In a world dominated by fast-growing tech stocks and meme-driven rallies, value investing often gets cast aside as outdated or boring. But history—and hard data—tell a different story. For patient investors focused on fundamentals, value investing remains one of the most powerful strategies for long-term wealth creation.
Here are three reasons why value investing still works, especially when it feels like it doesn’t.
1. Value Investing—The Math Is on Your Side
At its core, value investing is about buying quality businesses for less than they’re worth. This margin of safety lowers the bar for success. You don’t need a perfect macro forecast—you just need prices to eventually reflect intrinsic value. And over time, they usually do. Academic studies from Fama & French have shown that value stocks outperform over long time horizons, especially when starting from periods of underperformance.
2. Markets Overreact—And That’s an Advantage
Markets are emotional. Fear and greed often drive stocks to extreme highs or lows. Value investors exploit this by leaning into fear, buying when others sell, and holding through the noise. When pessimism dominates the headlines, prices often disconnect from fundamentals. For those willing to be contrarian, these are the moments when future returns are quietly compounding.
3. Reversion to the Mean
The growth vs. value pendulum never swings in one direction forever. While growth stocks may shine during certain market phases—such as low-interest-rate environments—value stocks tend to shine during recoveries, inflationary periods, and when interest rates normalize. The post-2000 dot-com crash and post-2008 recovery are prime examples. Each time, value came roaring back.
Bottom Line:
Value investing isn’t about chasing the latest trend. It’s about staying grounded in business fundamentals, having the patience to ride out cycles, and being ready when opportunity strikes. That’s why at The Prudent Speculator, we continue to invest in undervalued stocks with strong long-term potential—even when it’s not fashionable.
Kovitz Investment Group Partners, LLC (“Kovitz”) is an investment adviser registered with the Securities and Exchange Commission. This report should only be considered as a tool in any investment decision and should not be used by itself to make investment decisions. Opinions expressed are only our current opinions or our opinions on the posting date. Any graphs, data, or information in this publication are considered reliably sourced, but no representation is made that it is accurate or complete and should not be relied upon as such. This information is subject to change without notice at any time, based on market and other conditions. Past performance is not indicative of future results, which may vary.
