Skip to main content
Welcome to
super saver spring
offer ends april 20
save over $140
Sale ends in
per week for 24 weeks
Welcome to
super saver spring
per week for 24 weeks
save over $140
// //

B of A Securities quantitative strategist Savita Subramanian published a compelling, seven point argument this week advising clients to allocate at least a small portion of their equity portfolios to value stocks.

The strategist began by noting the success of valuation-conscious investing over the extreme long term. One dollar invested in U.S. value stocks in 1926 would be worth US$13,447 now, more than double the $6,267 that growth stocks would have generated.

The performance of value stocks during economic and profit recoveries is a key reason for optimism. Historically, value stocks have outperformed the overall market immediately after bottoms in economic growth and earnings growth. B of A believes the economic trough is just behind us, and that second quarter profit results will mark the bottom in U.S earnings.

Story continues below advertisement

Value stocks are also neglected in the current market. Ms. Subramanian observed huge asset inflows into growth stocks while portfolio managers are broadly underweight companies with lower price to earnings and price to book value valuations. This lack of faith in attractively valued stocks implies outperformance in the coming years.

Value stocks are also extremely cheap relative to the rest of the S&P 500. “Value stocks trade at record levels of cheapness to momentum stocks,” the strategist writes, while “growth [stocks] by almost any measure trade at record [high] premiums to the market.”

Ms. Subramanian goes on to highlight the dominance of large cap growth stocks in the index, and suggests that we’re nearing the point where government anti-trust regulation will force break-ups or otherwise limit their influence. This is almost certainly a reference to technology companies like, Alphabet Inc. and Facebook Inc.

The average investor prefers to buy assets that are already outperforming – the investments that have the highest returns over the past 12 months tend to attract the most new assets. They will be resistant to value-oriented stocks or ETFs then because they have badly lagged the major equity benchmarks since 2007.

But Richard Bernstein, founder of asset management firm RB Advisors and a former mentor of Ms. Subramanian’s when he was chief quantitative strategist at Merrill Lynch, cites “returns are best where capital is scarce’ as one of his primary rules of investing. Value stocks are currently neglected and starved for capital, and this provides yet another reason for investors to consider a value stock component in their portfolio.

-- Scott Barlow, Globe and Mail market strategist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Story continues below advertisement

The Rundown

Billionaires look to dump equities after turning quick profit

Billionaires looked after by Swiss bank UBS are looking to move their cash out of equities after profiting from an unprecedented sell-off and rapid rebound from March to May, the world’s largest wealth manager said this week. During the rout in stock markets across the globe in March, UBS’s richest customers took out loans to place billions into crashing stock markets. They are now looking to pull that money from equities and put the profits in illiquid and private assets, said Josef Stadler, UBS’s head of global family offices. (for everyone)

Rebalancing a portfolio has gotten trickier in this pandemic-warped market

The global pandemic has made all sorts of mundane tasks painfully complicated, from buying groceries to rebalancing a portfolio. With the course of the crisis and the fate of the global economy shrouded in uncertainty, simply tweaking one’s investments to realign with long-term goals and to strike a balance between risk and return is now full of hazards. Tim Shufelt tells us more. (for subscribers)

How to put together a gold ‘mini-portfolio’

Story continues below advertisement

Gold has always been seen as a haven investment in times of market turmoil. It’s no different this time around. The price of the yellow metal broke through US$1,800 last week. With bullion rising and equities uncertain, what holdings are best for building a mini-portfolio focused on gold? Gordon Pape shares his thoughts. (for subscribers)

The market rally is grounded. Just look at banks

Are investors blithely ignoring the economic damage caused by COVID-19? Bank stocks suggest that the mood remains far from upbeat, notes David Berman. (for subscribers)

Fund managers prepare for worst small-caps earnings season as COVID-19 second wave looms

Investors are searching for bargains in the world of U.S. small-caps, as the beaten-down asset class prepares for what may be the worst earnings season in its history amid a resurgent coronavirus pandemic. David Randall of Reuters has more. (for subscribers)

Cresting ‘first wave’ of stimulus may be next hurdle for world markets

Story continues below advertisement

A growth spurt in the balance sheets of the world’s biggest central banks has crested in recent weeks, drawing warnings from investors that any signs of backpedaling on stimulus will jolt financial markets and strangle economic recovery. Ritvik Carvalho of Reuters has this analysis. (for subscribers)

Also see: BlackRock CEO Larry Fink says economic recovery further away than markets think

Others (for subscribers)

The week’s most oversold and overbought stocks on the TSX

Friday’s analyst upgrades and downgrades

Thursday’s analyst upgrades and downgrades

Story continues below advertisement

Number Cruncher: Ten materials sector stocks enjoying a golden moment

Number Cruncher: Seven sustainable ETFs have outperformed their peers this year

Others (for everyone)

Rising gold to offset second-quarter COVID-19 pandemic hits on precious metals miners: analysts

Globe Advisor

Why more advisors are looking to go independent

Story continues below advertisement

Are you a financial advisor? Register for Globe Advisor ( for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’’ portfolios.

Ask Globe Investor

Question: When I have cash in my RRSP that I want to hold how do I get it into the high interest savings accounts recommended by The Globe and Mail without having to take it out of my RRSP? 

Answer: Ask the administrator of your RRSP. The company should have access to at least one and probably more high-interest accounts that can be used. Ask for the one with the best rate. Unfortunately, you’ll probably find its less than the comparable rate on a non-registered account. And be warned – “high interest” doesn’t mean a lot these days.

--Gordon Pape

What’s up in the days ahead

David Berman looks at some of the TSX stocks that have lagged badly during the rebound from the March lows - and shares his thoughts on each of them.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

Compiled by Globe Investor Staff

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies