86-Year-Old Investor Warns Peers on Value-Stock Betrayal

Unlike many peers, clients have largely stuck with him, a show of faith at a time when other managers are getting chased out of a market dominated by a small coterie of tech mega-firms.

The Russell value index has lagged its growth counterpart in all but two years since 2012. Earlier in 2024, it sank to a record relative low as chipmakers and software stocks rallied amid the artificial-intelligence craze.

In turn, the population of actively managed funds dedicated to value peaked near 1,100 in 2015 and has since fallen 15%, according to data compiled by Bloomberg Intelligence mutual fund analyst David Cohne.

Those that survived have been leaning into technology equities, mostly growth names. As of the end of June, the average large-cap value fund was over-exposed to the group — which includes Apple, Microsoft, Nvidia, Amazon.com, Meta Platforms and Alphabet — by 426 basis points, the second highest quarterly reading since at least 2012, data compiled by Goldman Sachs Group Inc. show.

Still, whether a stock is a bargain depends on who’s judging it. Value can be sliced and diced endlessly and index providers can’t agree on a definition. Some value managers appear to have taken advantage of selloffs in recent years to snap up tech stocks seen as more reasonably priced and held them since.

Yet the widespread practice by this cohort going after growth stocks highlights stresses in momentum-driven markets, like today.

Managers who underperform “lose assets, they lose their jobs,” said Cullen. “There’s pressure on people to cheat or what have you — to stretch it.”