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Value Investing’s Five Principles That Have Stood the Test of Time

Certain universal truths can guide investors in a transitioning market.

By Mark Donovan

There are few phrases more tired, simple, or consistently proven false than the assertion that “this time, it’s different.” And more than 85 years after Sir John Templeton identified these as the four most costly words in finance, the only change has been the reasons cited to explain why one market boom is any different or more rational than the market cycle that preceded it.

In the 1980s, the junk bond-fueled LBOs were supposed to revolutionize how stocks were assessed and valued; in the 1990s, the dotcom boom was premised on a misbelief that metrics like P/E ratios no longer mattered; and the speculative excesses that led to the 2008 financial crisis were set in motion by complex fixed-income derivatives that supposedly de-risked the credit markets. These days, the “TTiD” crowd will cite digital disruption or the rise of passive investing to support new claims the old rules don’t apply.

Given the clockwork-like cyclicality of these pronouncements, though, it can be worthwhile to regularly revisit investing’s five foundational principles.


Mark Donovan is co-CEO and portfolio manager, Boston Partners

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