No qualifying author-owned investment thesis was confirmed in this post.
no investment thesis
Score9
Comments55
▶ Full Post Text
Value investors love to style themselves as the "adults in the room." While the crypto bros chase hype, we look at P/E ratios and cash flows. It’s a comforting narrative: *Be disciplined, and you will eventually win.*
But Aswath Damodaran (the "Dean of Valuation" at NYU) just published a paper that essentially nukes this narrative.
His research (*Value Investing: Investing for Grown Ups?*) shows that active value investors, as a group, have consistently underperformed the "less sensible" strategies they mock.
Here is why the three main "Value" strategies are breaking:
**1. The Lazy Screener (The Graham Disciple)**
* **The Strategy:** Buy low P/B or Low P/E stocks.
* **The Trap:** In 2026, screens are free and ubiquitous. The "edge" of finding a low P/E stock is gone. Today, a low multiple is rarely a mistake; it’s usually a proxy for distress or structural decline. You aren't buying value; you're buying traps.
**2. The Contrarian (The Knife Catcher)**
* **The Strategy:** Buy the biggest losers and wait for mean reversion.
* **The Trap:** This mathematically works over 5+ years, but almost no one has the stomach for it. Most "contrarians" fold after 12 months of underperformance. To win here, you have to be comfortable owning "unexcellent" companies that are likely facing lawsuits or bankruptcy.
**3. The Activist (The Wolf)**
* **The Strategy:** Buy a stake and force management to change.
* **The Trap:** It’s expensive. The average campaign costs $10M+. Unless the company is sold/acquired, the returns from operational "fixes" are statistically underwhelming.
**The "Buffett Fallacy"**
We all idolize Buffett, but we forget his edge wasn't just "picking cheap stocks." It was insurance float, private deals, and 60 years of compounding. Trying to replicate his returns by just buying low P/B stocks is like trying to play in the NBA because you bought Jordan’s shoes.
**The Verdict**
Value investing isn't dead, but "lazy" value investing is. If your edge is just "I look at P/E ratios," you are the yield.
*Source: Discussion of Damodaran’s paper in depth at* [*Jarvis Capital Research*](https://substack.com/home/post/p-186948536)
*Disclaimer: I used AI to make my points more concise*