The Quality-Value Tug Of War

The Quality-Value Tug Of War by Richard Rooney, Burgundy Blog

[klarman]

By most accounts, the last few years have been a very tough time for deep-value investors. Persistent slow world economic growth and prevailing uncertainties about fundamental macroeconomic issues like the strength of the world financial system, the ability of central banks to ward off deflation, the growth of the Chinese economy and the survival of the Eurozone have led to enormous risk aversion among equity investors. This has meant that the traditional arbitrage of very inexpensive stocks, particularly in the cyclical area of the market, has not been taking place.

The flip side of that risk aversion has been a very high preference for quality among investors. Perennially profitable...