Markets rise and fall not just on cash flows and discount rates, but on the beliefs of investors. For 70 years, the Value Line Investment Survey has quietly compiled long-term earnings forecasts and price targets for thousands of companies.
That trove of forward-looking expectations and beliefs gives us a rare window into what sophisticated analysts were thinking across multiple market cycles.
A recent study by MIT's David Thesmar and Emil Verner digs into this data and compares it with surveys of individual investors and professional forecasters. The results are striking.
Sophisticated investors at Value Line think very differently about future returns than the crowd. They are contrarian, they are predictive, and they can help us understand not only the rhythm of market cycles but also where opportunities might lie in individual stocks.
Daily Leaderboard Reveals Today's #1 Stock (Recent Winner: Hated Stock Now Up 25%)
While you're reading yesterday's news, smart money is already moving on tomorrow's opportunities. This daily leaderboard reveals the day's top 10 stocks before the talking heads catch on. Like Brighthouse Financial – down 21%, ignored by media… then up 25% in three weeks after hitting our #1 spot. Show Me Today's #1 Stock
The Contrarian Signal in Market Timing
The heart of the findings is this: Value Line's expected 3–5 year returns move in the opposite direction of past stock performance. After markets fall, their forecasts rise. After markets soar, their expected returns contract. That is exactly what you would expect from an investor base that understands mean reversion in valuations.
Over the full sample from 1956 to 2024, these expected return series forecast future realized returns almost as well as the classic earnings-to-price ratio. And unlike most surveys of investors, which either show no predictive power or get the sign wrong, Value Line's expectations get it right. High expected returns today lead to higher realized returns tomorrow.
For us as investors, that means there is the potential for a practical contrarian timing overlay. When the Value Line numbers are high, it typically indicates that the market is depressed, valuations are low, and future returns are expected to be better. When their expectations are low, it is often after a bull run when prices are stretched. That is the time to scale back exposure, tighten stops, and raise cash. The contrarian read is simple but powerful: when Value Line expects more, the market usually gives more.
Beyond The Market: Stock-Level Insights
The value of this dataset extends beyond aggregate timing. Remember, Value Line produces these forecasts at the individual company level. Each report includes expected earnings growth, dividends, and a price target for the next three to five years. From those forecasts, one can calculate an implied expected return for every stock they cover.
The study aggregated these firm-level numbers into a market-cap weighted series. However, a practical investor can take the opposite approach: look for companies where Value Line is projecting outsized long-term returns. When aggregated across sectors, the data show that analysts consistently anticipated mean reversion in valuation multiples. That is essentially a systematic bias toward undervalued, overlooked, or temporarily out-of-favor names.
In other words, these numbers can serve as a screening tool for individual stock selection. If you want to build a list of candidates with strong forward expected returns, Value Line's own forecasts are a ready-made filter. Combine that with insider ownership, low institutional presence, or strong balance sheet metrics, and you have the ingredients for finding the kinds of high-upside stocks that Wall Street often ignores.
Disagreement As A Source Of Opportunity
One of the most intriguing findings is that when Value Line's expectations diverge sharply from those of individual investors, trading volume and volatility rise. This tells us two things. First, heterogeneous beliefs are a fundamental driver of market action. Second, periods of sharp disagreement are fertile ground for opportunity.
When the crowd is bullish but Value Line is cautious, that is usually a signal of froth. When the crowd is fearful but Value Line expects high returns, that is often the point of maximum opportunity. Investors willing to lean on the contrarian side of this divide can capture returns by exploiting that gap in beliefs.
Practical Takeaways
What does this mean for us? Three things stand out.
First, the Value Line expected return series provides a useful contrarian timing indicator at the market level. High expected returns indicate better times ahead; low expected returns serve as a cautionary signal.
Second, at the individual stock level, their forecasts can serve as a screening tool for identifying long-term value opportunities. Stocks with high projected returns often come from sectors or companies trading at temporarily depressed multiples.
Third, the very act of disagreement is investable. When sophisticated expectations clash with the crowd, volatility follows. Those moments are when disciplined investors can step in and buy assets at a discount or take profits before the crowd realizes its mistake.
Markets will always be a mix of rational analysis and emotional extrapolation. The Value Line record shows that the disciplined, contrarian approach of sophisticated investors not only aligns with rational benchmarks but also provides signals that can guide both our market timing and stock picking. For those of us willing to listen, it is a 70-year contrarian edge hiding in plain sight.
Three Current High-Return Candidates
In the current Value Line edition, three names stand out for their high implied 3–5 year annualized returns. Each tells a different story about why Value Line analysts expect long-term gains:
Columbus McKinnon
Columbus McKinnon (NASDAQ: CMCO) is a mid-cap industrial company specializing in material handling equipment, rigging tools, and automation systems. The stock has languished recently amid concerns about slowing industrial demand; however, Value Line's forecasts indicate steady earnings growth as supply chains retool and automation adoption continues across manufacturing and logistics. With an undervalued multiple and a clear path to stronger margins, the implied return suggests the stock could compound nicely once cyclical headwinds fade. This is a classic case of a strong business temporarily overlooked by the market.
B&G Foods
B&G Foods (NYSE: BGS) is a packaged food company with a diverse stable of brands, from Green Giant to Ortega. Investors have punished the stock due to its high debt load and pressured margins in a higher-cost environment, driving down the share price. Value Line, however, projects stabilization in costs, modest revenue growth, and the continuation of its generous dividend policy. That combination produces a high expected total return from today's depressed price. This is a contrarian income play — unloved now, but offering significant upside if even modest improvements materialize.
KinderCare Learning Companies
KinderCare Learning Companies (NYSE: KLC) is the nation's largest private provider of early childhood education and childcare. The stock has been pressured by cost inflation and uncertainty around childcare subsidies, but Value Line's forward view emphasizes long-term demand tailwinds. Demographics, workforce participation, and a shortage of quality childcare capacity suggest steady growth in revenue and earnings once short-term uncertainties subside. The 3–5 year projections imply outsized returns from current levels, making KLC a name to watch as both a growth and social-infrastructure story.
Editorial content from our expert contributors is intended to be information for the general public and not individualized investment advice. Editors/contributors are presenting their individual opinions and strategies, which are neither expressly nor impliedly approved or endorsed by Benzinga.
Photo: Shutterstock
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
