According to Savita Subramanian, a stock and algo strategist at Bank of America's global research department, after falling significantly behind growth-oriented peers this year, value stocks are offering some of the most attractive valuations in U.S. equity markets. #2024 Macro Outlook# #AI Hype#

"These companies are currently overlooked and trading at very low prices," Subramanian told attendees at Morningstar's annual investment conference. "But they offer an opportunity to buy quality stocks at a discount."

In her keynote address, she said that in the overall favorable conditions for stock markets and the economic environment, large cap.value stocks are "the sector I have the most confidence in."

Value stocks - typically cheaper company stocks in terms of book value or P/E ratio - have underperformed in the market this year, which has been dominated by the violent rise of large tech stocks such as Nvidia. The S&P 500 value index has risen about 4.5% so far this year, while the S&P 500 growth index has risen more than 23.5%.

Subramanian believes that the poor performance of value stocks has made their pricing relatively more attractive compared to growth stocks. According to LSEG Datastream, the forward P/E ratio of the S&P 500 growth index is 28.3 times, while the forward P/E ratio of the S&P 500 value index is 15.8 times.

One of the sectors favored by Subramanian is energy, where she said companies have become more disciplined in terms of output despite high commodity prices.

Subramanian also believes that the dividend payments provided by value stocks, which are typically higher than those of growth stocks, will make them attractive to investors. She expects dividend payout ratios to increase significantly over the next decade.