Eaton Vance’s Eddie Perkin is recommending four value stocks he thinks are really ready to flourish.
explains that “value stocks are in their ninth year of underperforming growth stocks, the longest streak on record, going back to 1926. But maybe the slump is coming to an end: The market’s rocky start to 2016 has finally brought value stocks to a point where the strategy can outperform again.”
A growth stock
is commonly defined as a share in a company whose earnings are expected to grow at an above-average rate relative to the market. A value stock
is a stock that tends to trade at a lower price relative to it's fundamentals (dividends, earnings, sales, etc.) and thus considered undervalued by a value investor.
Perkin, manager of the Eaton Vance Large-Cap Value fund (EILVX), believes that the recent selloff has expanded the universe of truly cheap stocks beyond the energy sector, making now a good time to take advantage of these lower prices.
Among others, he suggests:
- JPMorgan Chase (JPM). He says JPM “has one of the best CEOs in banking in Jamie Dimon, who invested a significant sum of his personal money in stock purchases. That sends a very strong signal to the market that he has confidence in his company. It has a strong balance sheet and a good franchise both in commercial banking. It has a nice mix of businesses and has a strong management team and is not particularly expensive.”
- General Electric (GE). He said GE “fundamentally has good businesses.” He also said his analyst “met a number of times with CFO Jeff Bornstein, and got the sense that there was a lot of internal change underway in terms of capital allocation and how it incentivized its management team.”
- Invesco (IVZ) is an asset management company, the same business Eaton Vance is in. “So we know the business well. There are challenges as many investors move money into passive index funds and exchange-trade funds rather than active strategies.”
- Microsoft (MSFT). He said MSFT has “some very exciting companies with secular growth and a lot of innovation and change. In a value context the opportunity set is quite unappealing.”
Growth stocks have been taking a back seat to value stocks in recent weeks, and according to one technician, the trend will continue.
“Value is starting to come back with a vengeance of late,” Mark Newton of Newton Advisors, told Yahoo Finance.
“A lot of this has to do with the dollar starting to underperform and sell off across the board.”
Newton expects the dollar to continue to decline, hurting growth stock’s relative strength against value stocks.
“Even though we've seen a little bit of a bounce just in the last couple weeks, that should be an ideal time to favor value over growth and think that that likely can still outperform in the weeks and months ahead,” he said.
(Newsmax wire services contributed to this report).
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