The underperformance of value investing could simply be attributed to the absence of tech stocks in the portfolio.
No profits. Cash burning. Or simply overvaluation. Value investors have been keeping their capital safe by avoiding such stocks for decades. Until now, it seems you get rewarded for doing opposite to whatever principles value investing espouses.
Has the world changed? Should you change the way you invest or stick to the principles because there are just too much hype going on?
The world always changes but human behaviour doesn’t.
We moved from horse carriages to cars to driverless cars. The economic value has been captured by different companies and investing methods have to adapt accordingly. But we still get booms and busts because humans’ greed and fear didn’t go away, despite centuries of evolution.
Technology has really redefined the economics and value investors need to adapt. Now it is about monopoly, hidden revenue, asset-lightness, and negligible marginal cost.
But I also believe that the market is exaggerating the value of tech stocks.
Simply put – adapt but be careful because the bubble is still brewing.