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James Li
James Li
Articles (1128)  | Author's Website |

Value Screeners Seek Good Opportunities Ahead of Valentine’s Day

Opportunities exist according to investing strategies based on Graham and Buffett teachings

February 04, 2020 | About:

As investors grapple with several market movers, including the coronavirus outbreak in China, GuruFocus’ value screeners track the number of stocks making popular value screens for its Premium members, including the Ben Graham Net-Net Screen, the Undervalued Predictable Screen and the Buffett-Munger Screen.

Dow shows some love 10 days before Valentine’s Day, Asian markets remain undervalued

On Tuesday, the Dow Jones Industrial Average closed at 28,807.63, up 407.82 points from Monday’s close of 28,399.81. Apple Inc. (NASDAQ:AAPL), the top holding of Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B), sweetened the Dow’s gain with a 3.3% increase for the day. Other stocks that propelled the Dow include Microsoft Inc. (NASDAQ:MSFT) and Caterpillar Inc. (NYSE:CAT).

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CNBC said that according to Reuters, the People’s Bank of China injected over 1.7 trillion yuan (approximately $242.91 billion) over the past few days to “restore investor confidence” as markets around the world grapple with fears that the coronavirus outbreak might impede global growth. CNBC added that Larry Brainard, emerging markets chairman at TS Lombard, said in a note that the research firm expects Beijing to “respond aggressively with fiscal and monetary stimulus” to get growth back on track during the second quarter.

As such, investors might seek opportunities in Ben Graham net-net stocks, especially for the Asian stock market. Table 1 reports the number of net-net stocks for each GuruFocus region.

Screener

USA

Asia

Europe

Canada

UK/Ireland

Oceania

Latin America

Africa

India

Graham Net-Net

105

482

182

34

26

10

4

10

153

Table 1

As Table 1 illustrates, the Asian stock market contains a significant number of net-nets compared to other regions, highlighting potential undervaluation among Asian markets. Ben Graham defines a net-net as a company where the share price is trading below 66% of net current asset value or net-net working capital, with the former defined as current assets less total liabilities and the latter defined as the sum of cash, 75% of accounts receivable and 50% of total inventory, less total liabilities.

GuruFocus’ global market valuation pages show high returns in several Asian markets assuming market valuations revert to the mean, including in Singapore, Korea, China and Russia. Figure 1 reports the projected annualized market returns of approximately 20 global markets based on Buffett’s favorite market indicator of total market valuation to gross domestic product.

Figure 1

Undervalued-predictable and Buffett-Munger strategies continue outperforming in significantly-overvalued U.S. market

While the Ben Graham net-net screen might identify good opportunities in undervalued markets, the Undervalued-Predictable and Buffett-Munger screens identify good opportunities in an overvalued market like the U.S. market. The GuruFocus Model Portfolios page indicates that in 2018, the two strategies slightly outperformed the Standard & Poor’s 500 index’s return of -6.24%. Table 2 reports the number of companies making the two screens as of Tuesday.

Screener

USA

Asia

Europe

Canada

UK/Ireland

Oceania

Latin America

Africa

India

Undervalued Predictable

30

93

102

10

42

5

31

2

11

Buffett-Munger

18

99

60

3

23

1

18

4

42

Table 2

See also

Table 3 reports the number of stocks for other popular screens, including the Historical Low Price-Sales Screen, Historical Low Price-Book Screen and the Peter Lynch Screen. Premium members have access to all value screens, including the All-in-one Screener that allows for customized screening.

Screener

USA

Asia

Europe

Canada

UK/Ireland

Oceania

Latin America

Africa

India

Historical Low PS

49

154

69

2

24

1

22

8

37

Historical Low PB

69

166

64

5

33

2

20

8

47

Peter Lynch Screen

24

47

27

0

11

0

8

3

17

Table 3

Disclosure: No positions.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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