This market is a lot of things…right now “bearish” isn’t one of them. Cyclical value continues to outperform as more and more investors pile into the reflation trade. Investors who‘ve been long growth stocks for the past 4 years are now seeing their portfolios underperform the benchmark. High multiple tech stocks are lagging, but not all tech stocks are the same. We have profitable vs. unprofitable companies, young vs. mature, clear growth prospects vs. unclear growth prospects, and industries with varying business cycles (semis, cloud computing software, hardware, e-commerce etc.)

Given the environment since September of last year, one can argue now is the time to gradually add to quality growth names. Specifically, quality names within the technology sector.

Stocks like $ADBE, $AAPL, $ADP, $PAYX, $FTNT, $MSFT, $INTC, $TXN, $INTU, $GOOG, $MXIM and $ACN. Profitable companies with relatively high ROE, some of which, have traded out of favor for the last 6 months. If you’re like many long-term investors, you’ve held onto these names through Q1 2021. Whether you’re happy, frustrated or indifferent to not being overweight value in this environment is beside the point. I don’t believe moving away from these quality growth names and into Energy, Regional Banks, Real Estate or Materials is the right move for an investor with a time horizon of 10+ years. Dipping your toes into these “junkier” areas of the market is to be considered. The evidence is in favor of value, no question about it. However, keeping your eyes on long-term growth prospects is a top priority for any investor looking to outperform the market over the long haul. Rebalancing your portfolio entirely away from such names in my opinion, would prove destructive over the long-term.

Disagree? Tell me why!

SM