James Dennin, Kapitall: Last week I sat down with John Thompson, head of Vilas Capital, to talk about value investing, and why everyone should do it. Many of the biggest names in finance - from Warren Buffett to Bill Ackman to Benjamin Graham – all proudly call themselves value investors. The group of investors who tout the practice is so large, that I was beginning to wonder why everyone wasn't a value investor. So I sat down with one, John Thompson of Chicago's Vilas Capital, to figure out why. Why are you a value investor?I went to U Chicago – and there’s a lot of academic research out of there which shows how value stocks outperform growth stocks by a decent margin. If you just cut the S&P 500 in half, that proves to be true. If you only look at the top and bottom deciles, the cheapest and the most expensive tenth of the S&P, the cheaper decile outperforms the most expensive decile by about 11% over a 5-year-period, statistically. So that’s the basic reality or trend that our fund seeks to take advantage of – on both sides. We’re long on the value side and short on the really expensive growth. How do you pick them on each side? Our longs are trading at less than 0.87 % of book value and our shorts are trading at 21 times book value, and the S&P is like 2.5 or 3 – just to give you a general idea. Citibank (C) is one of our biggest holdings right now, and BP (BP) on the oil side. What are you long on now?Most of the big banks are under valued. I own them all, except Wells Fargo (WFC), which is just too expensive. My biggest holdings are Citibank, Bank of America (BAC), and Morgan Stanley (MS). I think that eventually the market and the political climate will change so that it becomes unpopular to keep bashing on the big banks.Click on the interactive charts below to view data over time. What about community banks and such? Wouldn't those stocks be cheaper?Big banks are roughly half the price of local banks. Usually it’s the other way around, but small-caps have outperformed large caps to begin with for a while now, since 1999, I would argue. Also small banks have lower capital requirements than the bigger banks, so that drives their ROE up, which means they trade a little higher on price to book. But bigger banks have their advantages too, they’re a little more global, etc. Especially Citibank. Roughly half their earnings come from emerging markets.