Value Investing Had One of Its Worst Periods in History | Here is What Data Tells Us Comes Next
In this episode, Jack and Matt dive deep into the state of value investing with special guest Tobias Carlisle, founder of the Acquirers Funds and author of multiple books on value investing. In this insightful conversation, they look at some of the most insightful clips from our guests including Cliff Asness, Aswath Damodaran, Kai Wu, Scott McBride, Larry Swedroe and Dan Rasmussen. They explore why value investing has struggled in recent years, examine value spreads, and discuss whether this time is truly different. Tobias offers a compelling case for why value investors might finally see their patience rewarded. Topics covered: • Value spreads and how they've evolved from historically consistent ranges to unprecedented widths in recent years • Why value doesn't necessarily need catalysts or multiple expansion to generate returns • The impact of intangible assets on value metrics and whether traditional valuation methods need updating • How indexing and passive investing have affected market dynamics and created potential opportunities • The underperformance of international stocks compared to US markets and whether that trend might reverse • Why the "Magnificent 7" tech stocks have defied mean reversion and if that can continue • How to maintain conviction as a value investor during extended periods of underperformance 0:00 Intro - Jack and Matt introduce Tobias Carlisle, founder of Acquirers Funds and value investing author 2:03 Value spreads - Cliff Asness clip on how value spreads have changed throughout history 4:18 Toby on value spreads - Exploring why value hasn't worked since 2012 and why spreads are incredibly wide today 11:29 The value trap - Toby reflects on missing signals when value itself became overvalued in 2015 12:27 Does value need a catalyst? - Scott McBride clip on what makes value stocks work 14:09 Toby on multiple expansion - How to invest without relying on multiple expansion 19:52 Intangible assets - Kai Wu clip on how ignoring intangibles impacts value investing 21:41 Toby on intangibles - Why flow metrics like operating income are better than book value 25:42 First principles - Why Toby keeps returning to first principles during value's underperformance 28:15 Factor investing - Aswath Damodaran clip questioning whether simple factor investing can still outperform 32:44 Toby on factor complexity - Why simpler investment approaches might still work when the cycle turns 39:22 Mean reversion - Larry Swejo clip on why high growth rates eventually revert to the mean 42:21 Toby on mean reversion - How even the Magnificent 7 will eventually face lower returns 47:43 Indexing effects - Rob Arnott clip on how indexing pushes up valuations of index members 51:23 Toby on indexing - How value investors can benefit from finding quality companies ignored by index flows 55:38 International stocks - Dan Rasmussen clip comparing today's market to the late-90s tech bubble 1:01:04 Toby on U.S. dominance - Why U.S. stocks have outperformed but why that may not continue forever 1:07:13 Wrap-up and thanks