Fund managers have not joined race into cheap, value stocks: BAML survey


LONDON (Reuters) – Fund managers have not piled into so-called value stocks, which have been shunned during the decade-long technology-led boom, even as shares in beaten-down companies have rallied over the past week, a key investor survey showed on Tuesday.

Bank of America Merrill Lynch’s latest monthly survey of global managers, which was carried out between Sept. 6 and 12., showed only 7% of investors expect value stocks to outperform growth over the next 12 months.

That is up from the decade low in the last survey, but it undermines speculation that the rapid recent rally in value stocks, which are generally defined as firms whose fundamental worth is not reflected in their current share price such as banks and autos, is the start of a prolonged rotation back into sectors that have underperformed in recent years.

Over the past week, the MSCI world value index has vastly outperformed the growth index. Companies that boast a faster pace of growth, such as like the big U.S. tech names have been favored during the past decade of central bank largesse.

Also, 47% percent of investors surveyed saw oil prices fairly valued around $55 per barrel before the weekend attack on a Saudi Arabia crude oil facility with investors holding the biggest underweight on the resource sector in more than three years.

The overall outlook remains cautious. Some 38% of investors expect a recession over the next 12 months, the highest reading in a decade. That compares with 59% who see a recession as unlikely. The most crowded trade in the eyes of fund managers remains bullish bets on U.S. Treasuries.

Some 38% of investors think the U.S-China trade war is the new normal, while 30% believe it will be resolved before the 2020 U.S. Presidential election.

Reporting by Josephine Mason; Editing by Saikat Chatterjee and Louise Heavens



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