Value Investing II: Tough times for Value Investing – Passing Phase or a Changed World?
In the last post, I noted the strong backing for value investing for much of the last century, where a combination of investing success stories and numbers that back those stories allowed it to acquire its lead position among investment philosophies. In this post, I plan to look at the underbelly of value investing, by first going back to the "good old days" for value investing, and probing the numbers more closely to see if even in those days, there were red lights that were being ignored. I will follow up by looking at the last decade (2010-2019), a period where value investing lost its sheen and even long time value investors started questioning its standing, and then extend this discussion to 2020, as COVID has caused further damage. I will close by looking at the explanations for this lost decade, not so much as a post-mortem, but to get a measure of what value investors may need to do, going forward.
For value investors, nostalgic for the good old days, when the dominance of value investing was unquestioned, I think it is worth pointing out that the good old days were never that good, and that even in those days, there were legitimate questions about the payoff to value investing that remained unanswered or ignored.