2023: A Year in Value

When I looked at the performance of Value at the end of 2022, it was a rather depressing picture:

While it was clear that expensive stocks were not the place to be, the top decile of the Value Rank underperformed the FTSE All Share. Indeed, all of the deciles underperformed. It may seem strange: how can a series of portfolios that contain the whole market not match the index performance, on average? The reason for this mismatch is the difference between the market cap weighting of the index and the equal weight of the Value Rank deciles. An equal-weight portfolio has greater relative exposure to the performance of small cap shares. In 2022, the performance of large caps held up the value of the indices while the median stock underperformed.

2023 Value Performance

One of my Value Themes for 2023 was that small and mid-caps were due to play catchup. Fast forward a year, and we have some good news:

The cheapest Value Rank decile outperformed with a +5% return versus a broadly flat index. We still see most of the deciles underperforming, led by the woeful performance of the most expensive...