At the same time growth stocks have been storming ahead, with stocks like Facebook, Amazon, Netflix and Google leading the charge.
For Aram and Treussard, the correction in these and other stocks in the past few weeks suggest perhaps that the value winter might be moving into spring.
Nicolas Simar, manager for the Equity Value Strategy at NN Investment Partners is also positive that opportunity may be beginning to knock once more in the value sector.
“The gap in relative performance between the two styles, value and growth, has not been this large since 1999,” Simar points out.
Adding: “After the technology stock crisis we saw value stocks outperforming the market for several years. If we continue to see a distortion in valuations investors should expect to see a rotation in favour of value stocks, most likely happening this year.”
The cycnical among us might point out that value managers saying value stocks look likely to rebound, is perhaps not a particularly riveting story. But, what is perhaps a little more interesting is that, while all three are hopeful of a turn around, none is sure it will happen.
But, what they are all quick to highlight is the danger that now lurks at foot level. Indeed, after such a cold winter, it is understandable that many investors might well be getting rather cold feet.
But, as Aram and Treussard point out “The costs to investors of not eschewing performance chasing are very real, as documented by Hsu, Myers, and Whitby (2016), who found fund investors’ average dollar-weighted returns underperformed their funds’ buy-and-hold returns by 131 bps over the period 1991–2013.”
“This negative margin is the result of both buying and selling late, falling prey to chasing performance in lieu of investing in undervalued securities over the long term.”
The point is well made and one that crops up frequently within behavioural economics, jumping on a band wagon as it is roaring past, especially when the ground under foot is rocky, is a sure way to land up with your face in the dirt.
We may not yet be entering the “winter thaw” so hoped for by value investors, but if you have been sitting in your sun hat in the cold waiting for it to come, perhaps now is not the best time to rush out and buy a heater.
