While flashier, more star-studded teams like Lionel Messi’s Argentina, Kylian Mbappe’s France, and Erling Haaland’s Norway garnered most of the headlines at the just-completed World Cup, Spain was the best team. There was nothing flashy about Spain: no mega-stars, not a ton of goals, no relentless attack. Instead, they dominated the tournament with precision passing, immaculate ball control and near-impenetrable (just one goal allowed all tournament!) defense.
Some might call Spain’s style “boring”; in fact, many have. But it is undeniably effective – playing keep-away, limiting mistakes, biding time until a rare opportunity arises, and then pouncing when it does. And that is essentially what the most successful investors do.
Even in a bull market like this one, the big stock run-ups are limited. This year has been a perfect example of that. The S&P 500 is up 8.0% year to date, and the Nasdaq is up 7.2% … and yet, April and May were the only two months all year in which either index advanced by more than 1%. Since that furious two-month rally, stocks are down, as the on-again, off-again AI trade has cooled, dragging the headline indexes downward, at least marginally.
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Thus, in the seven weeks since the market topped in early June, it’s been more of a stock picker’s market, rewarding opportunistic investors rather than passive ones. And most of the opportunities have been in the value space – the Vanguard Value Index ETF (VTV) is up 4.6% since the beginning of June, compared to a 2.5% decline in the S&P 500 and an 8.0% drawdown in the Nasdaq during that time.
Growth funds like the FFTY (-8.3%) and IPO (-10.7%) have experienced even steeper falls since the start of June.
So, while there hasn’t been much positive action in the market over the last two months, like Spain, you could have capitalized by being opportunistic with resurgent, previously undervalued sectors like healthcare (+10.8% since the start of June) and financials (+10.3%).
Eventually, the entire market will get going again. Right now, it’s in a period of summer malaise, limited by much of Wall Street being on vacation at the Hamptons. Perhaps the just-underway earnings season will trigger a revival. Or maybe it won’t come until November, when the midterms are over and the market’s traditional two “worst” months (September and October) are in the rear-view mirror. Regardless, the next big rally is coming, probably before the end of the year. When it happens, all investors will benefit.
Until then, however, there are profits to be made if you look hard enough. As the saying goes, “There’s always a bull market somewhere.” Right now, it’s in value stocks – and that’s been a boon for our portfolio.
There will undoubtedly be a time when growth stocks take the reins again, but with growing investor unease around some of the market’s former darlings, value stocks may very well have more enduring appeal right now than they’ve had in recent memory.
And that makes the “growth at value prices” approach of Cabot Value Investor particularly attractive right now. To see which stocks we’re recommending now, subscribe today.
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