Why Value Investing Struggles in Manias | The Acquirer's Multiple®

During their recent episode, Taylor, Carlisle, and Jason Buck discussed Why Value Investing Struggles in Manias. Here’s an excerpt from the episode:

Tobias: The S&P500 value has had this record setting nosedive while everything else has been taking off. I don’t understand. Why can’t value participate in one of these manias? That’s what I want.

Jake: Show us on the doll where the market touched you.

[laughter]

Tobias: It’s been a long time since value worked. [unintelligible [00:20:15]

Jason: I’m curious how you guys think about a lot of this. Like, one, I saw– Ned did one of his great polls the other day. When it’s an up year for the stock market, what’s the average return in the up year? It had like 5% to 10%. 10% to 15%, like over 20%. Like, what would be your guys’ guess that to put you on the spot?

Tobias: The average return in an up year, so that’s taking away the down years.

Jake: It’s got to be like 15% or something.

Tobias: The average return is 9% across all years. Yeah, I wouldn’t say it’s fabulous. I’d say 15% or 16%, something like that.

Jason: I love right away though. You guys get it right away, is like the tyranny of averages, it’s actually 21%.

Tobias: Oh, wow. Okay.

Jason: Yeah, so to give you an idea. And then, we were talking about before, it was like, 2022 was a down 18% year, which got people nervous again, but it’s like, what have you done for the day? Everybody’s forgotten. Since the beginning of 2023, we’re up 58%, we’re up another 28% this year.

Jake: It’s never 9%. That’s the only answer. It’s not.

Jason: Exactly. It’s never the average. That’s why I bring that up. Related to that though, I think on value is like– I think we talked about before, like on another time or maybe privately, is like when you had those growth value rotations, I always wonder like, how much of those acute ones have been those pod shops just rotating out, and that’s why you see that quick cascade. And then, you guys are feeling my pain of the mean version of all, like that gets crushed back down and everybody’s like, “No, it’s finally the time. It’s finally the time.” Toby and all your cohort come out on X, Twitter saying, “it did.”

Tobias: I don’t celebrate. I don’t celebrate.

Jason: Yeah. I know you don’t. You’ve been in the game way too long. [Jake laughs] But that’s what happened– For that to come back, it doesn’t have to have a violent rotation. Bad has to happen for that to come back. So, it’s a weird thing, right?

Tobias: I think you get to work before we get to work.

Jason: Yeah. [laughs]

Tobias: When you throw a party, then I will come, because it’ll be the value parties just afterwards.

Jake: That is a good question though is, does value catch up or does everything else catch down?

Tobias: Yeah. Everything else catches down, I think

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

Apple Podcasts