Value investing comes back
Value investing is expected to make a comeback as valuation dispersion in domestic shares is nearing record levels in Australia, according to the research by Perennial Value Management.
A white paper, titled “Time to shift gears from Momentum to Value Investing”, showed that the divergence levels were higher than those seen in the global financial crisis (GFC) and approaching those of the early 2000s dot-com boom, meaning market dynamics were likely to shift in favour of value stocks.
Perennial’s managing director, John Murray, noted that previously when valuation divergences reached this level, there was a reversion towards cheap value stocks and away from expensive growth stocks.
He also said that with growth returning to the broader economy and interest rates rising, investors’ preference was likely to swing towards value investing as it had in the past, as paying such a high premium for growth would no longer make sense.
“Although every new situation is different, it’s worth remembering that while history doesn’t always repeat exactly, it usually rhymes. With a generally improving earnings growth outlook and rising interest rates, we see an inflection point in the rate cycle where the era of easy money is largely over and the conditions for value to outperform could be near,” Murray added.
AUTHOR
Oksana Patron
Recommended for you
Clime Investment Management has faced shareholder backlash around “unsatisfactory” financial results and is enacting cost reductions to return the business to profitability by Q1 2025.
Amid a growing appetite for alternatives, investment executives have shared questions advisers should consider when selecting a private markets product compared to their listed counterparts.
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
