Yann Giordmaïna, Head of Value and Manager, LFDE.
Whatever the market conditions, one principle remains never changes: valuation. This safety net is especially central in that markets currently appear driven by exaggerated flows and a form of exuberance that is not always Rational . Through a contrarian lens, value management is full of opportunities.
Investors cannot escape human nature: from 17th-century tulip mania to the dot-com boom at the start of the 21st century, via the railway boom of the 19th century, we are always drawn to whatever glitters. This phenomenon is amplified by algorithmic models, representing both a risk for market participants and an opportunity for the value approach, because reality always catches up with excess. And in the stock market, reality is valuation. Within LFDE’s Value Team , which manages €3.5 billion in assets,[1] we are convinced that a pragmatic and methodical approach is a source of long-term opportunities.
While value was considered the aristocracy of investing for a century, its image has become less prestigious over the past two decades. From steel to the automotive sector, we seem a long way from the allure of growth investing. In our view, sticking to such clichés is a error of perspective. Discounted valuations can be found anywhere, from Software AG to luxury goods, consumer goods and even pharmaceuticals. For long-term investors such as ourselves, every sector, business model and company has its own benchmarks. We do not believe there to be “value” sectors or value companies as such, but rather a long-term value-based investment philosophy. Spanish international cosmetics and fragrance company Puig is a case in point: its valuation has halved since its IPO in April 2024, even though its brand portfolio remains entirely relevant. It is a key example of a value stock where a discount combines, in our view, with real asset quality.
Mergers and acquisitions as drivers
The resurgence in M&A activity observed in recent months, particularly in the United Kingdom, clearly reflects this mechanism. The British stock market, neglected and undervalued for several years, has seen buyers return – not financial players, but industrial actors interested in specific sectors. This is a strong signal: when industry insiders identify a valuation opportunity, it confirms that an unjustified price Gap truly existed.
When these corporate transactions occur in our investment cases, they validate our upfront research work. The accompanying control PREMIUM is the added bonus. Energy company DCC illustrates the persistence of a Gap between market price and intrinsic value. After rejecting an initial offer deemed insufficient, DCC received a revised offer representing a PREMIUM of over 30% to the three-month weighted average share price prior to the initial approach. Another example is Tate & Lyle , a player in the food and beverage industry. The offer from US group Ingredion represented a 64% PREMIUM over the last traded price before discussions were announced. This positioning crystallises the value that the market had been slow to recognise, despite the group’s profound transformation from a historically sugar-reliant profile to a speciality ingredients platform.
Discounts and catalysts: two pillars of Value stock selection
In our Value approach, the essential – and most subtle – element is identifying the catalyst: an operational, sector-specific or regulatory event that will prompt the market to close the Gap between a company’s share price and its true value. Without a catalyst, a discounted stock can remain so indefinitely.
Another core analytical tool in our management at LFDE is return on capital employed (ROCE), which links the income statement to the balance sheet. It allows us to assess the quality of business models beyond simple valuation multiples. We adapt to market regimes. Over the past six months, this discipline has led us towards models offering good visibility on capital distribution, such as banks and energy. Overall, we have been following the consumer sector with interest for five years. Encompassing both Staples and discretionary goods, this segment covers a broad Spectrum of companies that we analyse through the power of their brands.
In Continental Europe as well as the United Kingdom, we generally find that small and mid-caps, which often trade at a discount, attract very small flows. Yet this overlooked segment lies at the heart of industrial history.
Value: a sustainable foundation rather than a tactical play
While value investing carries a well-identified risk – the “value trap” – the real challenge is to understand the fundamental reasons behind the discount. The trap occurs when the initial analysis is flawed – whether regarding the company’s fundamentals, its sector or the macroeconomic environment – and the discount persists or widens instead of narrowing. The Investor believes they are buying cheaply, but in reality, they are paying fair value or even more. We therefore believe it is essential to rely on an in-depth understanding of business models, economic conditions and sectors, while adapting to economic cycles and market regimes. In our view, a methodology that gets to the core of economic mechanics is decisive.
Far from being a tactical window that opens depending on factors such as interest rate movements or M&A opportunities, we believe the value approach has a permanent place as the core of a portfolio. Value offers a distinctive performance profile that enriches overall asset allocation, allowing investors and allocators to better manage portfolio construction over time by adapting to the market environment.
In a market where trendy themes and benchmark pressure push towards conformity and short-termism, an approach built on valuation, business model quality and patience is a management style that helps anchor performance in real-world solidity.
[1] At 30.06.2026
