One Quant Sees Value Rotation as Growth Bubbles Over

Value stocks are “poised to generate some of their best returns in a quarter-century,” says QMA CEO Andrew Dyson (QMA is the quantitative arm of PGIM). This according to a recent article in Barron’s. Noting the ongoing debate on Wall Street regarding whether the recent value rebound is a short-term shift or the beginning of a sustainable comeback, the article says that in a research report Dyson argued that recent earnings and earnings expectations for… Read More

O’Shaughnessy Insights on Value’s Terrible Performance

In a recent interview on the Bloomberg Markets Odd Lots podcast, O’Shaughnessy Asset Management (OSAM) co-CIO Chris Meredith talked about value’s long period of underperformance and shared some insights regarding the outlook and potential catalysts for a reversion. Here are some highlights from Meredith’s comments: Big technological discoveries have led to value’s underperformance. To gain perspective, OSAM looked at data going back to 1926 to see if there were any other periods with similar characteristics.… Read More

The Value Versus Growth Investing Debate Continues

Although the value strategy has fallen on hard times for the past 12 years causing many to question whether it still works, historical data shows that the value advantage exists. This according to an article in Forbes. The article offers the following chart by financial advisory firm Dimensional: The article states, “This chart illustrates that although the ten years from 2006-2015, 2007-2016, and 2008-2017 have been some of the worst decades for Value investing, the… Read More

When Will Value Investing Outperform Growth?

The current market cycle is testing the patience of value investors, according to an article in Barron’s. “Although value managers haven’t lost money, they have watched growth managers steadily pedal away,” the article reports, citing Morningstar data showing that over the past decade large-cap growth funds have returned an average of 15.6% annually, versus 13.2% for large-cap value. Historically, the article notes, value investing has lagged growth for long periods but eventually outperformed. This market… Read More

Valuation Metrics and Spreads Can Inform Future Returns

Research has found that valuation metrics and spreads can provide useful information with regard to future returns, according to an article in ETF.com by BAM Alliance research director Larry Swedroe. Metrics such as earnings yield or CAPE, the article says, “have information in terms of future returns—the higher the earnings yield, the higher the expected return; and the larger the spread in valuations between growth and value stocks, the larger the future value premium is… Read More

Is There Hope for Value Investing?

A recent article in The Wall Street Journal argues against giving up on value investing notwithstanding more than a decade of poor performance. It contends, however, that there’s more uncertainty about the strategy than there once was because: Value investors have never been “ground down for so long;” If investors understand value’s “great history,” then they are less likely to overreact to bad news, which would mean that value stocks would become less of a… Read More

Small and Passive is Better in Money Management

A recent S&P report offers deep-dive analysis into mutual fund performance over the past year versus various benchmarks, according to a Bloomberg article by columnist Barry Ritholtz. “Growth stocks are trouncing value,” Ritholtz writes. “Small caps are beating large. And more professional managers are beating their benchmarks now than a year earlier.” Here are some highlights of the findings: For investors in U.S. equity markets, small-cap stocks showed the strongest performance, gaining 20.5 percent, followed by… Read More

Rotation from Growth to Value Might Not Be Imminent

Although some investors are making the case that “stock market leadership should be passing from excellent-but-expensive growth stocks to cheaper value stocks more tied to a strong U.S. economy,” any lasting rebound of value is likely to require a “period of tougher overall market performance for a good while longer,” says a CNBC article. The article asserts that growth stocks represent too large a share of the market to “retreat quietly while value moves to the… Read More

Value Versus Growth in Emerging Markets

“Emerging markets are flashing warning signs, but don’t tell that to value stocks,” writes Bloomberg columnist Nir Kaissar, who adds, “To some investors’ surprise, value stocks are holding up better than growth.”   Theoretically, Kaissar explains, that’s not supposed to happen. “Value stocks, after all, are cheaper than growth for a reason: They represent companies, and sometimes whole sectors, that have fallen on hard times or are struggling to grow.” But in reality, he says,… Read More

Relative Performance of Growth vs. Value Stocks

A CFA Institute article poses the question: does the long run of growth stock outperformance suggest that value stocks must be due for an uptick? Although growth stocks have outperformed value since the end of the financial crisis, the article notes, the data could be misleading because of the “selective and short-term nature of the time frame.” If you look back to the bursting of the tech bubble in 2000, it argues, a different scenario… Read More