Enduring Value: Investing with a Margin of Safety
Value investing is a tried and tested approach that has delivered for investors over the long term. At State Street Global Advisors, the Fundamental Value Equity Team’s philosophy is relatively simple: we seek to buy stakes in good quality businesses for significantly less than they are worth. It’s a common-sense approach to investing where we manage risk by buying cheap stocks and give ourselves a margin of safety for when things go wrong.
Value investing has endured through the decades because it delivers by avoiding the bubbles and manias which can intermittently blind investors to risk. In fact, there have only been two periods of extreme dislocation where the Value style has struggled for any significant length of time. One was the internet bubble of the late 1990s — the so-called Dotcom boom. The other is the period since 2017 when abnormally low interest rates fuelled speculative bubbles in everything from growth stocks to private equity to cryptocurrency. Now that interest rates are rising, many of these risky bets have come unstuck. We have successfully pursued our approach to Value investing over many years. As the world returns to a more normal economic situation, we believe we can once again demonstrate the strength of our approach to stock selection.