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Value investing is, by general definitions, shorting growth. You are investing in today while intentionally ignoring tomorrow. The value investors who have don

by dannyw 6y ago

Value investing is, by general definitions, shorting growth. You are investing in today while intentionally ignoring tomorrow. The value investors who have done well are those that recognise growth as a factor, and put money into Apple when they were comparatively cheaper. The value investors who have done poorly are those who buy low PE stocks, which are stocks of stagnant and declining companies.

reducesuffering 6y ago
This is incorrect. All of the 100 years of historical US market data show that the indices tracking “value” companies (of which one component is low P/E) have outperformed “growth” companies over the long term. There are several explanations for this, one that irrational investors periodically pay premiums for “lottery tickets”, like the “next FAANG or Tesla.” But while the explanations aren’t conclusive, the underperformance of growth is.
- jl2718 6y ago
  I find this interesting because return variance (risk) and mean are supposed to correlate positively in the ‘efficient frontier’ theory that value investing is based on.
  - reducesuffering 6y ago
    That’s another of the possible explanations. That value companies are usually more debt-ridden and in declining industries and are thus higher risk. Although one way to measure risk is std. deviation (volatility), and while smaller cap stocks are considered “riskier” and they have higher std. deviation, value stocks don’t have meaningfully higher std. deviation.
imtringued 6y ago
> Value investing is, by general definitions, shorting growth. You are investing in today while intentionally ignoring tomorrow. Well, Wikipedia [0] seems to disagree. >Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. By this logic investing into stocks with verifiable growth is the way to go. Apple is basically the poster child of value investing. It's a company that is making lots of money and keeps growing because it releases new profitable products year by year. For some reason there is this belief that "value investing" = "boomer doesn't know stocks can grow". Yeah, one obviously has to think that those who engage in value investing are stupid, otherwise one would have to acknowledge that the stocks one is investing in have zero reason to grow as fast as they did, except that everyone else is also blindly buying them (which is dangerous circular reasoning and causes bubbles that pop once we run out of people who refuse to open their eyes). [0] https://en.wikipedia.org/wiki/Value_investing https://en.wikipedia.org/wiki/Value_investing

by dannyw 6y ago

reducesuffering 6y ago

This is incorrect. All of the 100 years of historical US market data show that the indices tracking “value” companies (of which one component is low P/E) have outperformed “growth” companies over the long term. There are several explanations for this, one that irrational investors periodically pay premiums for “lottery tickets”, like the “next FAANG or Tesla.” But while the explanations aren’t conclusive, the underperformance of growth is.

jl2718 6y ago
I find this interesting because return variance (risk) and mean are supposed to correlate positively in the ‘efficient frontier’ theory that value investing is based on.
- reducesuffering 6y ago
  That’s another of the possible explanations. That value companies are usually more debt-ridden and in declining industries and are thus higher risk. Although one way to measure risk is std. deviation (volatility), and while smaller cap stocks are considered “riskier” and they have higher std. deviation, value stocks don’t have meaningfully higher std. deviation.

imtringued 6y ago

> Value investing is, by general definitions, shorting growth. You are investing in today while intentionally ignoring tomorrow. Well, Wikipedia [0] seems to disagree. >Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. By this logic investing into stocks with verifiable growth is the way to go. Apple is basically the poster child of value investing. It's a company that is making lots of money and keeps growing because it releases new profitable products year by year. For some reason there is this belief that "value investing" = "boomer doesn't know stocks can grow". Yeah, one obviously has to think that those who engage in value investing are stupid, otherwise one would have to acknowledge that the stocks one is investing in have zero reason to grow as fast as they did, except that everyone else is also blindly buying them (which is dangerous circular reasoning and causes bubbles that pop once we run out of people who refuse to open their eyes). [0] https://en.wikipedia.org/wiki/Value_investing https://en.wikipedia.org/wiki/Value_investing