It’s happening again: The financial media is touting a potential shifting of investors to value stocks from the growth stocks that have propelled the extended bull market in the U.S. This last happened in September and October, though the value buzz ended up being short-lived.

Now the steady rally in stock prices over the past several months has driven the S&P 500 index SPX, -1.11% to an exceptionally high price-to-earnings valuation, making value stocks look particularly appealing to some investors. And some stocks have moved out of the value space over that time; Apple AAPL, -3.17% , for one, has had one of the biggest shifts in valuation in the last three months.

Wall Street has its own group of favorite value stocks, listed below. What matters most, of course, is your own opinion — is it time to shift to a value strategy?

The new arguments for value

The tremendous gains for U.S. stocks over the past year haven’t been propelled by earnings growth — analysts estimate that earnings per share were essentially flat for 2019. Investors simply have been willing to pay more for U.S. assets, as the Federal Reserve has switched its policy to lowering interest rates and increasing other stimulative activities, and central banks in Europe and Japan have maintained negative-interest-rate policies.

Mark DeCambre digs into the nervousness of professional investors as the market sentiment has turned “irrationally bullish.” Chris Matthews shows that the S&P 500 index SPX, -1.11% appears “overvalued” by more than one measure. Michael Brush makes the case for getting into value stocks early.

Among the questions to consider before shifting into value are how long you believe central-bank-driven growth can last and whether U.S. corporate earnings can grow enough over the next year or two to bring down P/E ratios.

Apple exits the value camp

Back on Oct. 22, I listed sell-side analysts’ favorite stocks in the S&P 500 Value Index. That and the S&P 500 Growth Index are overlapping subsets of the full S&P 500.

At that time, Apple was part of the S&P 500 Value Index. The index is rebalanced quarterly, and now Apple is out. This chart explains why:

FactSet

Apple’s forward price-to-earnings ratio has increased dramatically to 26.7 from 20.5 three months ago. A year ago, the forward P/E was only 13.2.

The prospect of an improved trade relationship with China is an obvious positive for Apple. Then again, the 10-year price-to-earnings chart for the stock shows how the valuation has ebbed and flowed through product-release cycles:

FactSet

Apple’s forward P/E valuation has typically been much lower than it is now. This is why it was included in the S&P 500 Value Index only three months ago, while other tech giants, including Microsoft MSFT, -1.24% , Facebook FB, -0.89% and Google holding company Alphabet GOOG, -2.37% , GOOGL, -2.41% were not.

If we add Microsoft, Facebook and Alphabet’s Class A shares to the 10-year forward P/E chart, it’s obvious that Apple, at least for now, no longer trades at a huge P/E discount to the others:

FactSet

More on Apple:Apple could fetch a $2 trillion valuation by the end of 2021, analyst says

Also read:Apple may not get the big 5G bump investors expect, analyst says in downgrade

Yet more Apple: Apple shareholders should be thankful the company isn’t handing them more cash

The broad market’s valuation has also expanded tremendously

This chart shows the forward P/E ratio for the S&P 500 over the past 20 years:

FactSet

Aside from a brief period early in 2018, the S&P 500 is trading at its highest forward P/E valuation since June 2002.

Value vs. growth over the long haul

Here are annualized returns for the S&P 500 Value Index, the S&P 500 Growth Index, the S&P 500 and the Dow Jones Industrial Average DJIA, -0.87% for various periods through Jan. 18:

Index 1 year 3 years 5 years 10 years 15 years 20 years S&P 500 Value 26.7% 11.8% 10.4% 12.0% 8.1% 6.6% S&P 500 Growth 30.8% 19.6% 14.8% 15.2% 10.5% 5.5% S&P 500 index 28.9% 15.9% 12.8% 13.7% 9.4% 6.2% Dow Jones Industrial Average 23.4% 16.7% 13.6% 13.5% 9.8% 7.2% Source: FactSet

Value has trailed considerably during the long bull market. On this chart, the S&P 500 Value Index leads the Growth index and full S&P 500 only for the 20-year period.

How long can the central-bank-driven growth last? Will U.S. corporate earnings grow enough over the next year or two to bring P/E ratios down? These are among the questions you need to consider before shifting strategy.

A new list of Wall Street’s favorite value stocks

The S&P 500 Value Index is made up of 391 stocks drawn from the S&P 500 by S&P Dow Jones Indices, based on price-to-book-value, price-to-earnings and price-to-sales ratios.

These are the three most liquid exchange-traded funds tracking the S&P 500 Value Index, according to FactSet:

• The iShares S&P 500 Value ETF IVE, -0.79% has $18.1 billion in assets and annual expenses of 0.18% of assets.

• The SPDR Portfolio S&P 500 Value ETF SPYV, -0.74% has $4.5 billion in assets and an annual expense ratio of only 0.04%.

• The Vanguard S&P 500 Value ETF VOOV, -0.73% has $1.3 billion in assets, with an expense ratio of 0.15%.

Here are the 20 stocks in the S&P 500 Value Index with the highest percentage of “buy” or equivalent ratings among sell-side analysts polled by FactSet:

You can click the tickers for more about each company.

How the ‘old’ list of analysts’ favorite value stocks performed

Half the stocks on the above list were on a similar list published on Oct. 22, amid the last round of value buzz. Jacobs Engineering J, -0.28% changed its ticker from JEC to J on Nov. 25. Keep in mind that three months is a short period for a list of stocks that includes 12-month price targets.

Leaving the list in its original order, here’s how the stocks performed from Oct. 21 through Jan. 18.

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