Is Value Investing Here To Stay?

Posted On Tuesday, Jul 20, 2021

Value Investing has long been advocated by industry stalwarts such as Warren Buffet and Benjamin Graham. Although it has been overshadowed by growth investing in the past few years, value investing has now come back to prominence. And investors are asking the question whether value investing is here to stay.

Let’s understand the global trends that have led to the rise of value funds.

After a decade of underperformance, value funds have emerged and trumped growth funds in FY 21. Looking at the historical trends, during the period 2000 - 2009, the MSCI value index performed better than the growth index, however, during 2010 -2019 growth superseded value.

The last 10 years (2010-2020) have been characterized by low global GDP growth (1.91%), low inflation and remarkably low interest-rates –average G-sec yields of 2.23%.1 This resulted in liquidity chasing a few companies making the market polarized. In contrast, the former decade was characterized by a high growth environment, characterized by better GDP growth rates globally and better G-sec yields and that’s when value investing thrived.

Chart 1: Value Vs. Growth: 2010-2019

Value Vs. Growth: 2010-2019

Source: Bloomberg.
Past performance may or may not be sustained in the future.


Chart 2: Value Vs. Growth: 2000-2009

Value Vs. Growth: 2000-2009

Source: Bloomberg.
Past performance may or may not be sustained in the future.


Chart 3: Value Investments are making a comeback

Value funds are making a comeback

Source: Bloomberg | Data for the period between Mar 31 - Jun 30, 2021
Past performance may or may not be sustained in the future.


What metrics do value fund managers look for?

Value fund managers analyze the stock price of the company based on fundamentals relative to its sector, its historical performance, and overall market trends.

stock price of the company

How was the pandemic a turning point for value style?

Come early 2020, the tables turned in favor of value again. During the Covid-19 induced market collapse, value fund managers got a great opportunity to acquire high-quality stocks at attractive valuations, thereby generating risk-adjusted returns when markets recovered.

What is the future outlook?

Table 2: Positive & Negative Catalysts

Positive & Negative Catalysts

In the short term, the equity market might not reflect the real fundamentals but may merely move on sentiments and liquidity. Apart from the above listed variables, corporate earnings in the June-21 quarter and management commentary on demand & raw material inflation will also set the tone for future earnings growth trajectory. Value investing is for the long-term. The inherent margin of safety approach is what makes your investment relatively less subject to downside risks.

Watch our webinar video on ‘Is value making a comeback?’ to find answers from our fund manager, Sorbh Gupta into the macro indicators that signal the growth of value investing.

Grow you investments with the India growth story and with the Quantum Long Term Equity Value Fund.


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Quantum Long Term Equity Value Fund

An Open Ended Equity Scheme following a Value Investment Strategy
• Long term capital appreciation

• Invests primarily in equity and equity related securities of companies in S&P BSE 200 index
Quantum Dynamic Bond Fund
* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
The Risk Level of the Scheme in the Risk O Meter is based on the portfolio of the scheme as on June 30, 2021.

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