Don Hays appeared on CNBC Friday afternoon and said that investors should be focused on growth stocks, as that group provides the best opportunity for gains in the year ahead.
His argument makes sense. The table below highlights the P/E ratio of the growth and value indices for the S&P 500 (large cap), S&P 400 (mid cap), and the S&P 600 (small cap). As you can see, in the mid cap and small cap indices, the aggregate P/E ratio for growth stocks is actually lower than value stocks. In other words, growth stocks are a better value than value stocks (yes, you read that right!).
So investors should invest in growth stocks right? But what exactly is a growth stock? Apparently, that is a tougher question than you would expect. S&P apparently, is not so sure. Currently, there are 162 stocks in the S&P 500 that are in both the S&P 500 value and growth indices.