10 Solid Value Stocks at Great Prices (and 10 to Pass Up)
We examined the nearly 500 holdings in the Morningstar US Value Index and found some solid stocks at great prices, and others that look too expensive.
At the Morningstar Investment Conference last week, Morningstar's Alex Bryan and AQR's Ronen Israel discussed some reasons the value premium exists, and why value investing is such an intuitive strategy.
The first theory is risk-based; essentially, value stocks' excess returns are compensation for bearing additional risks. Many value stocks are "cheap for a reason"; in other words, they are facing a tough economic environment, or a tough business outlook. Perhaps they are under some sort of regulatory or litigation risk, or there is uncertainty about the company's future. Maybe there are new managers in charge or the company is undergoing a restructuring, or both.
Karen Wallace does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.