Will value continue to underperform? Willy
Willy, thanks for posting an interesting topic here… (I’m serious)… it’s been a bit dry for interesting discussions lately… Value is presumably underperforming because a large proportion of value stocks are cheap for good reason, so they’re only faux-value. So for a value manager, I guess the key would be whether you believe they can separate the gems from the turds. We still gots a recession to slog through, but the market does tend to turn upwards before the rest of the economy does. I don’t know myself, but I might start looking at some technical indicators on value ETFs like IWD and IWN. Or maybe even construct a value minus growth portfolio and look at something like a MACD chart for it. Gee, I hope they don’t disqualify me for a charter by talking about technical indicators.
We have an internal debate here about which stocks will be the first to recover - growth, value, companies with a lot of debt… my opinion is there are growth stocks priced like value stocks right now and those will be the first out of the gate
Thats what I think JasonU. My feeling is that value will tend to underperform for at least another two [possibly three] quarters. Willy
Value stocks seem to hit the worst …however there are some good deals to be had right now . I agree that value will underperform for atleast another 2 quarters .
I’m just thinking that value could be a trap for quite some time. Willy
2 - 3 qtrs is a very short time from an Institutional perspective …however if you’re looking at it from an indivdual investor’s perspective then I guess 2 -3 quarters can be long ebough to make people nervous .
I currently ONLY manage private clients so to me a couple of quarters is more relevant [sorry should have prefaced this in my initial commentary]. Willy
What we’re looking at right now is, like others have hinted at, a classic value-trap. I meet with value fund managers pretty regularly and they are all extremely bullish because there is the appearance of so many value plays out there, but they have gotten absolutely killed these last 4 quarters or so. Growth on the other hand may have, fundamentally, a bigger problem where the growth catalysts just aren’t there. This passed year, due to the run-up in commodity prices, firms that were able to successfully pass of price increases have done quite well while those that have not are really hurting. As commodities head for a correction and the macro-environment continues to be extremely challenging, the growth catalysts for many firms are simply not there in many cases. Earnings y-o-y are coming down considerably and there’s a real chance that many companies will miss earnings in the first have of '09, and even into the back half. That said, I do not think that things are as bad as CNBC and the rest of the pundits are making it out to be. There are still a slew of good companies out there that may trade flat for the near-term or even marginally down, but when the economy picks back up again, they are going to rip. In my opinion this will happen in the back-half of '09. Great plays for value investors abound and if they could just weather the storm, will be in great shape to post substantial returns over the next 12-15 quarters. Obviously looking that far in the future brings about any number of uncertainties, making forecasting a formidable task, as any research analyst’s here should know. My .02 JW
sorry, wrong thread