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Better To Buy Value Or Growth During This Transition?



  • Technology and Stay At Home stocks have largely fueled the recovery thus far.
  • Over the past two weeks, we have seen some rotation beginning to take place from growth to value.
  • At current valuations, many names are starting to looked stretched and should be re-evaluated.
  • I do much more than just articles at High Yield Landlord: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Over the past couple of weeks we have started to see the shift from large-cap growth companies to the more value oriented names, which have largely lagged during this aggressive recovery we have seen since bottoming in March. Since bottoming on March 23rd, the S&P 500 has rallied 40%, and is now only down roughly 3% on the year.

Due to the COVID-19 pandemic that has taken a toll on the US and global economy in 2020, many workers have been shifted to a work from home setup, for non-essential businesses. During this time, work from home names, big cap technology companies and biotech companies have largely lead the recovery.

The past couple of weeks have started to show the tide may beginning to turn in favor of value.


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Growth Was Largely Driving The Market Forward During The Recovery

Let’s begin with the incredible run the FAANG names have seen since we bottomed out in March. Facebook (FB) has been the clear leader of the group with the stock increasing nearly 60% followed by Apple (AAPL) advancing over 40% through May 20th, which is about the time we started to see some growth names hit a wall.

Microsoft (MSFT), Apple, Amazon (AMZN), Facebook, and Google (GOOGL) make up over 20% weighting in the S&P 500, so any big moves by these names tends to pull the entire S&P 500 with it.

Outside of FAANG, stay at home stocks such as Netflix (NFLX), Peloton (PTON), Zoom, and Shopify (SHOP), among many other technology names have seen tremendous gains year-to-date. After all, the NASDAQ 100 is less than 1% from all-time highs.

The 30% growth in NFLX shares from March 25th to May 20th largely makes sense as more consumers were stuck at home and many turned

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This article was written by

Mark Roussin profile picture

Mark Roussin is an active Certified Public Accountant (CPA) in the state of California. Mark has worked as a CPA, serving both public and private Real Estate corporations for over 10 years. Today, he provides his followers insights to both undervalued dividend stocks mixed with high-growth opportunities with a goal of them reaching financial freedom in the long-term. Mark tends to invest primarily in dividend stocks with a strong emphasis on Real Estate Investment Trusts (REITs). 

Author of the weekly financial newsletter, "The Dividend Investor's Edge."

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DISCLAIMER: Mark is not a Registered Investment Advisor or Financial Planner. The Information in his articles and his comments on SeekingAlpha.com or elsewhere is provided for information purposes only. He asks that you perform your own due diligence or seek the advice of a qualified professional. You are responsible for your own investment decisions. 

Analyst’s Disclosure: I am/we are long AAPL, AMZN, T, BRK.B. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (19)

flumeride profile picture
Value is always the best approach during a market crash. However, the nasdaq is already at an all time high. I am sticking with value because I think the road will be bumpy for a while.
Atticvs Research profile picture
"Zoom was largely known in the business world, but once stay at home restrictions were put in place, the platform usage was something corporate America in every industry turned to"

Presume that should read;
"Zoom was largely unknown in the business world..."
Ron Burgundy’s Hair profile picture
Is big mike still a NFLX consultant
Bhughes7918 profile picture
Value investors always get rich over time and they can sleep by why you know right now the small banks are hot like OPY and FBSS
"Better To Buy Value Or Growth During This Transition?" Yes!
Oxbow11 profile picture
There is a lot of money in the market that is new and only thinks the market goes up- I'm 45 at for first time opened an Etrade account in March as I only have done 401K's in the past. I don't claim to be Nostradamus but in my mind going to be a big heat check coming up- i've taken my non dividend growth stock profits and either put them in cash or put it back is slow moving dividend stocks. Let's see how these retail investors react when they lose half their money in the period of a month- I'm hoping for another great buying opportunity
RickJensen profile picture
Ain't gonna happen. This market has both momentum and velocity. It takes a big top to burn that off.
Oxbow11 profile picture
let's shelve this and discuss in August- let's see where F and CLF are
RickJensen profile picture
At these prices you can easily get growth and value.
F, MAXR and CLF are my top choices for both. LMT is both. The market is full of stocks that offer both right now.
Just not BP.
Love the LMT call... there’s still plenty of value in the defense sector. Would add LHX, NOC, and RTX as well.
All the techs are overvalued and remain as such. REITs are still in play, but another strong day away from being out as well. Value in this market has all but disappeared, money will soon be deployed into overvalued techs and goods looking to make quick trades/growth
If you don’t have any REITs buy some, still only in the early stages of recovery. If you bought REITs when they were “Depression cheap” in Mar-May as opposed to just “Correction cheap” right now, continue to hold and collect the dividends for years, you’re not going to pick up those names at those rock bottom prices again. Some of the momentum names that are up huge off the lockdown/WFH hysteria, time to ring the register or at least trim to raise some cash. This does not include mega caps/ FAANG which should continue to be nibbled at opportunistically with every pullback heading into July earnings.
I like the looks at nly it would be good to lock in double digit dividends.
Trigalnorte profile picture
REITs are only stocks for people who lack ball$ to invest.
News flash when the biggest and best US companies are 50-60% off, buy them, not 80% discounted junk.
there are not any good big companies that are off 50 60% at this point anymore.except will be the exception of the airlines and cruises but I think they're at fair value right now. they're not worth what they were before the pandemic not even close.I'm playing triple-leveraged industrial and mid-caps and been killing it. just started investing in the Brazilian market it's the last beatdown market there is with the exception of India which I have some exposure to as well
I’m eyeballing the reits I Like the dividends but what is a good price?
actually you do: european stocks (renault/ socgen/ these have 2/400pct upside if you are a medium to long term investor)
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