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 […]

Former FPA Manager – Bob Rodriguez – Shares Market Insights

Robert (Bob) Rodriguez, former managing partner at asset-management firm FPA, shared insights and opinions regarding various market-related topics in an interview recently published in Advisor Perspectives. Here are some highlights: On mean reversion:  Rodriguez emphasizes that a mean reversion will occur. He shares his belief that the “standards in the industry are being compromised; monetary policy has so totally distorted the capital markets. You are now into the eighth year of a period that is unprecedented in the likes of human history.” When asked, “What is driving the flow of mutual fund assets to passive strategies and what can or should […]

Rob Arnott Says Clock is Ticking on Smart Beta ETFs

A smart-beta pioneer, Rob Arnott of Research Affiliates warns that these investment vehicles are in a bubble, says an article in last week’s Bloomberg. Smart-beta ETFs organize securities based on quantitative factors like volatility or “cheapness”, and the article explains that Arnott’s position is nothing new (he publicly battled with Cliff Asness on the topic a year ago). In fact, his firm’s website (Research Affiliates specializes in “cheap-stock” ETFs) offers investors a tool to gauge which funds are “about to pop” and has created a line of indexes that adjust holdings based on variables such as valuation. According to the […]

Chuck Royce – 4 Decade Small Cap Manager Talks Value’s Ultimate Rebound and the Downside of Indexing

Chuck Royce, small cap stock picker and pioneer, recently sat down with Consuelo Mack of WealthTrack to discuss his thoughts on the recent slump of value vs. growth stocks as well as his firm’s process for sourcing new investment ideas. Royce, who has been in the investment management business since 1972, explains that small cap stocks can offer outsized long term returns, potentially with less volatility (assuming you are investing in value stocks) compared to other asset classes. Royce points out that value stocks have significantly underperformed growth stocks since early 2009. He theorizes this is largely due to firms […]

Diversification & Rock Bottom Valuations In the Third Pillar

Rob Arnott and Christopher Brightman of Research Affiliates recently discussed the allocation and performance of PIMCO All Asset Fund, which goes outside mainstream investments into what they describe as the Third Pillar. Arnott explains that a three-year bear market in Third Pillar investments has impacted investors’ outcomes and outlooks. Although the fund’s 7% loss from 2013 to 2015 is significantly better than the relevant benchmarks, it appears disappointing in light of the excellent performance of the First Pillar investments (i.e., mainstream stocks). “Even though most investors have far less invested in the Third Pillar than they invest in U.S. stocks, […]