Notable investor says ‘the top of growth stocks is coming.’ Here is where he sees opportunity

It’s time to look at value stocks as growth names will have a difficult 2024, according to Ariel Investments’ John Rogers.

“I think the top of growth stocks is coming,” Rogers told CNBC’s Scott Wapner at the CNBC CFO Council Summit in Washington, D.C. “I really, really do.”

In fact, Rogers, chairman of Ariel Investments, expects the mega-cap tech stocks that outperformed this year are “priced for perfection,” and will likely face challenges heading into 2024.

Instead, the investor is bullish on value names as the gap in performance between growth and value widens. For example, the Russell 3000 Growth climbed roughly 34% this year, while the Russell 3000 Value is up by more than 2%.

“It’s one of the largest gaps in the history of recorded history, I guess, looking at those indexes,” Rogers said. “So that gives me a lot of confidence that small value is going to be the place to be, and that growth stocks are gonna have a very difficult time as we go into next year.”

To be sure, the value manager said growth stocks could continue to outperform in a falling interest rate environment. But he thinks the gap is so large between growth and value that there will be some big winners that could get overlooked by growth investors.

“I think there’s gonna be a real opportunity to pick up some of those orphans, really outperform as we go through ’24 and ’25, even with the tailwind that the growth stocks will have for the lower rates,” Rogers said.

The investor is bullish on stocks tied to the housing sector. Names include ADT, the home security company that is down 35% this year, or Mohawk Industries, the flooring company that’s down by 14%.

Rogers is also finding opportunity in the media sector that have been battered this year from concerns around advertising. He favors Paramount Global on the merit of its vast content library and portfolio of global brands, as well as a “mindset shift” among leadership there.

“We think the stock is worth over $40 a share,’ Rogers said. “We think there’s a real opportunity here.”

Paramount shares, which are down 14% this year, closed at $14.41 on Wednesday.

Elsewhere, the investor likes Madison Square Garden Entertainment. He also said his team is more “bullish than ever” on cruise stocks such as Royal Caribbean, which has been “our sort of anchor stock” given the consumer appetite for experiences.