“Not recognizing intangible assets can push down both profits and book value in businesses that depend on research and marketing,” the article says, “which are increasingly important in the global knowledge economy.”

According to Travis Fairchild, a fund manager at O’Shaughnessy Asset Management, “You’ve got all these assets that don’t show any value in their financial statements that are just becoming more and more valuable in today’s society. We’ve moved from an industrial marketplace to much more of a technology and intangible asset industry, and that’s just creating larger and larger distortions.”

But intangibles can be hard to value, says Angelo Meda of Banor SIM SpA, and trying to account for them can become an excuse to justify buying pricey tech stocks Metrics like book value, he adds, can remain useful for the financial and industrial sectors.  Research Affiliates’ Vitali Kalesnik weighs in: “Investors need to be quite conservative not to try to be too cute or too creative in trying to value each individual company in a way that supports their idiosyncratic thinking.”

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