Gotham Asset Management’s Joel Greenblatt sees better opportunities for value investing on the horizon, based on a recent study by his firm. This according to an article in Institutional Investor. Using data from the past 30 years, Gotham valued all the stocks in the S&P 500 without adjusting for interest rate changes. The analysis showed that the market has been cheaper for investors about 88 percent of the time and, at similar valuation levels, market… Read More
In a recent interview with Barron’s, veteran stock picker Chuck Royce said that active management and value investing will survive, and small-caps are headed for a rebound. Here are highlights from the interview: Regarding the outperformance of large-caps in the past decade, which Royce characterizes as a “megacap bubble”, he anticipates “growing investor disenchantment” with large companies that are generating persistent losses, “which could be a catalyst for increased interest in the opposite—small-caps with proven… Read More
Picking the right value metric can be one of the biggest challenges of quantitative value investing. Although the Price/Book is the most widely used value metric, its struggles in recent years and valid concerns that have been raised about its viability in a world dominated by intangible assets have led many to question whether it still works. But the other widely used value metrics also have their own problems. In this week’s episode, we discuss… Read More
In an interview with Morningstar last November, International Value Advisors CIO and portfolio manager Charles de Vaulx outlines what he sees as headwinds for value investing. De Vaulx cites the following major headwinds for value investing: Interest rates: One of the most powerful headwinds, says de Vaulx, has been what he described as “ultra-low” interest rates that have been distorted by central banks and have “resulted in misallocation of capital in some value-friendly industries.” When… Read More
Confirmation bias is one of the biggest problems in investing. We all have a set of core beliefs, and we tend to surround ourselves with people who also believe them and focus on information that validates them. That can be dangerous, though, because it can blind you to valid arguments that contradict your own. In this episode, we challenge our belief in value investing and discuss some of the reasons why we could be wrong.… Read More
A recent Barron’s article shares insights from an interview with the Oakmark Select fund manager and value investor Bill Nygren regarding “the perils of value investing.” Here are highlights from the interview: Nygren attributed his longevity (36 years at Oakmark) to learning the importance of sharing his investment philosophy with colleagues. He explained that his training was based “strongly in business valuation, where you try to identify what a business is worth, and you think… Read More
We are happy to announce the release of our new podcast Excess Returns. On each episode, Validea partners Justin Carbonneau and Jack Forehand will talk about a wide range of investing topics with the goal of helping those who watch and listen become better long term investors, all in twenty minutes or less per episode. In our first episode, we talk about the mechanics of value investing and the many decisions that go into constructing… Read More
There’s a “growing chorus on Wall Street for investors to look beyond the FANG momentum plays and more toward value stocks. In other words, investors are pulling a Warren Buffett.” This according to a recent article in CNN. The article cites sectors including banking, energy and health care as showing promise after “lagging growth stocks for the past half-decade” –adding that the S&P 500 Value Index is up approximately 40% over the last five years… Read More
In a recent interview with The Wall Street Journal, Joel Greenblatt—described as “maybe the best-known value investor this side of Warren Buffett,” shared insights on the subject of value investing and the strategy’s near decade-long struggle with underperformance. Here are some highlights: · On his definition of value investing, Greenblatt clarifies, “It does not mean low price-to-book-value, low price-to-sales ratio investing, which is how most people define it.” If you think about stocks as shares of… Read More
By Justin Carbonneau (@jjcarbonneau)—-Interested in chatting with Justin – let him know.—- Suppose you wanted to find the value stocks in today’s market using common value ratios. Which would you use and why? Would you lean more heavily on the price-to-book ratio, which is largely used in academic testing and originates out of the world of Graham & Dodd? Or would you rather use something like the price-to-earnings ratio, which is more common and uses… Read More