Value Pushes Back Against The Bear

Those who thought Value is dead probably had a rotten January, at least if they acted on such assumptions. I’m not prepared to say the rest of 2019 will be smooth sailing for fans of Graham, Dodd, and Buffett; the future has limitless ways of confounding us. But I am now tripling down on comments I made last September and again about a month later to the effect that the FANG-like momentum-driven world we had been seeing is not the new normal. Financial theory (including the value factor) still matters.

© Can Stock Photo, bruesw

Value Came Back

Figure 1 shows the January 2019 scorecard for each of six key factors I track, five of which reflect Portfolio123 ranking systems I created and one of which, Power Gauge, is a multi-factor approach created by Wall-Street veteran Marc Chaikin. (The figures are based on monthly share price returns for stocks in a Russell 3000-like universe sorted from best to worst by rank score and divided into five “buckets.” The Top bucket refers to the highest-ranked stocks whole the Bottom refers to the group of stocks with the worst factor scores).

Click here for an explanation of the factors I use, how I define them, and most important, why, I approach factors the way I do.

Figure 1

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Value is the obvious winner. Momentum is even more obvious as the big loser. Growth had a neutral showing while the other styles faltered, albeit not as badly as Momentum.

Context

Information like that is all well and good, but it's the context that makes it significant. Figures 2, 3, 4 and 5 supply that by showing the monthly tallies for 2015-18. Figure 6 repeats the 2019 information.

Figure 2

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Figure 3

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Figure 4

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Figure 5

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Figure 6

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Interpretation

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Disclosure: None.

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