Growth stocks are hot again but advisors caution against purging value plays to get back on bandwagon

Growth stocks may have gotten their mojo back, but advisors say that does not necessarily mean investors should jettison all their value stocks and get back on the “magnificent” bandwagon.

The iShares S&P 500 Value ETF (Ticker: IVE) is up 6.5% in the past month. That’s not a bad return by any means, but it hardly compares to the 11.5% surge in the iShares S&P 500 Growth ETF (Ticker: IVW) over the same period. This comes after a 6 month period where value was finally taking the baton from growth after years of underperformance.

At last check the trailing 12 month PE multiple for the IVE was 24 versus a 33 PE for the IVW.

So if growth is truly poised for a comeback, why does value still deserve a fresh look from advisors right now?  

According to Sean Beznicki, director of investments at VLP Financial Advisors, value deserves a fresh look because valuations remain relatively attractive compared to long-term averages, offering a potential margin of safety. In his view, higher interest rates and persistent inflation also tend to favor value-oriented sectors like financials and industrials. These dynamics support stronger pricing power and cash flows, particularly in a more uncertain macro environment where durable earnings matter most.

“Portfolio managers should look beyond book-to-price, which often misses value in an intangible-driven economy. Instead, focusing on free cash flow yield offers a clearer view of a company’s ability to generate sustainable cash returns,” Beznicki said.

Speaking of portfolio managers, Caroline Edwards, senior client portfolio manager at Putnam Investments, says several trends are apparent in the market that warrant further consideration for a value-based approach.

“First, the mostly constructive narrative that closed out 2025 has shifted. Not necessarily a full reversal, but we now have to contemplate the direct and indirect impacts of a potential extended Iran/US conflict including increased energy prices, resurgent inflation, and potential rate increases, all coupled with a reduced risk appetite and a very strong binary narrative playing out in the AI discussion. These trends could help to keep the value narrative front and center, allowing value to be relevant given the key exposures in the universe,” Edwards said.

Edwards says she tends to avoid “value for value’s sake” and instead look for stocks that have “multiple ways to win.” In other words, companies that find themselves with a value label that have been through something that warrants the discount.

‘We look for reasons why that could change – maybe it’s a new management team, a cost-out program, new products, changing industry dynamics, or a number of other elements that could be shifting positively,” Edwards said.

Lastly, she believes it is critical to give these stories time to work and usually aims for a 5-year time horizon.

“Value takes a long time to matriculate, you can’t expect to see significant progress over shorter periods,” Edwards said.

Elsewhere, Krishna Chintalapalli, portfolio manager at Parnassus Investments, believes the recent market pullback, one of many in recent years, is a reminder that advisors should adopt a balanced approach to participating in those long-term trends without paying growth-stock multiples, rebalancing away from concentration risk while still seeking attractive risk‑adjusted returns for clients.

“When assessing value exposure today, advisors may want to look beyond low multiples and focus more on the quality of the underlying business, because companies trading at low multiples may be cheap for valid reasons. Lower multiples can reflect real structural challenges, including deteriorating business models, poor capital allocation, or governance issues,” Chintalapalli said.

He adds that active management can play a key role in being selective and focused on higher quality areas of the market while avoiding companies that present “value traps” with limited growth prospects that aren’t likely to boost portfolio performance.

Finally, Daniel Lash, partner at VLP Financial Advisors, points out that every asset class will move through cycles of performance, so while growth has outperformed value for much of the past 10 years this recent change should not come as a shock. Beyond that, he says value historically has provided greater dividends than growth and can be a “key income provider for investors requiring income from their portfolio.”