Why tech investors' redefinition of "value" is meaningless

Pretending that high-growth tech companies are value stocks makes the concept meaningless, says Cris Sholto Heaton.

One of the strange things you notice after meeting hundreds of fund managers is that most of them are apparently value investors. Even when the largest holding in their portfolio trades on 30 times earnings, it’s a value stock because the market is drastically undervaluing its ability to generate cash or its dominant long-term position, or some similar explanation.

This has become slightly less common in recent years as value stocks have badly lagged the market (using a strict definition of value to mean stocks that are nominally cheaper than average on metrics such as price/earnings or price/book). But investors still feel compelled to paint themselves as shrewd bargain hunters, rather people who like to buy firms that are growing quickly or simply shares that are going up.

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Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.