In an article for The Wall Street Journal, columnist Mark Hulbert addresses what he describes as the “urgent” question of whether value investing or dead or merely suffering from an incorrect valuation method. Noting that value stocks—when defined by the traditional criterion of low price-to-book-value ratio—have fallen behind growth stocks for at least ten years, Hulbert cites growing concern as to whether they will come back as they have in the past. “That’s because,” he… Read More
A recent Bloomberg article highlights how old accounting rules and metrics are effectively “broken” and creating distortions that are making some company fundamentals look worse than they really are. The article quotes New York University finance professor Baruch Lev (whose 2017 paper sparked a debate about valuation methods): “You get numbers which are highly inflated for some companies and are understated for other companies. It doesn’t make any sense.” While some might see this as… Read More
Article Summary Warren Buffett reports Berkshire’s book value in Berkshire’s Annual Letter, but Buffett admits it is not perfect in determining the value of a firm. The price-to-book ratio is a popular factor, taking book value into consideration, but the effectiveness of this value factor has been fading recently. A prominent quantitative firm shows how share buybacks may be clouding price-to-book’s usefulness. The takeaway for investors is no factor is perfect. ———————- How does an… Read More