AllianceBernstein — Why Value WorksLindsay Paris
The Case for Investing in Undervalued Stocks.
For many decades, the value style has been one of the most successful ways to invest in equities; delivering handsome premiums to broader equity indices across regions. But in 2008, value investing experienced one of its worst periods ever and our portfolios under-performed. While a rebound has begun in 2009, investors may wonder whether their losses can be recovered by staying true to the value approach. In our view, a closer look at the basis of investing in stocks that are cheaper than the market when measured by price-to-book value, earnings, cash flow or revenues, suggests that value investing is likely to work as well in the future as it has in the past.