To say that today's market has forced large-cap growth investors to alter their expectations is, as you might expect, an understatement.

Truth is, growth investors are sounding a lot like value managers these days. They're on the lookout for undervalued stocks, taking a longer-term view on things and willing to wait for earnings momentum.

They're even sticking their heads into areas such as the financial and energy sectors, hoping to pluck out a hidden gem that will flourish in the post-recession economy. "You've got to be careful of what you consider to be growth," says Jerry Jordan, manager of the Jordan Opportunity Fund. "Growth in its most traditional sense, or what the Russell index would categorize as growth, may not be the best stocks to own."

The lines separating growth and value managers have in fact been getting blurrier and blurrier ever since the tech bubble burst in 2000. The current market crisis has stunted earnings and compressed P/E ratios to the point where large-cap growth and value fund managers are scouring much of the same landscape.

Jay Wong, co-portfolio manager of the Payden U.S. Growth Leaders Fund, points out that the Russell 1000 growth and value indexes, each with about 600 member companies, have a 200-company overlap. "Things have been changing dramatically over the past couple of years in terms of what's included in the indices," he says.

Fund managers say this is to be expected in today's market, where just about every industrial sector is "cheap" and P/E ratios of even some of the most growthy companies are below 20. "As you come through a period of poor economic growth and poor markets, you tend to find growth in defensive sectors," says Mark Bronzo, manager of the Security Global Investors Large-cap Growth Fund.

On the other hand, investors say, growth investing in today's environment offers higher risk premiums at a lower price-as long as you make prudent stock selections.

Growth strategies have outpaced value since the start of 2009, with the Russell 1000 Growth Index showing a year-to-date gain of 2.32% as of April 9, while the Russell 1000 Value Index suffered a 9.40% loss. On a broader level, results have been similar, with the Russell 3000 Growth index gaining 2.07% and the Russell 3000 Value Index losing 9.44%.

Last year, the Russell 1000 Growth Index finished with a loss of 38.44%, while value lost 36.85%. "I think it's better to be growth right now because I think everything is cheap, so you get a pass on valuation," says Alex Motola, manager of the Thornburg Core Growth Fund.

John Calamos, co-manager of the multi-cap Calamos Growth Fund, says he has been leaning toward large cap, particularly technology, since late 2006, when he was preparing for a recession. "We wanted to position the portfolio with stronger balance sheets and companies that could grow" in a tough economic environment, he says.

The plan didn't work in 2006, when the Russell 1000 Growth Index lagged the market with a 9.07% return. In 2007, however, Calamos' move paid off when that index topped the market with a return of 11.81%.

Now, in a financial environment Calamos says he has never seen in his 40 years in the investment business, the fund is still weighting in favor of large-cap growth. "At this point, it seems like growth is priced like value," he says.

In this shifted landscape, large-cap growth investors are frequently shunning sectors that are usually in favor, such as health care and consumer staples. Technology continues to draw interest, along with consumer cyclicals, particularly those U.S.-based companies with global marketing reach.

With an eye toward valuation, large growth managers are paying a lot of attention to the battered financial sector, where companies such as Charles Schwab, JP Morgan and Goldman Sachs-viewed by some as the most likely to thrive after the sector stabilizes-are appearing on growth holding lists. Raw materials and energy, once seen as core components of the value universe, are also drawing interest from large-cap growth investors looking to get returns on the global economic recovery-whenever that may be.

In a broad sense, growth investors say they are doing what they always do: searching for companies with exceptional growth potential. What have changed, it seems, are the time horizons and earnings expectations.

Jim Tierney, manager of the W.P. Stewart & Co. Growth Fund, says low leverage and positive cash flow are key metrics in the current environment. "We are looking at the highest quality companies-businesses built to perform in any environment," Tierney says.

Schwab is one of the fund's largest holdings. Tierney has steered clear of traditional financial holdings, such as banks and insurance companies. He views Schwab in a different light-as a dominant player that can grow earnings consistently through growth in sales volume.

He also feels increased savings rates will play into Schwab's hand, saying, "There has been a meaningful shift in how consumers save going forward."

Motola also feels Schwab will be one of the "survivors" of the financial meltdown, and he puts Goldman Sachs in that category as well. Both companies, he says, have placed themselves in a strong position without being overleveraged. Goldman Sachs, Motola says, continues to have a "pretty robust and valuable asset management business" that continues to be held in high regard by high-net-worth clients.

Bronzo says he started buying up financial stocks for his own fund in the fourth quarter of 2008. One of these was JP Morgan, which he feels strengthened itself with the acquisition of Bear Stearns without overleveraging itself. That, he says, puts the bank in a strong position as the sector recovers.

By comparison, he says, Bank of America's purchase of Merrill Lynch could end up being a burden to the bank. "With Bank of America, they had to go back and get more government money with a lot of restrictions," Bronzo says.

Raw materials and energy also represent unfamiliar territory for a lot of large-cap growth investors, yet the sector is now a key part of some growth strategies. "I think the raw material space is going to be the leader in earnings growth, albeit cyclical earnings growth," says Jordan.

Jordan feels this way despite being less than bullish on the global economy, which he doesn't believe will surpass 5% annual growth until at least 2011. But he does expect positive growth by the fourth quarter of 2009 and believes China, and later Europe, will be leading the way, upping the demand for materials and energy.

Jordan likes natural gas, which has been decimated on the downside, but which is in a good position to benefit from the U.S. focus on clean sources of energy. Caps on carbon emissions will also help the industry, he says.

"It's going to be a huge positive for natural gas and the U.S.," says Jordan, who has bought Devon Energy as a play in this sector. "It's the cleanest burning fuel we have."

The technology sector also represents fertile ground for some large-cap growth investors. The global reach of these companies, and their relatively low reliance on leverage, makes them stand out in today's uncertain environment, investors say.

"If you look at what's been doing well in the universe over the past year or so, it has really been those mega-cap names-the ones with steady earnings and strong balance sheets and healthy cash positions," says Wong of Payden U.S. Growth Leaders. "Most of them are in the tech sector."

IBM, Microsoft and Google are among the companies Wong's fund owns in this sector. All three companies provide steady earnings and diverse revenue sources, he says.

Google is also one of Calamos' largest holdings. The company earns 35% to 45% on invested capital, Calamos notes, adding that the company's growth potential isn't reflected in its price, which is at about $300 per share, down from a high of $500 last year.

"There is really no growth priced into a lot of these companies and in the market overall," he says. "People just extrapolate from right now into the future."

Wong says IBM is an example of a company the Payden fund wouldn't have held previously because its earnings outlook lagged those of other technology large caps. But now, he says, the company's lack of dependence on credit, its strong balance sheets and its diversified base of revenue make it a standout.

"Expectations have certainly been tempered," he says. "Much of our outlook has to do with how things look on a relative basis, and in this environment, if you are making money you are doing pretty well."