Invesco Value Opportunities Fund Q4 2024 Commentary

2025-02-12 09:07:00 ET

Summary

• Stock selection in the information technology, industrials and consumer discretionary sectors drove the fund’s relative outperformance. Selection in the materials sector was the largest detractor during the quarter.
• We took advantage of market volatility to add several new holdings to the fund, across various sectors. Conversely, we eliminated several holdings and used the proceeds to fund investments we believe have more upside potential.
• The price/earnings multiple of the Russell Midcap Value Index is at a large historical discount compared to the P/E of the S&P 500 Index. We believe this valuation represents a compelling long-term investment opportunity.

Manager perspective and outlook

• To select holdings for the fund, we employ an intrinsic value approach. It should be noted that the fund is not constructed based on a short-term macroeconomic view. Instead, positioning is driven by a bottom-up stock selection process based on our estimate of intrinsic value.
• We seek to create wealth by maintaining a long-term investment horizon and by investing in companies that we believe are significantly undervalued on an absolute basis.
• Given our focus on intrinsic value and our long-term investment horizon, at quarter end, the fund was positioned with greater exposure to economically sensitive stocks than its peers.
• Following the outperformance of large-cap versus mid-cap stocks in recent years, we anticipate greater long-term upside for intrinsic value in many mid-cap stocks compared to large-cap stocks.
• At quarter end, the difference between the market price and our estimate of intrinsic value of the fund’s holdings was attractive, in our view.
• Although there is no assurance that market value will ever reflect our estimate of the fund’s intrinsic value, we believe the gap between price and estimated intrinsic value indicates above-average, long-term capital appreciation potential.

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