At the 2025 Ben Graham Conference, Catherine LeGraw, CFA, Portfolio Strategist at Grantham, Mayo, Van Otterloo & Co. LLC (GMO), highlights a significant opportunity in value investing today, noting that value is currently trading at approximately a 40% discount to its typical fair valuation and is more than 60% cheaper relative to growth. Despite this, she cautions against simply buying traditional value indexes, stating that value has not performed well when sorted by traditional price metrics, yielding "nothing marginal" in excess returns over the past 40 years.
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2025 Ben Graham Conference - GMO's Catherine LeGraw
LeGraw identifies three main problems with traditional value indexes:
1. Reliance on Reported Financials
Traditional value indexes depend solely on backward-looking, reported financials which can be misleading or meaningless and often do not reflect true fundamentals.
Distortion by Intangible Assets:
Many major companies' financial statements, such as Apple's, are problematic. Apple's reported Return on Equity (ROE) of 150% per year is "just not possible". This is because Apple's balance sheet significantly underrepresents its true assets, with about 80% listed as cash and current assets and only a "tiny little sliver" dedicated to intangible assets. Crucially, Apple's brand value, network effects, patents, and underlying technology are not recognized on its balance sheet.
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