Is value investing dead?

The question comes up for me every few years, usually after a stretch where patience has looked like a mistake. You are holding cash. 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 think some versions of it are less effective than they were, and the part that still works requires more humility than confidence.

What I mean by value

Value investing, to me, is not a set of ratios. It is a discipline: trying to pay a sensible price for what a business can reasonably earn over time, while leaving room for being wrong. That last part matters more than people admit. Estimating intrinsic value is not precise. Forecasting cash flows is not clean. Even when you do the work honestly, you are guessing inside a range. The point is having a process that is less wrong than average, often enough, over a long period.

Why it feels hard lately

Since 2007 or so, growth has outpaced value in most developed markets, and over 10 and 20 year windows the gap is wide. Even Berkshire, which a lot of people treat as the cleanest long term example of the discipline, has had stretches where it roughly matched or trailed the S&P 500. Even the best version of an approach can spend years looking ordinary.

A few things probably contributed. The last decade rewarded businesses where most of the payoff sits far in the future, and when capital is cheap and optimism is high, investors naturally pay up for long duration stories. That is not irrational on its own — it just becomes risky when expectations themselves become the product.

Passive flows have grown too. I am cautious about saying this "breaks" markets, because I do not think it does in any clean way. But it probably changes the texture. More money moves on inclusion and weights rather than valuation, and that can amplify what is already working, especially when a small number of companies dominate index returns.

Accounting is another piece. Many durable businesses now invest in intangibles — software, brand, distribution, data, R&D, people — and a lot of that gets expensed. The reported numbers can make these companies look more expensive than they economically are, or sometimes the opposite. The old shortcuts become less reliable.

And there are incentives. Most professionals cannot afford to look very different from the benchmark for very long, which keeps crowded trades crowded and lets boring opportunities sit ignored longer than you would expect.

None of this means value will not work again. It means the easy screens probably will not.

What keeps it worth doing

Capital compounds when you are roughly right and you hold long enough. Judgment compounds too, if you keep paying attention to your behavior and your mistakes. The goal, as I hold it now, is to be right a bit more often than wrong, and to be wrong in ways you can survive.

The mistake I try not to make

When value underperforms, it is tempting to make it an identity problem. The market is broken. Everyone else is irrational. I am early and the world will catch up. Sometimes that is true. Often it is not. A stock can be cheap because the business is deteriorating, or the balance sheet is fragile, or because I have not actually understood what matters in that industry. The failure mode I worry about most is confusing "low price" with "low risk," and "contrarian" with "correct."

What still seems to hold

The version that still makes sense to me is mostly about reducing the odds of a permanent mistake. Caring about price, but caring as much about durability. Wanting businesses that can survive bad luck and bad cycles, management that allocates capital well, balance sheets that can take a punch. Accepting that the market can ignore value longer than I would like. Sizing positions small enough that I do not need to be right on timing.

In practice this looks less like buying the cheapest companies and more like refusing to overpay, with occasional moments of mispriced pessimism. Mostly it is the work of not making big mistakes.

Value moves 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, liquidity, earnings, the grip of a narrative. 2022 was a reasonable reminder. The numbers vary by index, but growth fell much more than value, and the gap was large enough to matter.

So is it dead?

I do not think so. What seems to be dying is the lazy version: buying something because it looks cheap on one metric, assuming mean reversion arrives on schedule, calling that a strategy. The craft itself still seems alive, but the bar is higher. It asks you to understand what a business is actually building, to admit what you cannot know, to hold your process through long stretches where the scoreboard is unflattering, and to design a life where you do not need the market to validate you each quarter.

I am still working out where the line is between "this approach is genuinely less rewarded now" and "this approach is harder to live with than I used to think." Probably some of both.