Price mattered in 2022. Or, if you prefer, “value” mattered. If you bought inexpensive assets a year ago you did OK, even despite the market rout. If you bought expensive assets…well, not so much.
Forget inflation. Forget oil prices. Forget Vladimir Putin’s invasion of Ukraine. Forget layoffs in the tech sector. Forget the yield curve.
So oil stocks began 2022 really cheap. And as value investors like to say, “good things happen to cheap assets.” Sooner or later someone who bought big oil stocks at knockdown prices was going to make out. Putin’s war sped up the process, but it wasn’t the only factor. Nuts? Well, the market didn’t like it. While inflation took off, TIPS tanked. By October, the same bonds were sufficiently cheap that you could lock in long-term real rates of nearly 2%. By historic standards that is pretty reasonable. And at that point they bottomed out.A year ago, futuristic “growth” stocks were in the stratosphere and boring, profits here-and-now “value” stocks were in the dumps: Nobody wanted them.
White shoe Boston money managers in 2020 launched a special hedge fund which bought the “cheap” stocks and sold short—bet against—the expensive ones. Returns last year? Up 20% . Personally, I’ve always seen the appeal of buying cheap “value” stocks in the hope that they will become more expensive . I’ve never really been able to get my head around the idea of buying wildly expensive “growth” stocks in the hope that they will become even more wildly expensive. There is plenty of data to argue that over the long-term buying low has usually been a better strategy than buying high. But to each their own. People who bought high made a lot of money from 2017 to 2021.
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