Following a long run of under-performance of value against the cap-weighted benchmark and against growth, it is disappointing to report that January 2020 was an exceptionally bad month for value.


As has been the story for a while now, stocks which look very expensive have run strongly in January with renewed optimism around global economic growth and reduced geo-political uncertainty. This has been reflected in growth sectors like IT and Health Care, which look very expensive on all of our measures.

Also, we see it in countries which are heavily biased towards these metrics, most notably, the US. We are quite deliberately underweight in these as we believe their fundamentals do not reflect their market valuations.

Stocks we view as expensive (based on Price to Book, Price to Sales, Price to Cash flow and Dividend Yield) such as Microsoft, Amazon and Tencent have run strongly in January as well. At the same time, stocks we view as cheap, based on the valuations mentioned above, have sold off somewhat, but the balance of drivers for January has been heavily weighted towards the movement of the expensive stocks.