Value Screens Identify Opportunities for 4th Quarter

A look at global markets and value screens based on Graham, Lynch and Buffett

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Sep 07, 2018
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One key feature for GuruFocus Premium members are value screens that follow the footsteps of legendary investors like Benjamin Graham, Peter Lynch and Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio). Not only can the value screens highlight global market trends, but they can also identify good opportunities for the remainder of the year.

Three investors, three different styles

GuruFocus’ value screens include the Ben Graham Net-net screen, the Peter Lynch Growth screen and the Buffett-Munger screen. Graham’s screen looks for companies whose share price is less than two-thirds of its net-net working capital, which is defined as cash plus 75% of receivables plus 50% of inventories less total liabilities. On the other hand, Buffett and Charlie Munger (Trades, Portfolio)’s screen looks for companies that have strong economic moats, predictable earnings and attractive price-earnings-to-growth ratios. Finally, Lynch’s “growth with lower valuation” screen looks for companies with a price-earnings ratio below 14, relatively predictable earnings and a 10-year revenue growth rate of at least 6%.

Tables 1 and 2 show the value screener records as of Aug. 9 and Sept. 7.

Screener Name USA Canada UK / Ireland Europe Asia Oceania Latin America Africa India
Ben Graham Net-Net 219 78 46 199 564 17 4 12 143
Undervalued Predictable 47 4 25 63 60 6 18 7 0
Buffett-Munger 17 5 16 41 70 1 12 5 38
Historical Low Price-Sales 8 1 8 19 112 1 11 4 6
Historical Low Price-Book 11 4 10 31 112 0 16 7 8
Peter Lynch Growth 35 3 18 66 111 2 30 4 27
Walter Schloss 18 29 27 99 361 12 12 5 42

Table 1: Value screener record as of Aug. 9

Screener Name USA Canada UK / Ireland Europe Asia Oceania Latin America Africa India
Ben Graham Net-Net 147 69 46 196 576 15 3 14 149
Undervalued Predictable 48 5 25 65 61 6 20 7 0
Buffett-Munger 17 4 16 42 75 0 12 5 35
Historical Low Price-Sales 7 1 7 18 123 1 10 5 7
Historical Low Price-Book 12 3 11 29 109 2 16 8 8
Peter Lynch Growth 35 3 16 72 124 5 31 3 27
Walter Schloss 20 36 29 146 386 12 11 4 53

Table 2: Value screener record as of Sept. 7

According to Tables 1 and 2, the Europe and Asia regions have a high number of Graham and historical low-price stocks. Additionally, the Asia region had higher Graham and historical low-price stocks in September compared to August, further suggesting that Asian markets are undervalued compared to other regions.

While the Buffett indicator sheds light on U.S. market valuations, we can also apply the "Oracle of Omaha’s"Â favorite market indicator to global markets. Figure 3 shows the ratio of market cap to gross domestic product for approximately 20 global markets, while Figure 4 shows the implied market return based on the market ratios.

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Figure 3

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Figure 4

See also

As said above, Premium members can view the stocks making the value screeners. GuruFocus also offers subscriptions for popular regions like the U.S., Asia, Europe, the U.K., Latin America and Oceania. We now offer India and Pakistan as a separate region.

Disclosure: No positions.