Australian Shares, International Shares, Investments

Time is right for value stocks

value stocks

The pervading global economic conditions mean investors should turn their attention to value stocks and away from growth stocks.

A senior wealth management executive has recognised the economic conditions both in Australia and worldwide mean the rotation toward value stocks offering the best return opportunities is underway.

Speaking at the smstrusteenews SMSF Trustee Empowerment Day 2022 in Sydney last week, Perpetual senior investment specialist James Holt noted: “History doesn’t repeat exactly, but it rhymes a lot and we’re getting the same old rhyme.”

“It is basically after a period where growth stocks do well, every 10 years you get a tremendous amount of money coming into the market, it causes a big lift in property, causes a big lift in tech stocks, all those sorts of things, and then that all comes to an end usually when there has been too much stimulus applied and central banks have to put on the brakes and turn things around.

“That’s when we see value stocks start to get up.

“Certainly that’s the sort of trend we’re in and in all likelihood if we see what’s happened in the past 20 to 30 years, that trend will continue of value stocks continuing to go up.”

Holt pointed out the Australian market is actually ahead of other global exchanges in the shift from growth stocks in favour of value shares.

To this end, he recommended investors begin to reduce their allocations to growth stocks, those with high price-to-equity ratios, such as equities in food, beverage and tobacco, and healthcare companies.

“You’ve got to keep your portfolio diversified, but I’d be careful about having too much exposure to those sectors,” he said.

“The sectors that do really well [during these economic conditions are] the banks, cyclicals, auto [companies], insurance and energy. They’re the sort of [sectors] that benefit from inflation.

“You can make money out of inflation if you are pointed in the right direction.”


Our Story

selfmanagedsuper is the definitive publication covering Australia’s SMSF sector. It uniquely offers online content tailored separately for SMSF professionals and individual trustees participating in the fastest growing and largest sector of the superannuation industry. As such, it is a must read for those wanting to stay informed about the latest news, regulatory developments, technical strategies, investments, compliance, legal and administration issues concerning SMSFs.

Copyright © SMS Trustee News 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital