Value rotation in 2021?

We believe effective coronavirus vaccines and the potential for an economic recovery could be the catalyst for a style rotation towards cheap ‘value’ stocks, particularly those in cyclical sectors.
The valuations of popular ‘growth’ stocks are extremely stretched, have decoupled from fundamentals and do not reflect potential risks such as increased regulatory or political scrutiny, in our view.
We believe our simple and repeatable process, which combines strict valuation screening and rigorous fundamental analysis, has the potential to identify attractive value opportunities, as well as reducing the risks that are associated with investing in cheap, out-of-favour stocks.

Vaccines the catalyst for value?
For some time now, we have been highlighting the wide valuation gap between the ‘value’ and ‘growth/quality’ ends of the market. Earlier this year, we suggested that the drivers of this extreme dispersion might be coming to an end and the 2020s could be the decade of the ‘cheap asset’.

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