Value Is Dead, Long Live Value

BRANK

Value Is Dead, Long Live ValueBy Chris Meredith, CFAJuly 2019EXECUTIVE SUMMARYValue has underperformed since the beginning of 2007. Another prolonged period of underperformance for Book-to-Price and Earnings-to-Price happened between 1926 and 1941. This paper offers a theory for the connection between the two periods: they coincide with the central turning point of Technological Revolutions. There have been five revolutions identified: clusters of innovation that replace existing business models through creative destruction. The fourth revolution was the Age of Oil, Automobiles, and Mass Production, where manufacturing of cars and their components (Oil, Steel, Rubber) flourished. Conversely, Railroads and Utilities, the infrastructure from the third revolution, declined amidst lower demand, a financial crisis and increased regulation. The fifth revolution is Information Technology, where the internet and mobile computing take hold while Financials declined amidst a financial crisis fo…