About Value Traps

Fabian Scheler

March 18, 2020

The underperformance of the value factor since the Great Financial Crisis has been dramatic and the latest Corona crisis means another blow to investors exposed to it.

2 Minute Read

Over the past years, many investors expected the next big shock to be caused by raising interest rates, resulting in a crash in Fixed Income markets as well as the so-called bond proxies in equities.

Years of strong outperformance on the back of rather unimpressive growth let valuations of the likes of Nestle look rather rich and for sure, Bill Gross was not the only one calling German Bunds the short of a lifetime.

Now, confronted with the worldwide spread of the Coronavirus yields are in free fall again and the big underperformers in equities are typical value stocks.

Nothing quite manifests the vulnerability of the globalized world economy like the share prices of airlines over the past weeks. This situation has inspired us to take a closer look at one of these stocks through the lens of our proprietary Quantamental toolbox and take it as an example to illustrate the pitfalls of value investing. The toolbox is an interactive analytics and valuation software developed by our FinTech, Amadeus Quantamental.

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