Value investing has rarely felt so out of favor—or so compelling. After years of narrow, growth-led market leadership in which value stocks were left behind, our U.S. value equity team sees a rare combination of improving fundamentals, deeply discounted valuations, and meaningful dispersion beneath the surface.
In this conversation, based on our four videos, members of our U.S. value equity team reflect on the discipline of value investing, the lessons that shape their approach, and why the current environment may be setting the stage for a broader market revival in 2026. Together, they outline how experience, balance-sheet discipline, and a willingness to look where others are not can create opportunity amid uncertainty.
The Case for Small-, SMID- and Mid-Cap Value
Against that backdrop, the team sees a compelling opportunity set emerging—particularly in small-, SMID-, and mid-cap value.
“Value is a really exciting asset class to consider for a portfolio right now,” says Matt Fleming, CFA, partner, head of the U.S. value equity team and portfolio manager. “The market has gotten increasingly narrowly focused on growth and momentum. More money is chasing fewer opportunities, and at the same time you’ve got some really terrific companies trading at historically low valuations.”
There’s less analyst coverage, and those are ideal areas for active management.—Mark Goodman, CFA
Mark Goodman, CFA, portfolio manager, points to inefficiency as a key advantage. “Small- and SMID-value segments of the market are inherently more inefficient. There’s less analyst coverage, and those are ideal areas for active management.”
Fleming adds that valuation dispersion is extreme. “If you look over the last three to five years, the bifurcation in valuation between large- and small-cap stocks is absolutely extreme. In some cases, larger companies are trading at five times the valuation of the lower segment.”
Greg Czarnecki, portfolio specialist and research coordinator for the team, describes how the team incorporates market inefficiencies and valuation discounts into the process. “We’re seeking to purchase high-quality companies that trade at a discount to their inferior peers and to their intrinsic values,” he says, adding that the team also focused on earnings and cash flows 18 months out, strong balance sheets, and management teams focused on shareholder-friendly capital allocation.
Seeking Value Amid Uncertainty
Opportunity often emerges where others are uncomfortable looking.
“We like to explore areas of the market that are less covered by our peer group and that may be undergoing some business transformation,” Czarnecki says.
Goodman agrees. “We’re always looking for opportunities where others may be running away from the fire—whether that’s apparel during tariff concerns, analog semiconductors at the trough of the cycle, or biopharma companies facing supply constraints.”
Fleming highlights the appeal of cyclicals. “There are periods where the market extrapolates the cycle indefinitely and assumes something is broken. Our experience tells us that we’re reaching a bottom. When you can buy a company on a trough multiple on trough earnings, you’re not only capturing earnings recovery—you’re also getting multiple expansion.”
Setting the Stage for 2026
Looking ahead, the team believes conditions may be aligning for a broader market recovery. “We think 2026 has the potential to really benefit small- and SMID-cap value asset classes as recent headwinds subside and turn into tailwinds driven by fiscal stimulus, tax refunds, and lower interest rates” Czarnecki says.
Fleming points to improving fundamentals and policy tailwinds. “Smaller companies are coming out of an economic downturn. Valuations are extremely cheap, and historically small caps have benefited from Fed rate cuts. We think 2026 is shaping up to be a classic small-cap rebound.”
Goodman sees the potential for market leadership to broaden. “What excites me is the opportunity for the market to move beyond what’s been a very narrow, growth-led environment. That could really help stocks that have been left behind.”
The underperformance of small relative to large is at extreme levels. That sets up a compelling scenario. — Matt Fleming, CFA, Partner
Risks remain, Fleming notes, including the possibility that recovery takes longer than expected. But the duration of underperformance itself stands out. “The underperformance of small relative to large is at extreme levels. That sets up a compelling scenario—not just for fundamentals, but also for a shift in flows.”
Meet the Portfolio Managers
Our view is that value investing is, at its core, an exercise in judgment—about businesses, balance sheets, management teams, and what the market may be missing.
According to Fleming, intellectual challenge is central to the discipline. “When you find a great company that’s continually growing, the question is not whether it’s a good company but rather what the growth is. I think when you think of a value company, oftentimes there are real considerations of, is this a good company, is this a viable franchise? And there are many that are really thrown out in the discard bin.”
The goal is to try to see something that the market doesn’t. — Matt Fleming, CFA, Partner
For Goodman, the foundation was built early. “I grew up with a father who was a stockbroker on Wall Street his whole career, and he was a small-cap value investor at heart. So, I really grew up learning the importance of protecting downside, having strong balance sheets, and finding compelling risk/reward opportunities.”
That emphasis on downside protection and differentiated thinking has shaped how the team approaches markets today. “It’s really intellectually stimulating,” Fleming adds. “And it really forces us to think differently. The goal is to try to see something that the market doesn’t.”
Lessons That Shape the Discipline
Over time, experience—and scar tissue—has sharpened the team’s instincts.
“The biggest lesson that I’ve learned over the years in my career is the importance of protecting downside through strong balance sheets and good management teams that are good stewards of capital,” Goodman says. “That’s really helped inform my investment philosophy over time.”
Fleming points to what he has learned to avoid. “I really try to avoid, if at all possible, getting involved in a turnaround situation too early,” he says. “It typically gets worse before it gets better, it takes longer to resolve, and it’s often not clear what the end payout is.”
He also stresses the importance of opportunity cost. “There’s opportunity cost to any investment. Even if you find a situation that you think is going to take some time, it’s really important to compare that against better risk-adjusted opportunities elsewhere.”
Why William Blair
That long-term, research-driven mindset is reinforced by the firm’s culture.
“For as long as I can remember, William Blair has been really known as a home for investors—the best and the brightest,” Fleming says. “Resourcing teams, enabling them to do what they do, and giving them the freedom to pursue their craft, with the resources of a much larger firm.”
Goodman highlights the same attributes. “William Blair has an excellent reputation for its entrepreneurial culture, its investment talent and rigor, and its private partnership model, which are all really important for success in this business.”
Watch the Videos
Meet the Portfolio Managers: Matt Fleming and Mark Goodman
The Case for Small- and SMID-Cap Value
Setting the Stage for a 2026 Value Revival
Value Amid Uncertainty
Greg Czarnecki is a portfolio specialist and research coordinator on William Blair’s U.S. value equity team.
Matthew Fleming, CFA, partner, is the head of William Blair’s U.S. value equity team, on which he also serves as a portfolio manager.
Mark Goodman, CFA, is a portfolio manager on William Blair's U.S. value equity team.
