Factor Performance

Commonly when people discuss a broad view of investment trends, they are referring to something that is a called a factor. For example, company’s and their performance after IPO (if they IPO’d in the year) are a factor. I really like this performance breakdown of factors by Koyfin:

What is also interesting, compared to the YTD above, it is pretty much the same story for the past 3yrs.

I always find these to be interesting to look at, but I also don’t really know if I am interpreting the data correctly. It is easy to say that value has been dead, but just thinking about these factors has me thinking about how there is some inevitable overlap.

Perhaps the more important question is to ask if this bull market continues, do these factors continue? I don’t think anyone really knows the answer to that, but for me it really has me asking the question as to what “factor” my strategy is actually classified as. If the next 3yrs this was flipped, would I be ok, it becomes more of a mental gymnastics game. Could I stick to whatever my strategy is, no matter how it is classified, at least as of right now I think so. I read this recently from Fundsmith:

Value investing has been out of fashion in recent years as 
persistently low interest rates have driven the value of almost all stocks beyond the reach of true value investors. Nonetheless value investing has its merits and will surely have its day when stocks of the sort which attract value investors perform well.

However, it is not a strategy which we will be pursuing even if we could foresee it coming back into fashion, which it will at some point. The sort of stocks which trade on low enough valuations to attract value investors are unlikely to be those which we seek businesses which can somewhat predictably produce a high return on capital employed, in cash, and can invest at least part of that cash back into the business to fund their growth and so compound in value.

Fundsmith Funds Q418 Letter

I don’t think I invest the same as Fundsmith, although I am envious of their returns, but the point being that it is important to stick to your strategy.