Goldman Sachs's ‘Quiet Outperformance Value Stock Strategy Report: Investment Strategy for the First Half of 2026

Goldman Sachs's ‘Quiet Outperformance Value Stock Strategy Report: Investment Strategy for the First Half of 2026

Report highlights

 

  • U.S. economic growth could accelerate to 3% or more in the first half of 2026

 

  • In a phase of accelerating growth, undervalued value stocks have a relative advantage over overvalued growth stocks

 

  • Goldman Sachs's undervalued stock indicator has already entered an outperformance zone

 

  • Not an explosive rally like in the past, but a gradual and sustained upward trend is expected

 

  • The market still talks about AI, but money is quietly moving into value stocks

 

 

Value stocks as defined by Goldman Sachs

 

  • Valuation metrics such as PER and PBR below the market average

 

  • A structure that is already generating profits

 

  • Stable cash flow and financial structure

 

  • Earnings leverage when the economy recovers

 

  • Companies that hold up on current earnings, not future expectations

 

 

Performance data behind it

 

  • Second half of 2025
    Goldman Sachs undervalued stock indicator return +15%

 

  • Since 1980
    Average 12-month return of +14% during periods of accelerating economic activity
    (about 2 times that of periods of economic slowdown or stagnation)

 

 

Why value stocks now

 

1) An environment of accelerating growth

 

  • Rebound in real economic growth

 

  • End of the period of soaring interest rates

 

  • Earnings, rather than multiple expansion, determine returns

 

  • → Premium on high-PER growth stocks shrinks
    → Undervalued stocks are re-rated

 

2) Market distortion caused by AI

 

  • Deepening concentration in AI and Big Tech

 

  • Valuation gap at a historic high

 

  • Traditional sectors relatively undervalued

 

 

Key value stock sectors

 

1. Financials (banks and insurance)

The first to reflect it in earnings when rates stabilize + the economy recovers

 

  • JPMorgan Chase (JPM)
  • Bank of America (BAC)
  • Goldman Sachs (GS)
  • Berkshire Hathaway (BRK.B)
  • Wells Fargo (WFC)
  • Citigroup (C)
  • Morgan Stanley (MS)

 

Insurance and asset management

  • BlackRock (BLK)
  • American International Group (AIG)
  • MetLife (MET)

 

ETF

  • VFH-ETF (broad financials, large insurance weighting)
  • KBE-ETF (focused on U.S. banks)
  • XLF-ETF (financial sector)
  • VTV-ETF (U.S. value stocks)

 

2. Energy (oil and gas)

Recovery in AI, data centers and manufacturing → rising power demand

 

  • Exxon Mobil (XOM)
  • Chevron (CVX)
  • ConocoPhillips (COP)
  • Occidental Petroleum (OXY)
  • EOG Resources (EOG)

 

Energy infrastructure (strong dividend orientation)

  • Kinder Morgan (KMI)

 

ETF

  • VDE-ETF (entire energy sector, strong value tilt)
  • XLE-ETF (major energy sector)

 

 

3. Healthcare (traditional pharma)

Defensive + structural demand from population aging

 

  • Johnson & Johnson (JNJ)
  • Pfizer (PFE)
  • Merck (MRK)
  • AbbVie (ABBV)

 

Healthcare services and devices

  • UnitedHealth Group (UNH)
  • Medtronic (MDT)

 

ETF

  • VHT-ETF (entire healthcare sector, relatively undervalued)
  • XLV-ETF (healthcare sector)

 

 

4. Consumer staples

Consumption unrelated to the economy, pricing power

 

  • Procter & Gamble (PG)
  • Coca-Cola (KO)
  • PepsiCo (PEP)
  • Philip Morris International (PM)
  • Altria Group (MO)

 

ETF

  • VDC-ETF (consumer staples, value tilt)
  • XLP-ETF (consumer staples)

 

 

5. Industrials and traditional manufacturing

A phase where earnings explode with a lag when the economy accelerates

 

  • Caterpillar (CAT)
  • 3M (MMM)
  • General Electric (GE)
  • Deere & Company (DE)
  • Honeywell (HON)

 

ETF

  • VIS-ETF (U.S. industrials, value tilt)
  • XLI-ETF (industrials sector)

 

6. Telecom and utilities (truly ‘quiet money’)

Zero buzz, strongest cash flow.

 

  • AT&T (T)
  • Verizon (VZ)
  • Utilities
  • NextEra Energy (NEE)
  • Duke Energy (DUK)

 

ETF

  • XLU-ETF (utilities)
  • VPU-ETF (dividend-oriented utilities)

 

 

Goldman Sachs's warning

This value stock rally
is unlikely to take the same form as the +35% surge of 2021 to early 2022

Some AI-related high-growth sectors still maintain strong momentum

Rather than excluding growth stocks entirely,
a combined growth + value strategy is realistic

 

 

The key to the market in the first half of 2026 is
not speed but sustainability

Value stocks are quiet, but

they are backed by earnings

and are assets that rise slowly, step by step, along with the economy

One-line conclusion
AI is a story; value stocks are cash