Value Investing Keeps You In Your Lane | The Acquirer's Multiple®

During their latest episode of the VALUE: After Hours Podcast, Weniger, Taylor, and Carlisle discuss Value Investing Keeps You In Your Lane. Here’s an excerpt from the episode:

Jake: Generally speaking, I’m in my early 40s. The greater part of my cognitive awareness, growth has beaten value. You start to wonder whether there will be a reversion to the mean at some point. Basically, depending on which index you’re looking at, you could start in 1993 with the S&P 500 growth beating value for the rest of that decade. Basically, only value working from, what, 2007. Other than that, you can get 6-month and 12-month windows. We had 2022 working for us in value. You say to yourself, if you could position a career in value and it does do [Tobias laughs] in the 50s and the 60s and the 70s and the 80s.

Jake: Yeah.

Jeff: It he might be sitting pretty. We’ll have to see if it comes to pass, maybe what we needed was to get away from this super easy silliness of a monetary regime. I think maybe we are away from that. We’ll see.

Tobias: Welcome to the pod. This is exactly what we talk every week. [laughs]

Jake: Oh, boy. Tinfoil hats. [laughs]

Tobias: JT and I, we joked that where– This is JT’s joke that I’m stealing, but he says that, “We’re momentum value guys. We got right on the momentum bus just as the–” [crosstalk]

Jake: Yeah, 2007, just because about ready to crash into the wall. [laughs]

Tobias: I read all the stuff in the late 1990s and then started watching it from 2000 through to 2007. I was like, “All right, this is pretty easy. You just buy the low multiple stuff and off you go.” Easy game.

Jake: Oh.

Tobias: It turns out it’s a bit tougher than that.

Jake: It works over the long-term, but how long is this long-term that you’re speaking of?

Tobias: Yeah. Well, the dividend stuff, when we look at the Siegel studies from 1957 to the present, that is accretive through time. What you found in the last quarter century or so is a lot of where it seems to be where you get your alpha is in these bear markets. Is it the nature of the bears?

Because the last one in 2022 wasn’t as ugly as the two prior bear markets, right? The dotcom one just takes the cake with the NASDAQ down 77%, just how much alpha was generated and things like small cap value just by generally avoiding that. I think the S&P 600 value was up in that bear market. I think you had to take out a microscope to see how much– [crosstalk]

Jake: [laughs]

Tobias: It doesn’t matter. Still counts.

Jake: Yeah.

Jeff: I talk to advisors for a living, and a lot of what it is– Think about it. I’m communicating to the advisor. The advisor is communicating to the end client. You deal with human beings, and a lot of it is just, the phone rings to chew out that advisor at the worst possible time, probably the time that you should be getting max overweight risk assets in general. I think a lot of the appeal of value is just keeping you in the course, staying you in your lane, so that how much stuff got taken out in 2022, down 80%, 90%, this unprofitable garbage. And so, people in value took their lumps, but nothing like what was happening in speculative biotech. Well, forget the meme stocks. That’s just ridiculousness. You get people that get absolutely burned. I remember at the turn of the century with dotcom, there was people– they basically didn’t get any part of that 2002 to 2007 bull market, because they were so rattled.

The other thing that we can’t maybe conceptualize, because I think you guys are roughly my age is, if you got clocked in the 1973, 1974 bear, you’re basically just telling the story. So, it’s difficult for me to conceptualize the psychology of the 1973, 1974 bear, because I wasn’t even alive yet, let alone alive and paying attention to that…

All I know is what happens from what I’ve read. Who wasn’t riding the 1982 to 2000 bull market, because they completely threw in the towel in overpriced Nifty 50, 30, 40, 50 times earnings stuff. I think that’s something you have to really, really be calm.

Tobias: it’s very true. I spoke to a lot of people post-2009, even by 2012, who were burned and looking for their opportunity to get back in the market. Now waiting for it to get cheap, which we know that it didn’t ever happen. So, I don’t know where they are now. At some point, I guess, they got back in 2021.

Jeff: Yeah.

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