Which Value

Cousin had two funds open on the same tab last night. Both said value. He was picking the one with the bigger number, which is the normal thing to do and the reason I bothered saying anything.

Asked him something else instead. Do these two actually hold the same stocks?

He assumed yes. Same word, same idea, same shelf. Reasonable assumption. Also wrong.

Take two flagship value indexes built on the same market. Roughly 75 to 80 pct of their weight is common. The rest is not, and more than 30 pct of index weight can sit in one and be completely absent from the other. Not because anyone is being dishonest. One rulebook penalises forecast earnings growth, the other scores each company against its own sector peers. Both are defensible. They disagree anyway, because they were always going to.

Here is the part nobody tells you. Value is an idea. Nobody sells you an idea. They sell you a rulebook that turns the idea into a list of stocks, and every choice inside that rulebook is doing work you never see.

How much work? The textbook value factor, the one thirty years of research is built on, decides what is cheap using a price from last December. Six months old when the portfolio gets built. Eighteen months old by the next rebalance. Asness and Frazzini changed that one input to a current price, left everything else alone, and found 3.05 to 3.78 pct a year of risk adjusted return that the standard version had been walking past. Measured against a model that already contained standard value.

One detail. Not a fee, not a manager, not a market call. Which price you read.

So the useful question was never whether value works. It is whose value, built which way. Three things to ask before the return number: which metric decides cheap, how old is the data it reads, how often does it rebalance.

The label is the marketing. The rule is the product.

Read the rule before you read the return: