4 Reasons Value Investing Is Not Dead

Interest rates are finally on the decline again, leaving investors considering where to focus their money next. At this point, the markets could tip in either direction, as the Fear and Greed Index sits at neutral right now, and economic and market pundits are sharing a wide array of commentary that calls for everything from a recession to a soft landing or even the potential for a continuation of greener pastures.

In recent years, the runaway valuations of growth stocks have caused some investors to think value investing is dead, but that couldn’t be further from the truth. Interviews with multiple fund managers revealed four reasons why value investing is not dead.

1. Valuation will always matter

First, Will Nasgovitz of Heartland Advisors told me that valuation will always matter. On one hand, some investors have been shelling out money on some stocks with no regard to valuation amid extreme market euphoria.

Nonetheless, many others still use a wide array of multiples and other methods to determine a company’s intrinsic value and determine whether they might be overpaying for a company. Considering valuation just makes sense because market euphoria is not a constant phenomenon. At some point, bubbles pop.

“Within our process, while we traditionally look at P/E, our ninth principle is valuation,” Nasgovitz said. “Our analysts look at the most appropriate multiple for each business and ascertain if the risk/reward is compelling. Strategic and financial buyers are going to pay attention to valuation. It’s applicable to all investing, more to value than other strategies.”

2. The markets are not completely efficient

Second, Seth Weingram of Acadian Asset Management pointed out that value investing can mean a variety of different things. He believes certain forms of value investing will always work because the markets are never totally efficient.

As it’s used in popular discussion, the term value investing can mean almost anything,” Weingram told me. “In a broad sense, the concept of value implies looking at market price relative to some fundamental measure of what the company is worth. It’s hard to imagine that the notion of finding discrepancies between the two would be obsolete. We know those things diverge quite often, and the idea that somehow this general philosophy of investing would stop working doesn’t compute. It’s tantamount to saying that markets are completely efficient or totally irrational. We don’t believe that.”

3. Value investing usually outperforms when people are concerned

Recalling a famous quote from Warren Buffett, Phil…