Value investing has become everyone’s least favorite strategy over the course of the current bull market, and not for no reason: those stocks traditionally considered “value stocks” have generally under-performed compared to the broader market. Perhaps this is a result of the times we live in and the unforgiving ethos that now rules us: winners win, losers lose, momentum is everything, and devil take the hindmost. Supposing for the moment that all of that is true, it means that stock prices are too high for those companies currently in favor and too low for companies that have fallen out of favor — even in cases when such companies have good long-term prospects.
That said, my own understanding of value differs somewhat from the word’s common usage and aligns more closely with the ideas put forward by Benjamin Graham, the father of value investing. This understanding includes rapidly growing companies, as well as companies that have fallen on hard times. They key, in each case, is that the company’s growth, balance sheet, and long-term prospects justify its valuation, whether that valuation be high or low.
Remember to treat these ideas as just that, ideas, and do your own research before making any investment decision.