Don't be put off by today's market dip as the ASX stocks can still deliver gains of up to 30% this year, according to one expert.
The S&P/ASX 200 Index (Index:^AXJO) started the week with a 0.8% fall this morning but the weakness could be a buying opportunity.
Experts reckon ASX stocks are still among the best placed to outperform among other major asset classes.
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Best types of ASX stocks to own in 2021
But mind you, indiscriminate buying isn't the way to go. If you want to generate returns of between 15% and 30%, the analysts at Macquarie Group Ltd (ASX: MQG) believe you will need to be selective.
One group of ASX stocks that investors should be targeting are value shares. These stocks have provided a mouth-watering 18% return in the December quarter – their third best quarter since 1975!
Their golden run isn't over yet either, according to Macquarie. The broker highlights four reasons why.
ASX value stocks to shine this year
The first is because value stocks will benefit more from the roll-out of mass COVID-19 vaccinations. That makes sense as they have suffered more during the pandemic compared to growth stocks. Just look at the record-breaking Afterpay Ltd (ASX: APT) share price for one example.
Another reason is because value stocks are usually cyclical. This means their earnings are more impacted by changes in economic conditions. Given we are emerging from a global recession, value stocks should be more leveraged to the economic recovery.
The other two reasons are because most ASX value stocks generate more of the income within Australia and benefit more from rising bond yields.
Given the positive outlook for resource stocks, which are within the value camp, it's all the more reason to be overweight on this group.
Bond yields could spike higher
Speaking about rising bond yields, Macquarie thinks the key US 10-year government benchmark could double.
"We continue to believe yields are too low for a post pandemic world. That world is less than a year away," said the broker.
"US yields remain too low relative to the ISM, copper/gold ratio and the industrial to utilities stocks ratio. Based on these factors, we estimate the US 10-year yield should already be closer to 2.2% (up from 2%).
"Fear of central bank intervention is likely dulling the rise in yields, but given V-shaped recovery and US$2tr more fiscal stimulus, we see much higher yields by year end."
ASX value stocks to buy
Some of the ASX value stocks that Macquarie is urging you to buy include the Worley Ltd (ASX: WOR) share price, Crown Resorts Ltd (ASX: CWN) share price and Telstra Corporation Ltd (ASX: TLS) share price – just to name a few.
Others on its buy list that are positively impacted by rising bond yields are the Westpac Banking Corp (ASX: WBC) share price, Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price, Suncorp Group Ltd (ASX: SUN) share price and Computershare Ltd (ASX: CPU) share price.
