Value Strategies

Renaissance of undervalued Equities

M&G (Lux) European Strategic Value Fund
M&G (Lux) North American Value Fund


The economic environment of the past decade was characterised by low inflation, low interest rates and ultra-loose central bank policies. Emotions and stories determined events on the stock markets, while valuations received less and less attention. This climate caused valuation differentials between the cheapest and the most expensive securities on the market to peak. High-quality but "boring" value stocks were left behind for a long time. Only the prospect of rising interest rates led to a change of mood among investors. The fundamental data and valuations of companies are now coming back into focus. Value investors are experiencing a renaissance.

 

Why invest in value now?

Undervalued, low-demand equities with strong balance sheets often have hidden potential. Valuation gaps are sometimes considerable, prices are often far below their real value. That is why we see value opportunities in almost all sectors - not only in cyclical sectors such as finance or energy, but also in defensive sectors such as healthcare.

 

Our investment approach

Since February 2008, we have been applying the classic idea of value investing with the strategies followed by the European Strategic Value and the North American Value. The strategies are based on a three-stage investment process:

  • In the first step, pre-selection is made within the individual sectors according to the most favourable quartile. The decisive valuation criterion is the adjusted price-to-book ratio, whereby "adjusted" means that, among other things, research and development expenses and inflation are included in the ratio in order to reflect as realistic a current value of the assets as possible.

  • In the second step, so-called “value traps”, i.e. stocks that have a low valuation for good reason, are to be eliminated through a deep fundamental analysis. In addition to financial strength and the quality of management, the long-term validity of the business model plays a crucial role.

  • The third and last step is to put together a balanced portfolio with cyclical and defensive components, comprising 60 to 100 stocks.

The value of the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested.

“The opportunities for value strategies are more convincing today than ever before.”

Richard Halle, Fund manager

What stands out for us?

Strict valuation discipline

Before a stock is included in our portfolio, it has to complete a strict selection process. Only those stocks that are trading below their true value and whose fundamentals convince us, pass this process. We are not bound by sector or country weightings - the most important criterion is value.

Consistent strategy

We make ourselves independent of trends in the equity markets. Despite headwinds, we have always remained true to the value approach and see many investment opportunities today. This also requires perseverance. Because even if a company has a strong balance sheet, sometimes it can take a while to develop towards the value we see in it.

Broad diversification

The investment process is set up in such a way that the result is broad diversification without excessive overweighting of individual sectors. The high diversity of our extensive portfolio, comprising 60 to 100 positions, enables us to achieve and maintain an attractive risk/return ratio. 

Further Information

Explanations of the investment terms used on this page can be found in the glossary.

You can find our sustainability-related disclosures here

This is a marketing communication. Please refer to the prospectus and to the key information document (KID) before making any final investment decisions.

The value and income from the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise. There is no guarantee that the fund will achieve its objective and you may get back less than you originally invested.

The fund can be exposed to different currencies. Movements in currency exchange rates may adversely affect the value of your investment.

In exceptional circumstances where assets cannot be fairly valued, or have to be sold at a large discount to raise cash, we may temporarily suspend the fund in the best interest of all investors.

The fund could lose money if a counterparty with which it does business becomes unwilling or unable to repay money owed to the fund.

Operational risks arising from errors in transactions, valuation, accounting, and financial reporting, among other things, may also affect the value of your investments.

ESG information from third-party data providers may be incomplete, inaccurate or unavailable. There is a risk that the investment manager may incorrectly assess a security or issuer, resulting in the incorrect inclusion or exclusion of a security in the portfolio of the fund.

Further details of the risks that apply to the fund can be found in the fund's Prospectus.

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