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Posted September 5, 2025 at 9:30 am
This week, we cover Burberry Group plc (BRBY LN, rated ‘Sell’) and Best Buy Co., Inc. (BBY, rated ‘Buy’). BRBY LN will return to FTSE 100 later this month. BBY was upgraded to ‘Buy’ last week on improved Quality (P-R). The company published its quarterly earnings last week, seeing positive top-line growth.
Global aggregate EVA Momentum (growth) hovered close to zero growth in Q3, after having seen 21 months of improvement to incremental EVA growth. Consensus has edged down in the outlook for Q4 and the 1H of 2026, suggesting EVA Momentum turns further negative before recovering in the 2H of 2026. With such elevated current market expectations for the ongoing recovery in value creation, investors should be mindful of the implied rolling over of growth.
In this report we screen for companies with a 5% or greater EVA Margin (profitability) that also currently have positive EVA Momentum. The firms are also avoiding the top 10% most expensively valued firms.
U.S. equities rallied across the board after Fed Chair Jerome Powell’s dovish tilt during his Jackson Hole speech but Small Caps, relatively better placed in PRVit than their Large-Mid Cap counterparts, saw an especially strong rally. Consumer Discretionary: North America Recovers while Europe Lags (report) Global Consumer Discretionary has underperformed the market in 2025 so far, aligning with our ‘Underweight’ outlook on the sector in January. Within the sector, however, North America is rated favorably within the PRVit framework.
On average, Large Cap firms look expensive in the PRVit model; however, the firms also have a high level of Risk-Adjusted Profitability, leaving a favorable view. EVA Fundamentals for the industry have turned positive over the past quarter.
Cheap Value started working in the Large Cap universe in June and continued to work through August as cheap names outperformed expensive names. In Small Cap, cheap Value also worked. All the Quality factors posted a negative spread except Profitability Trend in the Large Cap universe and Vulnerability Risk in both universes.
Cheap Value drove the market, as our Value factor saw a positive spread in both the Large Cap and Small Cap universes. Quality and all its subfactors (Profitability and Risk) were all negative in the Large Cap universe. In the Small Cap universe, investors took off some Risk as low-Risk names outperformed high-Risk names.
In Europe, Value continued to generate alpha in August, a trend that started in early June. Quality rolled over at the end of July and was off for the month of August. In the U.K., PRVit trended down throughout August.
In Asia ex Japan, Quality continued the slide that started in June, although it did tick up in the final days of August. Value trended up through most of June and July but then rolled over mid-August. In Japan, Value rebounded sharply at the end of June and throughout August. PRVit continued to follow Value.
Our Chart of the Week shows the compound log returns of our Quality and Value factors for the Global Large Cap universe over the past two years. At the beginning of June, we noted the significant shift in factor performance as investors started looking for cheap Value and became less focused on Quality (our Risk-adjusted Profitability metric). The trend that started in June has continued through the end of August. See our PRVit Factor Reports for regional analysis of Quality, Value, PRVit and our other subfactors.
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Originally Posted on September 4, 2025
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This material is from ISS EVA and is being posted with its permission. The views expressed in this material are solely those of the author and/or ISS EVA and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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