In a recent MarketWatch article, contributor Mark Hulbert asserts that while most investors don’t like rising inflation, value investors are an exception.

Value investors, Hulbert argues, “are keenly aware that the value-over-growth premium tends to rise when inflation accelerates.” Which, after a decade of unexpectedly low inflation, is leaving them hopeful.

“Inflation is good for the value premium because growth stocks are those for which a disproportionate share of their valuation comes from future years’ earnings,” Hulbert writes, adding, “So as inflation heats up, the present value of their future earnings can decline precipitously. Value stocks are at the opposite end of the spectrum, with a relatively greater proportion of their valuation derived from current earnings. So, they are relatively immune to higher inflation.” Hulbert shares the following chart showing that, historically, value stocks have beaten growth stocks by the widest margin when inflation was higher.

Hulbert concludes, “Expected inflation in coming years falls in the category that’s associated with a value premium of 8%, in contrast to a premium that’s barely positive when inflation is between 0% and 2%. No wonder that value investors are getting excited.”