Some speculative S&P 500 stocks may be getting some lift this year. But make no mistake — value stocks are still in control.
And that's why analysts are still spotting big opportunities in value stocks. Five stocks in the S&P 500 Pure Value index — including Dish Network, Centene and CVS Health — are all expected to jump at least an additional 25% this year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Given the rally in the Nasdaq 100, many investors might think growth stocks are back this year. But that's premature thinking — and simply not true.
"Investors should avoid the 'buy everything' approach, as there will be big winners and losers," said Nigel Green of deVere Group. "They must concentrate on high-quality, profitable companies which can consistently maintain or steadily grow margin."
Separating Fact From Fiction
Tech stocks are up big this year. But that's not enough to carry all of the S&P 500 growth stocks.
The numbers tell the truth. The Invesco S&P 500 Pure Growth ETF, which only holds the 73 most growth-oriented stocks in the index, is only up 3.0% this year. That's miles behind the 14.9% gain by the Invesco S&P 500 Pure Value ETF, which counts in its portfolio the index's 85 most value-priced stocks.
It's not just a quirk of an ETF. The average stock in the S&P 500 Pure Growth index is up just 4.1% this year, trailing the 13.9% average gain of stocks in the S&P 500 Pure Value index.
Value still rules if you broaden the definition, too. The SPDR Portfolio S&P 500 Value ETF, which has a wider interpretation of what makes a value stock, is up 9.9% this year. That outstrips the 8% rise by the SPDR Portfolio S&P 500 Growth ETF.
But what about the giant gains by S&P 500 technology stocks this year? The Invesco QQQ is up 17.0% this year.
Much of that is due to giant rallies in stocks like Meta Platforms. But following its 60% drop in 2022, Meta is actually now in the S&P 500 Value index, not growth. Giant technology stocks like Alphabet and Nvidia aren't considered pure S&P 500 growth stocks, although Apple is.
Meanwhile, growth stocks like Enphase Energy and Pfizer are hurting the S&P 500 Growth index with 13%-plus drops this year.
Value Still Leads Growth
| ETF | Symbol | Year-to-date change | 2021 change |
|---|---|---|---|
| Invesco S&P 500 Pure Value | 14.68% | -3.5% | |
| SPDR Portfolio S&P 500 Value | 9.98 | -7.4% | |
| SPDR Portfolio S&P 500 Growth | 8.07 | -30.1% | |
| Invesco S&P 500 Pure Growth | 3.39 | -28.1% |
Sources: IBD, S&P Global Market Intelligence
Pure Value Energy
So what kinds of purely value stocks in the S&P 500 do analysts like most?
Highest on the list among the S&P 500 Pure Value is broadcaster Dish Network. Analysts think the stock, already up 11.1% this year, should gain an additional 105% in 12 months to 31.93 a share. It's definitely a value play. The company's adjusted profit is seen dropping more than 30% in 2022 and 38% in 2023. So what's the draw? The valuation: Dish is trading for just five times adjusted trailing profit, a fraction of the S&P 500.
Not all of analysts' favorite value stocks, though, are up already this year.
Analysts think Centene, a health care provider to underinsured patients, will jump more than 36% in the next 12 months to 98.72. Keep in mind, though, that shares this year are down more than 11%.
In many ways, Centene isn't as much of a deep value as Dish. It trades for more than 21 times its trailing profit. Additionally, analysts think the company's profit will rise nearly 11% in 2023 after jumping roughly the same amount in 2022.
So while many big-cap tech stocks are back, that's not enough to put growth back in charge of the S&P 500.
Analysts' Favorite S&P 500 Pure Value Stocks
| Company | Ticker | Upside to analysts' 12-mo. price target | Sector |
|---|---|---|---|
| DISH Network | 104.7% | Communication Services | |
| Centene | 36.0% | Health Care | |
| CVS Health | 34.4% | Health Care | |
| Warner Bros. Discovery | 33.1% | Communication Services | |
| Delta Air Lines | 26.6% | Industrials |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
