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 homebuilding group that boasts an outstanding track record and seems significantly undervalued compared to peers.
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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.