For the first time since December 2009, South African value stocks have pulled ahead of growth stocks when measured over a one-year period, according to Andrew Dittberner, CIO at Cannon Asset Managers.

Over the long term, value styled investing outperforms growth styled investing, however, for the last seven years, both globally and in South Africa, value investing has underperformed.

Dittberner believes that this recent trend has reversed.

“Asset managers who were successful over the last seven years would no doubt have had a growth bias in their portfolios. But this year we have seen a resurgence of value styled funds and investors who own growth biased unit trusts should consider allocating more capital to value,” he said.

In South Africa, those who have invested in value funds will have experienced outperformance over the past year. 

An example is the Cannon SuperDogs fund, which is up 8% year to date, relative to its benchmark, the FTSE-JSE Financial & Industrial 30 Index which is down 7.6%. 

Dittberner noted that the fund owns no resource shares, which have also done very well this year and were also showing strong value at the start of the year.

According to Dittberner, given the poor performance of value over the last seven years, the number of pure value managers has once again dwindled. 

Towards the end of the 1990s, there were only two value managers left in South Africa after the growth boom of the mid 90s, yet there were plenty of growth managers. 

“We believe there are now only four deep value managers left in South Africa as investors abandoned the style and value firms closed down or style drifted towards growth,” Dittberner said.

“These style cycles have typically lasted anywhere up to five years and we believe that this represents the start of an extended period of value outperforming growth. Investors who wish to capitalise on this trend would do best by seeking out a pure value manager,” he added.

Cannon Asset Managers is a South Africa-based niche investment management company and is a member of the Peregrine Group.