Value stocks have been frustrating fans for a decade, testing their patience with year after year of subpar returns. But Rob Arnott says now is exactly the wrong time to bail on them.

In research published Wednesday, the Research Affiliates co-founder reiterates the case against quitting before the miracle. The 13-page paper, “Standing Alone Against the Crowd: Abandon Value? Now?!?” examines how the cheap-stock strategy has behaved over time, particularly after periods following severe underperformance. Arnott has stood by the strategy through years of struggle, and isn’t changing his stance now.

“We’re value investors, we see clients becoming uneasy,” Arnott said in a phone interview. “We owe it to our clients to remind them of an extremely basic fact, and that is when something is getting cheaper, its performance is disappointing. That doesn’t mean sell, it means buy.”

Arnott is occasionally called the “godfather” of smart-beta investing and his firm specializes in value strategies, so he’s not an unbiased commentator. And for better or worse, he’s talking his book. His RAFI Fundamental Index strategy -- which sorts under-priced stocks using weightings other than market-cap -- leans further into value when the strategy is “abnormally cheap,” as it is today.

Across U.S., developed, global, and emerging markets, value is trailing growth at a rate that falls within the worst decile in history, according to Research Affiliates. In the U.S., the disparity has only been larger twice before -- for a short period during the Global Financial Crisis and more than a year at the peak of the dot-com bubble, Arnott said.

While bad news if you’ve owned them, it’s a good setup for a recovery. Deeper underperformance often leads to a swifter rebound, and Arnott estimates current levels of relative valuation on average see value beat growth by 6% a year in the period that follows.

“A growth-dominated market over the past decade has served as a headwind and a gift in the form of a potential opportunity for the long-term contrarian investor,” Arnott and Research Affiliates’ Amie Ko and Jonathan Treussard write in the paper. “The RAFI strategy is positioned to experience a performance snapback when the cycle turns once again in favor of value investing and to recoup the accumulated shortfall in astonishing short order, achieving a swift and powerful recovery for the patient investor.”

Lately, value has shown a few signs of life. As a proxy, the S&P 500 Value Index is on track to outpace its growth counterpart for the third straight month in November, a feat not seen since 2016. That’s left Wall Street shops including Bank of America Corp. and Sanford C. Bernstein advising a greater allocation to the style.

Even AQR Capital Management’s Cliff Asness, who’s spent his career warning against factor timing, wrote a paper this month arguing that investors should consider upping their holdings of value stocks.

Arnott says the style currently has healthy fundamentals and attractive qualities, including higher dividends and more tangible company sales for every dollar invested.

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