Value Investors Riding a Hard Patch of Road [View article]
Mike, I don't think this is about an investment style being temporarily "out of fashion". Rather, the stocks that looked to you as though they were value stocks weren't really value stocks, because their earnings prospects were worse than you assumed.
The remarkable thing about value stocks is the way the market has swung in such a short time. Only recently, tons of capital was swashing around, causing private equity funds to buy companies and pushing other companies to increase their leverage at the cost of free cash flow. Now companies -- particularly financials -- are being forced to shore up their balance sheets by raising more capital.
We now know that the "easy money" wasn't really so "easy", as the credit pyramid was rotten at its base. And the earnings projections that were based on that easy money weren't real earnings.
Surely that's why your value stocks weren't really value stocks.
But is value investing out of style? Look at BRKA's stock price for an answer to that question.
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Value Investors Riding a Hard Patch of Road [View article]
The remarkable thing about value stocks is the way the market has swung in such a short time. Only recently, tons of capital was swashing around, causing private equity funds to buy companies and pushing other companies to increase their leverage at the cost of free cash flow. Now companies -- particularly financials -- are being forced to shore up their balance sheets by raising more capital.
We now know that the "easy money" wasn't really so "easy", as the credit pyramid was rotten at its base. And the earnings projections that were based on that easy money weren't real earnings.
Surely that's why your value stocks weren't really value stocks.
But is value investing out of style? Look at BRKA's stock price for an answer to that question.