My ZEUS screen focuses on a style of investing that has had a torrid decade: value investing. But a sudden positive jolt in the performance of “value” last month has prompted speculation (not for the first time) that this investment approach is finally due for a comeback. Could it really be so?
Value investing essentially involves buying cheap shares in the hope they will rerate (more discussion of this later). Over the very long term value has proved a superior strategy to growth investing. Growth investing involves buying shares in companies with high earnings growth rates in the hope that growth will persist; often such shares trade at high valuations that can collapse if growth disappoints. The chart below illustrates the very long-term case for value investing by comparing the MSCI World Value Net Total Return index with its Growth counterpart.
