The Case For Value Stocks

By Jack Forehand, CFA One of the biggest lessons I have learned in my investing career is the importance of being able to argue the other side of something I strongly believe in. Confirmation bias is one of the biggest enemies of successful investing. It leads us to seek out information that agrees with our position. It causes us to follow people who tell us what we want to hear. It makes us avoid those… Read More

Rob Arnott is All in On Value

In a recent interview with CityWire, Research Affiliates chairman and founder Rob Arnott explains why value investing has suffered from the coronavirus pandemic but says it isn’t time to run away from value stocks. “We’re in one of the few industries in the global macroeconomy where customers hate a bargain,” quips Arnott, describing how depressed stock prices are not drawing investors, adding, “That’s the nature of the investing world.” Arnott explains that value stocks have… Read More

Value Investors, Don’t Expect a “Massive” Comeback

A recent paper published by the Man Group’s quantitative investment unit (Man Numeric) suggests that while the value strategy may not be permanently broken, investors should not expect an impressive comeback. This according to an article in Institutional Investor. “While there is no debate over the recent difficulties of value, and it is true that historically value has recovered strongly following periods of poor performance, that is a fairly weak intellectual argument,” writes Daniel Taylor… Read More

Seth Klarman Defends Value Investing

In a letter to clients, billionaire hedge fund manager Seth Klarman suggested that value investing will have its day in the sun once again. This according to a recent CNBC article. The Baupost CEO said several factors, including the proliferation of passive investing, have “created market mispricings that will soon lead to a pay off for the long underperforming strategy.” “As funds continue to flow into the hands of indexers, stocks not included in prominent… Read More

Ang Warns About Value

BlackRock’s managing director Andrew Ang is urging investors to be cautious in how they return to the long-underperforming value factor, according to a recent article in Institutional Investor. Although several big-name factor investors argue it’s time for investors to buy inexpensive value stocks—including AQR’s Cliff Asness and Research Affiliates founder Rob Arnott—Ang warns to exercise caution, suggesting that some might be tempted to “buy into the value factor simply because it appears inexpensive,” the article… Read More

Arnott: Market Shift Coming in 2020

Research Affiliates chairman Rob Arnott sees a major market shift on the horizon that could present a “spectacular “opportunity for value investors. This according to an article in CNBC. In an interview with Trading Nation, Arnott said, “We’ve seen more and more people give up on the idea of value investing, which we think is a little strange because we’re in the only major industry in the global macro economy where people hate bargains,” adding,… Read More

Should Value Investors Abandon the Strategy Now?

A recent paper by RAFI Indices argues that now is the time to increase allocations to value strategies –specifically, to the RAFI strategy, a value-tilted approach that focuses on disciplined rebalancing out of trendy, popular, and most expensive securities, and into securities whose prices have fallen and become undervalued. The paper, co-authored by Research Affiliate’s Rob Arnott, offers an in-depth look at the origins of value investing and its historical performance data. Here are some highlights:… Read More

The Danger of Overscrutinizing Out of Favor Investment Metrics

By Jack Forehand (@practicalquant) —   No investing factor has been maligned more than the Price/Book in recent years. In a period where value in general has performed very poorly, the Price/Book has struggled more than any of the other common value factors. When you couple that with the fact that the Price/Book’s failure to account for intangible assets makes its validity questionable in a world where more than 80% of assets are intangible, you have a… Read More

JPMorgan: Value Rotation Will Continue

Marko Kolanovic, JPMorgan’s global head of macro quant and derivatives strategy, says the “massive rotation into value stocks that rocked investors two months ago is going to extend to 2020,” describing it as a “once in a decade” trade. This according to a recent CNBC article. Kolanovic reportedly believes the rotation has more life due to an improving macro environment, writing in a recent note to clients: “Since September, we had further easing of monetary… Read More

Value Stocks Not Left for Dead Yet

Although the value strategy has been “in crisis” of late, a recent Bloomberg article suggests, “let’s not take the panic too far.” It says, “Yes, on a relative basis, the buy-cheap philosophy has been a loser, particularly to more voguish quant strategies when deployed in a hedge fund long-short portfolio. At the same time, very few things can really be said to have done badly in the current bull market. AT least on an absolute… Read More