Value stocks have been ugly ducklings for years. Suddenly, they are turning into swans. Analysts have been predicting a rotation from the long-favored growth sector to value for years; it is finally here. It has not occurred easily or smoothly. Early this year, this shift began but then the pandemic gave another boost to growth stocks. The calculation was that in an almost closed economy, the only companies that would do well would be those that would facilitate the ability to keep some commerce alive. So, growth stocks that had been leading the market averages since the financial crisis got an extended boost.
Now that there is a vaccine for Covid-19 on the horizon, investors are turning their attention and dollars to those companies that will finally do better as the economy opens once again. Many growth companies should do well but are now expensive and unlikely to lead stock market advances. There has been a huge gap in the year-to-date performance of these two categories. So, a catchup in performance by value stocks may be in the offing.
The Bull and his partners have maintained some balance in portfolios between the two sectors with a bias towards growth. The shift to value actually began over a month ago. Since then there has been some back and forth, that is likely to continue. However nascent, a new trend has begun. It is now time to move more towards value stocks. These ducklings are turning into beautiful money-making swans. Stay steady my friends.
The Lonely Bull