One of the key themes we’re hitting on with clients this year is that there is a lot of value to be had in international stock markets, where the risks are, in some cases, widely known and already well discounted into valuations. My friend Peter Boockvar has a similar take. Some of his thoughts on overseas stocks below:
1) I remain positive on some emerging markets as that is where the bear market has occurred and thus where values still lie. I still like Brazil even after the great 2016 it had. The country and region are moving to the right of center and its market remains cheap. It’s Shiller 10 yr inflation adjusted P/E CAPE multiple is still only 10x even after a 39% rally last year. The US trades at 28x.
2) The South Korean stock market is trading 10x 2017 earnings and its stock market has basically flat lined for the past 5 years. Corruption was rooted out with the impeachment of its President and the trend to reducing the size and influence of the chaebol’s is rising. In fact, South Korea let one of them, Hanjin Shipping go bankrupt. A major sign that the bailout mentality is receding.
3) Notwithstanding the disastrous currency demonetization program in India, the pro business mentality of Narendra Modi still intrigues me and I believe the changes taking place are deep and long lasting. It’s market is not as cheap, with a CAPE ratio of 17.5x but returns on equity are very high for an emerging market at around 14%.
4) Only if Francois Fillon wins, buy France. He would bring a Reagan, Thatcher, and (Trump?) economic revolution to a country that has seen GDP grow by just 1.5% on average over the past 25 years. The CAC trades at 14x earnings with a 3.4% dividend yield with a CAPE of 18. It’s still 20% below its 2007 top and 29% below its 2000 record high. Raise your hand if you ever heard anyone tell you to buy France.
Managing Director, Chief Market Analyst
The Lindsey Group LLC