Explore the Valuation Gaps in the S&P 500

Even with the end of the year fast approaching, investors still have time to fine-tune their equity portfolios for 2025. Many equity investors would likely agree that sticking to mega-cap tech names in the Magnificent Seven paid off well this year. However, 2025 may present new opportunities for broader value strategies across the S&P 500 to really shine. 

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William Nygren, CFA, CIO–U.S. and portfolio manager at Harris | Oakmark, recently broke down the merits of a value strategy. In the Natixis post, Nygren explained how the valuation spreads in the S&P 500 are creating new opportunities for the new year. 

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“Because the S&P has been so concentrated in large cap technology companies, the cheap stocks are spread out across most of the other industries,” Nygren added. “I think there’s an unusual opportunity to put together a very well diversified portfolio today in low P/E stocks across lots of industries.”

Despite the market approaching new all time highs, Nygren expressed confidence in sticking with a value strategy. Crucially, he pointed out that the market valuations are largely being driven by the top technology companies. Given that the rest of the market is near “pre-bull market prices,” traders have a unique opportunity to build a portfolio that is more deeply diversified than many market-cap-weighted strategies on the market. 

OAKM Offers an Active Value Opportunity

Investors looking to tap into the Harris | Oakmark value strategy may wish to consider the Oakmark U.S. Large Cap ETF (OAKM). OAKM is an actively managed fund that invests in a highly disciplined portfolio of 30-40 value stocks. 

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The portfolio team behind OAKM, including Nygren, builds its stock selection with a three- to five-year time horizon. By doing so, the fund can give each of the companies enough breathing room to tap into their growth potential. 

This time horizon can set OAKM up for success in both 2025 and beyond. If equity growth broadens out next year, OAKM’s portfolio can be ready to cultivate capital appreciation in the long run.

For more news, information, and analysis, visit the Portfolio Construction Channel.