3 Reasons Why Value Investing Is Dead Since 2010

RIP value investing… 2008 – 2010…

Don’t get me wrong, I totally believe in value investing and its long-term benefits as a simple and effective way to grow your wealth. 

However, there are 3 main reasons why value investing (or how it is used) is not applicable in today’s market (actually it is dead since 2010)

REASON NO 1: VALUATION IS "RICH"

Value investing tries to buy good business at undervalued price.

By any matrix, the World biggest stock market (S&P500) is overvalued. 

Just look at the Shiller’s PE which takes into account inflation, it is currently standing at 28.95 with a Mean:16.65, Median:15.74,Min:4.78(Dec 1920) and max:44.19(Dec 1999).

Market is at an all-time high after a 10 yr bull run streak.

Warren Buffett, who popularized value investing, declared in June 2019.

• Berkshire Hathaway, held a record $122 billion in cash at the end of June 2019.

• The conglomerate’s cash is worth nearly 60% of its portfolio of public companies, the largest proportion since before the financial crisis (2008).

Even the guru himself is finding it hard to deploy cash based on value investing methodology.

REASON NO 2: YOU CANNOT SHORT THE MARKET USING VALUE INVESTING

Value investing advocates buying low and selling high. 

You buy when the valuation is low and sell when the valuation is high. 

At today’s market, there are very few, if any, opportunities to use this strategy.

As a value investor, you can only wait for a big market crash to enter when the valuation becomes attractive.

Value investing tries to buy good business at undervalued price.

By any matrix, the World biggest stock market (S&P500) is overvalued. 

Just look at the Shiller’s PE which takes into account inflation, it is currently standing at 28.95 with a Mean:16.65, Median:15.74,Min:4.78(Dec 1920) and max:44.19(Dec 1999).

Market is at an all-time high after a 10 yr bull run streak.

REASON NO 3: THE EMERGENCE OF ASSET-LIGHT COMPANIES

The Oracle of Omaha, Warren Buffett himself said this during Berkshire AGM in 2018: 

“The four largest companies today by market value do not need any net tangible assets (MSFT, AMZN, AAPL, GOOGL). They are not like AT&T, GM, or Exxon Mobil, requiring lots of capital to produce earnings. We have become an asset-light economy.”

Taking a look at the top 10 Market Capitalisation companies listed on the US, only Berkshire Hathaway and Johnson and Johnson relies on physical assets to generate earnings. 

The other 8 are all companies with an asset-light model. 

Using Net Asset Value (NAV) to determine the valuation with these companies no longer works.

So... How Can You Profit From Current Markets?

1. Do shorter term trading using Technical Analysis to guide your entry and exit

2. Using Options to long and short the stock accordingly with limited risk.

3. Use stop-loss and portfolio management methods to maintain a high expectancy of winning by fine-tuning your risk-reward ratio and win-loss ratio

Get Your "Free Financial Freedom Blueprint" TODAY

  • Discover the proven methodologies use in Ultimate Investing to achieve consistent ROI
  • Real case study and step by step instructions
  • Additional resources to get accelerate your success journey