Growth Versus Value Investing in 2011
Growth versus value investing is shaping up to be a horse race in 2011.
While growth stocks had maintained the lead throughout much of 2010, the performance margin between the two narrowed later in the year.
Growth stocks represent companies whose better-than-average earnings gains raise the expectation that they'll continue to deliver high profit growth. You're betting that they'll just keep growing.
Value stocks represent out-of-favor companies that are considered bargains based on their book or liquidation value. Investors aren't paying a lot as they cautiously hope these stocks will regain their pace toward a future payday.
"The growth investor sees blue skies forever," said
When an economy is exiting recession, which many experts predict the U.S. to do in 2011, investors pay closest attention to companies whose stock was beaten down the most, seeking more potential return for less money. But the coming year is difficult to handicap because prospects and prices are all over the board.
"We do have a strangely bipolar market right now, with a lot of really cheap stocks but others that would be considered expensive," acknowledged Jacobs. "For instance, there are a ton of really cheap large-cap companies, so you don't have to get fancy in your choices since value investing never goes out of style."
Two big-name stocks considered "really cheap" by Jacobs are
Similarly, growth stocks offer opportunities.
"The momentum of growth can push well on into the recovery," said
Despite the price run-up of
Other attractive growth investments due to earnings and sales momentum are
"People who are interested in broad market investing should stick with value in 2011 because value performs well coming out of recession," said
With the dramatic run-up in precious metals, one might think that the sector is tapped out.
Nonetheless, because the price of gold has indeed gone up, Newmont's revenues are moving onward and upward, and it also has a strong balance sheet to let it pursue acquisitions. Winmill considers Newmont a "stealth growth story" and a top investment choice.
"People have really thrown the baby out with the bathwater with real estate investment trusts (REITs)," added Jacobs. "Investors must distinguish between REITs with commercial buildings that have tenants bailing because they can't make payments and the new REITs that are actually taking in money."
In REITs, he recommends
Another Jacobs favorite is natural gas firm
So, with no clear growth or value outlook for 2011, investment strategies do fade a bit, and investor choices become somewhat eclectic.
"It does look like you can do very well next year with either a growth or value style, so it will be a good contest," said Collins. "In value,
Another value choice,
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