Utilize a manager with a thoughtful approach to value investing
We believe investing with a manager that is thoughtful about what constitutes value is crucially important. Many managers in the value universe simply look for companies that are trading at attractive valuation multiples, but we believe in active managers taking a more thorough approach to finding companies trading at attractive valuations. Figure 3 details the performance of several value definitions over time and you can see that these value factors performed very similarly from the early 1980s through the late 90s and early 2000s. Since then, there has been a divergence with balance sheet measures of value like price-to-book.
What has happened since this period? We have been going through a technological revolution and often the most important assets of a company are not adequately captured on a firm’s balance sheet. Assets like brand, network effects, and research and development have become increasingly important and are not always appropriately captured on a balance sheet. In figure 2, you can see the growth of intangible assets over time.
We believe you should look for a thoughtful, skilled active manager who considers intangibles and shortcomings of financial statements that do not necessarily reflect economic reality.
Legal Notices & Disclosures
The views expressed herein are those of Harbor Capital Advisors, Inc. investment professionals at the time the comments were made. They may not be reflective of their current opinions, are subject to change without prior notice, and should not be considered investment advice. The information provided in this presentation is for informational purposes only.
The information provided in this presentation should not be considered as a recommendation to purchase or sell a particular security. The weightings, holdings, industries, sectors, and countries mentioned may change at any time and may not represent current or future investments.
Past performance is no guarantee of future results.
The information shown relates to the past. Past performance is not a guide to the future. The value of an investment can go down as well as up. Investing involves risks including loss of principal.