Value investing has become increasingly popular among investors, especially in recent years when growth stocks have underperformed. The strategy of buying undervalued stocks with good fundamentals is time-tested and proven to generate market-beating returns in the long run. While individual investors can practice value investing on their own, working at or investing with top value investing firms provides unique advantages such as leveraging on seasoned analysts and portfolio managers. This article will provide an in-depth look at some of the highlights of top value investing firms.
Well-Established Track Records of Top Value Investing Firms
Many leading value investing firms such as Berkshire Hathaway, Tweedy Browne, Dodge & Cox, Davis Advisors, and Southeastern Asset Management have decades of experience practicing value investing. For instance, Warren Buffett’s Berkshire Hathaway has compounded its book value per share at 20% annually for over 50 years. Similarly, Tweedy Browne has returned around 13% annually since its inception in 1920. Such impressive long-term track records demonstrate these firms’ ability to successfully execute the value investing strategy over different market cycles.
Strong Research Capabilities of Top Value Investing Firms
Top value investing firms invest considerable resources into building robust equity research teams. For instance, Southeastern Asset Management has an 18-member global research team. Similarly, Dodge & Cox’s equity investment team consists of over 30research analysts and associates. The depth of research allows these firms to thoroughly analyze stocks from perspectives like industry dynamics, competitive threats, management quality, balance sheet strength, and valuation.
Disciplined Investment Processes of Leading Value Investing Firms
Successful value investing requires discipline to stay the course even when the strategy underperforms for extended periods. Top value investing firms have institutionalized processes that enforce discipline. For example, Davis Advisors utilizes a research checklist to ensure every stock purchase meets its stringent criteria. Dodge & Cox has four veteran portfolio managers jointly manage each of its stock funds to promote debate and guard against emotional decision-making.
Reasonable Fee Structures of Top Value Investing Firms
Unlike most actively managed mutual funds that charge expense ratios above 1%, top value investing firms are shareholder-friendly with reasonable fee structures. For example, the investor shares of Dodge & Cox Stock Fund have a net expense ratio of only 0.52%. Such low costs allow investors to retain a larger share of long-term gains accumulated through value investing strategies.
In summary, top value investing firms such as Berkshire Hathaway and Tweedy Browne possess strong track records, research capabilities, disciplined processes and reasonable fees. Investors can gain meaningful exposure to value investing by investing alongside these seasoned practitioners.