So Value Investing Is Not Dead According To Goldmans

Johnny HopkinsValue Investing News Comments

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I had to smile when I read this article on Bloomberg titled, Goldman Sachs Mulls the Death of Value Investing.

The article states:

There isn’t much value in value investing these days.

The value-factor strategy of buying stocks with the lowest valuations and selling those with the highest, pioneered by Eugene Fama and Kenneth French and espoused by none other than Warren Buffett, isn’t working. Sticking to that approach has resulted in a cumulative loss of 15 percent over the past decade, according to a Goldman Sachs Group Inc. report.

But, if you read a little further down you’ll see:

“The fundamental backdrop for value returns has been especially unfriendly in recent years, but these conditions are unlikely to persist (and are already moderating),” a Goldman Sachs team led by equity strategist Ben Snider, wrote late yesterday in note to clients. “Nonetheless, the maturity of the current economic cycle suggests value returns will remain subdued in the near term.

And this:

Longer-term, the biggest factor working in value’s favor is the mirror image of mankind’s more enduring investing flaw: the tendency for biases and emotion to affect the asset allocation process.

“Among the possible explanations for the historical value effect, one major theme is the tendency of humans to overprice growth profiles and other stock attributes,” wrote Snider. “Even with the growth of assets devoted to quantitative and passive strategies, the presence of humans with different investment processes, risk tolerances, return targets, and psychological biases suggests that some degree of the value effect will persist.”

So, inspite of the headline it would appear that as long as humans are investing, value investing is not dead yet.

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