Those Calling for the Death of Value Investing Are Wrong

Apr. 08, 2009 2:57 AM ETZD, BRK.A, BRK.B, SPY5 Comments
Jonas Elmerraji profile picture
Jonas Elmerraji

“The Death of Buy and Hold” flashes on the screen on CNBC…

Normally, seeing editorialized headlines touting the end for value investors on financial TV wouldn’t be a shock – but that latest television segment is just the last nail in the coffin for an investing strategy that’s been taking a lot of heat in the past year.

“I just don’t think that [buy and hold] is a wealth building strategy any longer,” says a major financial blogger. “These days, value as an investing strategy is dead,” says another.

Clearly buy and hold bashing is the cool thing to do in 2009. But is it true? Are buy and hold and value investors dinosaurs who’ll be relegated to losses this year? Not a chance.

The anti-value crowd’s favorite argument is that value investing poster boys like Bill Miller and Warren Buffett had horrendous returns in 2008, so their strategies clearly can’t work that well.

And just look at the S&P 500 – if you invested money in the market 12 years ago, you’d be sitting on 0% returns right now. So much for long-term investing meaning gains.

But thankfully for investors, the value naysayers are dead wrong when it comes to the virtues of value investing. Before they run a buy and hold obituary, there are some things that we should clear up.

Where Were the Value Investors in 2007?

To say that value didn’t work for investors in 2008 means that investors had to take a value approach in the first place in 2007 and before. Just how valuable were stocks before the bottom fell out of the market? Here’s a look at historical P/Es of the S&P 500 every quarter since 1936:

The consensus is generally that the average P/E of the S&P 500 is around 10; it’s not. Since

This article was written by

Jonas Elmerraji profile picture

Recommended For You

Comments (5)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.