Some have argued that value investing is dead. Growth names have considerably outperformed. Passive (index-linked) investments now represent the majority of ETFs and mutual funds. These two phenomena have been reinforcing because the growth companies—pricier companies whose valuations tend to overshoot as growth is prized—represent such a disproportionate portion of major indices.

To us, the answer is simple; by employing the tenets of value investing we can buy high-quality undervalued securities that are being ignored, while avoiding poor quality or expensive ones.

Our expectations are already lowered for general market returns. When expectations are this high, our fear of losing overcomes any fear of missing out. We still see a high probability of an economic downturn and remain defensively positioned for that reason as well, and we continue to hold some cash and hedges that should protect our portfolios when everybody else’s expectations are lowered.