Feature | Value vs momentum


Value stocks have underperformed for the past 10 years, but September saw a sudden rotation when they surged at the expense of momentum-driven stocks. Could value investing celebrate a comeback? Mona Dohle reports.


It has become rather quiet around Warren Buffet recently. The 89-year-old chair of Berkshire Hathaway has been celebrated by many stock pickers as a rock star of value investing. Entire quant funds have been launched in the attempt to replicate his approach of sourcing undervalued stocks. But in the past couple of years, Berkshire Hathaway’s funds have consistently under- performed the S&P 500, as value investors faced a challenging time. Amidst financial markets dominated by central bank engi-


neering, risk averse investors have piled their money into momentum or growth orientated stocks. But this trend appeared to come to a sudden end in September. To the casual observer, it seemed like a rather unremarkable month for global equity markets. The MSCI World was stag- nant at 0.21%. But underneath the surface a major shift took place: In the scope of just three days, momentum stocks plunged by 10% as investors piled their cash into value stocks. This is unusual, value stocks have


46 | portfolio institutional | November 2019 | issue 88


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