Value Investing

[Arif]

I am a value RE investor and try to do the same with my individual stock selection. I recently read somewhere that value investing has been in style since 1999. What does that mean? Someone please explain to me how buying a stock with a low PE can go out of style? If that stock beats estimates by a big margin (and the stars line up) how can that not move the stock (assuming the future is brighter than the past)?
This reminds me of when people say that the market will grow only 6-8%. Unless you're buying index funds why would I be concerned with what the market does? I would care more about what MY stocks are doing? BTW- I'm not knocking index investing just trying to understand why people say a particular investing style is out of favor.

 

[maddythebeagle]

I think it just means that during certain periods of time value has done better than growth. I think it more a case of folks "jumping on the bandwagon" of growth and there being more momentum while ignoring some other boring, money-making stocks at times. Does it make sense, no, but people are lemmings.

Another point is that higher dividend stocks are more in favor, also since people are somewhat shell shocked from the tech. bubble, I think as well as the increased interest from the lower tax rates on qualified dividends.

 

[wildcat]

I'm not knocking index investing just trying to understand why people say a particular investing style is out of favor

Still don't buy the out of favor style argument. Never will.

 

[wabmester]

Value stocks are like junk bonds. If the economy does well, it tends to transform junk into quality. But if the economy goes downhill, junk companies on life-support tend to go flat-line.

And just like junk bonds, you can diversify away a lot of the risk, but even with a diverse portfolio of junk/value, you'll still be hit hard during an economic downturn.

As far as value investing going into and out of fashion, obviously stock prices are more a function of investor psychology than fundamentals or we wouldn't have bubbles.

 

[wildcat]

As far as value investing going into and out of fashion, obviously stock prices are more a function of investor psychology than fundamentals or we wouldn't have bubbles

i.e. people are willing to pay more/less for earnings based on future irrational expectations/investor pyschology.

 

[Arif]

Maybe that's why I stick with RE instead of stocks. No heard or bubble mentality there . Thanks all for the explanation as I learn to diversify my holdings into more stocks and less RE.

 

[nash031]

Maybe that's why I stick with RE instead of stocks. No heard or bubble mentality there . Thanks all for the explanation as I learn to diversify my holdings into more stocks and less RE.

Did a quick search on "Value Investing" on the forum and this came up from 2005.

Immediate thought: "Holy smokes".