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Like hemlines, investing styles go in and out of fashion. And for the better part of 15 years, value investing — the strategy of buying shares trading at a discount — has been out of vogue, significantly lagging an approach focused on fast-growing stocks trading at pricey valuations.
Late last year, however, a shift began. Bargain-priced stocks in the Russell 3000 Index gained a bit more than 6% over the past six months through the end of March, for example, trouncing the nearly 9% loss in the bogey’s growth stocks over the same period. It’s early days, of course.
“I’m hesitant to call a regime change for something that’s only a couple of months old, but the magnitude of what we’re seeing today is stunning,” says Christian Heck, a value-oriented fund manager at First Eagle. “It’s not a small outperformance. And it’s something that is very different than what we’ve seen over the past five or 10 years.”
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In any case, you don’t have to believe in a value comeback to view bargain-priced stocks favorably right now. The war in Iran has increased market rockiness, certainly, and thrown a splash of cold water on value’s edge over growth shares.
But “volatility is a value investor’s friend,” says Heck, because it creates opportunity for bargain hunters to snap up shares in companies they admire that had previously been too pricey.
Moreover, buying stocks at low prices is one way to build some defense in your stock portfolio. Finally, just as frothy stock valuations can portend lower future returns, low stock valuations are often a good predictor of generous long-term gains.
Fire-sale prices on stocks
Cheap stocks are super-cheap now. At last report, the S&P 500 Pure Value Index — 100-odd stocks with the strongest value traits — boasted a price-to-earnings (P/E) ratio, based on estimated earnings, of 12. Its Pure Growth counterpart trades at a P/E of 24. That gap is “egregiously” wide, says Lewis Altfest, chief investment officer at Altfest Personal Wealth Management in New York City.
“It’s value’s turn,” he says. “Things are changing now, at least for the time being, and investors should be taking some money out of growth stocks” and investing in value.
We’ll point you toward some bargain-priced opportunities, including mutual funds, exchange-traded funds and stocks. Returns and data are through March 31, unless otherwise noted. But first, a primer on value.
Value is in the eye of the beholder
All value investors seek a discount, but there are many ways to define a bargain, whether that’s measured by a stock’s price in relation to earnings, sales, book value (assets minus liabilities), dividend or “enterprise value” — the value of a company if it were acquired today. At one end of the value spectrum are deep-value investors who target the cheapest stocks in the market.
“Often, they’re contrarian investors who are looking for stocks that have fallen out of favor, but they have reasons to be more optimistic about them,” says Robby Greengold, a principal member of the equity strategies team at investment research firm Morningstar. “They tend to employ some of the riskiest strategies in the value universe, because these stocks are controversial. The stocks could be cheap for a very good reason, and often the reason is there’s a high-risk situation. They might even face bankruptcy,” he adds.
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At the other extreme is an approach that focuses first on finding good businesses and buying only if the shares trade at a significant discount — called “a margin of safety,” says Heck — to what the business is worth. Often these investors are more willing to own some fast-growing companies that trade at price-to-earnings or price-to-sales multiples that are richer than those of traditional value stocks.
“They argue that the stocks are worth owning because the revenue and earnings growth rates justify higher-price multiples,” says Greengold.
Value indexes typically tilt more toward certain sectors, such as materials, industrials, real estate, energy and utilities, while growth benchmarks favor tech and communications services. But these divisions aren’t set in stone. The key to value investing is to home in on bargain prices.
“I’m a value investor, but that doesn’t mean I can’t own technology,” says John Buckingham, editor of The Prudent Speculator.
Value indexes typically tilt toward certain sectors, such as materials, industrials, real estate, energy and utilities.
Finally, although growth has trumped value for years now, it’s worth noting that bargain-priced investors have still generated decent returns on an absolute basis. The typical large-company value fund, for instance, has returned 11% a year, on average, over the past decade.
“Is value back?” says Buckingham. “It hasn’t really gone away.”
How to invest in value stocks now
The easiest way to add a dollop of value stocks to your portfolio is to buy shares in a diversified mutual or exchange-traded fund. The Kiplinger 25, the list of our favorite actively managed no-load mutual funds, includes several good value-oriented strategies: Dodge & Cox Stock (DODGX), T. Rowe Price Small-Cap Value (PRSVX) and Dean Mid Cap Value (DALCX).
The Dodge & Cox managers are self-described contrarians. That kind of strategy can take a fair amount of patience, as the investment thesis for any given stock might take time to play out.
T. Rowe Price’s manager, David Wagner, favors “unloved and under-followed” small companies. And Douglas Leach, Dean Mid Cap Value’s manager, calls himself a “classic” value investor who favors high-quality companies trading at low prices for reasons that are temporary.
But there is a universe of other funds to consider. One is the iShares MSCI USA Value Factor ETF (VLUE). It has a good record of staying on a value track, according to Morningstar. It’s pegged to an index of 150 undervalued stocks in large and midsize companies with solid earnings outlooks and low debt. Technology (38% of assets), financial services (11%) and communications services (10%) are its biggest sector exposures.
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Notably, the fund has held up well since the start of the year, with a 4.4% return. That’s better than 86% of its peers, as well as the 4.3% loss in the S&P 500. Over longer hauls, the fund stays well ahead of peers, too. And its 0.15% expense ratio is low. Cisco Systems (CSCO), General Motors (GM), Merck (MRK) and Bank of America (BAC) are among the top holdings.
The Vanguard Mega Cap Value ETF (MGV) stays focused on stable, large-company stocks, but it avoids an overconcentration in the Magnificent Seven stocks.
The exchange-traded fund tracks the largest companies by market value that score best on certain value traits, including stock price in relation to book value, sales, earnings (both estimated and historical) and other measures. Blue chip stocks JPMorgan Chase (JPM), Berkshire Hathaway (BRK.B), Exxon Mobil (XOM) and Johnson & Johnson (JNJ) are top holdings.
Dividend strategies can be an effective way to focus on value, and they come with the added benefit of good yields.
For a bigger tilt toward midsize companies, consider the Vanguard Value Index ETF (VTV) or its mutual fund share class, Vanguard Value Index (VVIAX). Nearly 30% of the stocks in the fund are mid-size companies; the rest are large companies.
Another fund worth considering is Fidelity Value (FDVLX). Matthew Friedman runs the midsize-value fund with two co-managers, trolling for the cheapest stocks of the highest-quality companies with increasing earnings and good free cash flow (money left after operating expenses and spending to maintain or upgrade property and equipment).
For instance, he acquired shares in Western Digital (WDC), a maker of data-storage devices, when it was cheap in late 2024. The stock has since climbed meteorically due to soaring demand for artificial-intelligence-related data storage and is now a top holding.
Over the past 12 months, Fidelity Value returned 21.5%, ahead of 88% of its midsize-value fund peers and beating the broad U.S. stock market. The fund trounces peers over longer hauls, too. “Some of my peers cheated” by adding growth stocks to their portfolio in recent years, Friedman says, “We don’t do that. We invest in cheap stocks. We’ve been consistent about that.”
Dividend strategies can be an effective way to focus on value, and they come with the added benefit of good yields. Among our favorites: Vanguard Equity Income (VEIPX), an actively managed mutual fund and member of the Kiplinger 25. The fund yields 2.2% and charges a 0.26% expense ratio — super-low for an actively managed fund. Since the start of this tumultuous year, Equity Income has gained 1.5%.
The Capital Group Dividend Value ETF (CGDV) is a member of the Kiplinger ETF 20 list of our favorite exchange-traded funds. A team of managers aims to invest in established, high-quality U.S. companies with above-average dividend yields. The fund, which yields 1.3%, boasts a 21.4% annualized three-year return that beat 98% of its large-value fund peers.
Individual stocks to buy
If you want to invest in individual stocks, start your search in areas of the market that have lagged. “The time to buy is when there’s a lot of pessimism,” says Buckingham.
Software stocks, for instance, have plummeted nearly 25% over the past six months over fears that AI will disrupt their subscription sales. That angst is overblown in some cases, says Angelo Zino, an analyst who leads the tech team at CFRA Research, who recently reiterated his Strong Buy’ rating on Salesforce (CRM). (Salesforce is a member of the Kiplinger ESG 20, the list of our favorite stocks that are environmental, social or governance standouts.)
Financial stocks are the worst-performing sector over the past 12 months, as well as so far in 2026. The sector is taking a drubbing in part over concerns about private credit.
Another snag is the war in Iran. The conflict is a risk for all businesses, for sure, but war raises the potential for higher interest rates, higher inflation rates and an economic slowdown, all of which can impact bank profitability. That said, any good news there could propel these stocks up; bad news will be a drag. Step in cautiously, but we found a few to consider.
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JPMorgan Chase typically trades at a premium P/E multiple relative to its peers. But shares have fallen 15% since they peaked in January, and the stock now trades at a P/E of 13, on par with its finance and investment banker peers, according to Zacks Investment Research. “That’s a reasonable price for the best bank with a fortress balance sheet,” says Buckingham.
Shares in the investment bank Morgan Stanley (MS) have slipped 15% from their 52-week high, too, and now trade at a P/E of 15. In the meantime, the stock sports a fat, 2.4% dividend yield.
Or invest in a financial-sector ETF or mutual fund. T. Rowe Price Financial Services (PRISX) and Fidelity Select Financials Portfolio (FIDSX) actively invest across the sector. The iShares U.S. Financials ETF (IYF) is an index-based ETF that invests in banks, insurers and credit card companies.
Healthcare stocks have been laggards, too, though lately they’ve been clawing their way back. Among the sector’s worst performers: healthcare equipment and supplies. Enter Becton, Dickinson (BDX). Becton is a dominant maker of needles and syringes. These pieces don’t cost much — a few cents, says Heck — and are mission-critical.
“Ninety percent of all people who enter any medical practice in the U.S. will get touched or pricked with a Becton product,” he says. The stock trades at 13 times expected earnings, which is cheap relative to its 10-year median P/E of 20.
You can ratchet down the single-stock risk by investing instead in an ETF focused on the industry, such as the iShares U.S. Medical Devices (IHI). Or consider a fund that invests across the health care sector. Fidelity Select Health Care (FSPHX) is our favorite actively managed health care fund; State Street Health Care Select Sector SPDR (XLV) is our favorite healthcare ETF.
How the pros avoid a falling knife
One of the biggest risks in value investing is a falling knife — a Wall Street metaphor for a stock with a rapidly declining stock price. You buy a stock you think is cheap, but it falls further. “I would love to say that never happens,” says Christian Heck, a value-oriented fund manager at First Eagle.
To protect against catching a falling knife or stumbling into a value trap — a stock that’s cheap because it’s actually a bad investment — Heck says he and his cohorts limit the size of their initial stake to just over 1% of fund assets. Then, they watch the stock for a bit. If its price falls further, they go back to their original investment thesis to figure out whether it still holds.
“If the stock’s variables are tracking as we expected, we may add shares,” says Heck. If not, they stay put.
Steph Guild, chief investment strategist at Robinhood Strategies, the advisory side of broker Robinhood, takes another tack. “I don’t invest when a stock price is really down, because when something has downward momentum, sometimes it keeps going down,” she says.
Instead, Guild waits for a shift in the stock’s moving averages, a technical indicator that helps investors visualize stock-price trends. A moving average is the average of a stock’s closing price over a set number of days, “moving” because with each new close, the oldest is dropped.
Guild focuses on three periods: 200 days, 50 days and 20 days. If shorter trend lines start to cross above the longer ones, it can indicate that a stock-price recovery is not merely in the works but “has legs,” she says. “I’ll wait until it starts to show some evidence of bottoming before I buy.”
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
