Value stocks tend to outperform growth stocks during periods of high inflation. These companies in the Russell 1000 Value Index have high revenue growth estimates for the next two years.
Microsoft is now considered to be a value stock: The company's shares fell 23% during the first half of 2026. But Microsoft is expected to increase its sales at more than twice the pace of the S&P 500 through 2028.
Let us begin with a midyear summary of index results that might surprise you in light of the triple-digit gains for so many growth stocks in the S&P 500.
Here is how several broad large-cap indexes performed during the first half of 2026, with dividends reinvested:
Value indexes tend to outperform growth indexes during periods of high inflation. The Russell 1000 Value Index outperformed the full Russell 1000 and the S&P 500 significantly during the first half of 2026.
The Russell 1000 Value Index RLV returned 16.3% during the first half of 2026, with dividends reinvested, according to data provided by FactSet. On the same basis, the full Russell 1000 Index RUI returned 10.3% and the S&P 500 SPX returned 10.2%. The Russell 1000 Growth Index RLG returned 5.3% for the first half of the year.
MarketWatch contributor Mark Hulbert used data going back to 1947 to show how value stocks tend to outperform growth stocks during periods in which the trailing 12-month inflation rate has been rising. That describes our current economic environment, and the first-half performance chart above is correlated. If inflation remains elevated, broad value indexes might continue to outperform growth-oriented indexes such as the S&P 500 SPX. The article also includes value-stock recommendations from newsletters whose performance is audited by the Hulbert Digest.
Value stocks tend to trade lower than growth stocks relative to book value, earnings or revenue. Companies in the value camp tend to have mature businesses, often feature attractive dividend payouts and can be expected to grow revenue more slowly than companies in growth indexes. But there are always exceptions that can be highlighted in a screen.
Screening the Russell 1000 Value Index
The Russell 1000 is made up of the largest 1,000 stocks by market capitalization in the Russell 3000 Index RUA, which itself is designed to capture 98% of the market for common stocks listed in the U.S. The Russell 1000 Value Index has 870 stocks drawn from the full Russell 1000 that have relatively low price-to-book ratios, as well as lower two-year earnings growth projections and lower growth rates for revenue per share over the previous five years when the index is reconstituted annually.
The Russell 1000 Value Index was reconstituted in June, so we began our screen with a fresh list of value stocks.
The most commonly cited valuation measure for stocks is the forward price-to-earnings ratio - this is a stock's share price divided by analysts' consensus 12-month earnings-per-share estimate for the company. For indexes, forward P/E ratios are weighted by component stocks' market capitalization.
These lists of the S&P 500's largest gainers and decliners during the first half include further discussions of P/E valuations and underlying estimates:
-- The 20 best-performing stocks in the S&P 500 for the first half of 2026
-- 20 stocks in the S&P 500 that plunged the most in 2026's first half
Here is a summary of forward P/E valuations for exchange-traded funds that track the four indexes in the chart above by holding all of those indexes' stocks, weighted in the same manner as the indexes. These portfolio P/E ratios have been calculated by LSEG.
ETF Forward P/E iShares Russell 1000 Value ETF 17.5 iShares Russell 1000 Growth 24.5 iShares Russell 1000 ETF 20.3 State Street SPDR S&P 500 ETF Trust 20.5 Source: LSEG
Investors who select value stocks, especially if they focus on low P/E or dividend yield, can fall into "value traps." A value trap is a stock that is trading at a low valuation or a high dividend yield for a reason. Investors expect relatively weak financial results ahead that could include dividend cuts.
To narrow the possibility of highlighting value traps in a forward-looking screen, we began with those 870 components of the Russell 1000 Value Index and sorted the group by projected compound annual growth rates for revenue from 2026 through 2028. These projections are based on consensus estimates among analysts polled by LSEG, with calendar-year adjustments by the data provider for companies whose reporting periods don't match the calendar.
We excluded companies for which consensus revenue estimates weren't available through 2028 and cut the list further to companies covered by at least five analysts polled by LSEG. We also narrowed to companies expected to show profits for calendar 2026, 2027 and 2028. This brought the list down to 782 companies.
But FTSE Russell's criteria can lead to stocks with very high forward P/E ratios being included in the Russell 1000 Value Index. So we cut further by setting a maximum forward P/E of 30. This narrowed the list to 669 companies.
Among the companies passing the screen, these 14 have projected revenue CAGR of 15% or more from 2026 through 2028, based on consensus estimates among analysts polled by LSEG:
Company Projected revenue CAGR from 2026 through 2028 Forward P/E 2026 price change Ascendis Pharma 33.0% 20.5 25% SoFi Technologies 22.2% 25.0 -32% Carlyle Group 19.9% 8.9 -29% Klaviyo 19.3% 15.7 -53% Microsoft 18.1% 18.9 -23% Meta Platforms 17.8% 16.5 -15% Figure Technology Solutions 17.7% 28.3 -25% Bill Holdings 17.3% 10.4 -34% TPG 16.7% 12.5 -36% Blackstone 16.5% 17.2 -24% United Therapeutics 15.8% 18.3 11% HubSpot 15.5% 12.5 -55% Guidewire Software 15.5% 29.5 -39% KKR 15.0% 13.4 -28% Source: LSEG
In comparison, the S&P 500 is projected to increase revenue at a weighted CAGR of 8.4% from 2026 through 2028, according to LSEG's data.
Any stock screen will be limited to a small number of data points. If you see any stock or ETF of interest here, you should do your own research to form your own opinion before making an investment. One way to begin this process is to click on the tickers.
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(END) Dow Jones Newswires
July 01, 2026 12:10 ET (16:10 GMT)
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