s Multiple Investor, run online by Validea.com and rebalanced monthly, is up 19.8% this year, while the S&P 500 has declined by 3.9%.
Top holdings this year have included US Steel (X), up more than 70% through February and March; Sibanye Stillwater (SBSW), a mining company, up 32% this year; and steel stock Ternium (TX), up 14% since it was added to the portfolio in November. ArcelorMittal (MT), another steel stock, was added in March and is up 11% since.
That’s not to say any of these are necessarily buys now; US Steel, in fact, was rotated out of the portfolio with the latest monthly rebalancing. But this portfolio has pointed to resource and cyclical stocks well-suited for inflation and the global supply shortage — conditions that may be with us a while. So if you’re used to buying mostly tech stocks and high growth, it may be time to shop for value in these and similar names.
What is Acquirer’s Multiple Investor?
The money managers at Validea run model portfolios based on the work of a variety of stock experts and gurus. This one is based on the writing of Tobias Carlisle, a deep value investor, author of “The Acquirer’s Multiple: How the Billionaire Contrarians of Deep Value Beat the Market,” and the founder of Acquirers Funds. Australian-born Carlisle takes the basic approach of looking at undervalued stocks, adds company metrics including operating earnings, enterprise value and debt, and seeks out cheap companies that could be takeover targets.
In 2022 the model “has bought some of the deepest value stocks that have started to demonstrate strong performance. Often tapping energy stocks, shippers, international names and retailers, this strategy seeks out those companies that are extremely cheap,” said Validea Vice President Justin Carbonneau. “As of right now, the top scoring stocks based on the model carry an average price-to-earnings ratio of 3.6.”
Of course years are what matter in investing, which is a long-term game. While the Acquirer’s Multiple Investor portfolio is up 30.3% over the past year, more than double the 14% return of the S&P 500, its five-year annual return is only 5%. The S&P 500 returned 14.3%.
Longer term, it’s almost a wash. Since the model portfolio began in 2008, it’s returned 420% — just 5.1% below the market. If the market is turning to value for a while, it may make up that ground pretty quickly.
Among the model’s top-rated stocks right now are some big winners and some still struggling this year:
|Sibanye Stillwater (SBSW)||$15.69||25.4%||5.10|
|ZIM Integrated Shipping (ZIM)||$59.23||4.4%||1.53|
|iTeos Therapeutics (ITOS)||$34.53||-27.2%||6.08|
|FinVolution Group (FINV)||$3.89||-22.7%||2.92|
If you’re intrigued, sample the portfolio — and many others — at Validea.com. Full access requires a subscription.
For more on value investing in general, read our guide. For more on low P/E stocks, read this primer. And if you aren’t confident in picking individual stocks, check out some of the best value ETFs.
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