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Rekenthaler Report

Why Value Stocks Have Disappointed

It's the economy, stupid!


Tough Times
Tuesday's column covered value stocks' long dry spell. After reliably and consistently beating growth companies for decades, lower-priced stocks have lost their edge. Since the mid-1990s, value stocks have roughly matched growth stocks' returns, and during the trailing 10-year period they have lagged. So much for the notion of a "value premium."

In his most recent quarterly letter, Jeremy Grantham, co-founder of the money-management firm GMO, discusses why value investing has struggled. The letter is unusual in that Grantham is himself a value investor, and his organization's funds are suffering net redemptions. Fund executives who find themselves on the wrong side of the financial markets tend to defend their investment approach, not question it.

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