- The fund manages value equity portfolios for leading endowments/foundations and pension plans, and for individual investors from around the world.
- We found value held up better and long-term corporate profitability remained steady in past periods of higher inflation. Investors' focus should be on valuation.
- While the two previous low inflation environments saw period ending price-to-earnings multiples of cheap and expensive stocks that were within roughly +/- 15 percent of the start of the period, the most recent period has been far different.
- Turning to corporate profitability, we looked at the ROE of the market and found it was indistinguishable in low and moderate inflation environments, and roughly 150 basis points lower in high inflation environments.
- This value cycle has beendriven by extreme value dispersion between cheap and expensive stocks that wasa decade in the making and catalyzed by the attractive earnings growth profileof cheap stocks over the next several quarters.
For further details see:
Pzena Investment Management Q2 2021 Commentary