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It depends on how inflation affects the business. A lot of value companies don’t really have pricing power, and will likely have to eat some of the inflation.
by christophilus 6y ago
It depends on how inflation affects the business. A lot of value companies don’t really have pricing power, and will likely have to eat some of the inflation.
Edit: but yes. If we see inflation coming, it’s better to have a dollar now than a dollar in the future, so I guess that should favor value. Hm. Investing is tricky.
- reducesuffering 6y agoIf we see inflation coming, it's complicated for value vs. growth. On one hand, value benefits because they are usually more debt-laden companies and the debt is debased more over the years, which is generally good for value. On the other hand, if interest rates are the same (basically 0; dollar now is only better if you can immediately gain interest on it), then inflation isn't great for value because the growth companies have most of their dollars to be made in the future where it's inflation-adjusted.