In his recent interview with Consuelo Mack at WealthTrack Joel Greenblatt believes out of favor stocks will make a comeback saying:
Value has taken it on the chin over the last pile of years. It’s very interesting. I was looking back at the returns from Gotham Capital when I was running it. In 1998, we’re value investors, we were down 5%, market was up 28.6%. In ’99 we were down 5% again. That was our first two years. I started in ’85. So first two years we lost money. ’99 we were down 5%, market was up over 20%.
But in 2000, market was down 9%, we were up 114%. It’s not that we were idiots in ’98 and ’99 and all of a sudden we became geniuses in 2000, it’s just we finally got paid for all the hard work we were were doing. So, I think certain of the companies that are strong cashflow generating companies, that earn high returns on capital are out of favor right now because they’re not the flavor of the day, and some of those will come back.
You can watch the entire interview here:
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