If you’ve never really committed to being either a growth investor or a value investor, here’s an approach that might sound appealing: Be both.
Growth stocks tend to come with earnings that are growing faster than the overall market, but can be pricey. Value stocks tend to have lower earnings growth, but are cheaper.
One of the problems with the market these days, though, is that the lines separating the two groups of stocks have become blurred. Tech and energy stocks, once the sole domain of growth investors, are looking like value stocks. And utilities and telecom stocks are looking like growth stocks.
John Kozey, a senior analyst at Thomson Reuters, has a potential solution to this confusion. He put growth and value criteria together, coming up with a list of 45 stocks that should appeal to both types of investors.
These stocks have market capitalization of more than $1-billion (U.S.), and have an average price-to-earnings ratio of just 12.4, based on estimated earnings. That’s cheaper than the P/E ratio of 15 for the S&P 500. They also have earnings and revenue growth rate expectations over the next one- and two-year periods that are 50 per cent better than the market.
“It’s perhaps the perfect marriage between growth investing and value investing, and each side may well feel they are gaining an additional edge in the process,” Mr. Kozey said in a note.
Indeed, if these stocks appeal to both types of investors, the strong demand could drive share prices higher.
What’s interesting about the list, though, is that it is overwhelmingly dominated by sectors typically associated with economically cyclical names, rather than defensives. Consumer discretionary stocks, energy stocks, industrials and technology stocks represent 35 of the 45 names. There are five materials stocks and three financials. There are just two health-care stocks, and no representation from consumer staples, utilities or telecom stocks.
This implies that if you are looking for growth and a cheap stock price, you have to bet on stocks geared toward an improving economy. Mr. Kozey’s list, by sector:
Consumer discretionary: Directv, PulteGroup, GNC Holdings, Harman International Industries, Tenneco, MDC Holdings, American Axle & Manufacturing
Energy: Schlumberger, Halliburton, Devon Energy, Transocean, Continental Resources, Chesapeake Energy, Weatherford International, Noble, Diamond Offshore Drilling, Rowan Cos., Oasis Petroleum, Atwood Oceanics, Rosetta Resources, Tidewater, Bristow Group, Carrizo Oil & Gas
Financials: Blackstone Group, Fortress Investment Group, Selective Insurance Group
Health care: Jazz Pharmaceuticals, Health Net
Industrials: Hertz Global Holdings, Chicago Bridge & Iron, Terex, Manitowoc, Spirit Airlines, JetBlue Airways, Titan International
Information Technology: Lam Research, IAC/InterActive, Arris Group, Finisar, Web.com Group
Materials: FMC, Cytec Industries, Carpenter Technology, HB Fuller, Coeur Mining
- PulteGroup Inc$19.44-0.22(-1.12%)
- GNC Holdings Inc$29.80-0.25(-0.83%)
- Harman International Industries Inc$103.26+0.38(+0.37%)
- Tenneco Inc$54.10+0.84(+1.58%)
- MDC Holdings Inc$26.38-0.35(-1.31%)
- American Axle & Manufacturing Holdings Inc$22.82+0.19(+0.84%)
- Schlumberger NV$77.56+0.73(+0.95%)
- Halliburton Co$39.82+0.69(+1.76%)
- Devon Energy Corp$46.02+1.15(+2.56%)
- Transocean Ltd$14.49+0.37(+2.62%)
- Continental Resources Inc$36.43+0.07(+0.19%)
- Chesapeake Energy Corp$5.17-0.09(-1.71%)
- Weatherford International PLC$10.81+0.31(+2.95%)
- Noble Corporation PLC$13.22-0.28(-2.04%)
- Diamond Offshore Drilling Inc$22.65+0.27(+1.21%)
- Rowan Companies PLC$20.36+0.31(+1.55%)
- Oasis Petroleum Inc$11.52+0.20(+1.72%)
- Atwood Oceanics Inc$15.77+0.28(+1.81%)
- Tidewater Inc$9.37+0.41(+4.58%)
- Bristow Group Inc$30.67+0.77(+2.58%)
- Carrizo Oil & Gas Inc$40.23+0.56(+1.41%)
- Blackstone Group LP$31.07+0.07(+0.24%)
- Fortress Paper Ltd$5.00+0.05(+1.01%)
- Selective Insurance Group Inc$25.78+0.13(+0.51%)
- Jazz Pharmaceuticals PLC$146.00-3.42(-2.29%)
- Health Net Inc$63.25-0.63(-0.99%)
- Hertz Global Holdings Inc$15.80-0.28(-1.74%)
- Chicago Bridge & Iron Company NV$42.90+0.81(+1.92%)
- Terex Corp$20.38+0.56(+2.83%)
- Manitowoc Company Inc$16.82+0.19(+1.14%)
- Spirit Airlines Inc$36.56+0.36(+0.99%)
- JetBlue Airways Corp$24.76-0.46(-1.82%)
- Titan International Inc$4.34-0.01(-0.23%)
- Lam Research Corp$78.17+0.54(+0.70%)
- ARRIS Group Inc$30.37-0.09(-0.30%)
- Finisar Corp$12.01-0.33(-2.67%)
- FMC Corp$43.00+0.81(+1.92%)
- Cytec Industries Inc$74.88+0.04(+0.05%)
- Carpenter Technology Corp$36.29+0.78(+2.20%)
- HB Fuller Co$39.84+0.07(+0.18%)
- Updated November 30 1:19 PM EST. Delayed by at least 15 minutes.