Is 2024 Prime Time for Value Stocks?

The tremendous returns for the S&P 500 (SPY enjoyed in 2023 are likely a thing of the past as we turn the calendar over to 2024. Instead the average investor should expect very modest returns. Yet those with a nose for picking value stocks are lined up for vastly superior results. Why is that? And what are the best value stocks to discover now? Read on below for the answers.

There is good reason to believe that value stocks will be in season this year. This is great news to all those who use our POWR Ratings system given its value bias.

That’s because 31 of the 118 factors analyzed for each stock is a value criterion. Meaning that we go far beyond just PE, book value and Price to Sales to determine the full value proposition for each stock.

The sum total of this POWR Ratings analysis has led to a 4X return over the S&P 500 (SPY going back to 1999. And yes, signs point to pressing our advantage once again in the year ahead.

Why precisely does the forecast look so favorable for value stocks?

The answer will be at the heart of today’s commentary below…

Market Commentary

For some of us, it is always a good time to be a value investor. That is because it simply does not make sense to overpay for a stock.

Because why would you overpay for anything???

Would you buy a new TV for $1,200 if you knew you could get the exact same one from Amazon for only $799? Of course not!

In fact, it is the very act of determining that the stock is undervalued at the outset that lines up the investor for the outperformance that unfolds as other investors awaken to the stock’s attractiveness. This was the point made by many classic investors including the father of value investing Benjamin Graham and his most famous disciple, Warren Buffett.

Unfortunately, the market tides do not always agree with this concept that value is always in fashion. That was certainly true in 2023 when growth stocks took the lead. That makes perfect sense when you understand the general rhythms of the market.

Best Time for Growth Stocks

The classic idea is that a bull market is the time to buy growth stocks. That is especially true in the early days of a new bull as these growth stocks are punished with the most severe price drops during the bear market phase.

It helps to appreciate the fear and greed cycle at work. As the pendulum swings to fear, the growth stocks are beaten down to extreme levels.

Once the foot of the bear market is removed from the necks of investors, then these same growth stocks race higher with the idea of forthcoming economic expansion that fuels earnings growth and share price advances.

Case in point is noting the +67.64% gain for the ARK Innovation ETF ARKK ( in 2023. That was a full 2.5X better than the S&P 500 on the year.

Best Time for Value Stocks

The flip side of the above coin is to say that value strategies work best during bear markets. When investors are more discriminating about the stocks they own.

This proves out well when I share with you that our Top 10 Value Stock strategy (the cornerstone of our POWR Value newsletter) enjoyed a +9.18% return in 2022 in the midst of the bear market declines.

Not surprisingly the aforementioned ARK Innovation ETF chock fill with everyone’s favorite growth companies cratered -66.97% that year as investors ran from growth stocks like the plague.

Yet bear markets are not the only time that value strategies are in fashion. This also takes place during the latter stages of bull rallies when valuations are near maximum levels.

Those times are marked by modest to negligible returns for the overall market pushing investors to dig a bit deeper to find worthy selections. A good example of that was 2018 a full nine years into the long bull run that started back in 2009.

There we find a -4.57% showing for the S&P 500 on the year. Yet our Top 10 Value Stock strategy enjoyed a robust +16.20% return.

The point is that I think that 2024 is lining up to be one of those years of modest returns for the overall market pushing people to value approaches to enjoy better returns.

That may seem like an odd statement as most would say that the new bull market just began in 2023. Thus, there should still be plenty of time and upside to follow.

Then again, lets appreciate the unique nature of the 2022 bear market. Yes, it technically qualifies as a bear because the stock market declined more than 20% from the all time highs.

However, it was a very shallow bear market because the forewarned recession never came to fruition. With that, stocks bounced back with gusto late 2022 and continuing into 2023.

That stage was prime time for beaten down growth stocks to be bid back up. Now with the overall market pressing against the all time highs…and really no serious increase in the earnings outlook in the coming year, then stocks are once again pretty fully valued.

To be more specific, FactSet is pointing to a 19.3 forward PE for the S&P 500. That is well above the 10 year average of 17.6. This points to the overall market being pretty fully valued.

It is typically at this stage, when most of the usual suspect stocks are back to full valuations that the overall market index starts to show tepid results. Meaning that after the 26% gain for the S&P 500 in 2023 that the index is likely set for very modest returns.

In my last commentary, I even predicted that 5,200 was likely the upside target for 2024 which only equates to around an 8% return. Even lower would not surprise me…but that is for the average stock.

So yes, I like the odds for value to be back in play in the weeks and months ahead. The results for just the first three days of 2024 seems to prove this out:

-1.70% S&P 500 (large caps)

-3.42% Russell 2000 (small caps)

+1.91% Top 10 Value Stocks

SPY shares were trading at $469.87 per share on Friday morning, up $2.59 (+0.55%). Year-to-date, SPY has declined -1.14%, versus a % rise in the benchmark S&P 500 index during the same period.

Photo by Ishant Mishra on Unsplash