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Apple Inc. Computer headquarters in Cupertino, Calif.


When you can't label a stock as "growth" or "value" it can sit in no-man's land, unloved by just about everyone. And for some investors, that's a good place to find attractive buying opportunities.

There is no strict definition for what makes a stock accepted by one camp or another. But generally speaking, growth stocks appeal to investors who want fast-rising earnings and revenues, and they don't worry so much about sky-high valuations. Netflix Inc. and Facebook Inc. fit the mould right now.

On the other hand, value stocks may not show the best potential for expanding their operations, but the share prices look like bargains when compared to earnings, sales or book value. Loblaw Cos. Ltd. and Magna International Inc. are good examples in Canada.

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But what about a stock like Blue Nile Inc., the online jewellery retailer? John Hempton at Bronte Capital made the case that the one-time growth stock has now fallen in the cracks: It recently reported disappointing fourth-quarter earnings and sales, and it lowered estimates for 2014.

The shares have fallen 19 per cent over the past four trading days, leaving growth investors feeling disappointed in the company's business model. However, there isn't much to like from the perspective of a value investor yet: The shares still trade at a steep 40-times trailing earnings.

"In other words Blue Nile is twixt-and-between," Mr. Hempton said. "It's not a great growth stock and is hardly a value stock."

Of course, there is more to the stock than its inability to appeal to two groups of investors. Mr. Hempton loves Blue Nile's build-your-own engagement ring business model, the fact that it doesn't rely upon repeat customers, pricing is transparent and inventories are very low when compared to traditional retailers.

The idea here is attractive: Buy the stock before growth investors or value investors swoop in.

But Blue Nile isn't the only stock that can't find an investor base right now. In some ways, Apple Inc. is in a similar position: Growth is clearly slowing and the company hasn't been able to bedazzle anyone with an innovative new gadget since the debut of the iPad. Although the stock is cheap based on earnings, value investors aren't so sure about Apple's prospects in an increasingly competitive environment. In the meantime, activist investors such as Carl Icahn and David Einhorn have been among the stock's biggest enthusiasts, largely on the premise that they can pressure Apple to distribute more of its cash to shareholders.

To come up with other potential ideas, we ran a stock screen for companies within the S&P 500, using two criteria: Stocks had to have price-to-earnings ratios above 30 and analysts had to have slashed their earnings estimates for the next 12 months. This gave us a sampling of growth stocks with disappointing outlooks.

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Among the standouts: Yahoo Inc. and Citrix Systems Inc. are beaten-up stocks that suggest growth investors are losing interest. Alliance Data Systems Corp. and Adobe Systems Inc. also showed up in the screen, although their strong share prices suggest growth investors are still hanging on for the ride. These stocks could become interesting if the shares turn down.

Meanwhile, if you want to know what can happen when value investors take over from growth investors after a difficult in-between period, Microsoft Corp. offers a good example. The stock has risen 39 per cent since the start of 2013, versus 28 per cent for the S&P 500 and just 1 per cent for Apple.

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