Value Stocks Poised for Comeback After Years of Underperformance Compared to High-flying Growth
• Value stocks trading at discounts compared to growth stocks have lagged the broader market rally. However, some value sectors like industrials and materials have recently accelerated gains.
• Value stocks are relatively cheap - healthcare trades at 18.9x forward earnings vs 20.8x for the S&P 500. Multiples for growth stocks appear too steep after a strong rally.
• Value stocks could better withstand rising rates than growth given shorter-term cash flows less sensitive to rates.
• Over the past decade, growth stocks have dramatically outperformed value stocks - 235% gain vs 110%.
• Some believe AI productivity gains could benefit value stocks most by improving margins and valuations.