Berenberg believes value will continue to perform in 2023

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By Sam Boughedda

Berenberg analysts told investors the firm is looking for value leadership in 2023.

The analysts explained that the tough backdrop in 2022 that resulted in a broad sell-off across markets meant value beat growth.

"Value outperformed strongly versus growth in all regions during 2022. In Europe, value outperformed growth by 22% in 2022; this was the best year for value relative to growth in the region since 1975. Can value continue to perform in 2023? We think the answer is yes," declared the analysts.

"Value has beaten growth as an investment strategy since the mid-1970s, but structurally underperformed between 2007 and 2020. 2020 was the worst of times for value; global value underperformed global growth by 26%," they added.

However, Berenberg recommitted to its value bias at the start of 2022, and the analysts told investors in their note on Tuesday not to be short value in 2023.

"So, can value win again in 2023? The set-up is not as supportive for value relative to growth now as it was at the start of 2022, but we continue to see support for value here and continue to overweight valuation in our overall strategy process," the analysts added. "While inflation is likely to roll hard in 2023, our economists continue to back the medium-term view of "higher for longer" in terms of inflation risks. An era of higher inflation rates and discount rates suggests net support for value and for the role of valuation in investment processes."