Why investors should continue rotating from growth into value stocks

Investors should stick with shifting from growth stocks, particularly those in the technology space, into value stocks, according to one market watcher.

Michael Bapis, partner and managing director of The Bapis Group at HighTower Advisors, said recently on CNBC's "Trading Nation" that value stocks will begin falling back into favor. Here are his reasons.

  • Earnings are going to matter more going forward than they ever have, and their fundamental backdrops will become more important than the story of stocks' future valuation.
  • High-flying technology names like Facebook, Amazon and Netflix have posted earnings that do not necessarily match their valuation, Bapis said, and their shares have been purchased more so on the prospect of future growth.
  • The equities themselves will likely continue performing, he said, though the growth will become difficult to sustain. Bapis said he would begin rotating out of those names, at least a portion of an investor's original investment.
  • Target is one name investors may look to for a value play at this point, he said. The stock is trading relatively cheaply to its historical valuations and offers a solid dividend.

Bottom line: After big upside seen in high-flying growth stocks, value stocks will soon become the better bet.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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