The market thinks software is breaking. We think it is being tested. 

It has been a hard time to be a value investor. 

Growth stocks have meaningfully outperformed value for decades, and investors have increasingly questioned whether value investing works at all. That is a remarkable place to find ourselves. Value investing is the foundation of modern finance, built on the idea of quantifying what something is worth based on its fundamental, cash flow-generating capabilities, and buying it when the price represents a meaningful discount from that intrinsic worth. 

It is the premise of how we look at things at Pender, though for clarity, we do not consider ourselves exclusively value investors, and the reasons for that will (hopefully) become clear. 

So why has this discipline fallen so out of favour? Is value investing truly broken? Or is it our definition that has? 

The value evolution 

When I studied finance during my undergraduate degree, value investing stood out to me immediately. As someone who loves a good deal while shopping, how could I not love a good deal in the stock market? 

Some of the greatest investment minds built their fortunes on the value doctrine: 

Warren Buffett: “If you don’t believe in value investing, what do you believe in?” 

Benjamin Graham: “The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices.” 

Howard Marks: “It’s not what you buy, it’s what you pay. Success in investing doesn’t come from buying good things, but from buying things well.” 

So, what is happening now? 

Is it the manic-depressive behaviour of what Benjamin Graham called “Mr. Market?” 

Traditionally, a value investor understands that Mr. Market does not tell you what something is worth. Mr. Market offers up securities at prices that can be wildly disconnected from their actual value. This creates opportunities to buy at a meaningful discount. 

That said, some strong businesses have spent years in Mr. Market’s area of despair. How can companies with solid fundamentals and reasonable valuations remain so persistently out of favour? 

A value trap? 

At its core, value investing has always been about buying something for less than it is worth. The fear that keeps value investors up at night, however, is the value trap. 

A low valuation metric is far from synonymous with being underpriced. A stock with a low P/E ratio is only a bargain if its current earnings are proof of the future. Chasing low multiples alone can lead straight into value traps: companies that look cheap on paper but are not in reality. This may reflect structural weaknesses or simply the fact that the earnings underpinning that valuation are not sustainable. 

Contrast this with growth stocks. For long stretches, high-growth, “growth-at-all-costs” companies were treated as if nothing bad could happen to them, and as if no price was too high. 

Are these really the only two options for valuing a business? We think not. In truth, these camps were never mutually exclusive to begin with. 

What gives? 

Here is what makes this interesting. As (value-inspired) technology investors at Pender, we are constantly searching for innovative companies, leaders who think differently and are changing the world one idea at a time. And yet much of our investment framework is rooted in thinking from a different era. 

We admire The Intelligent Investor by Benjamin Graham, published in 1949. It remains an excellent read and a foundation for many of our principles. Graham’s core insight, that price and value are not the same, still holds. 

But it is worth asking: if we relied on the technology of 1949 in our daily lives, what would that look like? 

We would be writing on typewriters, navigating by paper maps, and performing calculations by hand. The idea of a spreadsheet would be science fiction. 

So why do we sometimes treat an investment framework from that era as if nothing has changed? 

To be clear, the foundation is sound. But the environment in which it is applied has evolved dramatically. 

When Graham and Buffett were building their track records, investment management was a nascent industry. Information was scarce and difficult to access. Today, the opposite is true. The industry is highly competitive, and data is abundant, processed instantly by analysts and algorithms alike. 

In that world, it is harder to believe that obvious bargains persist. If something is easily identifiable in public information, it is likely already reflected in the price. 

But markets are not purely efficient. They are shaped by behaviour, incentives, and structure. Passive flows, algorithms, and benchmarking all influence outcomes in ways that can create new forms of mispricing. 

Oh, how the tables have turned 

Consider the sector most associated with growth investing: technology. Software. 

Even Warren Buffett eventually broadened his definition of value, shifting toward “great businesses at fair prices.” That evolution led him to Apple, one of his most successful investments. 

Today, something has shifted again. 

While technology remains a primary driver of global growth, parts of the software sector have undergone a meaningful reset. Changes in how customers purchase and deploy software, combined with the emergence of new technologies like AI, have introduced both disruption and uncertainty. 

As a result, many software companies have, for the first time, migrated into what looks like value territory. 

In some cases, valuations now imply modest or even negligible long-term growth. The market appears to be pricing software more like a mature, slower-growth sector. 

We think that may be a misread. 

As new technologies are adopted and begin to deliver tangible value, companies already embedded in customer workflows are often best positioned to benefit. They have distribution, data, and integration advantages that are difficult to replicate. 

The question is not whether change is happening, but which companies are equipped to adapt. 

Pressure makes diamonds 

There is a saying: “To the man with a hammer, everything looks like a nail.” The growth versus value debate has sometimes created the impression that investors must choose one tool. 

In reality, the best investors use both. 

Much of traditional value investing rests on mean reversion: the idea that what goes down will come back up. While this can still hold, it is less reliable in a world shaped by structural change. Some businesses do not recover. Others emerge stronger. 

The challenge is distinguishing between the two. 

As Albert Einstein put it: “Not everything that counts can be counted, and not everything that can be counted counts.” 

Value does not have to mean a low multiple. It does not require avoiding growth or technology. It means understanding what something is genuinely worth and buying it when it is available for less. 

What we have come to believe is that the deepest form of value is resilience. 

Resilience is not something a company improvises in a crisis. It is built over time. The businesses that endure are those that have structured themselves to absorb shocks and adapt. 

Fast growth can create fragility. Without strong foundations, it can amplify weaknesses rather than strengths. 

By contrast, the companies we find most compelling today tend to share a different set of characteristics. They have recurring revenue. They are embedded in customer workflows. They deliver real value, which supports pricing power. And they evolve continuously, incorporating new capabilities without losing coherence. 

These businesses are sometimes priced as if their best days are behind them. As if disruption is purely a threat, rather than also an opportunity. 

We think the opposite may be true. 

Value is not a multiple. It is resilience over time. 

It is a hard time to be a value investor. Approaching markets with an open mind and a willingness to think independently is rarely easy. 

But that is also what makes it interesting. 

Today, parts of the market are being priced as if they belong firmly in the “value” category: mature, slow-growing, and potentially disrupted. In some cases, that will prove correct. In others, it may reflect a misreading of a transition period as permanent decline. 

Some companies will not survive disruption. Others will be strengthened by it. 

The task is to tell the difference. 

In the end, value was never about buying what is cheap. 

It was always about understanding what will last. 

Please read important disclosures at www.penderfund.com/disclaimer.

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