Next phase of bull market could see ANZ Bank outperform Afterpay

The next phase of the rally could see the Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price outrun the Afterlay Ltd (ASX: APT) share price. Here's why…

Don't let today's weakness on the S&P/ASX 200 Index (Index:^AXJO) fool you. The new bull market is here to stay although the next phase of the rally could see investors rotate to value stocks from growth.

It's growth stocks, including tech darlings like the Afterpay Ltd (ASX: APT) share price, that's stolen the lime light since our market hit its bear market bottom in March.

But we may soon see the ASX value shares outperform as conditions seem ripe for these laggards to outperform.

Why value can outperform growth

The recent steepening of the yield curve and expectations of a V-shape recovery favour these underachievers, according to Morgan Stanley.

While there's great debate over the shape of the ongoing economic recovery due to the COVID-19 crisis, the broker is more convinced than ever of a quicker rebound.

"Our global team's increased conviction in a sharper and shorter economic downturn has projected a V-shaped recovery in global markets," said the broker.

"Coupled with ongoing stimulus roll-out across regions and within country, [these are] providing the support for improving Value signalling and performance over the near and long term."

What are value stocks?

Value stocks are those that tend to trade at a discount to the market or to their historical valuations. Growth stocks are those that trade at a premium as investors are willing to pay up for companies best placed to increase their earnings coming out of the recession.

"Expensive valuations and better growth should push bond yields higher and the curve steeper – a 'normal' early cycle pattern, with the global rates team forecasting steeper yield curves into year-end for both the US and Australia," added Morgan Stanley.

Top stock picks for new year

The broker highlights 11 ASX value stocks that it believes are the best of the bunch. Financial stocks on its list include Australia and New Zealand Banking GrpLtd (ASX: ANZ), Bendigo and Adelaide Bank Ltd (ASX: BEN) and Link Administration Holdings Ltd (ASX: LNK).

In the industrials space, its top picks include cement supplier Adbri Ltd (ASX: ABC), building materials group Boral Limited (ASX: BLD), casino operator Crown Resorts Ltd (ASX: CWN), alcoholic drinks maker Treasury Wine Estates Ltd (ASX: TWE) and national carrier Qantas Airways Limited (ASX: QAN).

There're also one stock from property and materials each that Morgan Stanley favours. These are DEXUS Property Group (ASX: DXS), retailer Harvey Norman Holdings Limited (ASX: HVN) and BlueScope Steel Limited (ASX: BSL).

Looking for more buy ideas for FY21? The experts at the Motely Fool have picked their best ASX stocks to buy now.

Click on the link below to find out for free what these stocks are.

Brendon Lau owns shares of Australia & New Zealand Banking Group Limited and BlueScope Steel Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Crown Resorts Limited and Link Administration Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

BrenLau owns shares of Australia & New Zealand Banking Group Limited and BlueScope Steel Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Crown Resorts Limited and Link Administration Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Cheap Shares

Elderly couple using laptop at home while drinking a cup of coffee.
Cheap Shares

3 undervalued ASX shares I would buy today

Three shares where I think the current valuation leaves plenty of room for upside.

Read more »

Man working on a laptop from home.
Cheap Shares

WiseTech Global vs Netwealth: Which ASX tech stock could double from here?

WiseTech and Netwealth have both slumped—here’s which ASX tech stock I think is more likely to double from here.

Read more »

A mature aged man with grey hair and glasses holds a fan of Australian hundred dollar bills up against his mouth and looks skywards with his eyes as though he is thinking what he might do with the cash.
Cheap Shares

3 reasons why this ASX dividend share is an unmissable buy today

I think this ASX dividend share is a screaming buy right now.

Read more »

Couple using their digital tablet together.
Cheap Shares

3 dirt cheap ASX shares I think are undervalued today

These three shares start to look much cheaper when I look beyond the next financial year.

Read more »

Green stock market graph with a rising arrow symbolising a rising share price.
Cheap Shares

2 ASX shares tipped to grow up to 55% or more in the next 12 months

These stocks can deliver significant returns, according to experts.

Read more »

Green arrow going up on a stock market chart, symbolising a rising share price.
Cheap Shares

2 ASX shares tipped to grow 62% or more in the next 12 months

Experts are excited about the prospects of these stocks…

Read more »

Buy now written on a red key with a shopping trolley on an Apple keyboard.
Cheap Shares

2 ASX shares highly recommended to buy: Experts

Numerous experts rate these ASX shares as buys…

Read more »

A man reacts with surprise when her see a bargain price on his phone.
Cheap Shares

2 very cheap ASX shares near 52-week lows I'd buy today

These two cheap ASX shares look very good value to me.

Read more »