At the start of 2018, I began to question value investing …

Discussion in 'Share Investing Strategies, Theories & Education' started by twisted strategies, 15th Feb, 2018.

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  1. twisted strategies

    twisted strategies Well-Known Member

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  2. PeterT

    PeterT Active Member

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    I went to an AIA seminar given by Roger Montgomery last week. Not to be too critical, but he does seem to have an almost exclusive focus on the US market – which is perplexing for a value investor, given the almost universal view of how stretched equity valuations in the US are.

    By the very same metrics that people argue that the US is overvalued (price-to-earnings, price-to-book, ...-to-free-cash-flow,...-to-sales-revenue, etc.) places like Eastern Europe, Spain, Italy, Portugal, Turkey, Brazil (to take a random selection of countries in the bottom quartile when ranked by Shiller P/E) are undervalued. Some of them are, by the same measures, positively cheap. And the bottom quartile of Shiller P/E countries (i.e, cheap valuations) collectively outperformed the top quartile (expensive valuations) by 6 percentage points in 2017; that's a 40% outperformance. And this is even with the US itself roaring upward by +21%. For someone like Roger, who's apparently having his doubts about value investing, a country-level performance comparison over 2017 offers solid, empirical support that value investing does work, were any evidence needed.

    For value investors, surely the narrative should be more about how best to invest in and realise the value in those international equity markets where valuations are cheap, rather than joining the long chorus of doomsayers pointing out how overpriced the US is (while sitting on the sidelines and giving all the upside to the momentum players)

    For those interested, Australia is pretty much bang on median - ie., fairly valued - amongst the 39 countries shown in this report.
     
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  3. twisted strategies

    twisted strategies Well-Known Member

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    actually several funds prefer the US as an investment arena , i am guessing FX is the key factor

    i focus a lot on the NZ markets but i ( normally ) play buy and hold and modest size parcels and reduced liquidity are not a deterrent to me .

    although most of my stocks are ASX listed ( or dual listed ) i do like a variety of income sources

    value investing (to me) implies you need patience to wait for a 'fair price ' ( that can give a couple of good buys even when the markets are over-valued , in general )

    PS i value stocks on historical div. return AND realistic future returns based on my own estimates