Every so often, value investors ask the same question. It usually shows up after a long stretch where patience looks like a mistake. You are holding cash, waiting for prices to come back to earth. Meanwhile the market keeps moving without you. People around you talk about easy gains. You start wondering if you spent years learning a craft that the market no longer rewards. I do not think value investing is dead. But I do think some versions of it are less effective than they used to be. And I think the part that still works requires more humility than confidence.
Because the truth is simple: markets can stay out of sync with our models longer than we can stay emotionally steady.
What I mean by value
Value investing, in my mind, is not a set of ratios. It is a discipline: trying to pay a sensible price for a business based on what it can reasonably earn over time, while leaving room for being wrong. That last part matters more than most people admit. Estimating intrinsic value is not precise. Forecasting cash flows is not clean. Even when you do the work honestly, you are still guessing inside a range. Value investing is not about certainty. It is about having a process that is less wrong than average, often enough, over a long period of time.
Why it feels hard lately
Since the post 2007 period, growth has meaningfully outpaced value in global developed markets. One way to see it is in long window annualized returns: some summaries using MSCI World style indexes show growth beating value across the last 10 and 20 years by a wide margin.
Even Berkshire, which many people treat as the cleanest long term example of value discipline, has had long windows where it roughly matched or slightly trailed the S&P 500. It is a reminder that even the best approach can spend years looking ordinary.
A few structural shifts likely contributed:
First, the last decade rewarded businesses where most of the payoff sits far in the future. When the cost of capital is low and optimism is high, investors naturally pay up for long duration stories. That is not irrational. It is just risky when expectations become the product.
Second, passive investing has grown. I do not think this “breaks” markets, and I am careful with that claim. But it likely changes the texture of the market. More money flows based on inclusion and weights, not based on valuation. That can amplify what is already working, especially when a small set of companies dominate index returns.
Third, accounting struggles with the modern economy. Many durable businesses invest in intangibles: software, brand, distribution, data, R&D, human capital. A lot of that is expensed, so the reported numbers can make these companies look more expensive than they economically are, or sometimes the opposite. Either way, the old shortcuts become less reliable.
And finally, incentives matter. Many professionals cannot afford to be too different from the benchmark for too long. That pressure can keep crowded trades crowded. It can also keep “boring” opportunities ignored longer than you would expect.
None of this means value will not work again. It just means value investors should expect longer winters and fewer easy screens.
What keeps it worth doing
What keeps it worth doing, at least for me, is that the craft compounds in two ways.
Your capital compounds when you are roughly right and you hold long enough. But your judgment also compounds if you keep learning and keep refining your behavior. Most of the game is staying rational when the crowd is not.
The goal is to be right a bit more often than you are wrong, and to be wrong in ways you can survive. It is mostly a quiet bet on compounding, temperament, and time.
The mistake I try not to make
When value underperforms, it is tempting to turn it into an identity problem. People start saying the market is broken. Or that everyone else is irrational. Or that they are early and the world will eventually realize it. Sometimes that is true. Often it is not.
Sometimes a stock is cheap because the business is deteriorating. Sometimes it is cheap because the balance sheet is fragile. Sometimes it is cheap because you have not understood what actually matters in that industry. If value investing has a failure mode, it is confusing “low price” with “low risk,” and confusing “contrarian” with “correct.”
What still seems durable
The version of value investing that still makes sense to me is mostly about reducing the odds of a permanent mistake.
- You care about price, but you care just as much about durability.
- You want businesses that can survive bad luck and bad cycles.
- You want management teams that allocate capital well.
- You want balance sheets that can take a punch.
- You accept that the market can ignore value longer than you would like.
- You keep position sizing small enough that you do not need to be right on timing.
This approach often looks less like buying the cheapest companies and more like refusing to overpay, while occasionally finding mispriced pessimism. It is mostly an exercise in avoiding big mistakes.
Value investing has always moved in cycles. It tends to look worst near the end of long, optimistic markets, because prices can keep rising even when future returns are being pulled forward. Then something changes. Rates move. Liquidity tightens. Earnings disappoint. Narratives lose their grip. 2022 was a good reminder. Growth fell much more than value that year, and the gap was large enough to matter. The exact numbers vary by index and region, but the pattern was clear: when the market started repricing duration risk, value held up far better.
So is it dead?
I do not think so. I think what is dying is the lazy version: buying something because it looks cheap on a single metric, assuming mean reversion will arrive on schedule, and calling that a strategy. Value investing, as a craft, is still alive. But it demands a higher bar now. It asks you to understand what a business is actually building. It asks you to admit what you cannot know. It asks you to hold your process through long stretches where the scoreboard is unflattering. And it asks you to design a life where you do not need the market to validate you every quarter. The hardest part is not finding value. It is living with uncertainty while you wait.
The question to ask is: can I practice a style of investing that I can stick with, ethically and emotionally, for decades?
If the answer is yes, value investing is not dead. It is just not a shortcut.