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The Peaceful Transition of Power?

17 December 2020   |  

With the US election almost officially behind us, it’s an opportune time to discuss politics. Ha! Just kidding. Let’s talk value stocks, which peacefully assumed power on November 9, 2020, with Pfizer’s vaccine announcement No shots were fired. Perhaps a few algos got whipsawed, but that’s about it. The change in market leadership hardly registered to the outside world, nor should it have, given the relentless 2020 news cycle. But, dear reader, be assured value investors the whole world over noticed value’s massive outperformance versus momentum, and you should, too. The 10-sigma event (how many of those happen a month, by the way?) stands tall, like a shiny monolith in the desert. These mysterious monoliths are rumored to have last appeared around 27 BC in Rome—which is not only when Octavian completed his arc to become Emperor Augustus and end the Republic, but also when value last outperformed.

Exhibit 1: Value’s Recent Inauguration

Source: Bloomberg. Bloomberg US Pure Momentum Portfolio represents the return of momentum factor from Bloomberg’s US Equity model. This factor separates stocks based on their one-year price performance. Bloomberg US Pure Value Portfolio represents the return of value factor from Bloomberg’s US Equity model. Value factor aims to differentiate “rich” and “cheap” stocks. Bloomberg US Pure Growth Portfolio represents the return of growth factor from Bloomberg’s US Equity model. Growth aims to capture companies’ historical and forward-looking growth.

I said I wouldn’t talk politics, but Augustus surely informed the mind of the US’s very own George Washington. The original George W. worried about a partisan spirit “having its root in the strongest passions of the human mind” and therefore resulting in the “alternate domination of one faction over another, sharpened by the spirit of revenge … [which] is itself a frightful despotism .” You know what? He’s right. After a decade of putting up with speculative nonsense, the Value Party wants revenge! You buy DoorDash with a $60bn enterprise value or similar “tech” companies at 60X sales, you may get what you deserve! I’ll take you behind the curtain here for some proprietary #analysis: If DoorDash is worth $60bn dollars, a well-capitalized and profitable value stock should be worth about 3 Teslas and a 17th century tulip . I realize my strongest passions on this topic would disappoint America’s first president, but I’d like to believe it’s value’s turn to dominate a bit.

Alright, on to nicer stuff. I was originally planning on doing a podcast with Rashida Jones to share my favorite books, charities and discuss topics of interest, but Bill Gates beat me to it. Maybe next year. In the meantime, if you’re looking to add a little goodness to the world this holiday season, here are some organizations the US Value team personally supports where donations go a long way*:

And if it’s been a long year and you just need a laugh, check out the Smartless podcast with Will Arnett, Jason Bateman and Sean Hayes. Truly hilarious and a great guest lineup.

Last, if you’d like to learn more about the birth of the United States, check out this free Yale course on the American Revolution taught by the great Joanne Freeman.

Stay safe, stay healthy, and enjoy the holiday season!

*Artisan Partners does not endorse or recommend the organizations mentioned. Please carefully assess whether any organization to which you choose to donate meets your personal charitable giving criteria.

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