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Why Value, Not Growth, Is the Smart Strategy: BMO’s Belski


Brian Belski, the chief investment strategist at BMO Capital Markets, says the growth strategy that has worked well in the market for the past few years might need to be traded in for 2013.

Speaking this week to Matt Nesto, Belski says that, longer term, "we think that there's a transition out of growth strategies into value strategies. When growth is scarce, growth outperforms, and growth has been outperforming for four out of the last five years."

It's no secret that major stock indices have doubled since the post-crisis lows reached in March 2009, and Belski says for investors to keep their positive streak intact, value may be the place to be.

"Our analysis suggests that growth strategies typically perform best during periods of slowing earnings growth -- something that has clearly defined the market environment over the past few years," he wrote in a research report earlier this month. "However, recent earnings growth trends suggest a change is in the making. Given that earnings revision trends remain relatively subdued ... we believe there is a good chance that earnings growth will at least match, if not exceed current 2013 earnings growth expectations."

With that being the case, this appears to be "an opportune time" for a value approach, he believes.

Belski said during his Breakout interview that when it comes to risky bets, he's focused for the time being on fixed-income assets. "The risk trade right now is to actually buy bonds, because most investors are losing money immediately because of the real rate of return of bonds," he explains.

The BMO team has overweight ratings on energy, industrials and information technology, while recommending that the firm's clients underweight telecom and utilities.

"To be clear, we are not suggesting that investors ignore companies that generate significant earnings growth," Belski says in his research note. "Rather, given market dynamics, we believe there are plenty of stocks that generate earnings growth at a reasonable price."

For more from Belski, be sure to see the attached video. Then tell us what you think. Does value make more sense than growth right now?