Value vs Growth Bibliography
Here is a list of the articles that have informed my thinking about value vs growth (see also these posts).
- ‘What Were You Thinking?’(Felder, October 2017)
- It’s All About the Style – Value vs Growth (October 2019)
- Is (Systematic) Value Investing Dead? (AQR, May 2020)
- Value: If Not Now, When? (GMO, Q3 2020)
- Market inefficiency, liquidity flywheels, asset class arbitrage, and Hong Kong Land (LT3000, July 2020)
- Unravelling value's decade-long underperformance (and imminent resurgence) (LT3000, November 2020)
- Pockets of the stock market are in a bubble. It's okay to just say it. (January 2021)
- Waiting for the Last Dance (GMO, January 2021)
- Reports of Value's Death May Be Greatly Exaggerated (Research Affiliates, January 2021)
If you read only one of these links, a very interesting one would be Lyall Taylor's essay about liquidity and redemption"flywheels":
the worse value is performing, the closer one is to the end of a liquidity flywheel bubble cycle (value had a woeful time in 1999, for instance), because value is the 'anti-bubble' expression - a Newtonian equal and opposite reaction - of liquidity flywheels driving bubbles elsewhere in markets. It is redemption flywheels that drive value opportunities, and redemption flywheels are often the result of investors pulling money out of unpopular areas of the market in a rush to get exposure to hot areas of markets
Lyall’s liquidity and redemption flywheel theory would mean that instead of a bubble making it so that you have to sit on your hands, a bubble causes the tide to go out from investments that are “cold” and we should be looking for those. Based on the theory, they would be investments that had done poorly recently for whatever (possibly idiosyncratic) reasons of their own and suffered a positive feedback loop of selling.
His theory implies that the very end of a secular trend in growth vs value would be a crescendo of selling in some areas (that creates the "value") and buying in the other areas (momentum ones, which become very overvalued).
And then after the crescendo, the trend would reverse sharply.
Is this what we are seeing? Is his theory correct? Here are some example comparisons of "growth" and "value" investments: Russell growth vs value ETFs, NASDAQ vs community banks, Chipotle vs Altria.
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Back in October of last year, I had the pleasure of discussing the “generational opportunity in energy stocks” with Leigh Goehring. At the time, he made a very compelling investment case for the energy sector and in just the five months since then it has nearly doubled in value. Leigh and his firm still believe energy offers compelling value but to truly appreciate it, it helps to also understand the related bubble in both renewables and electric vehicles. In this conversation, Leigh’s partner Adam Rozencwajg shares his views on the mania in these so-called green energy stocks, outlining why renewables and EVs are not the panacea for climate change investors believe them to be and why, ironically, the best way to profit from the transition to green energy may be in the very stocks ESG investors are shunning today.
https://thefelderreport.com/2021/03/10/adam-rozencwajg-on-the-speculative-mania-in-green-energy-stocks/
The “big market delusion” is when all firms in an evolving industry rise together, although as competitors ultimately some will win and some will lose.
The electric vehicle industry, with its astronomical growth in market-cap over the 12 months ending January 31, 2021, is a prime example of a big market delusion.
In the highly competitive and capital-intensive auto industry, the January 2021 valuations of electric vehicle manufacturers are simply not sustainable over the long term.
https://www.researchaffiliates.com/en_us/publications/articles/826-big-market-delusion-electric-vehicles.html
The @FTAlphaville put together a tracker of all the EV stocks
https://docs.google.com/spreadsheets/d/1nDqrN9ZLdCX_-2Hg6Outf8pMOrNZpPoooqMMR6TwvvY/edit#gid=0
There have been some 300+ car manufacturers in the United States.
So far, all but Ford and Tesla have gone bankrupt, at one time or another.
It's a tough business.
Beginning in 1899, Packard built luxury cars for kings, princes, bank presidents and movie stars.
In the 1920s, its cars cost five-hundred-thousand dollars each, in 2021 dollars.
The 1929 stock market made the high-luxury market too small for Packard to survive by building ultra-luxury cars
So it entered the Buick-Oldsmobile-Pontiac-Lincoln market with cars no more impressive than Buick-Oldsmobile-Pontiac-Lincoln cars.
The competition in a market segment packed with competitors was too intense for Packard.
It stopped building cars in 1958.
Tesla is repeating the Packard experience.
It is going from a low-competition market to a high-competition market, building un-needed cars in a market packed with cars that have better build quality.
https://schrts.co/ZRGKuXXx
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