There’s a “growing chorus on Wall Street for investors to look beyond the FANG momentum plays and more toward value stocks. In other words, investors are pulling a Warren Buffett.” This according to a recent article in CNN. The article cites sectors including banking, energy and health care as showing promise after “lagging growth stocks for the past half-decade” –adding that the S&P 500 Value Index is up approximately 40% over the last five years… Read More
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
Value stocks have underperformed growth “in all but one year,” but saw a shift last week. This according to a recent article in The Wall Street Journal. On Monday, September 9th, the article reports that value stocks “had one of their best days relative to growth shares since the financial crisis,” with the trend continuing into Tuesday the 10th. The article suggests that one possible factor is the rebound in Treasury yields, “as investors sold… Read More
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
Given today’s environment of rising interest rates and increased volatility, the market appears to be at a “crossroads,” and the value investing strategy could be poised to make a comeback, writes Wall Street Journal columnist Jason Zweig. He warns, however, “you would be foolhardy to believe anyone who claims to be able to predict precisely when it will happen.” Since 1962, value stocks have (on average) outperformed growth stocks by 6.1 percentage points during the… Read More
By Jack Forehand, CFA (@practicalquant) “Importantly, reversion to the mean in the investment business extends well beyond the results for mutual funds. It applies to classifications within the market (small capitalization versus large capitalization, or value versus growth), across asset classes (bonds versus stocks) and spans geographic boundaries (U.S. versus non-U.S.). There are few corners of the investment business where reversion to the mean does not hold sway.” – Michael Mauboussin Mean reversion is one of… Read More
Earlier this month, price spread between value and growth stocks was the largest it has been since 2000, writes Mark Hulbert in a recent MarketWatch article. Hulbert offers data from Columbia University finance professor Kent Daniel showing that the average large-cap value stock’s price-book ratio is “barely half that of the average among large-cap growth stocks. Among small-cap stocks, value is even cheaper relative to growth.” The only time value has been relatively cheaper, according… Read More
Robert (Bob) Rodriguez, former managing partner at asset-management firm FPA, shared insights and opinions regarding various market-related topics in an interview recently published in Advisor Perspectives. Here are some highlights: On mean reversion: Rodriguez emphasizes that a mean reversion will occur. He shares his belief that the “standards in the industry are being compromised; monetary policy has so totally distorted the capital markets. You are now into the eighth year of a period that is unprecedented… Read More
A smart-beta pioneer, Rob Arnott of Research Affiliates warns that these investment vehicles are in a bubble, says an article in last week’s Bloomberg. Smart-beta ETFs organize securities based on quantitative factors like volatility or “cheapness”, and the article explains that Arnott’s position is nothing new (he publicly battled with Cliff Asness on the topic a year ago). In fact, his firm’s website (Research Affiliates specializes in “cheap-stock” ETFs) offers investors a tool to gauge… Read More
Chuck Royce – 4 Decade Small Cap Manager Talks Value’s Ultimate Rebound and the Downside of Indexing
Chuck Royce, small cap stock picker and pioneer, recently sat down with Consuelo Mack of WealthTrack to discuss his thoughts on the recent slump of value vs. growth stocks as well as his firm’s process for sourcing new investment ideas. Royce, who has been in the investment management business since 1972, explains that small cap stocks can offer outsized long term returns, potentially with less volatility (assuming you are investing in value stocks) compared to… Read More
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