Kevin F. Simms

With so much information available to investors today, you might think that markets have become more rational. Think again. Equity markets are as emotional as ever—and maybe even more so. In a short-tempered world, we believe patience and human judgment are more important than ever.

When OPEC leaders convene in Vienna tomorrow, the recent sharp decline in the oil price will top the agenda. Yet despite the pressures, our research suggests that the underlying economics of production should eventually drive the oil price higher from current levels.

It finally feels like a great time to be a value investor again. After several challenging years, market conditions have become much more conducive to finding undervalued, controversial stocks with long-term payoff potential. Even after this year’s equity-market rally, we think the value rebound is just beginning.

Passive investing strategies that emulate an index have become increasingly popular. But passive investing can go awry when sector concentrations leave investors exposed to unintended risks.

Value investing has faced a crisis of confidence after five tough years. Here’s why we think the behavioral investing principles that underpin the discipline are more relevant than ever.

Even after this year’s equities rally, market imbalances created by the financial crisis in 2008 have not disappeared. When these distortions unwind, we expect deep value stocks to rapidly recover.

When J.K. Rowling finished her first manuscript of Harry Potter and the Philosopher’s Stone in 1995, she submitted it to 12 publishers, who all rejected the book. In time, those publishers would regret missing the chance to back an unknown author who would later take the world by storm. Like the publishers who passed over Harry Potter, we believe that many investors today risk missing a historic opportunity to invest against the grain in attractively valued stocks across the globe.

When US auto sales were in the dumps three years ago, an investor predicting a rebound was considered about as credible as a used car salesman. Today, a bumper year for car sales is providing a great example of the enduring principles of long-term investing.

Several key indicators have bolstered our confidence in the outlook for equities, as my colleague Kevin Simms explained in an article first published on Institutional Investor.com.