In his recent interview with Kiplinger’s, John Rogers explains why value is making a comeback, and why he believes we are only in the second innings of a long value cycle. Here’s an excerpt from the interview:
Value investing struggled for a long time but came back in a big way after last year’s bear market, and your funds have done very well. What accounts for value’s comeback?
We’ve been out in the wilderness for far too long. The valuation discrepancies between growth-oriented and value stocks were at historic highs, and that gap can’t persist for the long term. The second thing is that as inflation has started to come back, people understand it will cause higher interest rates. As interest rates rise, the future earnings of growth stocks become worth less and less.
Value stocks are often generating their cash in the here and now, and also are often cyclical, meaning that as the economy comes roaring back, value stocks are going to be able to generate a lot of earnings. And those earnings will be much more valuable in a higher-interest-rate environment than the earnings of growth stocks that will be coming years and years in the future.
How long does this new value cycle have to run?
It’s just getting going. I’d say we’re in only the second inning of a nine-inning game. I think the wind will be at our backs for at least a three- to four-year horizon. Our stocks are just so, so cheap relative to the broader market right now. It’ll take a long time for that gap to close.
You can read the entire interview here:
For all the latest news and podcasts, join our free newsletter here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple: