By Bill Bonner
Looking for Value
Editor's Note: At the Diary, we are big on value. Bill's motto is "buy cheap." And someone who knows where to find value in today's generally overpriced markets is Dr. Steve Sjuggerud, editor of Stansberry & Associates True Wealth Systems.
If you think there is no value out there … think again.
In today's edition - originally published in the June 30 issue of Daily Wealth - Steve reveals the system he uses to identify global value … and why the cheapest stocks in the world are outside the U.S.
What's Cheap in the World Today? by Dr. Steve Sjuggerud, Editor, True Wealth Systems
You probably haven't noticed, but boring government bonds are up double digits this year. U.S. stocks continue to push to all-time highs as well. Even Europe is soaring to multi-year highs. Today, we've got uptrends around the globe. The big question is: after so many investments have run up so high, where is the value in the world today? Is there any left out there? In short, yes!
Let me show you exactly where the value is right now. There are dozens of ways to size up what's cheap. One classic measure of value is the price-to-earnings (P/E) ratio. But like most value measures, it isn't perfect on its own. To fix that problem, we built an in-house value indicator for a few dozen global markets. We call it the "True Wealth Systems (TWS) Value Composite Measure."
These TWS Value Composite readings give us a simple way to see where the value really is in the world. And today, there is a clear winner. Let me show you what I mean by looking at a few major developed countries' stock markets.
The table below shows each country's historical premium or discount relative to its own history, based on our TWS Value Composite. In addition, it shows each market's premium/discount to U.S. stocks - the benchmark for comparison for developed markets.
Developed markets compared - via True Wealth Systems
But when you look at the major emerging markets, the story changes. The table below shows the full details. The only change in this table versus the table above is the right column. It shows each country's premium/discount to emerging markets in general, as opposed to the United States. Take a look at a few selected emerging markets.
A selection of emerging markets - via True Wealth Systems
The first thing that jumps out is, aside from Mexico, the major emerging markets are cheap, based on history. Of course, places like China, Greece, and Russia aren't the most savory places to invest today. But when you look around the world, these emerging markets offer the best value.
I expect these dirt-cheap markets to be the big winners over the next few years. Our computers say emerging markets offer the absolute best value around the globe. If you don't at least have these beaten-down emerging markets on your radar, you are making a mistake. They are the best value in the world today.
Russia's RTS Index has been the world's best-performing stock market so far this year (we provided timely advance warning of the event). It nevertheless remains cheap by traditional valuation measures.