Times, they will be a’changin’, or that’s what one value investor says. At Value Invest New York 2025, David Iben of Kopernik Global Investors explained that we’ve been taught that what works will always work, but times change. He also sees warning signs in the market that suggest change is coming.
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Beware perception
Iben believes things will be fun for value investors going forward. Currently, he said the issue is perception, but over the long run, the markets are a weighing machine that sorts itself out through the various cycles.
A few months ago, Iben felt the markets were starting to shift into a better position for value investors, but growth and momentum have taken over again. Describing growth investors as “the Jetsons,” he added that value investors are “the dung beetles,” dealing with crap all day long.
However, Iben feels investors should look beyond skin-deep at value investing. Referencing the movie Shallow Hal in the title of his presentation, he spoke about “very shallow people just chasing after what they’ve perceived to be the great things,” which he said “perfectly captures the zeitgeist of the market.”
“No one even considers intrinsic value,” Iben said. “I think you've seen these things with people throwing out the Intelligent Investor. Price doesn't matter anymore. Let's start with the conclusion of this thing. As you've already heard earlier, things are cyclical. Things change. I think people are wrong to think that value is dead.”
Value investing should never go out of style
He questioned how the idea of buying something for less than it’s worth can be a bad strategy.
“Value is not about buying crap and hoping it goes back up,” Iben said. “Value’s about buying good things that have intrinsic worth at a discount.”
Comparing 1972 and 1999 to today, he sees now as an opportunity. Although the market is expensive, Iben thinks it’s great because there are some very good companies “being sold for nothing.”
He noted that many investors have said that the stock market has never been as expensive as it is now on a price-to-book basis, price-to-sales basis, replacement value and other measures. However, Iben added that some people who have been doing the math around the indexes are leaving out companies with negative earnings altogether. Others minimize them to 40 times earnings.
“They say, to calculate things right, I think it's closer to 100 times earnings might be right,” Iben said. “Might not, but I think the market might be a little more dangerous.”
Shallow markets
He also said the market is shallow because of the “staggering” amount of money being poured into a small group of stocks.
“Talk about shallow, you've got Microsoft, Nvidia and Apple being worth more than any country on Earth, the entire stock market, not going to Japan or the U.S.,” Iben said. “That's never worked out in the past. The U.S., great country, but to be worth two to three times everybody else put together, I think that's a caution sign.”
Thus, he said it all goes back to perception, and we’re currently in a market of extreme perceptions. When Iben entered the business many years ago, investors felt that small stocks were the place to be, so they sold at a big premium.
However, small stocks now trade at a big discount, flipping that past perception on its head. Iben said the change happened because the world and growth are becoming global. Thus, investors want to own international companies.
The problems with perception
While Iben does agree that such companies may deserve a premium, he suggested that the premiums maybe shouldn’t be as high as they are. It’s the result of value going nowhere for a decade and a half while growth does very well.
However, Iben noted that value has outperformed growth in almost every decade for the last 150 years before the last one and in other cases, like the 1990s. He suggested that maybe this will change back.
Turning to inflation, Iben said everyone saw that it was dead, and then we had a target. We wanted to rise to 2%, but 2% was the ceiling. Now 2% appears to be the floor.
“We just don't want to take the risk that inflation drops at 2%,” Iben said. “I think Jim Grant had pointed out that 2% means in an average person's lifetime, prices go up five times, and that's a massive loss of purchasing power. That's the target.”
Switching to commodities, he pointed out that commodities have been down since 2013. In the past, commodities were the way to protect against inflation and benefit from scarcity. Iben added that inflation hasn’t gone down in a single year of his lifetime.
He said the population explosion should be good for commodities, but the perception of commodities has shifted from they’re good to they’re bad.
“Now, I'm not here to say the market's wrong to perceive beauty where they see beauty,” Iben added. “These are great companies, and they're going to continue to be great companies, I think. But what price do we pay for beauty? Because it might be that we're misperceiving it. It might be that it's fleeting, it might be that it's really great, but it's still overpriced at those valuations.”
Beware disruptors
Thus, he always tells people that while disrupting companies are very exciting, the disruptors often become the companies that are disrupted in the future. Iben has seen this happen many times in his career.
“Will this time be different?” he asked. “I think it’s interesting, with Google, just in the last couple of years, it seemed invincible. Now, I think most people I know switch to Perplexity or ChatGPT or other things. Times change. So we've all been programmed that what goes up must go up, and what goes down stays down, and that value deserves to be cheap, and the winner is price doesn't matter. Let's reprogram that.”
