Poor Values

An article in FORBES magazine suggests that today's "value stocks" are way overpriced. The cheapest 125 stocks among the S&P 500 normally have a price/book value that's 50% of the ratio of the entire index. But now those "clunker" stocks go for 65% of the index level, more expensive than at any time in the past 40 years.

Beyond the S&P 500, small-company value stocks are even more expensive because small companies tend to have less stable returns and lower profit margins. Therefore, it's time to buy growth stocks that (1) have shown impressive earnings growth and (2) trade at price/earnings ratios far below the levels of 1999.

NOTE: Many promising large growth stocks are in technology, but retailers such as Home Depot and Wal-Mart also may be priced well.

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