Last week was a foul one for technology stocks and the markets usually, nevertheless it was a reasonably good one for value stocks. The markets have been surging for nearly a yr and a half, and the valuations of growth and technology stocks have soared higher along the way in which.
The value-to-earnings ratio of the S&P 500 has climbed over 22, up from 18 a yr ago, while the 10-year inflation-adjusted Shiller P/E ratio is as much as 33, higher than the typical, which indicates a market that’s overvalued.
This will likely create a possibility for value stocks, as we saw last week. In actual fact, the best-performing stocks on the S&P 500 last week were value stocks: namely, United Airlines (NASDAQ:UAL), Globe Life (NYSE:GL) and Paramount Global (NASDAQ:PARA).
A great week for United
While the Shiller P/E ratio was even higher in March, at 34, it continues to be hovering at an above-average level of 33. When you concentrate on that the all-time mean for the Shiller P/E ratio is 17, it’s clear that 33 is high. While the 17 reading is skewed somewhat by lower ratios within the last century, it has been within the mid-20s on average for the reason that dotcom bubble burst in 1999. For perspective, the Shiller P/E ratio was 28 in April 2023 and 38 in October 2021 — just before the tech bubble burst.
Investors should definitely be taking a look at valuations straight away, particularly with stocks like NVIDIA, which has been on fire for greater than a yr now. While NVIDIA has massive earnings power, it’s currently trading at around 64 times earnings, which is on the high side. For perspective, the typical P/E of the Nasdaq 100 is about 30 straight away.
Investors sought out good values last week, including United Airlines, which rose about 27% last week to around $52 per share. United Airlines posted strong fiscal first-quarter earnings that beat earnings expectations.
United saw a ten% increase in revenue within the quarter to $12.5 billion, while its net lack of $124 million was lower than anticipated. It also posted better-than-expected earnings guidance for the second quarter and full yr.
United predicts adjusted EPS of $3.75 to $4.25 in Q2 and $9 to $11 per share for the complete yr, topping analyst estimates. It also lowered its capital expenditures for fiscal 2024 to $6.5 billion from $9 billion, partly because of the indisputable fact that it slashed its aircraft deliveries to 61 — from the sooner estimate of 101. That is because of expected manufacturing delays from Boeing.
United is trading at just six times earnings, so it’s dirt low-cost.
Globe Life and Paramount also rise
The second-best performer last week was insurance company Globe Life, which gained 25%. The catalyst for Globe Life seemed to be an announcement it released refuting allegations made by short-seller Fuzzy Panda Research. The firm raised concerns about Globe Life’s business, leadership and legal issues.
Globe Life management called the short-seller’s claims “wildly misleading, mixing anonymous allegations with recycled points pushed by plaintiff law firms to coerce Globe Life into settlements … We intend to more fully rebut these allegations within the near future.”
Globe Life is about to report its first-quarter earnings results today after the market closes, so search for more information on this issue, its earnings and its outlook then. Globe Life can also be trading at six times earnings.
The third-best stock last week was Paramount Global, which gained 12.5%. Paramount is incredibly low-cost with a price-to-book ratio of 0.36 and a P/E-to-growth ratio of 0.25.
Nevertheless, the catalyst for Paramount was reports that Apollo Global Management and Sony Pictures are in talks to make a joint offer to purchase Paramount. Currently, Paramount is in merger talks with Skydance Media, so it appears investors prefer a Apollo/Sony bid, given the value surge on the news.
Investors should tread cautiously with the struggling Paramount stock, given the uncertainty surrounding its future.
Disclaimer: All investments involve risk. On no account should this text be taken as investment advice or constitute responsibility for investment gains or losses. The knowledge on this report mustn’t be relied upon for investment decisions. All investors must conduct their very own due diligence and seek the advice of their very own investment advisors in making trading decisions.