Value investing is probably the most intuitive investment strategy there is: Buy what's cheap and avoid or sell expensive alternatives. Valuations have an undeniable impact on investment returns. The higher they are, the lower future returns tend to be. Yet, valuations don't appear to be very helpful for tactical adjustments across regions, sectors, and factors, or for timing exposure to credit risk.Valuations Matter, but …Valuations are only moderately predictive of performance. For example, from January 1970 through January 2019, a 1-point increase in the MSCI USA Index's price/earnings ratio was associated with a 0.72% decrease in returns over the next year, while lower valuations had the opposite effect. However, valuations could explain only a small part of the variation in stock returns over this period--6% … Full Story

T. Rowe Price's David Giroux and Wellington Management's Jean Hynes talked value investing, innovation in healthcare, and where they're finding opportunity at the 2019 Morningstar Investment Conference.A recurring theme at the conference was: Will value investing ever rebound? Is a reversion to the mean forthcoming or has the market fundamentally changed during the past decade?Morningstar's director of equity strategies Katie Reichart posed those questions--and many others--to two fund managers who've proved adept at valuing companies relative to their growth prospects: Giroux, who manages Gold-rated T. Rowe Price Capital Appreciation, and Hynes, who leads Gold-rated Vanguard Health Care."It has definitely changed over the past decade," Giroux replied. Specifically, the market has experienced a secular change. Giroux argued that … Full Story