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Benjamin Graham, author of the renowned book Intelligent Investor, once said, “Price is what you pay; value is what you get." This is a critical lesson for all investors to learn, and it is more important than ever, especially following two years of 20% + market growth. But is now the time to pivot from a growth-focused strategy to one centered on value?
Thomas Hayes, chairman and managing member of Great Hill Capital, joins Stocks in Translation from the New York Stock Exchange trading floor on Wall Street, alongside Yahoo Finance Markets and Data Editor Jared Blikre and Producer Sydnee Fried as they explore the value and value stocks.
Blikre introduces today’s phrase which is V.S.D.: volatility, spreads, and duration. Blikre explains that volatility measures price swings, spreads indicate the difference in yields between two bonds, and duration measures a bond's sensitivity to interest rate changes. Hayes explains how he uses V.S.D. to identify opportunities and what he sees in the current market.
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Hayes also shares his views on the current market: “What we're seeing in the last few weeks is exactly what we saw after Trump 1.0—after the election and before the inauguration,” says Hayes. “After the inauguration, what's surprising to most people that they forget is that bonds actually rallied, yields compressed, the dollar came down, and international stocks did exceptionally well. China had one of its best years ever in 2017 after the inauguration.”
Hayes predicts that while the "Magnificent Seven" stocks will continue to see gains in 2025, following huge earnings growth last year, their growth is “decelerating down to 21%.” He adds, “So I think you're [going to] find the real opportunity in the un-Magnificent 493—in international [markets] and small caps.”
Hayes also shares two stocks he believes are poised to break out in 2025, both led by new CEOs pursuing similar business strategies.
The first is Advance Auto Parts (AAP), headed by new CEO Shane O’Kelly, who is revamping the company’s strategy with a target of $630 million in operating income by 2027. “They've done that four times before… 2018, 2019, and two other years,” Hayes explains. “Every single time that they hit that marker, the stock traded between $180 and $220 a share. It's a $45 stock right now.”
The second is Vans, owned by VF Corporation (VFC) and led by CEO Bracken Darrell, who previously transformed Logitech into a tech accessory giant. “Somehow, this guy figured out how to brand Logitech to the gamers, and the game was on. He's doing the exact same thing. And not only does VF Corp own Vans, which has struggled—by the way, it peaked during Covid.”