Value investing has been a losing strategy in recent years, and value stocks are currently trading at the steepest discount in history. This according to a recent article in MarketWatch.
“There’s never been a worse time in history to be a value investor,” the article says, citing a recent comment by JP Morgan’s chief U.S. equity strategist, Dubravko Lakos-Bujas that “the relative price-to-book spread of the cheapest vs. the most expensive portfolio is at 9 times.”
The article notes that the performance differential between growth and value stocks has increased so much that even Warren Buffett’s Berkshire Hathaway has been buying shares of Amazon, “a quintessential growth stock, while Buffett regrets not having bought shares himself sooner.”
Lakos-Bujas contends that value investing is challenged by the rise in disruptive technologies, the continued move toward passive investing, slow global growth and “easy access to cheap capital globally” and says that the following developments are needed for value to make a sustained comeback:
- Regulatory changes that support competition;
- Less policy uncertainty;
- “A stabilization of active manager assets under management relative to passive investing;”
- “Either a reaccelerating of global growth or a full-blown recession that forces a repricing of growth stocks.”