Key facts
- Value stocks are outperforming growth stocks in 2026, with the iShares Russell 1000 Value ETF up 16% year-to-date.
- JPMorgan cites broadening earnings growth and favorable fiscal/monetary conditions for the value stock resurgence.
- Three leading value fund managers have identified their top stock picks.
- Francis Gannon favors Atmus Filtration Technologies (ATMU) for its recurring revenue from replacement parts.
- Bill Smead recommends APA Corp. (APA) due to its capital discipline and low valuation.
- Mark Zagata's top pick is CBRE Group (CBRE), a global commercial real estate firm expected to benefit from AI productivity gains.
Value stocks have experienced a resurgence in 2026, outperforming their growth counterparts which have been dominated by the artificial intelligence boom. The iShares Russell 1000 Value ETF has gained 16% this year, significantly outpacing the iShares Russell 1000 Growth ETF's 3% return.
According to JPMorgan, this shift is driven by a broadening of earnings growth and a more favorable fiscal and monetary environment. Despite the outperformance, firms like Morgan Stanley and Nomura continue to recommend increasing exposure to value stocks, especially as the broader market remains heavily concentrated in AI-related companies.
For investors seeking focused exposure to the value trend, three prominent value fund managers shared their top stock picks. Francis Gannon, co-chief investment officer at Royce Investment Partners, favors Atmus Filtration Technologies (ATMU). This company, spun off from Cummins, specializes in filtration systems for industrial vehicles and benefits from a recurring revenue stream from replacement parts, with 86% of its revenue derived from these products. Gannon noted the industrial filtration industry's rapid growth and positive outlook for Atmus.
Bill Smead, founder of Smead Capital Management, has selected APA Corp. (APA), an oil firm trading at a low forward PE ratio of 5.3. Smead highlighted the company's capital discipline, choosing to return earnings to investors rather than reinvesting heavily in drilling, which he described as creating "massive owner earnings." This industry-wide trend of capital discipline also helps to constrain supply and support oil prices.
Mark Zagata, portfolio manager at Parnassus Investments, pointed to CBRE Group (CBRE), the world's largest commercial real estate firm. Zagata believes AI will enhance the company's productivity, and the firm operates in brokerage, property management, and development across over 100 countries.