The Widening Growth/Value Gap

In a recent Financial Times Money Show podcast, editor Claer Barrett discusses the recent market rally, government stimulus, and the relationship between value and growth stock valuations with FT columnist Merryn Somerset Webb. Here are key takeaways from Ms. Somerset Webb’s comments: Investors should view the rally with caution: Those that had concerns about the market and valuation levels before the pandemic hit should be “particularly concerned about the areas that are very expensive,” with… Read More

Rob Arnott is All in On Value

In a recent interview with CityWire, Research Affiliates chairman and founder Rob Arnott explains why value investing has suffered from the coronavirus pandemic but says it isn’t time to run away from value stocks. “We’re in one of the few industries in the global macroeconomy where customers hate a bargain,” quips Arnott, describing how depressed stock prices are not drawing investors, adding, “That’s the nature of the investing world.” Arnott explains that value stocks have… Read More

Why Value Has Been Lagging Growth

Amidst continued speculation that the value strategy is dead, asset manager Dimensional Fund Advisors argued that its growth performance that has been abnormally high relative to historical levels. This according to a recent article in Institutional Investor. A research report by Dimensional contends that, over the past decade, value performance “has been more or less in line with its historical average: 12.9 percent versus 12.7 percent. We can see value has performed similarly to how… Read More

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