Forget growth stocks—this year, value is where it’s at
by Alex Rosenborg
One of the most widely forecast trends in the investing world has finally come to pass.
In 2016, value stocks have risen 2.4 percent as measured by the S&P 500 value index, while the S&P 500 growth index has slid 1 percent.
This is in contrast to the dramatic outperformance of growth stocks that have become de rigueur recently. Over the past 10 years, growth stocks have risen 90 percent, while value stocks are up just 26 percent.
As a dramatic illustration of growth's gains, Eddy Elfenbein of the Crossing Wall Street blog points out that if the S&P as a whole had managed to keep pace with its growth component, it would currently be trading at 3,800, rather than its current 2,060.
"But since late January, everything changed, and value is once again popular," Elfenbein said Monday on CNBC's "Power Lunch."
And, he would add, with good reason.
"Value provides less volatility, you get better dividend yields, and it's also better if the economic outlook is uncertain," Elfenbein said. "So there are a lot of good things pushing toward value right now."
A few stock-specific factors are generating the performance disparity as well. The most heavily weighted stock in the S&P 500 growth index is struggling Apple (AAPL), while the biggest in the value counterpart is ExxonMobil (XOM), which has shone in 2016 amid oil's bounce.
Still, value-centric investors probably shouldn't throw themselves a party just yet.
"Value is indeed having a very good start to the year. It's also had the benefit of a terrific starting point coming into the year, coming off its worst [relative] level in 10 years," Oppenheimer technical analyst Ari Wald said Monday on "Power Lunch," furnishing the below chart to make his point.
Indeed, it is the recognition that this relationship could be set to swing the other way that has led so many market prognosticators to predict a value comeback.
Wald added, however, that he "wouldn't write off growth just yet."
Courtesy of cnbc.com