Tags: Investors | value | stocks | growth

Investors Shift to Value Stocks From Growth Stocks

By    |   Monday, 07 April 2014 10:17 AM

Value stocks are outperforming their growth brethren, in a reversal of last year's trend, as investors look for U.S. economic growth to accelerate and see growth stocks as expensive, The Wall Street Journal reports.

The Russell 1000 Value Index, soared 2.2 percent in March and has gained 3.9 percent so far this year. Meanwhile, the Russell 1000 Growth Index slid 1.1 percent last month and has risen 2 percent in 2014.

In the second half of 2013, the growth index climbed 18 percent, besting the 13 percent gain by value stocks.

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Investors' thinking is that strong economic growth will boost the profits of value companies, which generally have slower earnings growth than growth companies do, according to The Journal. GDP expanded 2.6 percent in the fourth quarter.

"Ultimately what's happening is that the recovery is on firmer footing, and if that's the case, you'll see growth in more sectors of the economy," Andrew Slimmon, managing director of Morgan Stanley Wealth Management, tells the paper.

"Maybe I don't need to pay up for these ultragrowth stocks, because there will be a lot of stocks in a lot of sectors that might grow as well," he adds.

Meanwhile, the Russell 1000 Value Index recently traded at 17 times expected earnings, compared with a price-earnings ratio of 22 for the growth index, according to The Journal.

Some experts expect the market to continue tilting in favor of value stocks. "Last year was a momentum year, but this year has been frustrating for anyone who was a momentum investor," Linda Duessel, senior vice president at Federated Investors, tells TheStreet.com.

"So if I'm considering getting into the market and the economy is accelerating, I'd try and buy the value sector, as it looks inexpensive."

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Value stocks are outperforming their growth brethren, in a reversal of last year's trend, as investors look for U.S. economic growth to accelerate and see growth stocks as expensive, The Wall Street Journal reports.
Investors,value,stocks,growth
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2014-17-07
Monday, 07 April 2014 10:17 AM
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