Expensive Growth-Stock Valuations Are ‘Done For,’ Says FL Putnam’s Hazen

(Bloomberg) -- Given the sustained inflation and wild market swings that kicked off the year, Ellen Hazen, portfolio manager at FL Putnam Investment Management, expects bloated growth valuations to deflate as investors reposition their allocations.

“We think that it's clear from data over the last several months that we're seeing the growth beneficiaries really begin to get the wind taken out of their sails,” Hazen said Monday in an interview on Bloomberg Television. “The very expensive growth names that had very high valuations, those are probably done for at least for a while, but there are plenty of less expensive names that you can buy.”

Due to the opportunity to snag desirable, “quality growth” names at cheaper prices, “volatility can be your friend in 2022 if you have a strong idea of what you want to buy, what your buy prices are, what your shopping list is,” according to Hazen, with February “likely to be a bouncy ride.”

The expectation of “mixed” earnings results should help support dip-buying when fluctuations occur, Hazen said. “We're looking at the high frequency data. The TSA checkpoints. The OpenTable reservations, and frankly, what companies are saying on their calls,” Hazen said. “At the same time, it looks like omicron might be fading after having peaked possibly -- but then again, we're looking at margins possibly declining throughout the year. So it's a very mixed bag.”

Hazen plans to use some of the rallies to cut back on the most expensive names, she says. Holding onto cash in the current inflationary environment could support buying the dips, as this strategy would give investors “dry powder to buy the really high quality names when they dip down,” Hazen added.