I am a growth investor through and through, but I pride myself on keeping up with everything else going on in the world. Earlier this week Las Vegas was host to the 8th annual spring Value Investing Conference. Lots of great ideas were floated, and everyone can learn something from the techniques in play.
Although one tends to think of “value” and “growth” as two poles on a continuum, that’s not always the case. It was the greatest value investor of them all, Warren Buffett, who once said that value and growth are joined at the hip. And statistically, “cheap” stocks that never recover and begin to grow again aren’t really much of a bargain at all.
At some points in the market cycle, stocks I prefer look an awful lot like those held by the so-called value school. One such occasion is when the market has had a severe correction and even the very best stocks are statistically cheap. Another time is when the market is entering the mature phase of a bull market and the advance is starting to concentrate on only the very best stocks. Metrics like P/E ratio and price-to-book-value are getting stretched to the upside, and even the value crowd is focusing on companies with strong and improving fundamentals.
As I’ve mentioned many times over the past few weeks, that’s the market environment we find ourselves in today.
So I decided to load up some of the stocks being discussed at the big value conference into Portfolio Grader and see what I found. Given the narrowing market, I was not surprised to find that some of the value managers were suggesting stocks that could also be considered growth stocks.
One of the companies mentioned was Nathan’s Famous (NASDAQ:NATH), the hot dog company of Coney Island fame. The company has a high return on equity and excellent profit margins that have earned the stock a grade of “A” — it’s a strong buy right now.
Several of the stocks touted at the conference are ranked “B” by Portfolio Grader — they’re a buy at current levels. Howard Hughes Corp. (NYSE:HHC) is a real estate development company that has just been blowing away the analyst estimates as markets have improved. The stock was just upgraded to buy in late April as analysts raised their estimates heading into the earnings report.
First Fidelity National (NYSE:FNF) is another value favorite that’s rated a buy by our growth stock grading system. The title insurance company is also benefitting from the strong real estate recovery we are seeing in parts of the nation. More home sales means more title searches and title insurance — and the company has posted four consecutive positive earnings surprises.
Growth and value are not always mutually exclusive. During periods of strong change in the stock market, they are often one and the same. Right now appears to be such a time as the rally matures and investors of all stripes focus on the very best stocks.
Louis Navellier is the editor of Blue Chip Growth.