While perusing Barron's on Saturday, I wondered if I had picked up a publication entitled, "Hope for Broken-hearted Value Investors." Note the articles, most of which should be behind a paywall:
- Move Over, Facebook and Netflix: Value Investing Is Rebounding
- Taking Advantage of Underpriced Stocks
- The Best Value Mutual Funds
- An American Century Value Investor Goes Looking for Quality
- And a few more like it…
Two things: First, this could just be a bounce off of the recent run-up in oil prices. Lots of value investors are hiding there, and I think they are early. Also, many people are hoping for a bounce in global growth, but there isn't a lot to commend that in the short run.
Second, there are too many people hoping for this. Lots of money is flowing out of value strategies, and the stocks are cheap. I've lost several clients, and may lose some more.
Oddly, it is the losing of clients that gives me the most hope. You need people to leave a strategy when it is down and out for the strategy to bottom. These are the sorts of people that create the difference between time-weighted and dollar-weighted returns. They will move to strategies that have outperformed, so they can lose money again.
As for me, I'm not changing. I like my stocks more than ever, and I think I've got good ideas throughout the portfolio. But I am not depending on value investing as a strategy turning upward now. I think we still need and will get more pain before it turns.