Industry insiders predict value will make a comeback
OWith the Federal Open Markets Committee looking to raise rates and inflation continuing to be a thorn in investors’ side, many industry insiders are predicting that value stocks will fare better than growth. . After all, rising interest rates tend to favor value stocks, and higher inflation is often a net benefit for value strategies.
John Davi, Founder, CEO and CIO of Astoria Portfolio Advisors, writing that “portfolios should tilt towards value-oriented assets”, adding: “Growth stocks will continue to suffer with higher rates and value stocks always provide a margin of safety.
Davi also notes that “inflation-sensitive assets…are cheap, under-owned and could potentially support portfolios if inflation remains high.”
During this time, a outlook report of LPL Financial says the company has maintained “a slight preference for value over growth to benefit from potentially above-trend economic growth in 2022. Rising interest rates and rising inflation are conditions that have historically been favorable to the performance of value-style stocks”.
At the Cabot Wealth Network, Bruce Kaser Remarks that while growth stocks have outperformed value stocks over the past decade – growth has produced a 17.4% annualized return over the 10 years, while value stocks have returned just 10.6 % over the same period – performance is cyclical, and he believes that “the growth style of investing has reached its limit” and value investing “is increasingly likely to emerge as a winning strategy.
Kaser suggests that, with investors having accelerated their valuation assumptions in response to the COVID-19 pandemic accelerating the digitalization of the economy, the growth cycle may soon be coming to an end.
“Value investing is about finding companies with lasting value, at great prices,” Kaser writes.
Investors looking to add value to their portfolio might consider the American Century Large Cap Value ETF (FLV). FLV tries to achieve long-term returns through an investment process that seeks to identify value and minimize volatility. FLV holdings and value stocks typically trade at lower prices than fundamental measures of value, like earnings and asset book value.
For more news, insights and strategy, visit the Core Strategies Channel.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.