A Value Manager on How Most Value Managers Are Getting It All Wrong
Odd Lots
Bloomberg
4.5 • 2K Ratings
🗓️ 18 February 2021
⏱️ 64 minutes
🧾️ Download transcript
Summary
As you might have heard, so-called value investing has not had a good run. At least from a quantitative standpoint, strategies that aim to buy low-valued stocks (based on metrics such as price-to-earnings or price-to-book) are quite out of favor, as fast growing names, loaded up on intangible capital, have outperformed. So is there any way to resuscitate the concept of value, or do investors just need to wait for the tides to change? On the latest Odd Lots, we speak with Rafe Resendes, a portfolio manager and co-founder of the Applied Finance Group, who argues for another way of reconceptualizing value, beyond just cheapness, in a way that works across market environments.
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Transcript
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| 0:54.4 | Hello and welcome to another episode of the Adlots podcast. I'm Joe Wyzontal. |
| 1:00.1 | And I'm Tracy Alloway. Tracy, you know, one of these things that we've discussed a |
| 1:04.5 | fair number of times in 2020, but also maybe before it's just sort of the, I guess you would say, |
| 1:10.5 | permanent state of crisis that you might call it in so-called value invest. |
| 1:18.0 | Yes, it's been, it's certainly been a long-running theme, hasn't it? And I feel like we've done |
| 1:24.1 | quite a few episodes on it at this point. But 2020 didn't exactly turn things around for |
| 1:29.9 | value investors either. No, definitely not. And I think like, you know, there's really two strands |
| 1:37.2 | that tend to emerge in our conversations. And I would characterize them as this. One is that there |
| 1:44.0 | is some like cyclical element to value investing in that this cycle just hasn't turned around yet. |
| 1:50.0 | So it's like we have this sort of long multiple expansion. It's kind of low growth fed-driven |
| 1:57.2 | economy that sort of creates this permanent bid for growth companies at the expensive value, |
| 2:03.5 | weak GDP growth, et cetera, just like certain industries aren't going to thrive in that environment. |
| 2:08.8 | And then I would say the other half is that no, the problem is that we are not good at defining |
| 2:14.9 | value and there are people who sort of take a more accounting approach and say traditional measures |
| 2:20.4 | of the stocks, cheapness, like say price-to-book value. It just, these measures don't work in a world |
| 2:27.2 | where so much value is intangible. Right. This is the idea that as companies, well, the sort of |
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