For the better part of a decade, betting on value stocks has felt like bringing a knife to a gunfight. Growth shares—particularly the technology titans that now dominate market indexes—have delivered returns that made traditional value metrics seem quaint. But as 2026 unfolds, a growing chorus of strategists argues the environment is finally shifting in value's favor.

The Valuation Divergence

The numbers tell a stark story. In 2025, the S&P 500 Growth Index climbed 21.4% while its value counterpart managed just 11%—a continuation of a pattern that has persisted for years. Yet this performance gap has created what value advocates see as a compelling opportunity.

"When growth outperforms value by this magnitude over an extended period, it typically creates conditions for a reversal," said Brian Jacobsen, chief economist at Annex Wealth Management. "The valuation spreads between growth and value stocks are near historical extremes. That's not sustainable indefinitely."

Consider the contrast: Many mega-cap growth stocks trade at 30, 40, or even 50 times earnings, pricing in years of optimistic growth assumptions. Meanwhile, classic value stocks in sectors like consumer staples, healthcare, and financial services trade at mid-teens multiples with more modest expectations baked in.

Top Value Picks for 2026

Morningstar's latest research highlights several value opportunities that analysts believe offer attractive risk-reward profiles:

Campbell's (CPB): The food company has successfully shifted its portfolio mix away from core soup products toward faster-growing snacks while driving supply chain efficiencies. Morningstar assigns it a wide economic moat rating, reflecting strong brands and entrenched retailer relationships.

Bristol-Myers Squibb (BMY): The pharmaceutical giant has built a robust drug portfolio and pipeline supporting its wide moat rating. With shares trading at a discount to fair value estimates, the company offers exposure to healthcare—a sector with defensive characteristics and less economic sensitivity.

Berkshire Hathaway: Described as "the relatively boring value pick of the bunch," Warren Buffett's conglomerate owns approximately 60 subsidiary businesses including GEICO, Duracell, and Dairy Queen. The company's cash pile exceeds $150 billion, providing optionality in a downturn.

"Value investing requires patience, but the setup today is more favorable than it's been in years. Growth stocks aren't going to compound at 20% annually forever, and when the music stops, investors will rediscover the merits of reasonable valuations."

— David Giroux, Portfolio Manager, T. Rowe Price

The Economic Uncertainty Argument

Beyond pure valuation arguments, some strategists point to economic conditions that historically favor value stocks. When growth becomes uncertain or turns negative, the high multiples commanded by growth stocks become harder to justify. Investors tend to rotate toward companies with stable earnings, strong dividends, and lower valuations—classic value characteristics.

The current environment offers plenty of uncertainty. Fed policy remains in flux, with rate cut timing unclear. Tariff policies and trade tensions create unpredictable headwinds. The labor market shows signs of cooling. In this context, the argument for more defensive positioning gains appeal.

"I don't think you need a recession to see value outperform," noted Michelle Meyer, chief U.S. economist at Mastercard Economics Institute. "You just need enough uncertainty that investors start questioning whether growth stocks deserve their premiums. We have that uncertainty today."

The Magnificent Seven Question

Any discussion of growth versus value in 2026 must reckon with the Magnificent Seven—Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla. These companies have driven an outsized share of market returns in recent years, and their continued performance will significantly influence whether value strategies can gain traction.

Consensus expects 18% earnings growth for the Magnificent Seven in the coming year—strong, but notably the slowest pace since 2022. If these companies merely meet expectations rather than exceeding them, the enthusiasm that has propelled their valuations may moderate.

Moreover, concentration risk in growth-oriented indexes has reached levels that concern some institutional investors. When a handful of stocks account for a disproportionate share of market capitalization, portfolio managers seeking diversification may naturally gravitate toward underweighted value sectors.

The Selective Approach

Even value advocates acknowledge that not all cheap stocks deserve investor interest. Many companies trade at discounted valuations for good reason—structural decline in their industries, competitive pressures, or management missteps. Successful value investing requires distinguishing temporary headwinds from permanent impairment.

Kiplinger's investment team highlighted Alphabet (GOOGL) as an example of a stock that combines growth characteristics with value-like pricing. "A company that knows how to make search—and research—pay. Shares have more than tripled in five years but are still a bargain," noted their analysts.

Similarly, LVMH, the French luxury conglomerate, has seen its stock languish over the past year, creating what some see as a rare buying opportunity for a collection of 75 high-end brands with strong pricing power.

Implementing the Value Tilt

For investors considering a value allocation, several approaches exist:

  • Value-focused ETFs: Low-cost index funds tracking value benchmarks like the Russell 1000 Value or S&P 500 Value Index
  • Dividend-focused strategies: High-dividend stocks often overlap significantly with value characteristics
  • Active value managers: Experienced portfolio managers who can select individual value opportunities while avoiding value traps
  • Sector tilts: Overweighting traditionally value-heavy sectors like financials, energy, and healthcare

The Patience Requirement

Perhaps the most important caveat for would-be value investors: timing is notoriously difficult. Value has been "due" for outperformance before, only to disappoint. The strategy requires patience and conviction that can be tested when growth stocks continue ripping higher.

That said, the setup entering 2026 offers more favorable conditions than value investors have seen in years. Fed rate cuts—if they materialize—could benefit rate-sensitive value sectors. Valuation spreads are stretched. Economic uncertainty favors defensive positioning.

As one veteran portfolio manager put it: "Value investing is about buying good companies at reasonable prices and waiting. The waiting part is always the hardest. But for patient investors, this could be the year that patience finally pays off."