Value Is Dead, Long Live Value

Value is still out there. Then as now there are many reasons why people won’t pay more at the present time for these stocks.

Seems a perfectly logical point since after that the gov't took control of the economy to fuel the war effort and dictated what was produced.

Also, how may Axis citizens saw high equity returns on their government bonds?

You ought to write a paper. Eugene Fama and Kenneth French have always been pretty upfront about not understanding why value outperforms.

So value investing doesn't mean great investing as much as several people wants us to believe. Every stock purchase is necessarily a speculation and there is no escape from that.

Lots of expansion within the realms they're in, though.

That’s not the “appearance” of growth, that seems the definition of growth! I also find your reference to “value revenue” somewhat confusing in the context of the usual growth/value classification of stocks.

Of course it can. Tripping twice over the same stone, etc.

Casinos are full of people playing games with negative expected return after all. And if the stock market is like gambling, it’s mostly on the side of “glamour” (as opposed to “boring”) stocks.

3) A rational actor with $1 to their name can't eliminate mispricings because it takes more money than that to move prices. Just because you aren't the first person to show up with knowledge of a mispricing doesn't mean that it has been completely eliminated by the time you get there - those genius hedgefund managers that no mortal can beat may not have enough capital to price every stock in the entire market at exactly what they think it should be.

>unless you are unable to access leverage

It's also worth mentioning that you have to pay for loans. "Organic" risk that comes from buying risky securities doesn't have interest, while "synthetic" risk does.

The 100% number is kind of more useful because it is the extra return on the decision to switch to Y back then.

Growth investing: buy whatever grows (earnings, revenue, even DAU are all flavors of growth investing). VC investing/startup investing is classic growth investing. PG on the topic: http://www.paulgraham.com/growth.html

Growth stocks are usually overpriced because of hype (looking through rose glasses), but can still be good, as the last 10 years shows.

A value company is the exact opposite, a stock with low ratios. As you might have suspected, value has been clobbered in the last 10 years, and a bunch of Chicago school economists are pissing their pants (Fama, French, etc).

V

"The foundation of value investing is the notion that cheaply priced stocks outperform pricier stocks in the long term."

"Value has several dimensions: the stock price as a multiple of company earnings, price as a multiple of dividends paid, price as a multiple of book value, and other such “ratio descriptors.”

The idea is that investors in aggregate are too optimistic about the stocks with positive outlook (everybody wants them, they get overvalued) and too pesimistic about the stocks with negative outlook (nobody wants them, they get undervalued). In principle, by investing on the stocks that are currently "cheap" (and undervalued in average) you get better returns as they won't do (in average) as bad as discounted by their stock price.

What I described above is the "value factor" (used to classify stocks in the value/growth axis). You can also do "value investing" looking at the fundamentals for a company and making sure that that particular company is undervalued. The factor approach is a systematic way to do that without a detailed analysis for each company: you try to identify the measures that allow you to capture undervalued stocks in average.

the way I think of this is that the price of any stock is related to the value of its expected future earnings. For value stocks, the bulk of that value is in the near term earnings. For growth, the value is in the long term earnings.

The reason that value stocks outperforms growth stocks in the long term is that people think the distress on value is worse than it is, and overestimate how good it will be for a growth stock.

The reason this is different for now, and in 1926-41, is that the growth stocks executed their business model. And value stocks didn’t revert back from distress.

Hope this helps, Chris

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&t...

Part of my growing up has been to realize that sometimes that person picking up the $20 can be yourself. That perfect competition is a theory, and that the world is in fact always far away from that theory. Businesses can survive despite large in-perfections.

Trying to apply efficient market thesis to justify ignoring fundamentals while implicitly claiming growth is not efficiently priced is itself silly. To assume growth is being under priced during an era when all the hype and public attention goes to growth companies is silly.

Boring companies with strong fundamentals and good prices are the vehicles which will preserve wealth and return it to shareholders year in year out. The silly pumps into silly growth companies is the exact behavior marking the end times of a boom cycle.