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DiMeo Schneider & Associates

Is Value Dead?

Investment Manager Research December 19, 2019

 

  • Over the past decade, value stocks have underperformed growth stocks substantially. Historically, the value premium has experienced prolonged periods of underperformance. We do not believe that value investing is broken.
  • Value stocks look historically cheap relative to both growth stocks and their own historical valuations.
  • Given the historical return pattern of the value premium, we recommend a balanced portfolio with exposure to both value and growth stocks.

Value investors have had a rough decade. The investment style has experienced one of the most prolonged periods of underperformance in recent memory. Value has consistently and significantly underperformed growth, leading investors to question whether value investing itself is dead. We do not believe that is the case and expect value investing to recover eventually. In fact, we caution investors against abandoning value in their portfolios.

For our discussion, we define the value premium as the excess return of the Russell 3000 Value Index over the Russell 3000 Growth Index.

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