Value Investing Works

Before adopting a particular investing approach, it makes sense to ask if the approach has been successful over time. There is clear evidence that a value oriented approach will outperform over time. Buffett wrote about this outperformance in his 1984 article “The Superinvestors of Graham-and-Doddsville”.

I took a quick look at the performance of six prominent value equity funds vs. the Vanguard Index 500. The data compares the funds’ 10 year annualized returns and the data is through 7/15/2009. The data is from Morningstar. It is instructive to remember that most actively managed funds underperform the S&P 500.

Longleaf Partners: 1.32%
Dodge & Cox: 3.16%
Weitz Value: 2.50%
FPA Capital: 6.36%
Third Avenue Value: 5.83%
Sequoia Fund: 2.63%
Average: 3.63%

Vanguard 500 Index: -2.29%

Average Outperformance: 5.92%

These value oriented managers have added significant outperformance over the past decade in spite of the very challenging conditions.


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