Boring Is Better

The shares of sleepy companies have recently bested those of exciting companies. This is just the beginning of a big trend, says the billionaire money man running AQR

- William Baldwin

Vindication is coming for fund manager Clifford Asness. It was certainly a long wait.

For a depressingly protracted period the value-conscious portfolio managers at AQR, which Asness, 56, cofounded in 1998, lost ground to competitors chasing hot growth stocks. Then came last year's stock market rout. As the air exited inflated tech stocks, AQR funds became winners.

This is how Asness describes what bubbles do to value players: "It starts out ugly and then it turns wonderful." Wonderful, that is, if you hang in there. Which some clients didn't.

Asness is not one to cut and run, and he is not shy about expressing his convictions. On Twitter he has been waxing indignant about bond yields below the rate of inflation and welfare for Silicon Valley Bank's depositors. In academic papers and pronouncements for clients he makes the case that value's rebound is far from over.

There is a lot going on in the data-intensive stock picking at AQR, a far-flung operation with six branches abroad, a headquarters in Greenwich, Connecticut, $100 billion under management and a roster of researchers festooned with advanced degrees. But one theme shines through: the idea that value beats growth over the long haul.

Value stocks are the shares of sluggish, unexciting companies that only contrarians love-like Stellantis, the Chrysler-Dodge-Fiat car company. The market darlings are fast-growing and sexy. Ferrari, for example. Growth stocks should trade at a premium to boring stocks. But how much of one? Expensive stocks, as AQR defines that universe, are trading at triple the multiple of earnings that cheap stocks trade at. Asness thinks they ought to be at only twice the multiple.