Ariel Investments’ Charles Bobrinskoy on markets: 'This has been a terrible 15 years for value'

Summary

Charles Bobrinskoy of Ariel Investments argues that after a terrible 15 years for value, value stocks still have room to outperform growth. He warns overall markets are expensive and specifically sees bank stocks like Goldman Sachs and Morgan Stanley as overvalued on price-to-book. He also cautions that heavy AI-related capex is inflating reported EPS relative to cash flow.

• Value has underperformed growth for 15 years and now looks reasonably priced while growth remains overpriced.
• History shows value beats growth over long cycles, suggesting a long catch-up runway.
• The broad market is expensive, with high valuations historically preceding poor forward returns.
• Bank stocks such as Goldman Sachs and Morgan Stanley are trading near 3x book value, a sell signal per traditional measures.
• Reported EPS may be overstating true cash flows due to massive data center spending with unproven returns.
• No explicit portfolio allocation or specific index shorts were recommended beyond the value preference.