Value investing

Pockets of value arise amid corona crisis

Value investing is difficult enough in benign environments, but in the current circumstances, it is proving particularly challenging. Suddenly, consumers are confined to their homes and global demand for many products has moved close to zero, with the exception of medical supplies and groceries.

Investors hate uncertainty. When faced with such extreme risk and uncertainty, their first instinct is to flee. The stock market has been a conduit of fear in recent weeks, which is perfectly understandable given the chaos that surrounds us.

Rated Funds to help investors navigate choppy waters

Extraordinary times call for extraordinary measures – and then some. In little more than a month, the fiscal and monetary measures to prop up economies and financial markets in the great coronavirus crisis (GCC) have already exceeded what was done during the global financial crisis (GFC) of 2008/09.

ETF portfolio: global markets feel coronavirus fear

These have not been a good three months for our global value ETF portfolio, which fell in value by 6.9% between 2 December and 2 March. The total return since purchase at the start of September 2019 is also down, by a disappointing 7.7%.

Value investors, did you check the price tag?

It will come as no surprise that ‘value’ investing has underperformed in recent years. A quick look at the top performers in the FTSE 100 index year to date confirms this: the top three performers are JD Sports, Aveva and London Stock Exchange.

All three are good companies that are growing earnings at double-digit rates; but all are on a high valuation (versus both the UK market and their own history) and would pay little in the form of a dividend.

- Laura Foll interview

Where can value investors find the best fund and trust bargains?

Value investing is set for a comeback in 2020, after a decade in the doldrums. While recession risk appears to have subsided, sentiment remains fragile and there is a solid argument for a shift to buying value.

“Value is already pricing in a downturn – and growth stocks trade close to all-time highs,” says Lee Wild, head of equity strategy at interactive investor.

Precisely timing the shift is impossible, though, and Wild concedes growth stocks may have further to climb if macro events such as trade talks and interest rate policies go their way.

ETF portfolio: slowing China hits returns

Our new global value exchange traded fund (ETF) portfolio has produced a negative return over the three months to the end of November. In total, the £8,000 portfolio was down to 0.87%, losing a total of £69 between 2 September and 2 December.

Time to switch from growth to value?

With stockmarket indices near all-time highs, capital growth has not been a problem over the last decade or so: investors have had a good ride. Quoted companies have found it cheap to borrow money, which has led to greater levels of capital expenditure and boosted profits, in turn encouraging more investors to buy shares and pulling prices up.