The Case for Value Stocks

By Jack Forehand, CFA (@practicalquant) —  Value stocks have lost their mojo. After an extended period from 2000 to 2007 where they outperformed growth stocks by a wide margin, they are now in one of their longest periods of underperformance ever. The below chart shows the iShares Core US Growth ETF against the iShares Core US Value ETF from 2007 to the present. As you can see, growth has outperformed value by almost 3 to… Read More

Most Read Posts on Validea’s Guru Investor

Below are links to our most popular posts for this week on Validea’s Guru Investor blog. [1]The Case for Value Stocks [2] Jeremy Grantham Says Market Has More Upside [3] Hedge Fund Titan Ray Dalio Says American Debt Likely to be a Drag on Growth [4] Investors Betting on Record Stock Market Run ——- Photo: Copyright: arcady31 / 123RF Stock Photo  

How Investors Can Survive a Market Bubble

While stocks are not in bubble territory, according to a recent article in The Wall Street Journal, “there are increasing signs of euphoria, and it is plausible that a true blowout end to the bull market could be on the way soon.” The article discusses current conditions and trends, and offers four options that investors can consider in attempting to time an exit from a “frothy” market: Get out early—”As the bubble builds, sell into… Read More

Morningstar Survey Results for Long-Term Stock and Bond Returns

A recent Morningstar article outlined the intermediate-term (10-year) market return assumptions of a group of industry leaders that responded to a recent survey: John Bogle, founder of Vanguard: 4% stock return, 3% bond return over the next 10 years. Bogle asserts that “future returns from the major asset classes will be muted. GMO: -4.4% returns for U.S. large caps over next seven years; 2% real returns for emerging market equities. The firm, the article points… Read More

Rob Arnott Steers Clear of FAANG Stocks

A recent Forbes article offers a recap of an interview with Research Affiliates’ founder and CEO Rob Arnott, including his insights regarding the market and “smart beta” investing. Here are some highlights: Research Affiliates’ index investing strategy weights companies by the size of their businesses rather than market capitalization (share price). Arnott argues, “Why would you want to have a bigger investment in a company just because it got more expensive? That makes no sense.”… Read More

Investors Betting on Record Stock Market Run

In two months, the stock market’s recovery from the financial crisis will reach nine years, according to a recent CNBC article. “To be aggressively optimistic on this stock market now is to bet that it can challenge the greatest bull market of all time—the 13-year run that ended in early 2000.” Elevated valuations are also showing that U.S. stocks are more richly valued than in any period except the late 1990’s, the article says, and… Read More

The Stock Market Party Must Eventually End

The market’s continued gains may “not be such good news for investors,” according to a recent article in The New York Times. The article offers insights of market historian and InvesTech Research president James Stack: “If there are any certainties, one will be that this party will eventually come to an end. A correction would be healthy. The longer we go without one, the greater the risk this will end badly.” The article points out… Read More

Small-Cap Ratings Often Fall Short

The correlation between analyst ratings of small-cap stocks and the subsequent returns of those stocks showed no statistical significance, according to analysis conducted by Barron’s. “In most cases,” the article argues, “you could have done just as well by flipping a coin.” The analysis, which used FactSet data, compiled all buy, sell, and hold recommendations outstanding as of January 1st for each of the past five years, then compared the average rating to shareholder returns… Read More

Hedge Fund Titan Ray Dalio Says American Debt Likely to be a Drag on Growth

Although Bridgewater Associates founder Ray Dalio doesn’t see a market crisis in the near term, he believes that Americans have accumulated more debt than their assets and income can support. This according to a recent article in The Wall Street Journal. This will “drag” on growth and markets, says Dalio, leaving the economy “acutely vulnerable” to higher interest rates, arguing that the Fed is now being forced to balance containing inflation through rate hikes with… Read More

Jeremy Grantham Says Market Has More Upside

In a recent essay, GMO co-founder and chief investment strategist Jeremy Grantham offered insights on the market by “looking very hard at all the great bubbles of the past,” and “searching for useful guides to the future.” His commentary was excerpted in Barron’s. While Grantham agrees that today’s market is priced “exceptionally high,” he says the typical examples of past bubbles are “not just characterized by higher-than-average prices.” Indicators of “extremes of euphoria” he says,… Read More