There are some truths that are so obvious that we never question them. The virtues of value investing is one of them. If you buy value stocks, your reward should be superior returns over the long run. 

From 1927 through 2019, value stocks outperformed growth stocks 93 percent of the time over rolling 15-year time periods, according to the data compiled by Nobel laureate Eugene Fama and Dartmouth professor Kenneth French. The value premium—the excess return over growth stocks—was 3 percent per annum. 

Value investing has held a structural advantage when considered over multiple market cycles. Its worst-ever performance, therefore, when compared to growth stocks last decade is vexing. The Russell 3000 Growth Index skyrocketed more than 300 percent in the last ten years while the Russell 3000 Value Index was only up 107 percent. 

Should investors adjust to the changing landscape or side with a truism that has stood the test of time? The question took on new urgency this month after the scale of the rotation to cheap value stocks from trendy momentum names was the most violent on record.

This seems easy to resolve, as we believe the reason for value’s persistent outperformance is widely misunderstood. 

Rat