The Resilience of Value Investing in a Low-Rate Era: Lessons from Chung Ju-Yung's Industrial Blueprint

In an era marked by historically low interest rates and persistent macroeconomic uncertainty, value investing has faced renewed scrutiny. Critics argue that undervalued, capital-intensive sectors like industrials lack the growth allure of tech darlings or AI-driven disruptors. Yet, this perspective overlooks a critical truth: enduring principles of hard work, frugality, and long-term vision—epitomized by the late Chung Ju-Yung—remain the bedrock of sustainable value creation. These principles, honed during South Korea's postwar industrialization, offer a roadmap for identifying undervalued industrials equities poised to outperform in a low-rate environment.

Chung Ju-Yung's legacy is defined by four pillars: relentless execution, strategic frugality, trust-based leadership, and long-term reinvestment. These principles are not relics of the past but actionable frameworks for navigating today's challenges. Consider strategic frugality, which Chung practiced during the 1997 Asian Financial Crisis by redirecting savings into innovation rather than cutting costs. This mindset is mirrored in Edison International (EIX), which invests $8 billion annually in clean energy and grid modernization while maintaining a forward P/E of 8.17. Similarly, Teradyne Inc (TER) has thrived amid trade restrictions by prioritizing R&D and lean operations, achieving a 43% forward P/E discount despite robust growth in semiconductor testing.

The low-rate era amplifies the appeal of such companies. With capital costs near zero, firms that reinvest in infrastructure and innovation—rather than short-term shareholder returns—gain a competitive edge. Microsoft (MSFT) and Verra Mobility (VRRM) exemplify this. Microsoft's Azure division grew 34% year-over-year in 2024, driven by long-term reinvestment in cloud infrastructure. Verra Mobility, with its 46.77% projected earnings growth for 2025, reflects the power of disciplined R&D and operational agility. These firms align with Chung's philosophy of “shortening the time”—executing with speed and precision to outpace rivals.

Trust-based leadership, another cornerstone of Chung's approach, fosters resilience in volatile markets. Companies like Universal Health Services, Inc. (UHS) and James Hardie Industries (JHX) demonstrate this. UHS, with a forward P/E of 9.4 and a narrow economic moat, has maintained consistent performance in healthcare through a culture of adaptability and trust. James Hardie's strategic acquisition of Azek, despite short-term stock volatility, mirrors Chung's bold 1965 investment in heavy machinery—a move that transformed Hyundai into a global industrial power.

For value investors, the industrials sector offers fertile ground. Firms with strong free cash flow margins, low debt-to-EBITDA ratios, and a history of reinvesting during downturns are particularly compelling. Dell Technologies (DELL), for instance, leveraged its direct-to-customer model to navigate supply chain disruptions, maintaining 15% free cash flow margins despite a 12% revenue decline in 2023. Its disciplined execution and frugality—hallmarks of Chung's principles—position it as a prime candidate for undervaluation in a low-rate environment.

The key to identifying such opportunities lies in qualitative metrics. Look for companies with high R&D intensity, employee retention rates, and ESG alignment. These indicators signal a culture of long-term thinking and operational resilience. For example, NVIDIA and Apple have thrived by allocating 25% of earnings to R&D, a strategy akin to Chung's crisis-to-opportunity mindset. Their ability to compound value in low-earnings environments underscores the relevance of strategic reinvestment.

In conclusion, the low-rate era is not a death knell for value investing but a catalyst for rediscovering its core tenets. By focusing on industrials equities that embody Chung Ju-Yung's principles—relentless execution, strategic frugality, and trust-based leadership—investors can uncover undervalued gems. These firms, with their durable competitive advantages and long-term vision, are poised to deliver outsized returns as markets evolve. The lesson from Chung's legacy is clear: resilience is not a function of external conditions but of the values and discipline that define the enterprise.