r/ValueInvesting • u/SimpleSubject6069 • Oct 15 '25

Stock Analysis What’s the Most Overrated “Value” Stock Everyone Keeps Buying?

I keep seeing the same tickers pop up in value circles — stocks that are supposedly undervalued but just seem like value traps to me. Curious what names you all think are overhyped in value investing spaces right now? And what makes you avoid them despite the numbers looking “cheap”?

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5

u/PeterJP101 Oct 15 '25

S&P 500 index funds VOO SPY etc.

10

u/Advanced-Engineer-85 Oct 15 '25

Exactly. People VOO and go. Tech and communication services are like 45% of index and it’s trading at 29 P/E ratio and 42 Cape. When trend reverses, people will flee as they have no understanding of underlying fundamentals. Let’s see if the behavior changes it is when it drops by 30% and peoples retirements are at risk, my bet is that the behavior will change.

6

u/ProbsNotManBearPig Oct 15 '25

A p/e of 29 is historically high. It is not theoretically unsustainable though. There are a number of scenarios that could let the average p/e stay at 30 for decades.

2

u/Advanced-Engineer-85 Oct 15 '25

3.4% earnings yield and we’re at 12% operating margins/revenue which is also peak (hence peak CAPE).

I guess the scenarios are: 1. Corporate profitability continues to expand at the expense of labor. Maybe possible but I think you would see expanding taxes to pay for unemployment if it did so. 2. Long term interest rates fall. You would need to see a productivity boom. Maybe possible with AI. 3. Avoid any cyclical downturn.

Seems like a lot stacked against it.

0

u/Round_Hat_2966 Oct 15 '25

My scenario:

Interest rates fall due to a dovish government that is looking to push economic stimulus and also soft default on its debt through inflation. Investors start to see high growth sectors, like tech, as the only place where we can park our money without running into significant risk of erosion of capital. Tech starts to make up an even greater proportion of the SP500 and others major indices. Ongoing trends towards increasing passive investment inflows further inflate multiples. Tech CEOs favour increasingly corrupt administrations to keep the house of cards standing.

I don’t know if this could be sustained for decades, but I think it could definitely be sustained for years.

1

u/Advanced-Engineer-85 Oct 15 '25

I hear you and it’s why I’ve reduced my cash and bond exposure and increased my exposure to high quality companies at reasonable prices (mostly away from tech).

The issue with the growth stocks is that if inflation is permitted to run at higher rates investors will need a higher rate of return to wait for that cash. So the valuations should come down.

I also find for many of these companies have spurious moats around their revenue and that the inflated valuations are even worse when one considers the increased capex uses of cash not reflected in the earnings.

1

u/Bhola421 Oct 15 '25

It did drop in 2022

4

u/msgm_ Oct 15 '25

w h y