Does value investing still work?

FOR A MOMENT this week investors could afford to ignore stockmarket superstars like Amazon and Alibaba. As news of a vaccine broke, a motley crew of more jaded firms led Wall Street higher, with the shares of airlines, banks and oil firms soaring on hopes of a recovery. The bounce has been a long time coming. So-called value stocks, typically asset-heavy firms in stodgy industries, have had a decade from hell, lagging behind America’s stockmarket by over 90 percentage points. This has led to a crisis of confidence among some fund managers, who wonder if their framework for assessing firms works in the digital age (see article). They are right to worry: it needs upgrading to reflect an economy in which intangibles and externalities count for more.