Is Value Investing Really Back?

Value investing is back. But is it really?

Jack Forehand showed that despite the impressive results over the last 12 months, there is more to the story than just value leading the charge. He writes:

When you adjust for quality and size, it turns out that value has not outperformed much at all off the bottom, even though many value funds have more than doubled the market.

Jack built a 3-factor portfolio over the last year and found that value gained an impressive 145.1% return, but low-quality wasn’t far behind at 132.6%, and small companies raced ahead, gaining 180.4%.

The stocks that have worked best over the past few months are re-opening plays. It just so happens that the companies that benefit from a reopening of the economy tend to fall into the value bucket.

So even if value’s resurgence might be overstated, there is still room for optimism for value investors. This chart from Joe Davis at Vanguard is stunning.

High-quality value stocks have lagged for so long that this could easily be the start of something bigger. Oooor the reopening is already baked in, and this was just one more series of false hopes in a long and painful decade. Given the long drought and the current momentum, I would think this has more to go. Just how much is the million-dollar question.