In the first of a three-part series for The Washington Post, Bloomberg columnist Nir Kaissar discusses the recent, abysmal performance of value investing strategies.

Here are some takeaways from the article:

• Since 2007, value has suffered a “devastating drought, and the last three years ending in September were an utter disaster,” with value trailing growth by a “stunning 8.4 percentage points a year.” This is in sharp contrast to the prior 80 years when, according to data from Dartmouth professor Ken French, value outpaced growth by 4.5 percentage points a year (including dividends).
• “And that’s not the worst part,” Kaissar writes, noting that for the three years between September 2017 and 2020, value investors were leveled a “ruthless gut punch,” lagging growth by a “record 24 percentage points,” the worst period for value in a century.
• While some of value’s past performance “may be attributed to investors’ habit of overlooking sleepy bargains in pursuit of pricey highfliers (Tesla anyone?), value investors have almost surely been paid to bear more risk. And if they can no longer expect to be compensated, what does that say about the risk-reward tradeoff investors rely on in other contexts? Is it still safe to expect, for instance, that stocks will beat bonds?”

“It’s no wonder value investors are frantic for answers,” Kaissar concludes, adding, “and there’s no shortage of smart-sounding explanations for value’s disappearance. But how plausible are they? And more important, will value ever return?” These are questions he’ll explore in the next two installments of the series.