Article: There’s Value Left in Value

Damian Handzy | March 22, 2021

According to a recent research paper by renowned LA-based asset manager DoubleLine, there’s still plenty of value left in Value investing even after the rally of the past few months. The authors of the piece, portfolio managers Emidio Checcone and Brian Ear, do a good job of dispelling several myths surrounding value investing that includes several arguments we’ve also made, including that even though Book-to-Price is a flawed measure, other less-flawed measures give a strong value signal. They expanded upon our analysis showing Value to be the only uncrowded factor and developed a strong argument against the notion that value has been arbitraged away. We wanted to see just how closely they follow their own advice.

Looking under the Value covers

We decided to look into their flagship Value fund with our comparison tool, Peer Insights, to see just what kind of Value exposure they give their investors. DoubleLine gives investors what they promise: Value exposure with strong risk management. We used the Morningstar Large Value (US Domicile) peer group of 520 funds and ETFs compared to the Russell 1000 index to measure the fund’s exposures to 19 sub-factors grouped including 6 ESG measures, as shown below.

In the chart, the DoubleLine Value fund is represented by the yellow square and their benchmark, the Russell 1000 Value index, is in the red triangle. The bars indicate the range of value for the 520 funds in the Morningstar Large Value category, with the darker bands indicating the inner quartiles. In this chart, any value above 1 (or less than -1) indicated a significant deviation from the zero-line Russell 1000.

The DoubleLine fund provides near- or above-average Value exposure (light blue), similar to the Russell 1000 Value but also provides more exposure to Growth (green) than most Value-oriented peers and more than the Russell 1000 Value. While they did not take the opportunity in their research paper to dispel the myth that Value and Growth are opposites, their fund’s factor exposure does a very nice job of doing just that! They appear poised to extract the value left in value investing by combining it with other factors.

They also provide exposure to low leveraged funds (a Quality sub-factor shown in purple) and a strong exposure to firms scoring well on the ESG Governance measure. Both of these point to a well-executed risk mitigation strategy, something their website says is engrained in their investment approach. While the fund gives investors larger beta and price volatility than the Russell 1000, it is in line with betas and volatilities of Value stocks and the Russell 1000 Value index.

We see the DoubleLine Value fund as delivering what they say and then some: risk managed Value exposure with a Growth kicker.


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