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"Value portfolios underperforming glamour by the widest margin ever"


perulv
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https://acquirersmultiple.com/2019/04/the-value-decile-of-portfolios-formed-on-p-cf-is-underperforming-the-glamour-decile-by-the-widest-margin-ever-going-back-to-1951-59/

 

I'm not sure about the method used to generate this results, but as far as I can tell, this is just one of many "value-investing is underperforming" statistics of late.

 

Not sure if this question is more naive or obvious, but isn't this just a natural consequence of valuations/multiples being (too) high? Or rather, that "sexy stocks" gets all the attention, and these get grossly overvalued? The last time this happened, it was leading up to the .com crash etc.

 

If and when multiples get back to normal (for whatever value of "normal"), value investing will again start to "work".

 

Not much higher order thinking on my part here, what am I missing?

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I wonder if it isn't just a case of people forgetting the dotcom bubble. I think there would be a tendency through time for glamour stocks to be popular because they always have better "stories"--until people get badly burned. Then the cycle starts over again after enough years have passed so that people forget. Or there is enough turnover in the investor base.

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As has been discussed a million times, I think these things just become excuses for certain "types" of value investors. I know several value investors, just amongst my circle of friends and contacts who are not having these issues. Carl Icahn is a value guy, amongst many of his strategies, and he had the fore site to see Netflix was mispriced. I think Bill Ackman is an example of a value investor who finds a few value traps, but typically employs a value strategy; look at what he is doing this year. Value doesn't work to me is a bullshit excuse/ quasi mea culpa from people who just aren't able to generate alpha. Some self proclaimed value investors I know would rather generate crap returns and keep their "value investor badge" than be flexible and generate respectable returns. It's crazy.

 

I mean who says just because you buy a low PE name in a troubled industry you are entitled to outsized returns? More often than not, when I find people claiming value doesnt work, it is because they have in their head this mold of what "value investing" is and refuse to deviate from it. As such they continue to find themselves in the same type of investments and plagued by the same type of problems. The biggest value investment payoff I've seen in the past half decade was Straight Path. How many "traditional" value models did that fit into? Successful value investing is often a product of understanding the times. Buying yesterdays textbook "value" investments has never really worked, but this past cycle people  seem to think it should be different.

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Yes, there is definitely the issue with value traps, but there are also a lot of indications of irrationality stocks, like blockchain stocks, weed stocks, perhaps money losing IPO‘s and in particular the stupendous selling in December that let’s me believe that many market participants are chasing quick bucks and aren’t really “rational” ( at least not the way I define rational ). It’s a bit of a “muppet show” out there.

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As has been discussed a million times, I think these things just become excuses for certain "types" of value investors. I know several value investors, just amongst my circle of friends and contacts who are not having these issues. Carl Icahn is a value guy, amongst many of his strategies, and he had the fore site to see Netflix was mispriced. I think Bill Ackman is an example of a value investor who finds a few value traps, but typically employs a value strategy; look at what he is doing this year. Value doesn't work to me is a bullshit excuse/ quasi mea culpa from people who just aren't able to generate alpha. Some self proclaimed value investors I know would rather generate crap returns and keep their "value investor badge" than be flexible and generate respectable returns. It's crazy.

 

I mean who says just because you buy a low PE name in a troubled industry you are entitled to outsized returns? More often than not, when I find people claiming value doesnt work, it is because they have in their head this mold of what "value investing" is and refuse to deviate from it. As such they continue to find themselves in the same type of investments and plagued by the same type of problems. The biggest value investment payoff I've seen in the past half decade was Straight Path. How many "traditional" value models did that fit into? Successful value investing is often a product of understanding the times. Buying yesterdays textbook "value" investments has never really worked, but this past cycle people  seem to think it should be different.

 

+1

This post redeems you for everything in the politics thread...almost  ;)

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