In their latest Q1 2021 Market Commentary, Pzena Investsment Management provide four reasons why we’re entering into a powerful period of value outperformance. Here’s an excerpt from the commentary:
This represents the value approach in a nutshell: having the fundamental research and discipline to buy good businesses when their path of profitability is at its most uncertain typically pays off when earnings recover, and sentiment improves.
Returning to our original questions, we believe a number of factors point to the likely start of a long and enduring value cycle, including:
• the starting point for value is attractive, particularly relative to the overall market valuation
• the brevity of the current value rally to date compared to past value cycles,
• strong projected earnings growth for value stocks, and
• significant opportunity for re-rating as sentiment continues to improve.
This value rally began as in past cycles; sentiment improved dramatically over a relatively short period of time. The relatively modest outperformance of value compared to past value cycles, and the extreme depth of the previous anti-value cycle, all portend a strong recovery. Although these recoveries can be bumpy as uncertainties are resolved, the evidence indicates we are in the early stages of what may be a powerful period of value outperformance.
You can read the entire commentary here
Pzena: Q1 2021 Early Days In The Value Recovery
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