Value investors can be unbearably smug. Despite an overwhelming body of evidence that no one investment style is best in all markets, value investors delight in their own certainty. The stock is undervalued, the investor is right and eventually the market will agree and the stock price will rise.

Warren Buffet’s long term investment performance is often cited as an example of the power of the value style. There’s no disputing the strategy has many successes.  However there are at least two problems with this approach. The first is that the wait for a stock to “come good” can be interminable, tying up capital for years. This is an investment opportunity cost. The second issue is that value investors rarely use the discipline of a stop loss order. In other words if a value stock is falling there is no share price at which many value investors will admit defeat.

This brings us to Isentia Group (ISD).

Isentia is a long term darling of the value investment community. Initially listed in mid-2014, the stock more than doubled in price from $2.40 to $4.95. (Chart above). Those buying ISD on a value argument were well rewarded. However since the high in late 2015 the stock has slid dramatically and is now closer to $0.80 per share. The problem is the downward revisions of ISD’s market value have lagged the share price drop, trapping investors.

Many valuations are based on the present value of future earnings. This does not account for market failure. It’s hard to dispute that the failure of ISD’s content marketing business is the primary cause of the share price slide, and the trapping of value investors.

Now that ISD has shed content marketing and it’s CEO in my view the stock is interesting. The remaining media monitoring business is well established and profitable. I estimate the current PE ratio around ten times - cheap if there is future growth. The long term outlook for the media monitoring industry is not clear. Right now it is delivering. Some investors may wait for the share price to break the downtrend with a move up through $1.00.  But at eighty cents I’m happy to take a twelve month speculative view that this share price will recover significantly.