Value investors haven’t been wandering in the wilderness for 40 years, but it’s starting to feel that way.
Over the past 10 years, the S&P 500 Value Index of companies selling at low prices relative to their earnings, revenues and net worth has returned an average of 7.1% annually. The S&P 500 Growth Index — stocks selling at high prices — has gained an average of 10.7%.
The longer-term picture is brighter for value-hunters: Over the course of many decades, cheap stocks have tended to do better, as you would expect from investments bought as bargains: From 1926 through the end of last year, value out-earned growth stocks by an average of 3.1 percentage points annually.
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This article was originally published on The Wall Street Journal.
Further reading
Jason Zweig, Your Money and Your Brain
Jason Zweig, The Devil’s Financial Dictionary
Benjamin Graham, The Intelligent Investor