According to the Benjamin Graham Net-Net Screener, a GuruFocus Premium feature, five European and Asian net-nets with low price to net-net working capital ratios are Jinli Group Holdings Ltd. (TPE:8429, Financial), Agribank Securities JSC (STC:AGR, Financial), Manho Rope & Wire Ltd. (XKRX:001080, Financial), Investment Friends Capital SE (WAR:IFC, Financial) and Capital Estate Ltd. (HKSE:00193, Financial).
European leaders begin four-day meeting on climate change
The World Economic Forum, an organization whose motto says it is “committed to improving the state of the world,” organizes a four-day event each year. This year’s event started on Tuesday and runs until Friday: CNBC columnist Sam Meredith said Monday morning that this year’s meeting focuses on controlling the climate crisis in light of several natural disasters, including bushfires occurring in Australia.
Professor Johan Rockstrom, director of the Potsdam Institute for Climate Impact Research, said that the world is facing a “planetary emergency,” where Earth must cut fossil fuel emissions in half by 2030. Additionally, organizers of the Unite Behind the Science Campaign added in a statement that scientists aim to limit global warming to 1.5 degrees Celsius by 2100 by requiring all policies and business decisions worldwide to follow this path.
European markets remain undervalued
GuruFocus tracks the market valuations for several countries in addition to the U.S. While the U.S. stock market was closed for the Martin Luther King Jr. holiday, European markets closed slightly lower on Monday with the Stoxx 600 closing down 0.1%, driven by a 0.9% decline in household goods.
Figure 1 gives the projected annualized market return for over 20 countries around the world.
Figure 1
As Figure 1 illustrates, the Spanish and U.K. markets have implied market returns of 9.9% and 8% according to their market valuations based on Berkshire Hathaway Inc. (BRK.A)(BRK.B) CEO Warren Buffett (Trades, Portfolio)’s favorite market indicator. The implied market returns include dividends, business growth and the reversion to the mean contribution.
For Spain, the ratio of market cap to gross domestic product is 70%, about 29% below the historical mean of 99%. Likewise, the ratio of market cap to gross domestic product of 115% is about 2% below the historical mean of 117%.
Other European markets that offer positive returns include the Netherlands, Italy and Germany.
Asian markets also remain undervalued
Asian markets like China and Russia remain significantly undervalued, with implied market returns above 20%. China’s ratio of market cap to gross domestic product is 40%, close to a historical low of 35%. Likewise, Russia’s ratio of market cap to gross domestic product is 27%, about 28% lower than the historical median of 55%.
Jinli Group Holdings
Jinli designs and manufactures a range of apparel goods, including sports shoes, jeans, casual wear and accessories. The Xiamen, China-based company has a price-to-net-net-working-capital ratio of 36.72% according to the net-net screener.
GuruFocus ranks Jinli’s financial strength and valuation 9 out of 10 on several positive investing signs, which include interest coverage and debt ratios outperforming over 92% of global competitors. Additionally, the company has price-book and price-sales ratios near 10-year lows, with the former outperforming 86.46% of global apparel manufacturing companies.
Agribank Securities
Agribank Securities provides securities and stock brokerage, securities investment and corporate finance consultancy, and securities placement and registration services. According to the screener, the Vietnamese capital market company has a price-to-net-net-working-capital ratio of 38.95%.
GuruFocus ranks the company’s financial strength 9 out of 10 on several positive investing signs, which include a strong Piotroski F-score of 7, a solid Altman Z-score of 5.54 and an equity-to-asset ratio that outperforms 91% of global competitors.
Manho Rope & Wire
Manho Rope & Wire manufactures products like fiber ropes, wire ropes and stainless cables and wires. The Korean materials company has a price-to-net-net-working-capital ratio of 40.61%.
GuruFocus ranks Manho’s financial strength 8 out of 10 on several positive investing signs, which include a solid Altman Z-score of 3.79 and debt ratios that outperform over 96% of global competitors.
Investment Friends Capital
Investment Friends Capital, a Polish venture capital company, has a price-to-net-net-working-capital ratio of 41.94%. According to GuruFocus, the company’s cash-to-debt and equity-to-asset ratios outperform over 90% of global competitors, suggesting good financial strength.
Capital Estate
Capital Estate operates three business segments: Hotel Operations, Financial Investment and Property. The Hong Kong-based company primarily generates revenues from its Hotel Operations segment, which engages in hotel businesses and the provision of related services. According to the net-net screen, Capital Estate has a price-to-net-net-working-capital ratio of 42.16%.
The company has good financial strength on the heels of little or no long-term debt. Other positive investing signs include a strong Piotroski F-score of 8.
Disclosure: No positions.
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