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Value Has A Pulse

Within our Small Cap universe, Value made a comeback last month

Don't call it a comeback, I've been here for years...

I'm guessing anyone around my age will recognize those words as the opening line to LL Cool J's "Mama Said Knock You Out". Why did this come to mind regarding a post about our small cap Value factor?

Value in our small cap universe just had the best monthly return since April 2022.

In case you missed it, Value poked it’s head up from the depths of despair. We have written a couple times this year on Value’s underperformance (read: Role Reversal & Halftime Update). For the August month just ended, Value had its most positive Decile 1 (most attractively valued) minus Decile 10 (least attractively valued) spread this year (+10.1%) and the best since April of 2022. Excluding the years in and after the dot com bubble, August 2023 was the third-largest positive spread. The Value spread was +11.6% in March 2022 and +11.3% in April of last year.

Bar chart of Value spreads by month, 2000-2023, Jackson Creek small cap universe

Source: S&P Global, Jackson Creek Investment Advisors

The 2000-2002 years skew the y-axis, so here is the same chart starting from 2019, for better context.

Bar chart of monthly Value returns, 2019-23

Source: S&P Global, Jackson Creek Investment Advisors

With the August bump, Value is now leading our five key factors year-to-date. It is still a tight race, though. Through the end of end of August, Value is up 5.74%, Size (Capitalization) is up 3.76%, Volatility is up 2.14%, Medium-term momentum (MTM) is down 1.03%, and Short-term momentum (STM) is down 4.19%.

2023 YTD Factor Returns - Momentum, Size, Value, Volatility; small cap universe

Source: S&P Global, Jackson Creek Investment Advisors

Value’ resurgence sent me searching for other good pop culture references, other than LL Cool J's, that depict a grand return. Some that came to mind:

  • There's Michael Jordan’s very matter-of-fact fax announcing his return to basketball: “Value's Back!”; or the Schwarzenegger version from Terminator 3

  • Along the Jordan theme, the line in Jay-Z’s Encore: “When Value comes back like Jordan, wearin’ the 4-5…”

  • From Futurama, there’s Bender’s favorite catchphrase: “Value's Back, Baby!”

  • This heroic scene from Independence Day also came to mind: “Hello boys, Value's baaaack!”

Whichever lyric or movie line is best, it is probably premature to truly declare Value as being “back”. One month does not make a trend. However, Value did show signs of life in August. Therefore, instead of the destruction and aggression LL Cool J imparts in his song, I think the most relevant reference is the iconic scene from Frankenstein: “Value’s Alive, It’s Alive!”



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