A “sea change is underway in the global investment landscape.” The long-standing approach of value investing, most famously championed by Warren Buffett, is experiencing a resurgence. Unloved markets, particularly the UK, are now “back in favour.”
As the article notes, “America’s tariffs have turned the fortunes of some of the world’s largest companies, with new trade deals fostering a changed world order.” Notably, “last week the UK struck fresh deals with India and America,” which is making Britain more attractive to investors looking for discounted opportunities.
Buffett, poised to step down from Berkshire Hathaway, remains “the world’s most famous ‘value’ investor,” known for targeting companies “considered cheap compared with their long-term potential.” Though this method fell out of vogue after the 2007–09 financial crisis, dominated instead by growth stocks like Apple and Microsoft, there are signs “the tide may be turning.”
What Is Value Investing?
Value investing is “a strategy of identifying stocks that are trading below their intrinsic value, or true worth.” These companies are often “out of favour or overlooked by other investors.” The aim is to benefit once the broader market recognizes their real value.
Russ Mould of AJ Bell puts it simply: “The idea is to buy stocks that investors will want to purchase, but just don’t know it yet, often because the current outlook is so bleak.”
But caution is necessary. This approach can fall into a “value trap”—a firm that appears cheap but is fundamentally flawed due to “competition, customer dissatisfaction, obsolescence, or regulation.”
What Is Growth Investing?
This strategy focuses on “companies with strong potential for earnings growth.” Growth investors typically prefer firms expected to “expand rapidly rather than provide an income by paying dividends.”
Mould explains, “The danger is that growth misses expectations, with the result that the share price collapses — the lofty valuations that price in that rapid future growth leave little or no protection against any disappointment.”
An example came in 2022, following the Ukraine war. The Morningstar US Growth Index “plunged 36.7 per cent,” while its value counterpart fell just 0.72 per cent.
The Value Comeback
Growth stocks soared in 2023 and 2024, up 38 per cent and 23 per cent, respectively, based on Morningstar data. In contrast, value stocks saw more modest gains: “12 per cent in 2023 and 13.8 per cent last year.”
This year, however, marks a reversal. “Growth stocks are down about 3.5 per cent while value stocks have climbed 0.85 per cent.”
The UK, once shunned, is seeing renewed interest. “While the S&P 500 index of big US firms is down 3.5 per cent this year, the UK’s FTSE 100 is up about 3.6 per cent.”
Susannah Streeter of Hargreaves Lansdown noted: “In recent years growth stocks have been the darlings of Wall Street… but most have seen sharp falls this year amid concerns about the impact of Donald Trump’s tariffs and the competition emerging in the AI revolution.”
Individual Investors Are Changing Course
Joe French, a 52-year-old from Lancashire, used to place “70–80 per cent of any new investment into US shares.” Now, that’s dropped to “30–40 per cent.”
He attributes the shift to “Trump’s intervention” and believes “UK shares… are ‘massively undervalued,’” adding, “While I would never completely dismiss America, I certainly think it is time to look elsewhere, at least for the next few years.”
What’s Behind the Shift?
Growth stocks gained popularity after the global financial crisis of 2007–09. Ultra-low interest rates helped growth firms thrive through “a surge in borrowing and therefore in investment and asset prices.”
But Andrew Oxlade of Fidelity International points to “the post-pandemic economic recovery” and “the volatility of tariffs” as factors now favoring value stocks. He said it’s now “better to buy companies with high earnings today rather than based on some uncertain future potential.”
Jason Hollands of Evelyn Partners emphasized the role of interest rates: “Growth stocks typically thrive when interest rates are falling.” He adds that “Trump’s policies” could also keep inflation high, meaning “rates stay higher for longer.”
On Thursday, the Bank of England “cut interest rates to 4.25 per cent,” while the US Federal Reserve “kept rates on hold.”
Investing in UK Value Stocks
The FTSE 100 is described as “a value option,” filled with established companies in sectors like banking and energy.
A simple way to invest is via a low-cost tracker fund. “The iShares FTSE 100 exchange traded fund… charges 0.07 per cent.”
For active investors, Hollands recommends Artemis UK Select. It features “Barclays, Shell and Rolls-Royce” and has “returned 15.7 per cent over a year,” well above the 5.4 per cent sector average.
Alternatively, Fidelity Special Situations is a dedicated value fund. Top holdings include “British American Tobacco, NatWest and National Grid.” It’s “up 13.7 per cent over a year.”
Global Value Opportunities
Russ Mould suggests looking beyond the UK. The Schroder Global Recovery fund has “34 per cent of its portfolio in US stocks” like Molson Coors and Verizon, plus holdings in “Germany, China and Japan.” It’s “returned 2.4 per cent over a year” and charges 0.94 per cent.
Long-Term Outlook for Value
Lindsay James from Quilter offered this context: “On a cumulative basis, value investing outperformed growth strategies between 1975… until 2020. Only since then has ‘growth’ dominated.”
Rather than betting on a single style, James advocates a mixed portfolio.
Fidelity Asia Pacific Opportunities, for instance, includes both value and growth picks. It holds “AIA and HDFC” but is “down 2.5 per cent over a year,” trailing its sector.
Another example is AllianceBernstein’s Europe-focused fund, which includes “Novo Nordisk and LVMH.” It is “down 5.8 per cent over a year,” despite a 4.1 per cent sector rise.
Conclusion
As macroeconomic trends shift and new trade deals reshape global markets, value investing is making a notable comeback. While past performance does not guarantee future results, the data suggests that “unloved” markets and stocks may be back in vogue.
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