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The Value vs Growth Debate: 2021 Update

This Time, Does the 'Value'  Emperor Really Have New Clothes?

A resurgence in the performance of value stocks, dominated by cyclical recovery and reflation trades since the November vaccine announcements, finally seemed to give value investors something to cheer. However, it might just have been a short-term rotation. Over the last six weeks yield curve flattening and rapidly falling U.S. bond yields have led some investors to re-evaluate elements of the reflation trade. Certainly, since June, growth names have been back in the ascendancy. Is it just a short-term hiccup for value investors caused by portfolio rebalancing and considerations about the discount rate, or is there something else afoot? 

A number of papers in this selection debate the outperformance by value over recent months, while others concern themselves with how sustainable and protracted the value rally might be. Several papers look at the fundamental valuations of companies and how changes in input metrics might impact some of the key valuation techniques used by both growth and value investors. 

  

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Spring Has Sprung For Value Investing (Robeco, May 2021)

Does value still have room to run? Robeco looks at the recent upswing as value attempts to rise out of the harsh 'quant winter'.

Is There Now ‘Value’ in Value Investing? (Aviva Investors, Jun 2021)

For compliance reasons, this paper is only accessible in certain geographies

Giles Parkinson of Aviva Investors describes changes in the calculation of intrinsic value of a company that have caused it to decouple from a financial statement approach. This has relevance for value investors and for the value vs growth debate.

Comparing Value Factor Performance in Global Equity Markets (FTSE Russell, 2021)

FTSE Russell analyses the sources of value's historical underperformance in global equity markets on a regional basis, drawing out both differences and parallels over time.

The Value Outperformance Dilemma (Invesco, Jun 2021)

For compliance reasons, this paper is only accessible in certain geographies

Invesco attempts to shed some light on the future path of value, after outperformance in the current market cycle.

Factor Olympics: Value, Size and Momentum (FactorResearch, 2021)

FactorResearch provides updates through H1 2021 as well as historical performance for six different factors. Globally, the value factor is the only one with positive returns through the first half of the year.

Riding the Value Wave (S&P Dow Jones Indices, Jun 2021)

S&P Dow Jones Indices discusses the length of the current cycle of value's outperformance relative to previous cycles.

Value and Interest Rates: Don’t believe (all) the hype (Acadian, 2021)

Given the nature of growth stocks and value stocks, many investors favour a straightforward relationship between value stock performance and interest rates. However, the authors show that this relationship is oversimplified and many other nuances are also relevant.

Value Investing Principles That Have Stood the Test of Time (Robeco, Jun 2021)

Mark Donovan, Senior Portfolio Manager at Robeco, discusses the pendulum swings between value and growth investing over time and principles that have held true for value investors.

Going by the Book: Valuation Ratios and Stock Returns (2021)

The authors examine the book-to-market ratio commonly utilised by value investors, finding that it has become a worse predictor of future returns and is perhaps less relevant than other valuation ratios.

Has Value’s Run Just Begun? (SEI, 2021)

The first quarter of 2021 was the best quarter for value stocks in decades. SEI describes the fundamental and economic case for value stocks.

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