Excess Returns, Ep. 22: A Look at the Impact of COVID-19 on Value Investing

The process of using past fundamentals to try to predict future prices has been in place for a very long time, and there is substantial academic evidence to support it. One of the major challenges of it; however, is what happens when we are confronted with breaking points that are so large that a company’s past results prior to it occurring might tell us very little about what it will look like after. The current situation with COVID-19 might be the most significant situation of this type that any of us will experience in our investing lifetimes.

In this episode, we look at the impact of COVID-19 on value investing and offer some practical tips for building a value portfolio during a time like this.

We discuss:

  • Why cash is so important at a time like this
  • The dangers of overconcentrating in stocks and industries
  • How to value stocks when most companies will see significant earnings declines
  • Why negative screens take on an added importance during times of crisis

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