Where we stand
We present an update of the value vs. growth draw-down chart featured in past newsletters. ... more
Pockets of value
We have been writing about the recovery in the performance of the Value factor since November 2020, and have since highlighted a few corners of the market which fall squarely within the Value category but which have been slow to join the trend.
Another example is the Japanese regional bank sector, which has only just started to move off its lows. ... more
It’s not too late
In November we identified a possible turning point in the under-performance of value, based on a sharp spike in the volatility of the Asia-Pacific Value/ Growth ratio, which resembled a similar event in the year 2000. The previous occasion marked the start of a long period of value out-performance.
This is important because a repeat outcome this time should be very positive for RV strategies, which naturally have a long value factor bias. ... more
The outlier rejoins the pack
We have been writing for some time about the bottoming-out of the value factor which started in November 2020.
This trend has been observed globally and among the various markets of the Asia-Pacific region.
However, one market had been notably absent from the trend: ... more
Holding the floor
We have recently written about the potential turning point for Value versus Growth which occurred in mid-November.
To recap, we identified a sharp spike in the volatility of the Value / Growth ratio as resembling a similar event in the year 2000, which at that time marked the start of a long period of Value out-performance.
What do we need for the turning point thesis to hold? ... more
Why are volatility spikes significant?
In our last post we highlighted a volatility spike in the Value / Growth ratio as a potential sign that the multi-year under-performance of Value might be coming to an end.
More specifically, we looked at the 10-day volatility of the MSCI Asia-Pacific ex-Japan Value index divided by MSCI Asia-Pacific ex-Japan Growth index, which in November spiked to 30 for the first time in twenty years.
The last time this happened marked the start of a long period of Value outperformance.
Volatility spikes are often associated with market turning points. Why? ... more
A turning point?
We may finally have seen a turning point in the under-performance of Value.
The volatility of the Value / Growth ratio in Asia-Pacific surged to 30% on 6 November. The last time we saw a similar level was just over twenty years ago, on 10 April 2000:
This is significant because ... more
Worst performance of value since 1926
We continue to have a strong conviction in a strategy of buying companies at 80-90% discount to NAV, with an expectation of a catalyst for value realisation.
While over the long-term this has proven to be a very effective strategy, it has performed poorly over the past year.
What could be the cause? We believe the global underperformance of the value factor is the main culprit.
We have previously illustrated this using benchmarks from MSCI and Russell Investments. However, to show just how extreme the current moves are, ... more