Goldman Sachs Mulls the Death of Value Investing

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#1
(https://www.bloomberg.com/news/articles/...ing-decade)
by Luke Kawa
 
During roughly the same period, the S&P 500 Index has almost doubled. While followers of the value-factor strategy are enduring their longest sustained stretch of underperformance since the Great Depression, Goldman Sachs said it may be too early to give up on it.

“The fundamental backdrop for value returns has been especially unfriendly in recent years, but these conditions are unlikely to persist (and are already moderating),” a Goldman Sachs team led by equity strategist Ben Snider, wrote late yesterday in note to clients. “Nonetheless, the maturity of the current economic cycle suggests value returns will remain subdued in the near term.”
 
Most of the recent weakness can be attributed to the unusually slow growth and prolonged length of the current economic cycle, the strategists wrote. Specific characteristics of the equity market prior to the last crisis were also key, they said.
Waning cyclical headwinds are poised to fade, with the near-term outlook for growth stocks looking better, the report said. But so long “as humans continue to make investment decisions,” Snider wrote, value will work out over the long haul. However, the more widespread appreciation for and adoption of passive funds and smart beta strategies implies returns “will be harder to capture in the future.”
Value stocks tends to outperform when an expansion is broad-based and relatively robust -– generally at the start of an economic cycle, Goldman Sachs argues, and underperform when the economic backdrop is weak and growth scarce. The team said that the so-called new normal of slower growth magnified investors’ appetite for growth stocks like the FANG quartet.
 
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I like how people can comment so much about something they do not really understand. Value investing isn't just about buying shares with "the lowest valuations and selling those with the highest". It is way more than that, it is about really understanding and finding out the intrinsic value of an underlying stock and buying the shares with the lowest price compared to its intrinsic value. In that sense, value investing is evergreen and also completely different for each individual with different definitions of value and perspective.
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#2
What is the FANG quartet ? Not able to view the bloomberg link
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#3
(12-06-2017, 12:11 PM)soros Wrote: What is the FANG quartet ? Not able to view the bloomberg link

Tech growth stocks Facebook, Amazon, Netflix and Google (now Alphabet). Though some people substitute Apple for Amazon, and Nvidia for Netflix. Or add Apple to create the FAANG quintet.

Recently I also saw mention of FAAMG, substituting Netflix for Microsoft.
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#4
Warren Buffett: Forget About Value vs. Growth Investing

Wall Street and the media typically differentiate between value and growth stocks. However, as Warren Buffett explains, this distinction can be too short-sighted. Here is why you need to think beyond value vs. growth to make the best investing decisions.

Andrés Cardenal
(TMFacardenal)

Feb 4, 2015


Wall Street analysts and the financial media typically use the terms "value" investing and "growth" investing as opposing ideas. However, Warren Buffett believes this way of thinking is too myopic and can lead to some important misconceptions when evaluating investment opportunities.

So what is the Oracle of Omaha suggesting exactly?

Value and growth are joined at the hip

Value investing is about buying a company for a market price below the intrinsic value of the business. According to Buffett, this is the only way to truly invest, since paying a price above the estimated value -- usually hoping to sell it for an even higher price -- should be considered speculation.

Growth is one of the variables you need to consider when estimating that intrinsic value. Growth can be a major part of the company's value, or it can be a less crucial driver -- it depends on the particular business. Growth can also sometimes be negative in terms of value -- this happens when a company puts money to work in ultimately unprofitable growth initiatives. In his letter to Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) shareholders in 1992, Buffett wrote: 

Quote:Most analysts feel they must choose between two approaches customarily thought to be in opposition: "value" and "growth." Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing.

We view that as fuzzy thinking (in which, it must be confessed, I myself engaged some years ago). In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous and whose impact can be negative as well as positive. 

Companies trading at relatively low valuation ratios are usually referred to as value stocks, while those with superior growth rates and higher than average valuations are generally called growth stocks. But Warren Buffett believes these simplifications are severely lacking, as growth and value are intimately related. Elaborating on this concept, Buffett wrote to his shareholders in 2000:Common yardsticks such as dividend yield, the ratio of price to earnings or to book value, and even growth rates have nothing to do with valuation, except to the extent they provide clues to the amount and timing of cash flows into and from the business. Indeed, growth can destroy value if it requires cash inputs in the early years of a project or enterprise that exceed the discounted value of the cash that those assets will generate in later years. Market commentators and investment managers who glibly refer to "growth" and "value" styles as contrasting approaches to investment are displaying their ignorance, not their sophistication. Growth is simply a component - usually a plus, sometimes a minus - in the value equation.

https://www.fool.com/investing/general/2...nvest.aspx
_____________________________________________________________________________________________________________________
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
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#5
Hey Goldman, Value Investing Is Not Dead
John Buckingham , 14 June 2017
https://www.forbes.com/sites/johnbucking...7cbaad46a5
________________________________________________________________________________________________________________________
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
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