In a recent article from global investment bank William Blair, they discuss the prospect of a return to normalcy leading to prolonged outperformance of value stocks going forward. Here’s an excerpt from the article:
While it has been challenging to be a value investor over the past 10 or more years, history has proved time and time again that it is dangerous to declare that value is dead.
Value Stocks Appear Inexpensive
We looked at valuations earlier in 2020, noting that value stocks are attractive based on a number of valuation metrics.
While this has changed since early November as value has begun outperforming growth, we still view value stocks as extremely inexpensive.
Value Isn’t Dead
Moreover, although current market trends have been in place for some time and seem unstoppable, the mindset that this is inevitable is often the case at market inflection points.
As the well-known investor Howard Stanley Marks once said: “Rule Number 1: Most things will prove to be cyclical. Rule Number 2: Some of the most exceptional opportunities for gains and loss come when other people forget Rule Number 1.”
As long-term investors, we believe that nothing lasts forever. Markets are cyclical. While it has been challenging to be a value investor over the past 10 or more years, history has proved time and time again that it is dangerous to declare that value is dead.
Is the Tide Turning?
The strong efficacy data from recent vaccine trials, renewed optimism for a near-term vaccine, and hopes for a return to normalcy fueled the recent outperformance of value over growth.
Although the transition to value will undoubtedly experience fits and starts, we believe sustained progress toward controlling the virus could be the catalyst for a further rotation into value stocks and lead to a period of prolonged outperformance of value stocks going forward.
You can read the entire article here:
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