By Paul R. La Monica
It's been a rocky start to the year on Wall Street. But investors in value stocks are faring better than their counterparts who have loaded up more on growth and momentum plays. The Vanguard Value exchange-traded fund is up 3.3% in 2026, for example. Meanwhile, the Vanguard Growth ETF has tumbled 9.5%.
Will the gap between value and growth continue to widen? One veteran value fund manager thinks so, but he's quick to point out that value doesn't have to mean unloved stocks that are trading at bargain basement prices.
"We are not just buying cheap stocks and hoping for mean reversion. Those days are over, " said Ari Sass, president of M.D. Sass, a more than 50-year old firm founded by his father Martin that specializes in value stocks. "We are looking for strong business fundamentals and reasonable valuations."
Sass has been running the firm's concentrated value strategy since 2019, mainly for institutional clients. The portfolio typically holds no more than 25 stocks at a time and the strategy has been a hit so far, posting a net annualized return 16.8% since its inception, versus about 12.1% annually for its benchmark, the Russell 1000 Value index.
Now the firm is looking to replicate that success with a newly-launched exchange-traded fund version of the portfolio for retail investors: the M.D. Sass Concentrated Value ETF, which debuted in March.
Sass told Barron's that the current broadening of the market beyond artificial-intelligence and tech leaders will continue, which should bode well for value stocks. But, he says, that doesn't mean investors should abandon the AI trade entirely -- they just need to think of it differently.
"We're excited about value because we felt there had been so much attention on AI infrastructure," he said. "But we see AI enablers as exciting, physical assets companies and logistics. We still think this AI enablement phase is investable for the next few years."
So who could benefit? Williams Companies, an owner of natural gas pipelines, is one potential AI winner, per Sass. The stock is having a great year, surging more than 20% due largely to rising energy prices in the wake of the Iran war. But Sass said he's bullish on Williams for the long-term because he is optimistic that earnings could grow at a mid-teens rate annually, thanks to power demand from data centers.
On the logistics side, Sass said the fund also owns freight services company C.H. Robinson Worldwide, a recent Barron's stock pick . Sass argues that the use of AI should help boost employee productivity and also lead to better pricing. Sass thinks that one of the fund's other holdings, hazardous waste disposal firm Clean Harbors, could benefit for many of the same reasons.
There's even a tech opportunity for the tooth fairy. Sass owns shares of dental equipment and services firm Henry Schein. Sass points out that in addition to its core business, the company has a dental software joint venture with KKR-owned Internet Brands called Henry Schein One. Dentists use the platform for X-rays and other imaging, as well as scheduling. (KKR is also the largest shareholder in Schein.)
And Sass isn't even completely shunning the Magnificent Seven. One of the fund's more recent additions is Amazon, which Sass says he likes because of its dominant positions in both retail and cloud computing, such as Amazon Web Services.
Sass thinks that Amazon isn't getting enough credit for some of its own AI investments, most notably an $8 billion stake in Claude developer Anthropic, which is widely expected to go public later this year.
Amazon, like other Magnificent Seven stocks, is also a more attractive buy than it used to be. Sass said valuations do still matter -- and Amazon, trading at 22 times earnings estimates for 2027, compared to a 5-year average forward price-to-earnings ratio of 40 and a high of more than 70, is now a much better bargain.
Write to Paul R. La Monica at paul.lamonica@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 07, 2026 15:08 ET (19:08 GMT)
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