Although growth funds haven’t regained their power ever since the dot-com crash—overtaken in every year since by value funds—some investment experts believe this might be the year that they stage a comeback, The Wall Street Journal reports.
The primary reason investment managers are becoming more optimistic about growth funds is that they are undervalued, said Ron Canakaris, manager of the Aston/Montag & Caldwell Growth Fund. The largest 25 companies in the S&P 500 Index are at one of the “lowest points in 20 years,” he said.
Large-cap value stocks in the Russell 1000 Index have posted average annual returns of 8.1% since 2000, while large-cap growth stocks have fallen an average of 5% a year.
Certainly, a number of T. Rowe Price mutual funds are “overweighting growth versus value,” said Ned Notzen, head of the firm’s asset allocation committee. “Normally, growth trades at a premium to value. Right now, they are [trading] about as tight as ever.”