By some measures, the most basic premise behind value investing, paying less for stocks, has not worked for investors for the last 30 years. Despite the intuitive appeal of buying less expensive stocks, value benchmarks have trailed the broad market significantly, and the success of active strategies following a value approach has faded.
How is it that paying less stopped providing more upside and is not providing the downside protection it once did? Has the world really moved to a point where paying more and more results in better returns? There is an answer to this puzzle that is logical, intuitive and not rooted in conjecture, but it requires investors to put to the side the conventional measures of valuation we were taught to use.
- The legacy of value investing and its most important tenets
- The structural change in our economy over the last several decades
- Accounting for R&D versus traditional Capital Spending and the comparability issues it creates
- Why your “value” benchmark may not be what the name implies
- Restoring comparability in measures of valuation and quality
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