Insights

Value shares are done, we’re back to growth: analyst

Investment expert says inflation won’t rage out of control, but advises to get your money out of the ASX and send it to overseas stocks.
The post Value shares are done, we’re back to growth: analyst appeared first on The Motley Fool Australia. –

The massive rotation to value shares is done and dusted and it’s now time to return to the growth winners that carried 2020.

That’s the opinion of Nucleus Wealth head of investments Damien Klassen, who revealed his team repositioned its portfolios earlier this month.

“We have… called time on the value trade,” he said in a memo to clients. 

“The current inflation spike looks to be short term and will likely recede over the next 6 months.”

Growth is back, baby

The Nucleus team has returned to the growth shares that served investors so well during the post-crash rally last year.

“We have made some substantial changes to reduce weight to the stocks we perceive will be the losers from the new environment: banks, resources and value stocks,” said Klassen.

“The replacements are similar to the winners from 2020: quality growth — think profitable technology — and defensive.”

The strategy is a classic “barbell portfolio” with growth shares at one end and interest-rate sensitive defensive stocks at the other.

By “quality” growth shares, Klassen clarified he meant “stocks that can grow considerably above-trend” that will look appealing in a low-growth world.

“If you were looking for maximum returns, you might buy ‘junk’ growth stocks — ones with little to no earnings which often perform best in this type of environment,” he said.

“We look at our portfolios differently though. Risk is an important factor, and the junk growth stocks are far from cheap and have as much downside as they do upside.”

Inflation now is not the same as the 1970s

Inflation ran out of control in the 1970s, causing grief for the entire global economy.

But Klassen said that the fundamental forces controlling prices and wages were entirely different now.

“The rules have changed since then. We looked at technology being inherently deflationary. Net result: a financial system overengineered to prevent inflation.”

The rotation back to growth now also means investors should look at moving their money from the ASX to overseas shares.

“Australian equities have been a good source of investment performance in recent months. Now, they are facing a higher risk of reversal,” said Klassen.

“It is time to use the high prices here to switch to international equities. We are building the defensive side of the portfolio up, changing out of value winners like resources, banks and cyclical industrials. A more aggressive switch into quality/growth is ahead if we see the opportunity developing.”

The post Value shares are done, we’re back to growth: analyst appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More reading

What 4 share market experts think of cryptocurrencies

2 stellar small cap ASX shares to watch

Why Telstra (ASX:TLS) and this ASX dividend share could be buys
5 things to watch on the ASX 200 on Thursday

2 ASX shares that could be top buy and hold options

Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
Trade The US Market With ZERO Brokerage* + FREE Access To Trading Ideas & Value Analysis Tools. Click Here!