The return of value investing
David Prosser on how concerns about high valuations are prompting investors to search for bargains.
“Price is what you pay, value is what you get,” Warren Buffett once observed. The world’s most renowned investor was attempting to explain his value investment approach – the idea that investors should focus on reasonably priced companies with strong balance sheets and good prospects, rather than getting carried away with market trends or fads.
Buffett’s philosophy has not been fashionable in recent times. Investors focused on value have largely eschewed the technology stock phenomenon, arguing that the rising share prices of many of these companies looks like a triumph of hope (or even hype) over reality. That view has sometimes proved costly – Buffett himself concedes he has missed out on some tech sector gains.
The continuing swoop of large private equity firms on UK-listed companies tells you just how much value there is to be found in the UK.
David Prosser
But there are now signs that value investment is once again coming to the fore, as investors respond to concerns about a possible bubble in technology and AI-related stocks by embracing asset-heavy companies with robust cashflows. Indeed, after a long period of underperformance, the MSCI World Value index – a proxy for companies regarded as value plays – has moved ahead during much of 2026.
Intuitively, this shift makes sense. Value investors are determined not to overpay for assets; they actively look for companies they believe are too cheaply priced, then look to benefit as this mispricing corrects. That’s a logical approach in most market conditions, but in the context of the global stock market highs we have seen in recent months, it feels even more appropriate.
Investors in the UK stock market have been beneficiaries of the value investment comeback this year. UK equities have performed strongly compared to their overseas peers precisely because the market here is lacking in big technology companies. The UK is dominated by businesses such as miners, telecoms companies and utilities, where value is more likely to be found.
Many of these companies became remarkably cheap by all historical comparisons as the UK market fell out of favour with investors in recent years. But the continuing swoop of large private equity firms on UK-listed companies tells you just how much value there is still to be found in the UK.
Value investors believe there will be more to come. For example, Temple Bar Investment Trust, which has just celebrated its 100th birthday, has embraced this style of investment for some time and its managers continue to make the case for this approach, marking last month’s anniversary with a video documenting the long-term success of value investing. This style has outperformed in every decade of the fund’s existence other than the 2010s, it points out.
Elsewhere, analysts point to Fidelity Special Values investment trust as a potential outperformer in a value comeback. The fund has held its own even during a period when its style has been out of favour, but returns now appear to be accelerating.
More generally, it is worth saying that investment trusts are well suited to value investment. Very often, you are more likely to find underpriced companies in areas of the market less thoroughly researched by analysts – particularly in the small and mid cap sectors. But these companies are often less liquid, with smaller numbers of shares changing hands each day. The closed-ended structure of investment trusts is better suited to such holdings.
David Prosser
David is former Business Editor of The Independent, Personal Finance Editor of the Daily Express, and Deputy Editor of Money Observer magazine. He writes regularly for the AIC.
