RVP Posted August 11, 2020 Share Posted August 11, 2020 We all know the performance divergence between "growth" and "value" investing has been pretty wide for a while now, and that's only been exacerbated in 2020. There have been so many explanations for this, just to list a few: - Growth stocks have fundamentally and consistently blown past expectations, allowing them to work through initially "high" multiples - The internet has brought down many barriers to entry, allowing growth to scale faster and cheaper - Low interest rates benefit cash flows that may be far out in the future - Huge amounts of capital printed globally create a very robust and excessive funding environment for all sorts of ventures While all these explanations are sound, I don't see any reason why value investing can't benefit from the same trends. What's stopping your [boring business name here] from communicating like how [exciting startup business name here] does, and potentially also obtaining high multiples/ generous funding? I'm not talking about businesses in secular decline. I'm talking about the many businesses around you that are quietly chugging along just fine (and that value investors love to swarm around), but maybe not exhibiting hyper top-line growth (because they choose to grow profitably/ responsibly). If a startup can raise unfathomable amounts of capital at sky high valuations by promising super growth and future dominance, why can't an already dominant established player (whose lunch the startup may be eyeing) point to what they've built, while also planting seeds of exciting promise to come in the minds of potential investors? A lot of people attribute Buffett's early success to his incredible capital allocation (completely agree) and much easier environment (somewhat agree). But if memory serves me correctly, wasn't Buffett also a master at creating an incredible image for himself and his companies? Was value investing truly the greatest during Buffett's time because of the opportunity set, or was value investing's incredible stretch also aided by a young, hungry Buffett able to captivate the minds of so many (just like how Bezos/ Musk was able to do in more recent times)? Long story short: is the divergence between value and growth investing largely a symptom of the group of growth investors knowing how to tap the mainstream psyche way better than the current group of traditional value investors? Link to comment Share on other sites More sharing options...
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