Bridgeway: Small-Value Stocks Still Have Room To Run

Johnny HopkinsBridgeway CapitalLeave a Comment

In their latest Perspectives, Bridgeway Capital say, “after the tremendous run of large and growth stocks over the last decade, we believe small-value stocks still have room to run.” Here’s an excerpt from the article:

After a dramatic four-plus years of underperformance, small-cap value stocks came roaring back over the last year through March 31, 2021. Is this “run” of small-value stocks over, or is there more to go?

Bridgeway’s analysis indicates that the size factor (less so the value factor) has indeed made up tremendous ground over the last year. However, based on our analysis of relative book-to-market valuations through the end of March, prices of small-value stocks would have to rise another 43% relative to the broader US market to get back to median historical levels.

At Bridgeway, we don’t believe in timing the market, but we do believe in establishing and holding appropriate factor exposures as a long-term investing best practice. After the tremendous run of large and growth stocks over the last decade, we believe small-value stocks still have room to run, and investors whose portfolios have become underweight to this segment of the market should add to their allocation.

You can find the entire article here:

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