The reaction to Thursday's market action was about what you might expect.
I saw the words "slaughter" and "bloodbath" being used in reference to what was admittedly not a good day, as the S&P 500 fell 3.56%, and the Nasdaq plunged 4.99%. It may seem minor, but somehow we forgot that the S&P actually closed at a higher level Thursday than it did last Friday. While you can't sugarcoat Thursday's action, some perspective is warranted.
But there is a side story on which there's not a great deal of coverage: value is continuing to hold up relative to growth.
Within large-caps, the Russell 1000 is down 13.37% year-to-date, with the Russell 1000 Value Index (down 5.43%) outperforming the Russell 1000 Growth Index (down 20.42%) by 1,499 basis points. And while small-caps are, not surprisingly, being hit harder, the story is similar there:
Russell 2000 Index (down 16.36%)
Russell 2000 Value Index (down 9.06%)
Russell 2000 Growth Index (down 23.6%)
Value outperformance: 1,454 bps
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Russell Microcap Index (down 17.05%)
Russell Microcap Value Index (down 11.16%)
Russell Microcap Growth Index (down 25.73%)
Value outperformance: 1,457 bps
EBay Takes Another Hit
While it's difficult to be excited when your value-oriented names are, on average, still in negative territory, it does help cushion the blow. What we are experiencing now is a technology/growth rout, with other collateral damage.
Take a look at eBay (EBAY) , squarely on my watch list, which dropped nearly 12% Thursday, and now trades at just over 10x next year's consensus estimates. That's if you can trust the estimates, that is, in this inflationary (and I would argue recessionary) environment.
This is where some patience in an entry point may pay off -- certain names may appear to be very cheap, but you might get them even cheaper. That's a lesson you learn after experiencing several bear markets.
NL Industries Quietly Gets the Job Done
Meanwhile, deep in small value land, the ever-mysterious, sum-of-the-parts play NL Industries (NL) continues to quietly put up good numbers. First-quarter earnings per share came in at $0.38, as revenue rose 17.2% year over year. NL, which garners no ongoing analyst coverage, ended the quarter with $145 million, or nearly $3 per share in cash, and less than $1 million in debt.
With a current market cap of $358 million, NL owns 1.2 million shares of its parent company Valhi, Inc. (VHI) (worth $45 million), 31% of Kronos Worldwide (KRO) (worth $565 million) and 86% of CompX International (CIX) (worth $245 million). That's a total of $855 million worth of stock in the aforementioned companies for a company with a $358 million market cap.
What's wrong with this picture?
Well, there remains a deep discount due in part to the company's former life; its name used to be National Lead. There are accrued environmental remediation, and long-term litigation liabilities on the balance sheet, which totaled $143 million at quarter end. That likely scares some investors away.
NL, which raised the quarterly dividend to $0.07 from $0.06 last March, currently yields 3.8%. I continue to reinvest dividends back into shares.