Six Reasons Investors Should Consider U.S. Value Stocks

By Phil Davidson & Peter Hardy, CFA - November 2019

Key Takeaways

• The U.S. market is deep and diverse, offering ample opportunity to own stocks in high-quality, dividend-paying companies. We think the market’s characteristics, combined with the diversification benefits of U.S. exposure, make U.S. equities an appropriate, material position in global investors’ portfolios.
• Style is an important consideration when investing in the U.S. A value strategy focuses on companies that trade at a discounted valuation that doesn’t reflect the issuer’s future quality and earnings power. We believe buying undervalued, higher-quality stocks represents an opportunity for investors to benefit when the stock price reverts to higher levels. Historic returns show that such an approach outperformed with less risk over time.
• An emphasis on income has also proven to be successful, as dividends have provided a stable and more certain source of investment returns. Importantly, focusing on higher dividend-paying companies may be a way to identify higher-quality companies.

In this paper, we identify six reasons we believe investors should consider a material allocation to U.S. value stocks.