Georg von Wyss has made a clear decision for himself on the often controversial question of what is better to do with stocks or growth stocks when it comes to equity investments.

The CEO of the Swiss asset manager BWM leaves no doubt: "Value stocks are superior to growth stocks in the long term." Investors value cheap stocks, he says, and refers to studies that show that the value of American value stocks has risen by more than 20 percent over the past 50 years is, while the broad market brings it to 16 percent.

Martin Hock

Editor in business.

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What doesn't sound like much will have a huge impact in 50 years. $ 100 in value stocks turned into $ 2.7 million, and a modest $ 181,000 invested in the broad market. “Speculative bubbles always work according to the same pattern,” says von Wyss. "Old industries have no sex appeal, while new inventions always give the impression that the world is brand new." That has always been the case. Railways and telegraphy would have made people excited at the time.

“What is always confused is technical change and the principles of investing,” says von Wyss. The latter, however, did not change due to technical innovations. Occasionally, however, current developments can obscure this connection. For example, value stocks had a hard dry spell between 2014 and 2020, during which the share value of the in-house Classic Global Equity Fund was just as high at the beginning of the Corona crisis as it was six years earlier and then fell by 35 percent.

Substance values ​​were just not in demand. But they also went into so-called value traps. It was believed too early that the regulatory requirements of the ECB for the Italian banks had been met, and therefore invested in shares in the Bank Monte dei Paschi. However, von Wyss reproaches the regulator here. But they also had to suffer with the British breakdown service AA, whose inflows of funds were overestimated at the time. Since then one has become stricter in dealing with balance sheets.

“However, it doesn't make it any easier,” admits von Wyss. “Because many interesting companies are heavily in debt.” But it is safer with companies with good balance sheets. However, the asset manager will not agree to speak of quality stocks here. What does that mean? He asks and gives an example: The automotive cable specialist Leoni is actually a good company. But poor management at a new plant in Mexico caused the debt to swell. Accordingly, the controlling was probably not good.

The BWM fund has recovered from the slump in the Corona crisis and has more than doubled its value since then. “Of course, we have profited massively from the so-called reflation trade, which actually only means buying the stocks of European manufacturers of cyclical consumer goods, which fell sharply during the crisis, instead of large technology stocks.” Von Wyss sees this not as a trend towards value stocks, but rather a return to normality. Now count the evaluation again. Of course, that of value stocks has also risen, but there are still undervalued stocks. No longer like a dime a dozen like a year ago, but you can still buy selectively.

He thinks supermarkets, auto suppliers and stocks from IT service are promising. In his own words, the topic of sustainability is not a concern. Old industries could also adapt to this, for example if Agfa uses its experience from long-faded film production to manufacture membranes for hydrogen production. In any case, the in-house fund has very good grades, although von Wyss finds some criteria a bit strange, for example when the control of a company by a family is rated negatively, when they think more long-term than professional managers.