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Rekenthaler Report

4 Questions (and Answers) About Value Investing

Will the ride continue?

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Robert Huebscher of Advisor Perspectivesan online publication with many fine (and free!) articles, recently posed four questions about value investing. He offered his own answers, which are sound and which I recommend that you read, but he also wondered about my thoughts. Here goes.

Is there an economic reason why small-company and value stocks have performed well historically?
(For clarification: The tactic of investing according to a single characteristic, such as the company being small or its shares trading at relatively low price multiples (that is, value stocks), has many names. The approach may be called purchasing anomalies, factors, or risk factors. Recently, it has been dubbed smart beta. As that reeks of smart marketing, Morningstar prefers instead the term strategic beta. Anomalies, factors, risk factors, smart beta, strategic beta ... different ways of saying the same thing.)

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John Rekenthaler does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.