Capital-Intensive, Cyclical, Value Stocks Likely To Continue Their Outperformance: ICICI Securities
Risk factors changing favorably resulting in outperformance of cyclicals.
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ICICI Securities Report
Factors such as ‘high capital intensity’ (low operating asset turnover), ‘low asset valuation, ‘high financial leverage / high beta’ and ‘low return on equity’ have consistently driven stock price outperformance within the BSE200 universe since FY21.
This behaviour is a departure from the trends observed from the period FY12 to FY20 wherein expensive and low-volatility stocks outperformed.
Size as a factor significantly outperformed during FY21, but there has been no major difference in performance over FY22 and FY23-to-date.
Overall, the three factors mentioned in the Fama-French model (market risk, size and value) have outperformed post FY20.
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