Lauren Templeton and Scott Phillips on bargain hunting in the stock market

The thrill of locating more bargains should be far more rewarding than sitting back and relishing your recent successes.  This idea is embedded in the notion that focusing on the future is more important than focusing on the past.

~ Lauren Templeton and Scott Phillips, Investing the Templeton Way

2008

Jim Grant on value investing

It's an arithmetic truism that bearishness prepares the ground for bullishness; nothing succeeds in the long run like a low entry point.

~ Jim Grant, "Tale of two decades," October 11, 2024

Howard Marks on value investing

For a value investor, price has to be the starting point.  It has been demonstrated time and time again that no asset is so good that it can’t become a bad investment if bought at too high a price.  And there are few assets so bad that they can’t be a good investment when bought cheap enough.

~ Howard Marks

(as quoted by Tim Price in "The Only Thing That Matters?")

Josef Lakonishok on the importance of valuations on momentum investing

We tried to see if valuations also matter within momentum.  So actually what we did, we looked at companies with high momentum, low momentum, deciles, quintiles, whichever you want to do, and then we looked at the valuations.  Let’s call it momentum factor.  So when the momentum factor is cheap, it kind of tends to do well.  But when the momentum factor is crazy expensive, the high momentum guys are very expensive relative to low momentum guys, subsequently the return on this momentum factor is nothing to write home about.  And I actually find it to be a very interesting finding because valuations always matter.  We know that valuations matter when you compare value to growth.  Valuations matter when you compare high momentum to low momentum.  I’m sure that it matters when you compare large companies to small companies.  So for me it is just another indication that you cannot run away from valuation.

~ Josef Lakonishok, LSV Asset Management, "Value For the Long Run" roundtable discussion, October 28, 2020

John Heins on the new value investors

The next generation is not as recognizable for people with a standard view of what a value investor is.  They are more eclectic, focused more on special situations.  Some have the head of a growth investor and heart of a value investor.

~ John Heins, editor-in-chief, Value Investor Insight, "The New Value Hunters," Barron's, May 22, 2021

Seth Klarman on Benjamin Graham

As the father of value investing, Benjamin Graham, advised in 1934, smart investors look to the market not as a guide for what to do, but as a creator of opportunity.

~ Seth Klarman

Morningstar: large cap value funds take in record flows in March

As a category group, U.S. equity funds gathered the most assets in March.  They took in $54 billion, dwarfing the previous monthly record of $38 billion set in February 2021.  Their month-over-month organic growth rate of 0.49% was the highest since October 2013's 0.53%.  Resurgence in investor appetite for cheap stocks drove the inflows.  Investors poured into value-oriented and cyclical funds at some of the sharpest rates in history.  Large-value strategies collected a whopping $20 billion, by far the largest sum ever.  Their 1.47% organic growth rate in March was the highest since the 1.68% mark set in January 2004.  Small-value strategies achieved a similar feat, picking up $5.4 billion, more than double January 2017's previous record of $2.2 billion.  The 2.77% organic growth rate was the highest since April 2002, a period when investors were reeling from the dot-com bubble crash. 

Despite investors' push into value-equity strategies, the influx of cash hasn't exactly been a windfall for active managers.  Actively managed large-value funds took in just $2.2 billion of the category's $20 billion in total inflows in March, breaking their streak of 78 consecutive months of outflows totaling $318 billion.  Prominent passive funds such as iShares Russell 1000 Value ETF (IWD) and Vanguard Value Index (VVIAX) collected as much or more in March than all active managers just by themselves, pulling in $2.2 billion and $2.8 billion, respectively.  Investors gave active small-value managers more credit than their active large-value counterparts, handing them $1.4 billion of the category's $5.4 billion total inflows.

~ Morningstar Research, March 2021

Warren Buffett on investing and quality

Whether we're talking about socks or stocks, I like buying quality merchandise when it's marked down.

~ Warren Buffett

Kevin Duffy on value investing

Value is subjective and all investing is taking a stab in the dark as to what consumers (and investors) will value in the future.  Honestly, all investing and speculating is “value investing.”  Look at how the “value investor” has evolved since Benjamin Graham from searching for cigarette butts to focusing on high quality businesses with durable competitive advantages.  I suppose this might even change over the next 100 years.  Those who understand this adapt and thrive.  The traditional value investor risks missing opportunities due to a rearview mirror/present profitability bias.  Amazon.com in the mid-2000s was a classic example.  It was clear that a) e-commerce would take significant share from traditional retailers over time and b) Amazon was the clear winner.  Yet I passed because it looked “pricey” at 75 x current earnings.  Stupid!!!  Biggest, and dumbest, mistake of my career.

~ Kevin Duffy, February 23, 2021

Preston Athey on the value of technical analysis

My favorite chart is generally the chart that makes everyone else ill.

~ Preston Athey, portfolio manager, T. Rowe Price Small Cap Value Fund

The Economist on the crisis of value investing

So-called value stocks, typically asset-heavy firms in stodgy industries, have had a decade from hell, lagging behind America’s stockmarket by over 90 percentage points. This has led to a crisis of confidence among some fund managers, who wonder if their framework for assessing firms works in the digital age (see article). They are right to worry: it needs upgrading to reflect an economy in which intangibles and externalities count for more.

~ "Does value investing still work?," The Economist, November 14, 2020

Inigo Fraser-Jenkins on how Amazon is destroying retail moats

If Amazon is going to continue to destroy other parts of the retail sector, say, then why should we expect mean-reversion to still hold?  We agree that this dynamic is likely behind part of the underperformance of value.  Technology has disrupted industries in a way that may permanently destroy ‘moats’ that used to exist around certain industries.

~ Inigo Fraser-Jenkins, Sanford C. Bernstein’s head of European quantitative strategy, "Is value investing dead? It might be and here’s what killed it," CNBC.com, June 23, 2019

Morningstar: Vanguard closes diversified U.S. stock fund for the first time

The fate of Vanguard U.S. Value (VUVLX) is particularly symbolic, as the fund is to be merged into Vanguard Value Index (VIVAX). Out with active, in with passive. This is not the first occasion in which Vanguard has folded an actively managed fund into an index fund, but it represents the first time it has done so for a diversified U.S. stock fund, save for a tax-managed vehicle.

~ John Reckenthaler, "Whither Vanguard’s Active U.S. Equity Funds?," Morningstar, July 30, 2020

Whitney George on the culture at Royce & Associates in the late 1990s

In the late '90s, when everybody was firing their value managers - because then making 10 or 20% per year was like losing money, relative to being in the dot-com boom - we hired a lot of very good people, and have found that the best time to get talented good people is when nobody else wants them.  Because when things are going well, why would anybody change jobs?

~ Whitney George, interview with Rick Rule, 15:00 mark, YouTube, April 26, 2017

Aaron Edelheit on current investment opportunities in small cap stocks

I think the opportunity today is in small cap value and fundamental research while everyone is paying attention to the macro and the craziness of what's going on in trying to day trade.

~ Aaron Edelheit, "The Biggest Value in Social Media," Stansberry Investor Hour, July 2, 2020

Kevin Duffy views the investment landscape through the lens of an Austrian economist and value investor

These are extraordinarily disorienting times. While the economist in me is terrified, my inner value investor feels like a mosquito in a nudist colony.

~ Kevin Duffy, The Coffee Can Portfolio, May 27, 2020, p. 12

Kevin Duffy on growth vs. value investing

Categories such as “growth” and “value” are overly simplistic attempts by investors trying to make sense of complexity. At the end of the day, growth and value investors are both attempting to buy a stream of future cash flows at the lowest possible price. Value investors put more weight on current earnings whereas growth investors emphasize future earnings, but I see little benefit in favoring one approach over the other.

~ Kevin Duffy, The Coffee Can Portfolio, May 27, 2020, p. 7

Howard Marks on contrary investing

Large amounts of money aren’t made by buying what everybody likes. They’re made by buying what everybody underestimates.

~ Howard Marks

Rob Arnott on investing

There's no such thing as a bargain in the absence of fear.

~ Rob Arnott, Research Affiliates, Grant's podcast, June 21, 2019

Rich Karlgaard: No safe harbors for traditional value stocks (2000)

From where did this loony idea emerge that a cowlicked midwesterner who buys stock in companies that turn out syrupy fizz water, bland ice milk and lefty newspapers should thus be known as a Value Investor?...Tech will roar back. It will continue its merry dash toward infinite powers at zero cost. It will transform all in its path. Markets may (and just did) correct for overvalue, but they can't abjure the laws of physics... Bottom line: In such an explosive economy, there will be no safe harbors for traditional 'value' stocks.

~ Rich Karlgaard, publisher, Forbes Magazine, Forbes, May 2000