Contrarian picks: 10 out-of-favor value stocks set to outperform growth
While Wall Street chases growth, contrarian investors are rotating into out-of-favor value stocks that could benefit from a late-cycle shift in market leadership.
A growing number of contrarian investors are shifting away from high-flying growth stocks and into value names that have been left behind by the bull market. MarketWatch highlights ten such 'losers' — out-of-favor companies with solid fundamentals that could be poised for a comeback as market dynamics evolve.
Value stocks have underperformed growth for several years, driven by low interest rates and a tech-led rally. However, with the Federal Reserve signaling a slower pace of rate cuts and the economic cycle maturing, the environment may be shifting. Historically, value tends to outperform in late-cycle phases when earnings growth broadens beyond a handful of mega-cap tech names. The Fed model — comparing equity earnings yields to Treasury yields — currently favors value, as the spread between the two has narrowed, making bonds less attractive relative to stocks. Contrarian investors are betting that these neglected sectors, such as financials, energy, and industrials, will benefit from a rotation out of overvalued growth.
Traders should watch for further signs of sector rotation, particularly in relative strength between the S&P 500 growth and value indices. Key catalysts include upcoming earnings reports from these value names and any shift in Fed rhetoric. NowPrice's live stock charts allow traders to track price action and volume in these out-of-favor stocks in real time, helping identify entry points as the rotation unfolds.