The investment paradox of software

The period 2014 to the present has been one of soul-searching for value investors as many formerly successful fund managers retire following stagnant performance. Commenters increasingly describe a market rally that is remarkably narrow in breadth led by FANG (Facebook, Amazon, Netflix, and Google) and other software-driven technology stocks which trade at valuations which appear unhinged from traditional cash-flow based valuation metrics. There are several possible explanations for value investors' under-performance: more competitive markets, diminished information asymmetries, a venture capital bubble, or changes in business models, especially in terms of technology and intangible assets. Yet, there is also some historical evidence that our current tech-dominated market indexes may simply reflect the out-sized importance of software in emerging business models

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