Yann Giordmaina, Head of the value division. La Financière de l'Échiquier

Yann Giordmaina, Head of the value division. La Financière de l'Échiquier

Although value management has distinguished itself through its performance, it remains secondary in allocations. Yet it offers a differentiating approach.

This is a far from anecdotal anniversary that value investing in the stock market can boast. Since the Covid shock and the stock market low of 18 March 2020, the MSCI EMU Value index has rebounded by 160.9% in 5 years, outperforming the MSCI EMU index by 21.6 points (+139.3%)¹. The chronology of recent years calls for a reaffirmation of precisely what value management is: a long-term investment philosophy and not a stock or sector selection criterion, under the sole prism of macroeconomic cycle momentum or market timing.

Let's return to market trends and investors' cognitive reflexes. In the second quarter of 2018, the global economy was at a cyclical high point and, until autumn 2019, the market consensus feared a recession, particularly in industry. In an environment of then zero nominal interest rates, investment flows are massively directed towards "growth" and "quality" equities, for their protective nature and because they generally do well in monetary easing cycles.

The search for safe havens legitimately accelerated with the outbreak of the Covid crisis and the March 2020 market low, which may have led to significant allocation biases: buy positions on the sole altar of earnings growth visibility were favoured, building up in fine sometimes excessive overweights. The themes of luxury goods, pharmaceuticals in the wake of the promise of the hormone GLP-1, or AI, may have accentuated this phenomenon. Conversely, investors and allocators have largely stayed away from value management over the past five years and have consequently not benefited from the outperformance of discounted stocks.

A matter of company history, not headline style

With a little hindsight, this period provides an opportunity to reflect on the diversification of investment approaches and the way in which value management is approached. Combined with growth stocks, value has its rightful place at the heart of a portfolio, and this should be reflected in a constant allocation to value stocks. In other words, a long-term strategic vision, not a tactical one. Breaking with a few received ideas, such an approach considers that it is possible to identify undervalued stocks at all times, at any point in the cycle.

It is also wise to move away from the straitjacket of style that can definitively stamp this or that stock or sector profile. In fact, a dynamic reading of stock market trends shows that any stock can, for various reasons, show a valuation discount.

In short, knowing how to spot investment opportunities requires the most fundamental skills in equity management. Analysing the trajectory of a company, its income statements and the development of its businesses, to compare its intrinsic value with any inefficiencies in stock market valuations. Cultivate a contrarian psychology with regard to the abundance of market information. Finally, recognise the signs of disruption that will disrupt, or not, a business.

¹Source: Bloomberg. Data as at 18 March 2025. Net dividends reinvested.

Disclaimer:

Investing in the financial markets involves risks, particularly the risk of capital loss. The opinions expressed in this document are those of the fund manager. LFDE cannot be held liable for them under any circumstances.

This information is provided for information purposes only and, as such, does not constitute an offer to buy or sell a security, investment advice or financial analysis.