Time to ditch growth stocks for value stocks, portfolio manager says

In the debate between growth and value, some may argue value can prevail.

After all, “value” stocks typically boast low price-earnings ratios and other traditional assessment metrics, often looked upon as undervalued relative to its underlying fundamentals. “Growth” stocks are often considered those whose earnings are expected to increase at an above-average rate but don’t necessarily boast the same strong fundamental backdrop.

Chad Morganlander, portfolio manager with Washington Crossing Advisors, recently went overweight value stocks over growth stocks. Here are his reasons why.

Though earnings are coming in quite nicely for growth stocks this quarter, valuations are stretched.

Outsized gains in technology shares, specifically, reduce the relative attractiveness of growth over value at this juncture.

Three sectors that appear particularly attractive here are financials, health care and energy. Energy was once a major laggard but has made a comeback in the last months.

Health-care names investors may want to consider include Merck and Pfizer, two value companies with improving margins, improving revenue growth with a rising dividend.

Disclosure: Morganlander’s firm owns shares of Merck and Pfizer; he does not personally own these names.

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