It's no secret famed investor Warren Buffett sold off all his General Motors stock. But it's just one S&P 500 stock that worth more dead than alive.
Now 11 S&P 500 nonfinancial stocks, including automakers GM and Ford Motor, now trade for less than their book value, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Book value is how much the company says its assets are worth.
If a stock's price drops below its book value, it indicates investors don't have much faith in the company's future — at least they're not willing to pay much for it. In contrast, investors are paying eight-times more for the average S&P 500 company's assets.
Seeing some S&P 500 giants' values drop below the book value of assets is one of the most dramatic signs yet of how investors are leaving behind laggard stocks as high-tech firms grow. Tesla, one of the so-called Magnificent Seven stocks, in contrast, trades for 14 times book value. And even Deere, an industrial company which is pushing into high-tech upgrades to its farm vehicles, trades for nearly 5 times its book value.
The spread of highly valued growth stocks and value plays is only widening. "One way to avoid high equity valuations in bonds, another is small caps, or value-oriented companies, since the market has forgot about them," said Ladenburg Thalmann's Philip Blancato.
S&P 500 Growth Pulls Way Ahead
The massive divergence of S&P 500 growth stocks from value bottom dwellers has been so steady, it's almost easy to miss.
On its face, the SPDR Portfolio S&P 500 Value ETF is up 14.3% this year. That doesn't seem too bad. Sure, it's miles behind the SPDR Portfolio S&P 500 Growth ETF, which is up 24.1%. But it's not terribly far behind the SPDR S&P 500 ETF Trust's 19.4%.
But that masks the true value stock sob story. If you only look at the cheapest of the cheap value stocks, the underperformance is ugly. The Invesco S&P 500 Pure Value ETF, which only owns the stocks considered deep value, is down 0.4% this year. The ETF owns both Ford and GM.
And that's where the pain is.
GM And Ford Driving A World Of Hurt For S&P 500 Investors
What's worse than watching Tesla shares rise nearly 95% and not owning any? Owning shares of GM or Ford instead. Both are now trading as if investors would prefer if all their assets were sold and their money returned.
Take GM, which Buffett just threw in the towel on. Shares this year are down nearly 2.4%. That means investors are only paying 61 cents on the dollar of assets at the company. That's one of the lowest price-to-book ratios in all of the S&P 500. Ford isn't much better. Its stock is only trading for 96 cents on a dollar of assets. That's following an 8.5% drop in the stock price this year.
To be fair, it's not just the old-school automakers investors are hating on. The newly formed Warner Bros. Discovery trades for just 59 cents on the dollar of assets. And that's after the stock rising nearly 15% this year. Contrast that against Magnificent Seven entertainment company Netflix. Investors are paying up nearly 9-times the company's book value for the stock.
Of course, markets may look to equalize the imbalance between the cheap value companies and growth plays. But even Buffett, it seems, is losing patience.
Better Off Dead?
S&P 500 companies trading for less than book value (lower is cheaper)
| Company | Ticker | Price/book value | Sector |
|---|---|---|---|
| Paramount Global | 0.46 | Communication Services | |
| Viatris | 0.55 | Health Care | |
| Warner Bros. Discovery | 0.59 | Communication Services | |
| General Motors | 0.61 | Consumer Discretionary | |
| Mohawk Industries | 0.80 | Consumer Discretionary | |
| Kraft Heinz | 0.89 | Consumer Staples | |
| Walgreens Boots Alliance | 0.88 | Consumer Staples | |
| Ford Motor | 0.96 | Consumer Discretionary | |
| Tyson Foods | 0.98 | Consumer Staples | |
| Mosaic | 0.96 | Materials | |
| Hewlett Packard Enterprise | 0.97 | Information Technology |
