At QMA, the valuation measures we use in our model shift to favor attractively priced companies the more they fall out of favor. This deep contrarian approach has made such swings in the market a persistent feature of the strategies’ performance over the years, ultimately to the long-term benefit of our clients. As value stocks underperform they become relatively cheaper, so a portfolio like ours that stays focused in the space gains more exposure to value. When the cycle turns, performance may snap back dramatically1, and investors who stick through a full market cycle tend to see the most benefit – We call this the “rubber band” effect.
1There is no guarantee this objective will be achieved.