Performance and valuation of value vs. quality/growth is extreme. As is investor positioning.
• The value of quality strategies is in the 99th percentile
• The valuation gap between the most expensive and cheapest stocks in the market is approaching the extreme ‘tech boom’ levels of around 2001
• Mean reversion is at a 30-year low. This means that the winners keep winning and the losers keep losing, irrespective of valuation
• Money flows to ‘winning funds’ have also played a major part in this phenomenon
• Many market participants have never seen value outperform during their careers and this could be part of the current problem
But in recent weeks, value stocks have bounced back strongly and this looks set to continue. We examine the factors that have prompted this huge turn around and discuss why now is the time to buy value.