As a follow-up to our “Crowded Trade” blog post from last week, we offer another potential market top forecast. In a recent article on Bloomberg Markets by Luke Kawa, a Goldman Sachs team led by equity strategist Ben Snider, wrote a note to clients, stating, “Nonetheless, the maturity of the current economic cycle suggests value returns will remain subdued in the near term.”
The article highlighted the fact that Value investing has dramatically underperformed the S&P 500 during the last decade, and they attribute much of the reason to accomodative monetary policy favoring the FANG stocks. The question becomes, is Value investing truly dead as an investment style?
I sometimes feel as if I’m participating in a remake of the movie “Groundhog Day”. Having spent 36 years in the investment industry, I have witnessed many equity market cycles, and most times the bottom of a cycle is accompanied by proclamations related to that particular style of management being dead.
As we mentioned the other day, great companies don’t always make for great stocks because valuations do ultimately matter. Well, that can also be said about finding diamonds in the rough that appear to be poor businesses that offer potentially great value. It remains critically important to note that these cycles exist, and that it is much better to buy closer to the bottom and sell closer to the top, if possible!
Without sticking my neck out too far, I am fairly comfortable proclaiming that Value investing is not dead!