It Costs Lots to Invest In Stocks That Look Cheap
Many traditional value advocates are publishing material that points out the potential future benefit of value investing. It makes sense; they certainly cannot use recent performance when selling their investment process. This claim that “value is exceptionally cheap today” typically comes in the form of measuring value spreads, which divides a universe of stocks based on price multiples, then compares the current gap between low and high multiple stocks against historical observations. When studied with an intrinsic value framework, however, we note a mild valuation preference towards value stocks, although the historic nature of this claim is not observable.
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