In recent years, investors' decisions have primarily been guided by companies’ earnings growth prospects. In this context, there are promising opportunities to be seized by returning to an approach more focused on the value of publicly traded companies, particularly in Europe. For M&G Investments, this has been a long-standing conviction. "Although many believe the past decade hasn’t been favorable for value-driven investment strategies, our 'value' strategy, implemented since 2008, has achieved superior performances compared to major market indices," says Loïc Pouget, Associate Sales Director Belux at M&G Investments.
our 'value' strategy, implemented since 2008, has achieved superior performances compared to major market indices
A rigorous, sector-by-sector selection process
By adopting a purely bottom-up approach, M&G Investments’ teams begin with a detailed analysis of the valuations of companies available on the market. They select those that fall within the cheapest quartile of the market and present opportunities for recovery. "This analysis is conducted sector by sector to thoroughly evaluate the potential of each player. In this way, we can build a solid and diversified portfolio by considering assets that offer the most interesting prospects while avoiding those in decline," continues Loïc Pouget. This sectoral approach ensures strong diversification, free from style-related biases, enabling adaptation to both favorable and adverse market conditions.
"In recent years, investors have shunned the 'value' approach, favoring assets that thrive in a low-interest-rate environment and come with compelling stories. In this context, valuation gaps between the cheapest and most expensive market stocks have reached a peak. However, the current environment could prompt investors to reconsider their approach. We’re already seeing this in the performances of certain stocks this year, such as L’Oréal, LVMH, and Pernod Ricard, compared to others like Siemens Energy or the banking sector, which, in our view, has been delivering strong performances since the start of the year," comments Loïc Pouget.
In Europe especially, there are numerous companies with strong potential, solid foundations, quality management, and attractive pricing
Europe: more conducive to a value approach
For M&G Investments, there is genuine interest in looking beyond the major stocks that dominate attention. "In Europe especially, there are numerous companies with strong potential, solid foundations, quality management, and attractive pricing," assures Loïc Pouget.
According to him, the prevailing perception of value investing is often shaped by the U.S. market, where growth stocks, particularly in the tech sector, continue to dominate. However, the European market presents a different landscape, potentially providing a more suitable backdrop for the value investing style.
"In Europe, there is a wide range of players capable of delivering sustained performances over time and increasing their value, even in challenging economic conditions. These are the opportunities we aim to identify," explains Loïc Pouget.
Resilience and performance
These 'value' assets can offer investors interesting performance prospects, often uncorrelated with the volatility of international markets. "The approach requires rigorous active management, with a disciplined sell strategy, particularly when these assets evolve into growth stocks or if their growth stagnates, turning into value traps."
"Our 'value' approach over the past three years has outperformed major European indices. For investors' portfolios, it provides greater resilience, as seen in 2022, while still supporting performance. We also see this value-driven opportunity in U.S. and emerging markets," concludes Loïc Pouget.
For more information,
The views expressed in this document should not be taken as a recommendation, advice or forecast. We are unable to give financial advice. If you are unsure about the suitability of your investment, speak to your financial adviser. M&G Luxembourg S.A. Registered Office: 16, boulevard Royal, L-2449, Luxembourg.