Is Value Investing Dead?

Newspaper headline reads – “Modi’s ₹20 trillion package: What does it mean for stock markets?” Reminds me of a Hindi idiom – गाँव बसा नहीं लुटेरे पहले आ गए (Translation: The village is still not thriving, but the robbers have already come).

The first part of the article reads – “Indian equity markets rallied in early trade on Wednesday as the size of the economic stimulus package announced by Prime Minister Narendra Modi is significantly higher than the Street’s expectations.” Well, after everything ‘unexpected’ that has happened over the past few months with the economy, businesses, markets and in people’s livelihoods, we are still playing the expectations game? Ha!

Anyways, that article was not the best thing I read today. Instead, here they are –

• “Nobody wants to read your sh*t.” That’s the first thing I read today morning as I sat down to write this post, and how demoralizing it was! It came from Steven Pressfield who wrote it in his post on the most important writing lesson he has ever learned. Pressfield pacified me a bit by writing, “It isn’t that people are mean or cruel. They’re just busy.” Now I can appreciate this thought better than cursing my own writing or people who I think may be mean when then don’t read what I post, I mean the sh*t I write! I know you are busy, so I am highly grateful for you to be reading my work, if you are reading even now. 🙂
   

• “We’re having the ‘Value Investing is Dead’ conversation again,” writes Josh Brown in his latest post, and then explains why, “Value investing is immortal. It cannot die. Perhaps the way it’s been traditionally practiced is dead.”
   

• I read a post some time back wherein Jack Schwager, the author of Market Wizards series, when answering a question on whether value investing works, turned to the wisdom of Joel Greenblatt, one of the foremost experts on the subject. Schwager quoted this from his interview with Greenblatt – “Value investing doesn’t always work. The market doesn’t always agree with you. Over time, value is roughly the way the market prices stocks, but over the short term, which sometimes can be as long as two or three years, there are periods when it doesn’t work. And that is a very good thing. The fact that the value approach doesn’t work over periods of time is precisely the reason why it continues to work over the long term.”
  

• “…a previously unknown unknown has now become a known unknown, and consequently is now already factored into investor risk appetite and market positioning and so it ceases to have much impact on market prices,” writes the author of this nice post titled Coronavirus Update: From An Unknown Unknown to A Known Unknown. He concludes well – “When people look back at this sell off many years from now – particularly investors that did not live through it – they will say ‘this was a very obvious buying opportunity; if it were me, I would have been smart and rational enough to buy, because it was obvious the economic impact was only going to be temporary; next time there is a pandemic that tanks markets 40%, I’m going to buy by the truckload’. The problem is that the next event that causes a 40% market crash will not be a pandemic. The next time there is a pandemic (unless it’s materially more virulent and deadly), markets might only fall 10-15% because investors will know the playbook and so it won’t be as scary. It will be something else that cause investors to believe ‘life as we know it has changed’.”
   

• The coronavirus pandemic has forced economists, financiers, executives, and policymakers to jettison or dramatically revise their forecasts for 2020. But what will the future look like on the other side of the crisis? Bloomberg asked a variety of leaders from around the world for their best guess on how our lives will be fundamentally changed.
   

• Finally, even if value investing is dead, Calvin is immortal!
   
  

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Stay safe.

With respect,
— Vishal