Billionaire Investor David Booth on Value Stocks Comeback and Why Bitcoin Isn't a Bubble.
David Booth became a billionaire patiently adhering to a philosophy of betting undervalued stocks. Over the past several years that patience has been tested as so-called value stocks endured one of their worst stretches in memory. Now Booth says those stocks are making a comeback — even as he doubts the stock market, powered by the runaway gains of tech and other growth stocks, is in a bubble.
Booth co-founded his private investment firm Dimensional Fund Advisors (DFA) in 1981 from the spare bedroom of his Brooklyn apartment. He took an academic approach to investing after studying at the University of Chicago under a professor who would eventually win the Nobel Prize for research on the “efficient market hypothesis” — which essentially says you can’t beat the market. Since then, Booth has become a staple in the value investing world and DFA has grown to have $637 billion in assets under management and more than 1,400 employees. After four decades, the firm sticks to the same basic principle: investors can’t beat the market, but they can lean into factors like value and profitability, eyeing stocks that have a higher value on the books than the cheap price they’re trading at on the market.
Value investors, though, have recently been disappointed as fast-growing companies like Netflix and Amazon have driven stock market returns. From August 2006 to mid-April 2021, the Russell 3000 Value Index has lagged behind the Russell 3000 Growth Index by 5.61 percentage points a year, according to Morningstar. While value stocks have just recently made a small comeback, it’s too early to tell if the pendulum is actually swinging that way again.
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