Back into orbit
Jan 10, 2023
Value Investing as an investment style has been out of favour since the financial crisis in 2008. With the benefit of hindsight this is understandable as central banks artificially kept interest rates ultralow and hereby suspended valuations. In other words, with interest rates close to zero in a discounted cashflow ( DCF ), the value of future cash flows was the same than the present cash flows. Or, expressed differently, there was no price for growth except the uncertainty that it would never materialize. With interest rates reappearing as central banks tighten their monetary policies, valuation becomes relevant again and the value style, after almost 15 years in the dark, makes a comeback. At ECP, we apply a quality value investment style where we avoid overpaying for any business while we focus on businesses with solid balance sheets and earning power due to a moat. It increasingly looks to us that our investment approach will remain relevant during the coming years.