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Research Summary

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Value in Controversy

Chief Investment Officer—International Value Equities
Chief Investment Officer—North American Value Equities
April 02, 2013

Since the financial crisis in 2008, as investors fled to safety and away from the riskiest stocks, the most attractively valued stocks on global markets slumped. But there are increasing signs that a powerful recovery of value stocks is imminent.

In late 2012, the cheapest quintile of global stocks based on price/book value outperformed the most expensive quintile by 10.5% (Display)—and we believe there is much more to come. This paper explores how market distortions that undermined value investing in recent years have created a unique opportunity for active managers in attractively valued stocks across the globe.

As markets transition from being driven by top-down macroeconomic issues to bottom-up fundamentals, we believe that deep research will be the key to turning today’s controversial undervalued stocks into tomorrow’s winners.

Increasing Signs of a Value Recovery
Global Stocks Price/Book: Quintile 1 vs. Quintile 5*

Historical analysis does not guarantee future results.
*Rolling hedged returns in USD based on the Bernstein global large-cap universe of stocks, sorted monthly by P/B ratio, measuring the difference in returns between the cheapest quintile of stocks (Q1) and the most expensive quintile of stocks (Q5). Periods of more than one year are annualized.
†From January 1, 2008, to December 31, 2012
‡From January 1, 1971, to December 31, 2012
Source: CRSP, MSCI and AllianceBernstein

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