Webinars [[{“value”:”Original broadcast details
Date: Thursday, January 16, 2025
Executive Summary
S&P 500 returns in 2024 continued to be propelled by a few mega-cap growth stocks.For 2023 and 2024 combined, an incredible 78% of the S&P 500 constituents underperformed, causing the S&P 500 EW to underperform by 12.4 percentage points in 2023, and 12 percentage points in 2024.
Lyrical CS outperformed the S&P 500 EW and S&P 500 Value again in 2024. While we also outperformed the S&P 500 in 2023, we were unable to keep pace with the S&P 500 in 2024.Our CS composite was up 13.4%, modestly outperforming both the S&P 500 Equal Weight and the S&P 500 Value in 2024. Over the last two years, Lyrical significantly outperformed the S&P 500 EW by 15.8 percentage points, and the S&P 500 Value by 7.3 percentage points.
S&P 500 outperformance has been driven by multiple expansion, not EPS growth.The S&P 500 and S&P 500 EW had similar P/Es for years, even as the S&P 500 EW grew EPS faster. Now the S&P 500 P/E is 32% higher than the S&P 500 EW’s, despite the same EPS growth for the last 7 1/2 years. If the S&P 500 P/E converges to that of the S&P 500 EW, it would drive significant underperformance over time, and historically, that is what has happened. Historically, after the best periods of S&P 500 outperformance, the next 5 years have produced significant underperformance.
International markets also benefited from outsized gains in the largest stocks.Our International and Global portfolios were down 2.1% and up 6.1%, respectively, in 2024, underperforming their cap-weighted benchmarks. For International, our underperformance was driven by our underweight position in the largest stocks and by not owning banks, which performed well in 2024.
For GIVES, our value approach to impact investing outperformed the style benchmark.Many richly priced impact-themed stocks have suffered serious declines, which we avoided given our valuation discipline. In 2024, GIVES was up 5.7%, outperforming the MSCI ACWI Sustainable Impact Index by 1,510 bps.
We believe we are positioned well for the future.We believe our Lyrical CS composite P/E is attractive at 12.1x. Meanwhile, the S&P 500’s P/E is 21.8x, 36% above its average since our inception, and 85% above that of Lyrical-CS. Furthermore, Lyrical-CS’s current portfolio EPS growth history is more than two percentage points faster than S&P 500’s.
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