Value Storms Back
In just two short days, the stock market has spooked traders following an abrupt shift away from momentum stocks and high-growth tech names.
Despite little reaction from the major averages, the market’s forgotten value stocks are catching a bid and outperforming the formerly red-hot growth names.
“Momentum or growth stocks have blown their value counterparts out of the water over the past five years. In that time, the MTUM exchange-traded fund is up more than 130% while VLUE has gained nearly 70%,” CNBC notes. “Growth stocks have also outperformed the S&P 500 over the past five years. The broad index has jumped 108% in that time. This year has been no different.”
The “MTUM” in question here is the iShares MSCI Momentum Factor ETF, while “VLUE” is the iShares MSCI Value Factor ETF.
Here’s a great chart from analyst Charlie Bilello:
After the action we’ve seen this week, a little perspective goes a long way. While momentum names have taken a tumble, it’s clear that these stocks have absolutely thrashed their value cousins over the past several years.
We don’t yet know if value can take its newfound lead and make a serious run. But you can bet this is one of the most important relationships we’ll be watching as the month progresses.
But for now, the year’s biggest laggards are getting their day in the sun.
Banks, transportation names, and even the ragged retail sector are beginning to outperform this month.
The SPDR S&P Retail ETF (NYSE:XRT) flashed a nice breakout move Tuesday, jumping almost 3% to close at new four-month highs.
One of the sectors leaders right now is Target Corp’s (NYSE:TGT). Not only did Target recently report bang-up earnings, the big-box retailer is also beefing up its expectations as it looks to hire 130,000 workers for the holiday shopping season.
It’s not exactly headline news for a large retailer to hire several thousand new employees for Christmas shopping season. During the 2018 holiday season, Target hired around 120,000 workers, reports CNBC. In an environment where most people are employed, 10,000 more workers than last year’s holiday season is a lofty goal. And since Walmart has eaten Target’s lunch for years in the brick & mortar discount store wars, Target’s announcement to hire even more workers is putting retail competitors on notice.
To sweeten the deal for people planning on joining the Target army, wages start at $13 an hour ($2 an hour less than Amazon). In addition, seasonal employees will enjoy a 10% discount store-wide and a 20% discount on what Target refers to as “wellness” products like workout equipment and healthy food.
It’s no wonder Target has vaulted to the top of the retail pile. Shares are up more than 62% year-to-date, and the stock continues build upon last month’s strong earnings gap.
While Target is enjoying a renaissance, J.C. Penney (NYSE:JCP) refuses to go gently into that good night.
Retail is so hot this week that even the worst of the worst are posting huge gains. J.C. Penney shares jumped nearly 20% yesterday to close above $1 for the first time since July.
The ever-imploding retail chain just announced the launch of its new outdoor brand and store within a store, reports CNBC. The new stores will be opened in 100 of the remaining J.C. Penney locations and offer its new clothing brand, St. John’s Bay Outdoor, along with items from Nike and Adidas.
If that’s not the definition of too-little too-late, I don’t know what is. It’s the retail equivalent of musicians playing violin before the Titanic sank. I just know that somehow, somewhere, there’s a group of hardcore J.C. Penney fans keeping the dream alive and they are ecstatic. I hope they enjoy their gains this week…
Finally, let’s check in with yesterday’s big Apple event.
The big news out of the Apple Event this year is every existing Apple product got a fresh coat of paint and gained an extra camera — whether it was needed or not.
Aside from the new three-eyed iPhone 11 Pro, Apple TV+ stood out as potentially the most important release in the new lineup. Priced at $4.99 per month, it’s one of the cheaper streaming services out there. It’s not a Netflix Inc. (NASDAQ:NFLX) killer yet — but we’ll see how it fares after Friends and The Office leave Netflix to rejoin the NBC family.
Netflix currently costs $12.99 a month. while many consumers will probably pay for both Apple TV+ and Netflix, Apple’s significantly lower price point may be enough to draw some customers away.