Notable investor says ‘the top of growth stocks is coming’

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Notable investor says ‘the top of growth stocks is coming’

John Rogers Jr., Chairman and Chief Investment Officer of Ariel Investments.

Adam Jeffery | CNBC

According to John Rogers of Ariel Investments, it’s time to look at value stocks as growth stocks will have a difficult year in 2024.

“I think the peak of growth stocks is just around the corner,” Rogers told CNBC’s Scott Wapner at the CNBC CFO Council Summit in Washington, D.C. “I really, really do.”

In fact, Rogers, chairman of Ariel Investments, believes the mega-cap tech stocks that have outperformed this year are “perfectly valued” and will likely face challenges heading into 2024.

Instead, the investor is bullish on value stocks as the performance gap between growth and value stocks widens. For example, the Russell 3000 Growth is up about 34% this year, while the Russell 3000 Value is up more than 2%.

“When I look at these indices, it’s probably one of the biggest gaps in recorded history,” Rogers said. “That gives me great confidence that small-value stocks will be the place to be and that growth stocks will have a very difficult time early next year.”

The value manager said growth stocks could continue to outperform in a falling interest rate environment. However, he believes the gap between growth and value is so wide that there will be some big winners that might be overlooked by growth investors.

“I think there will be a real opportunity to acquire some of these orphans that will really outperform over the course of ’24 and ’25, even with the tailwinds that the growth stocks will have from lower interest rates,” said Rogers.

The investor is bullish on stocks related to the real estate sector. include names ADTthe home security company, which is down 35% this year, and Mohawk Industriesthe flooring company, which is down 14%.

Rogers also sees opportunity in the media sector, which has been battered this year by concerns about advertising. He favors Paramount Global to the advantage of its extensive content library and portfolio of global brands, as well as a “mindset change” in the leadership there.

“We believe the stock is worth over $40 per share,” Rogers said. “We believe there is a real opportunity here.”

Shares of Paramount, down 14% this year, closed at $14.41 on Wednesday.

Elsewhere the investor likes it Entertainment at Madison Square Garden. He also said his team is “more optimistic than ever” about cruise stocks royal Caribbeanwhich was “our anchor stock of sorts” due to consumer demand for experiences.

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