Listen to "The Return of Value Investing" on Spreaker.
The Comeback Nobody Announced
For the better part of fifteen years, value investing was the market's wallflower. The conversation belonged to growth — Microsoft, Amazon, Tesla, Apple, and eventually the whole Magnificent Seven. Value stocks? That was your grandfather's portfolio.
This year, the story has flipped.While the S&P 500 is up roughly 8–9%, the value sectors are running: energy up about 20%, industrials 17%, healthcare 15%, utilities 14%, financials 12%, consumer staples 9%.Pick almost any mix of value-based sectors and theworstof them is keeping pace with the index — and most are lapping it.
This week's show is about why that's happening, why it took so long, and what the greatest investors of all time — Benjamin Graham, Warren Buffett, Charlie Munger — can teach anyone trying to build wealth in this market. This is the space where we live every day: highly convicted positions in strong, profitable companies you actually know, paying you real income on a regular basis.
What Value Investing Actually Is
Strip away the jargon and value investing is simple:buy good businesses at sensible prices, collect what they pay you, and be patient.
The tradition runs straight through three names:
- Benjamin Graham— Buffett's actual professor — taught buying cheap assets, focusing on book value, and selling when a company reaches fair value. His famous idea, themargin of safety, means paying enough below a company's worth that you're protected when you're wrong.
- Warren Buffetttook it further: buyoutstandingbusinesses, focus on earnings power, and often hold for decades. He's not hunting for discounts so much as quality at a fair price.
- Charlie Mungersupplied the discipline in one line:"The big money is not in the buying or the selling, but in the waiting."And another we love: quality businesses can compound for decades — plural.
None of it is new, and that's the point. These principles have survived every market cycle since the 1930s because they're built on how businesses actually make money — not on how stories make headlines.
Why Value Went Dark: 2009–2025
So if value investing works, why did it spend a decade and a half out of fashion?
Interest rates.When money is nearly free — and for most of the 2010s it was — growth companies can borrow cheaply to fund expansion, research, and moonshots. Cheap debt is rocket fuel for companies whose whole pitch is the future. Investors chased that growth, and the results were real: the big tech names delivered.
But the same force works in reverse.When rates rise, growth gets expensive.Borrowing to build costs more, future earnings are worth less today, and suddenly the market starts asking harder questions: Where's the revenue? When does the AI spend pay off? Show me the earnings.
Meanwhile, the value companies — the Procter & Gambles, the Coca-Colas, the Home Depots of the world — never needed the cheap money. They already figured it out. They have the product, the profits, and enough cash flow that instead of borrowing from the bank, they send moneyback to shareholdersas dividends.
Growth borrows. Value pays you.That's the cleanest way to understand the rotation happening right now.
The Rotation: Tired of the Chase
There's a psychology to this year's shift, too. After three years of chasing the next tech story through extreme volatility, a lot of investors are simply worn out. They're not leaving the market — they're taking gains off a historic run and asking a different question:who's going to pay me to invest with them?
That's the return to fundamentals. Investors are going back to the balance sheets and rediscovering companies that are presently profitable, pay real dividends, and sell things people buy every week. Toothpaste and toilet paper, as we put it on the show — as opposed to rockets and data centers.
And here's the piece most people miss:the information takes a long time to reach the average investor.Every 401(k) contribution checked into "technology — it's been good" keeps flowing to last cycle's winners, while value quietly outperforms. By the time the average allocation catches up, much of the move has happened. Value is outperforming the S&P 500 by roughly two-to-one this year — and most people haven't noticed yet. That's exactly the window where understanding matters.
The Demographic Engine: America Needs Income
Underneath the rate story sits something even bigger and slower:demographics.
Roughly 10,000 baby boomers reach retirement age every day — a wave we've watched build for nearly two decades, taking America toward the largest retired population in its history. And what does every one of those households need more than anything else?Present-day income.
Growth stocks don't provide that. To get paid from a growth stock, you have to sell shares, realize the gain, and settle the taxes. A dividend portfolio pays youfor owning it— cash arriving on a schedule, whether the share price had a good quarter or not.
From 2007 through roughly 2023, the bank paid you essentially nothing, which pushed income-seekers toward dividend stocks by default. Today CDs and fixed annuities pay 3.5–5% — but if you have twenty years of retirement ahead of you, the question isn't what the bank pays this year. It's where your income comes from when rates recede. Mature, profitable, dividend-paying companies — many of which have paidand raisedtheir dividends for decades — are one of the most durable answers.Pepsi has paid a dividend for 53 consecutive years.
The Compounding Story: Buffett's American Express
If you want one picture of what patience plus dividends can do, it's Buffett's American Express position.
Berkshire bought it decades ago and, as far as anyone can tell, never sold a share. Today,the position pays Berkshire more in dividends every single year than the entire original investment cost.The dividend alone — not the share price, thedividend— returns the full purchase price annually. That's what Munger meant by compounding for decades, plural: dividends buying more dividend-payers, which pay more dividends, until the snowball rolls itself.
It took years before that position looked brilliant. That's the price of admission. As Buffett puts it:"Price is what you pay. Value is what you get."And when a stock is paying you to own it, patience gets a lot easier.
One more note from the professionals: even the best don't pick all winners. Fidelity's Will Danoff beat his benchmark by roughly two percentage points a year for over three decades — driven substantially by a handful of high-conviction positions he let ride. Conviction matters. So does honesty about mistakes: sometimes the story is right but the buyers never come, and the discipline to admit it and move on is as important as the discipline to hold.
The Sector Scoreboard
Here's where the return of value shows up in plain numbers this year:
- Energy: up ~20%.Geopolitics, oil deliveries, and the data-center power build have the tried-and-true names — long-tested dividend payers — leading the market.
- Industrials: up ~17%.Reshoring and the construction wave anticipated around the AI buildout are lifting companies like Caterpillar that nobody called exciting a few years ago.
- Healthcare: up ~15%.Long ignored and beaten down by headlines — which is often exactly where value lives.
- Utilities: up ~14%.AI data-center energy demand is pushing on utilities years before any private mini-reactor gets built, and consolidation is active.
- Financials: up ~12%.Solid loan growth, improving capital markets, strong buybacks, attractive dividend yields — J.P. Morgan, Berkshire Hathaway, and Goldman Sachs have led, with plenty of names behind them.
- Consumer staples: up ~9%.And if reshoring brings more jobs home, more people are buying toothpaste and toilet paper.
The S&P 500 as a whole — still dominated by tech — is up about 8–9%.You could have chosen nearly any basket of value sectors and matched or beaten the index.
When Funds Stop Making Sense
One more conversation from the show that almost nobody in the industry will have with you.
Mutual funds and ETFs were designed to solve a real problem:diversification for investors starting out.If you have $2,000 to invest and one share of Eli Lilly costs nearly $1,200, you can't build a diversified portfolio of individual stocks. A fund does it for you. That's a genuinely good invention.
But here's what the industry doesn't say:once your portfolio is large enough to diversify directly, the fund layer becomes a fee you may no longer need.The greatest investors aren't holding 500 stocks — they're holding a focused set of businesses they deeply believe in. Owning quality companies directly means no fund expense ratio, full control over what you own, and dividends flowing straight to you.
The fund companies make a great deal of money on the idea that you can't do this yourself. At a certain net worth, with professional guidance, you can — and it's simply a way to cut a layer of fees out of the picture. That's a conversation worth having, and we're glad to have it honestly.
Final Thoughts: Boring Is Back
The return of value investing isn't really a comeback story — value never stopped working over the long run. Looking across the whole history of the market, value stocks actually hold a slight edge over growth. What changed is that the market's attention finally came back around.
Strong, profitable, dividend-paying companies you actually understand. Patience measured in years, not quarters. Income that shows up whether the headlines are good or not.The big money is in the waiting.
If your portfolio is still positioned for the last cycle — concentrated in growth, light on income, paying fund fees a portfolio your size may not need — this is the moment to look again.
"You can't get lucky if you don't take action. The best opportunity in the world is just a missed opportunity if you don't grab it."
— James Clear
Next Steps
Want to know whether your portfolio is positioned for the value rotation — or still riding last cycle's allocation? We'll walk through your holdings, your income needs, and where dividend-paying value companies could fit.
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Frequently Asked Question
What is value investing and why is it working again in 2026?
Value investing means buying strong, profitable, often dividend-paying companies at sensible prices and holding them patiently — the approach built by Benjamin Graham and made famous by Warren Buffett and Charlie Munger. It struggled while near-zero interest rates favored growth stocks, but higher rates flipped the equation: in 2026, value sectors like energy (~20%), industrials (~17%), and healthcare (~15%) are outpacing the S&P 500's roughly 8–9%. The appeal is simple — instead of borrowing to chase growth, these companies pay shareholders real income today, and reinvested dividends compound over decades.
The views expressed are educational in nature and should not be construed as personalized investment, tax, or legal advice. Investing is subject to risk, including loss of principal. No strategy, product, or tool mentioned can assure a profit or protect against loss. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the issuing company. Individual companies are referenced for illustrative and educational purposes only and are not recommendations to buy or sell any security. Index and sector figures cited are approximate year-to-date values as of the air date, drawn from sources believed reliable, and subject to change. Individual situations vary — coordinate any strategy with professional advice. Past performance is not a guarantee of future results.
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