Is Value Investing Dead?

Reporting on a Goldman Sachs study published a few months ago, a recent article from the Wharton School addresses the underperformance of value compared to growth strategies. The Sachs report, it says, claims that “value investors are seeing the longest dry spell since the Great Depression, and future returns will likely be lower than the historical average.” But the firm also acknowledges that assessing whether value strategies are in trouble depends on how one views value. Specifically, the report says value strategies that choose stocks based on the ratio of enterprise value to EBITDA have performed better than those (like […]

This Bull Market Isn’t Happy

The current bull market’s backdrop of low volatility, high valuations, and tightening monetary policy are worrisome factors for some in the investment community, according to a recent article in The New York Times. Jim Paulsen, a market strategist for the Leuthold Group, describes the above factors as “scary,” adding that most questions he hears from clients and audiences at speaking engagements relate to what he believes will finally trigger a major correction. “No one ever asks me when the S&P is going to blow past 3,000,” says Paulsen. The article also cites comments by UBS chief investment officer Mark Haefele, […]

Market Could be Reflecting a “Buying Climax”

A Morgan Stanley strategist is seeing signs that the stock market’s current momentum could be waning, according to a recent article in The Wall Street Journal. According to equity strategist Michael Wilson, the article says, there is evidence of a “buying climax” that could result in a dip over the weeks ahead. “Technical sell signals,” says WSJ, “haven’t proved terribly useful to investors this year as the stock market has gone nowhere but up. Even so,” it adds, “Mr. Wilson points to muted post-earnings price performance and a popular reading on market momentum as signs that this rally could be […]

Insights on Increasing Concerns Regarding Quant Funds

A recent article in Institutional Investor recalls the “quant bloodbath of August 2007” and offers insights regarding if and how the increased popularity of these strategies and the associated rise in leverage may be increasing the risk of another “downfall.” The article offers details regarding the 2007 calamity, when “some of the biggest and smartest hedge funds in the world suddenly tumbled in tandem, as their algorithmic trading systems went hay wire.” The reckoning, the article says, led to a near 400-point drop in the Dow, but points out that the market recovered with “little overall effect.” Still, it says, […]

Hulbert: Value vs. Growth Valuation Spread Widest Since 2000

Earlier this month, price spread between value and growth stocks was the largest it has been since 2000, writes Mark Hulbert in a recent MarketWatch article. Hulbert offers data from Columbia University finance professor Kent Daniel showing that the average large-cap value stock’s price-book ratio is “barely half that of the average among large-cap growth stocks. Among small-cap stocks, value is even cheaper relative to growth.” The only time value has been relatively cheaper, according to Daniel, was when the internet bubble peaked. “Researchers have found,” writes Hulbert, “that value stocks tend to perform particularly well over the ensuing 15 […]