There’s a “growing chorus on Wall Street for investors to look beyond the FANG momentum plays and more toward value stocks. In other words, investors are pulling a Warren Buffett.” This according to a recent article in CNN.
The article cites sectors including banking, energy and health care as showing promise after “lagging growth stocks for the past half-decade” –adding that the S&P 500 Value Index is up approximately 40% over the last five years compared to the S&P 500 Growth Index which has surged by 80% during the same period. “But value stocks,” it says, “have narrowed the gap considerably as of late. The value index is up nearly 18.5% this year—not far behind the gain of 20% for the growth index.”
The article cites comments from Huntington Private Bank chief investment officer John Augustine, who believes that within the pricey tech sector, much of the projected earnings growth for the next year may come from semiconductor stocks which tend to be cheaper than shares of cloud software, social networking or e-commerce companies. He says, “If these earnings projections hold up, we could see more investors start to shift from growth to value.”
The article notes, however, that many investors also gravitate to dependable, slower-growth companies that pay hefty dividends, a trend that could continue “now that interest rates are expected to fall further in the United States, and yields for Japanese debt and many government bonds in Europe have fallen into negative territory.”
“Still, ” the article notes, “some fund managers warn investors to not bail on momentum tech darlings just yet,” citing comments from fund managers Brain Macauley of Broad Run Investment Management: “Some stocks are cheap for the right reasons.”