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 […]

Value Investors Must Accept Stretches of Underperformance

Even though value investors have seen lackluster performance over the past ten years, panelists at a last month’s Morningstar Investment Conference argue this isn’t an indication that this approach is “dead.” This according to an article in Financial Advisor. AQR’s Ronen Israel commented that a value strategy is good over the long term, but an investor will have to accept periods of underperformance. “Ten years,” he said, “isn’t enough time to judge it.” Jared Watts, a portfolio manager at Morningstar, said that while the value premium exists, it can elude investors, the article says. Both Israel and Watts argued that […]

Is the Value Premium Disappearing?

Nir Kaissar, founder of  Unison Advisors and columnist for Bloomberg Gadfly, asks the question — does the “value premium” still exist today given the bout of value stock underperformance vs. growth stocks. As Kaissar points out, by the mid-90s, research had emerged, driven by studies from the likes of Eugene Fama and Ken French, that value stocks trumped growth by a wide margin over the long term. The data was compelling, showing that “the cheapest 30 percent of U.S. stocks by price-to-book had returned 13.7 percent annually to investors from July 1926 to December 1995, whereas the most expensive 30 […]