As 2017 nears its end, US value stocks are mired in their longest stretch of underperformance versus growth stocks since the Great Depression, held back by low interest rates and easy monetary policy. In my view, the top issue that will help determine whether that trend continues or abates is US tax reform.
CEOs and boards are focusing on the wrong metrics. But if they change their ways, the opportunity could be great.
Being a deep value investor can be a lonely endeavor. We crunch the numbers to find unloved companies that we believe have bright futures ahead — years ahead, in many cases. But if you wait long enough, market sentiment can shift and your previously unloved holdings may suddenly appear on everyone’s radar screen.
The Russell 1000 Value Index has generally underperformed the Russell 1000 Growth Index for the past decade, on average. Naturally, this leads to questions about when the tide may turn back in favor of value. Below, I highlight two of the key factors that I believe will influence performance during the next few years.