EdenTree's Hepworth 'going against the herd' on value

Added 15th May 2017

The “Trump bump” may have slumped in 2017, but EdenTree Investment Management’s CIO Robin Hepworth argues the value trade is for the long-haul.

EdenTree's Hepworth 'going against the herd' on value

Although value stocks started to outpace quality/growth stocks in 2016, fuelled by Donald Trump’s presidential victory, they have had a shakier start in 2017.

During Trump’s first 100 day stretch it was US growth style active funds, not value that outperformed, in general.

“The last decade proved to be a challenging time for proponents of value investing,” said Hepworth.

“There have been only three periods over the last 90 years when value has underperformed for an extended period – the Great Depression, the TMT bubble and the global financial crisis.”

But, so far, the global financial crisis has been the longest period of underperformance, he noted.

At its core, the value trade is not for the faint of heart. 

"The discipline of value investing is in most part built on buying out of favour companies at a time when the share price appears to understate the long-term value of the underlying business model," said Hepworth.

But over the long-haul, it pays to "go against the herd," in Hepworth's view.

Since the inception of the MSCI value, growth and world indices, value has provided greater returns over the long-term, particularly in relation to growth stocks.

 

"One of the clear tailwinds behind value investing over the long term, which has been evidenced by most academic studies, is mean reversion," explained Hepworth.

"Companies trading at a discount to the fundamental value of the underlying business model do not sustain the discount indefinitely.

"Given both the length and the depth of the malaise in value investing since the global financial crisis, the potential recovery could be meaningful."

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Kristen McGachey

Senior Reporter

Kristen joined Last Word Media and the world of financial journalism in April 2016, leaving behind a career in a legal publishing firm as a senior researcher turned assistant editor.

This native Angelino initially moved to the UK in 2008 to complete her undergraduate studies at the University of Nottingham. She subsequently obtained a Masters degree in Philosophy with Literature from the University of Warwick.

Profiles

Viewpoint

Investment Strategy

Feature

Tweets

Events

PA Channel Islands November 2017
PA Channel Islands November 2017

Tuesday 14 November
Royal Yacht Hotel, Jersey

PA Alternative Ucits November 2017
PA Alternative Ucits November 2017

Tuesday 7 November 
Furniture Makers' Hall

PA Global 2017
PA Global 2017

Thursday 23 November
M by Montcalm Shoreditch Tech City

PA Emerging Markets November 2017
PA Emerging Markets November 2017

Tuesday 28 November
Radisson Blu Edwardian Bloomsbury Street Hotel

OTHER STORIES FROM LAST WORD...