Rob Arnott: Out-of-Favor Value Stocks Set to Outperform Next Five Years
A turnaround in the outlook for value would mark a stark change from the recent past. Rob Arnott explains why this is likely in an extended Q&A. By Robert Stowe England Value stocks have been underperforming the market for most of the last 12 years. Their recent performance relative to large market cap benchmarks is well below historic norms. This might lead investors to think they should avoid this sector. Think again, suggests Rob Arnott, chairman and founder of Research Affiliates of Newport Beach, California. “When value gets as cheap as it is now in the U.S., historically it has beat growth by 4% a year over the next four to five years,” Arnott says. This projection comes with roughly a 5% uncertainty factor, which means it could be 5 percentage points higher or lower. That would mean “somewhere between zero and 10%,” Arnott says. “Oh, I’ll take that bet. The low end of the spectrum of the range is zero.” Emerging market value is even cheaper