Why is value investing good for the long-term? The main reason is due to the theory of “reversion back to the norm”. Something that is undervalued won’t stay as such for the long-term. As the market catches up, the undervalued stocks will catch up as “investors” (or traders in this instance) look for new stocks that hasn’t risen that much or has stayed beaten down for some time. Market will always re-value companies that are fundamentally strong, higher.
A current example I can think of is that property investors investing in Hong Kong and Singapore are heading to Tokyo to invest as prices are still cheaper there. After a while into the future, properties in Tokyo will become expensive too as more investors jump on the bandwagon and brings prices up (reversion back to the norm).
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Thank for sharing. Keep writing..
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