Nery Alaev

Value investing due for rebound, experts say 

Nery Alaev writes about value investing in 2016.

A recent article points towards a potential return to prominence for value investing and value investors, thanks to value stocks becoming ‘too cheap’ to ignore and growth stocks becoming too expensive to stomach.

I’ve decided to look further into the news and conclude upon value investing’s year ahead.

Better options

Nery Alaev

Is value investing due to return?

A recent article in Barron’s indicates that stocks popular in recent years (mostly tech-based, such as Google, Amazon and Facebook) have taken dents recently, leading to a revival of interest in value stocks.

The macroeconomic environment is important to the fate of value stocks – arguably more so than growth stocks thanks to their focus on “real” earnings.

Given that economies globally have been growing stronger since the intense financial struggles that underpinned the earlier years of the 2010s, there is more of an impetus for growth in value stocks as a result. As Barron’s points out, financial stocks occupy a large portion of all value stocks so economic performance is definitely an important factor.

Changes in the New Year

A second article, published by Equities.com, points towards a possible end to the value investing ‘pain train’ in the early months of 2016, despite investors’ decrying of the strategy in 2015 as a failure.

For example, Steve Galbraith of Herring Creek Capital Management is quoted in Barron’s stating that:

our dyed-in-the wool value brethren are starting to abandon ship, espousing the merits of GARP [growth at a reasonable price] or finding tortured definitions of value to justify their investments.”

Such a negative comment is an indictment of the attitude towards value investing in 2015. This comment may end up being a stick in the mud of an increasingly strong tide favouring value investing, however – we will have to watch the seas for this.

Nery Alaev

Nery Alaev is the current Director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria.