Stocks & Investing
Sun, November 16, 2025
Value Stocks Outshine AI Hype: A Winning Strategy for 2024
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Published in Stocks and Investing on Sunday, November 16th 2025 at 21:32 GMT by MarketWatch- 🞛 This publication is a summary or evaluation of another publication
- 🞛 This publication contains editorial commentary or bias from the source
Why Value Stocks Are Outperforming the AI Hype (A Summary of MSN’s Latest Investing Feature)
The past year has seen an unprecedented surge of interest in artificial‑intelligence (AI) companies. From Nvidia’s soaring shares to the buzz around generative‑AI startups, the market’s “AI circus” has been a headline‑grabbing force. Yet a new article on MSN Money – “This investing strategy features value stocks doing well below the AI circus” – argues that a disciplined, value‑oriented approach is delivering superior returns, even as AI‑themed stocks continue to inflate.
Below is a concise overview of the article’s key insights, the strategy it promotes, and the resources it points investors toward.
1. The Premise: Value Investing as a Counter‑Cyclical Hedge
The article opens with a clear thesis: value stocks—those priced lower relative to fundamentals such as earnings, book value, and dividends—are outperforming AI‑heavy portfolios because they offer a “margin of safety” in a volatile market.
A quick side‑note cites a 2023 study from the CFA Institute, which found that the S&P 500’s value segment outperformed its growth counterpart by 2.5% annually over the past 12 months. In contrast, AI‑heavy funds (e.g., ARK Innovations, Global X AI) have delivered double‑digit growth but with far higher volatility and valuation multiples.
The article uses a vivid comparison: while AI stocks are “flying high on hype,” value stocks are “steadily climbing on fundamentals.” This sets the stage for a strategy that leverages low valuation metrics, solid earnings growth, and a conservative risk profile.
2. Core Components of the Value‑Focused Strategy
a. Screening Metrics
The author recommends a three‑tier screening process:
- Low Price‑to‑Earnings (P/E) or Price‑to‑Book (P/B): Target companies with P/E below the industry average and P/B below 1.5.
- High Free‑Cash Flow Yield: Seek firms with a free‑cash‑flow yield above 5%, indicating the ability to return capital to shareholders.
- Consistent Dividend Growth: A minimum of 5% year‑over‑year dividend growth over the last five years is viewed as a sign of stable earnings.
b. Sector Focus
While value investing can span the market, the article spotlights cyclical sectors that have historically rebounded strongly when valuations tighten:
- Industrials (e.g., Caterpillar, 3M)
- Financials (e.g., JPMorgan Chase, Goldman Sachs)
- Consumer Staples (e.g., Procter & Gamble, Coca‑Cola)
These sectors often get overlooked during AI‑driven rally phases but can provide a steady income stream and price appreciation.
c. Risk Management
The strategy advocates diversification across 10–15 high‑quality value stocks, limiting any single stock to 5% of the portfolio. Additionally, investors are encouraged to keep a small portion (around 10–15%) in a broad‑market index to maintain exposure to overall market upside.
3. Performance Evidence
A pivotal part of the article is the performance comparison:
| Portfolio | 12‑Month Return | Volatility (σ) |
|---|---|---|
| Value‑Focused Strategy (sample) | +18.2% | 10.5% |
| AI‑Heavy Fund (e.g., ARK Innovations) | +22.7% | 28.4% |
| S&P 500 | +14.5% | 12.3% |
The table demonstrates that while AI funds have higher nominal returns, their volatility is more than double that of the value portfolio. Over a five‑year horizon, the value strategy would have delivered a 10% annualized return with a Sharpe ratio of 1.1, compared to 1.3 for the AI fund—signifying a better risk‑adjusted performance.
4. Practical Implementation: ETFs & Mutual Funds
The article goes a step further by listing low‑cost ETFs that track value indices, making it easier for individual investors to deploy the strategy without picking stocks:
- Vanguard Value ETF (VTV) – 1.05% expense ratio, weighted heavily toward consumer staples and industrials.
- iShares Russell 1000 Value ETF (IWD) – 0.15% expense ratio, provides a broader exposure to U.S. large‑cap value stocks.
- Schwab U.S. Large‑Cap Value ETF (SCHV) – 0.04% expense ratio, a near‑zero‑cost alternative.
Each ETF link in the article provides further details on holdings, expense ratios, and performance history.
The piece also highlights the “Dividend Growth Fund”—a mutual fund that invests exclusively in dividend‑growth stocks—highlighting its historical resilience during market downturns.
5. Supplementary Resources
To give readers additional context, the article includes several hyperlinks:
- CFA Institute Study on Value vs. Growth – A deeper dive into the research behind the strategy.
- Morningstar Analysis of Value ETFs – Provides performance data, ratings, and expense ratio comparisons.
- SEC Filings of Sample Companies – Allows readers to verify the financial metrics cited in the screening process.
- A Brief on “The AI Circus” – An explanatory piece detailing how AI hype has led to inflated valuations and the risk of bubble‑like dynamics.
These resources are intended to help investors independently validate the claims and to foster a deeper understanding of how value metrics translate into tangible returns.
6. Closing Takeaway
The MSN Money article concludes that while AI will remain a significant driver of future economic growth, the current market over‑valuation of AI‑centric firms warrants caution. Value stocks, by contrast, provide a conservative yet rewarding path for investors who prioritize fundamentals, lower volatility, and a steady income stream.
The underlying message is clear: Diversifying into value can cushion against the inevitable corrections that often follow speculative rallies. By adopting a systematic, metrics‑based approach, investors can harness the long‑term potential of value while staying grounded in risk‑adjusted performance.
Final Thought
In a world where headlines are dominated by AI breakthroughs and high‑profile IPOs, the article reminds readers that time-tested principles still hold merit. Whether you’re a seasoned portfolio manager or a novice investor, the value strategy outlined here offers a pragmatic counterbalance to the exuberance of the AI circus—combining disciplined screening, sector focus, and prudent diversification to deliver sustainable growth.
Read the Full MarketWatch Article at:
[ https://www.msn.com/en-us/money/savingandinvesting/this-investing-strategy-features-value-stocks-doing-well-below-the-ai-circus/ar-AA1QeE2D ]
