IS THE TIDE TURNING TO VALUE? Raheel Altaf, manager of the Artemis Global Emerging Markets Fund, discusses value as an investment style. For a number of years the environment has supported ‘growth’ stocks over ‘value’ stocks. Is the tide starting to turn? Indeed, the combination of historically low interest rates, a protracted but weak economic recovery and a number of structural trends have supported growth stocks above value stocks over the last decade. Investors’ risk aversion has been another important factor. At the time of writing, the
tide is yet to turn. Rather, it has become more extreme, which indicates that we are close to an end point: growth has outperformed value by 15% year to date, even after multi-year outperformance. This sharp de-rating is not reflective of the relative fundamentals of value stocks. As a result, dispersions in valuations are at extreme levels in many markets around the world (Chart 1). History suggests this will not carry on and a subsequent reversion is likely to mean that value stocks offer an attractive opportunity to investors.
Time for a comeback? Rolling 10 year value vs. growth performance 80%
60%
Emerging markets
40%
20%
0%
-20%
-40% 1985
Developed markets
1990
1995
Source: FactSet, as at 31 March 2020.
38
Invest
Spring 2020 www.rsmr.co.uk
2000
2005
2010
2015
2020
