Asian Stocks: Potential Investment Opportunities

Since 1996 The Applied Finance Group (AFG) has been a reliable provider of quality research, helping its clients identify and understand which investments to consider and which to avoid, through the use of AFG’s Economic Margin (EM) methodology. AFG helps investors understand a company’s true economic profitability, and AFG’s proprietary valuation model allows you to take advantage of mis-priced securities in the market. AFG has recently expanded its EM methodology and valuation model across the globe, providing the same quality of research that many investors in the US have relied upon for the last 14 years.

Asian Markets have been attracting the attention of many investors over the last decade, and AFG believes this shows a strong correlation to the growing EM’s in Asia, displayed in the chart below. Also provided below is AFG’s outlook on several companies within the 3 major Asian indices Hang Seng, Nikkei 225 and Straight Times. We have given 3 potential investment ideas and 3 potential torpedoes within each index that you may want to take a closer look at or avoid if you are considering adding to your portfolio. AFG’s proprietary variables have proven through vigorous back-tests to be effective at identifying winners and losers across sectors, styles, sizes, indices, and even countries.

Asian Indices - Potential Investment Opportunities and Potential Torpedoes

The chart below displays the growth in Economic Margins in Asia relative to that of the rest of the world. Since 2002, The Asian/Pacific Region’s EMs and growth have far exceeded the world. Its corresponding market performance has improved, but probably not in proportion to its economic performance.

Asia Economic Margin Growth vs. The World

A company's Economic Margin is a measurement of a their true earnings above or below their cost of capital. EM also corrects distortions caused by accounting policies to give a more accurate assessment of a company's real value. It is important to understand the direction a company's EM's are heading because, by knowing this, one can get a complete assessment of how profitable a company can be in the future. The EM Framework addresses profitability, competition, growth and cost of capital. When factoring in each of these variables, investors can fully assess a company's value.

AFG's Buy/Sell criteria factors in Economic Margin, Management Quality, and AFG's Valuation Metric. In order to determine Management Quality, AFG scores management on their growth decisions in accordance with the company’s ability to either create or destroy wealth. AFG's Valuation Metric measures a company's Percent to Target (the deviation between a stock's current trading price and its AFG current default target price). To derive the intrinsic value of a firm, AFG uses its proprietary Valuation Model.

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Comments

[whimsy:]

How can I invest in Shanghai without investing in China?

Jul 30 09:47 AM