Billionaire Seth Klarman's investing philosophy has been in something of a rut for years.
In his letter to investors at the beginning of this year, he said that "short-term market gyrations matter little unless one wishes to – or is forced to – transact."Value investing appears to be slowly returning to favor for hedge fund managers, as Seth Klarman has predicted all along. "Sometimes, the market tells you one story, even as the performance of the underlying businesses tells you another. This is the case with many 'value equities' today, which have been significantly underperforming the market even as operating cash flows are strong," he wrote to investors.
Cliff Asness, the billionaire founder of AQR and legendary momentum trader, even posted a trolling blog on the hedge fund's site on Feb. 27, styled off of Abraham Lincoln's Gettysburg Address. "We have always been more comfortable owning value stocks because they are typically less exposed to rapid technological change and obsolescence and also have greater valuation support based on near-term cash flows. While this strategy has delivered good returns for investors over long periods, it has also gone through extended periods of underperformance, including the last ten years," the Mangrove Partners letter said.
To be sure, some see cracks of light appearing at the end of the tunnel for Klarman and his disciples who have stuck with it through the stubborn bull market.
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