Value stocks are attracting significant investor attention amid the economic recovery because they now possess more upside potential than expensive growth stocks. Because rising inflation and high Treasury yields now make pricey growth stocks risky bets, we think it could be wise to bet on POSCO (NYSE:PKX), Arrow Electronics (NYSE:ARW), Albertsons (ACI), and Huntington (HII). These companies possess solid growth potential but are trading at discounts to their peers. Read on.The stock market has continued its rally so far this year, except for a few stocks that have retreated. However, the fundamental difference between this year’s rally and last year’s is that the broader economy is not significantly disconnected to the stock market this year. Because the economic recovery this year is a solid support for the stock market, investors are rotating to undervalued turnaround candidates that lagged the broader market last year due to lack of support from the economy and respective industry trends. Concern over rising inflation is another motivator for investors to shift away from expensive growth stocks.
This trend is evident in the Vanguard Value ETF’s (VTV) 17.1% returns year-to-date compared to the Vanguard Growth ETF’s (VUG) 4.7% gains.
The continued reopening of the economy on the back of a strong vaccination drive is expected to keep driving demand in various industries that struggled amid the pandemic, helping their stocks attract investors. Given this backdrop, we think it could be wise to bet on POSCO (PKX), Arrow Electronics, Inc. (ARW), Albertsons Companies, Inc. (ACI), and Huntington Ingalls Industries, Inc. (NYSE:HII). They are all well positioned to capitalize on the economic recovery and are currently trading at discounts to their peers.