The past year has produced a performance chasm between value and growth equities, with value recapturing the lead following a strong run for growth in recent years. As interest rates rose rapidly in 2022, with the fed funds rate now around 4.3%, we saw downward pressure on higher-valuation assets, including growth stocks. Many investors gravitated towards more defensive value sectors. A U.S. large-cap value index fell nearly 8% on a total return basis while its growth-style counterpart dropped 29%.
Value will likely continue to outperform growth in the near term as the Fed continues down its rate-hiking path. Today’s featured stock is a discerning selection from the homebuilders group that boasts an outstanding track record and seems significantly undervalued compared to peers.
NVR, Inc. (NVR)
NVR is one of the top five major U.S. homebuilders. Rising mortgage rates have weighed on the U.S. housing market. However, as one of the highest-quality homebuilders in the group, the stock has a history of outperforming peers during difficult periods in the housing market cycle. Currently trading at around ten times earnings, NVR is a value against its peers.
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