Ross Clark Ross Clark

The problem with investing in ‘value’ stocks

Image: Getty

For the first half of the pandemic a simple investment rule would have served you well: buy anything that was being plugged as a ‘tech’ stock – and dump nearly everything else. Lockdown ushered in a new era in which everything would be done online, rendering the traditional bricks and mortar economy. Since ‘Pfizer Monday’ on 9 November, when the results of the first phase 3 trials of Covid vaccine were made public, the opposite advice has served investors just as well: buy any bricks and mortar company that was dumped during the first phase and sell anything touted as a tech stock. The economy was going to spring back quickly into life, leaving over-valued tech stocks struggling to maintain their toppy values.

International Consolidated Airlines – the parent company of British Airways – has nearly doubled since November. Cruise operator Carnival has also doubled, as have pub operators Marstons and Mitchell and Butlers, while Cineworld is up three times. The more boring and plain vanilla your company, the better. Companies don’t come much more ‘old economy’ than Card Factory – which sells greetings cards in garish shops, many in tired, second-rank shopping centres. But it is up two and a half times since November. If you timed it right that is a bigger profit than you could have made on Amazon at any point during the pandemic. Although there is an emphasis on the ‘if’ in that sentence. Indeed, it was a contrarian taste for something boring, seemingly out of date – but perversely profitable – which made me pick up a small slice of Card Factory for my own portfolio in the summer of 2019. I am still sitting on a loss of 40 per cent on that one.

But have these value stocks now run their course? It is remarkable how shares in old economy stocks have continued to do well even as dark clouds have gathered on the reopening of economies around the world.

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