As investors send their kids back to school, GuruFocus’ value screeners identify good investing opportunities in light of a volatile end of the summer season.
US markets continue vacillating between highs and lows
On Monday, the Dow Jones Industrial Average closed at 25,896.44, 391 points lower than last Friday’s close of 26,287.44 but 178.7 points higher than last Monday’s close of 25,717.74. Major U.S. banks, including Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) holdings Bank of America Corp. (BAC, Financial) and Goldman Sachs Group Inc. (GS, Financial), tumbled over 2% from the previous close on the heels of the 10-year Treasury constant maturity rate dropping near a three-year low. As of Aug. 8, the 10-year yield is 1.72%, just 0.1% higher than the two-year yield. Figure 1 illustrates Bank of America’s share price compared to the Dow over the past three years.
Figure 1
CNBC columnist Yun Li listed several reasons for the market decline, including lower bond yields and escalating protests in Hong Kong.
Asian Ben Graham net-nets are on the rise
Figure 2 illustrates the number of Ben Graham net-nets for GuruFocus’ Asian region.
Figure 2
As we can see in Figure 2, the number of Asian net-nets has generally increased since May 24, suggesting that the Asian markets are undervalued. According to global market valuation data, the expected market return for Asian markets like China, Singapore and South Korea is in the double-digits assuming market valuations revert to the mean. Figure 3 reports the expected market return for approximately 20 global markets.
Figure 3
US market remains significantly overvalued despite early-August slump
The Buffett indicator stood at 141.4%, down approximately 2.4% from the Aug. 2 level of 143.8% but still 7.1% below the all-time high of 148.5%. Based on this market level, the U.S. market is expected to return -1.8% per year over the next eight years, assuming market valuations revert to the mean of approximately 80%. Figure 4 illustrates the historical market cap to gross domestic product ratios while Figure 5 illustrates the predicted and actual returns chart.
Figure 4
Figure 5
GuruFocus has said when stock markets are overvalued, strategies that have outperformed the benchmark include the undervalued-predictable strategy and the Buffett-Munger strategy. Table 1 lists the number of stocks making our most-popular value screens across all regions.
| Screener | USA | Asia | Europe | Canada | UK/Ireland | Oceania | Latin America | Africa | India |
| Graham Net-Net | 155 | 623 | 228 | 48 | 75 | 12 | 5 | 13 | 60 |
| Undervalued Predictable | 53 | 78 | 184 | 8 | 77 | 5 | 54 | 7 | 12 |
| Buffett-Munger | 31 | 108 | 95 | 3 | 41 | 0 | 23 | 6 | 33 |
| Greenblatt Magic Formula | 4481 | 13381 | 8433 | 529 | 3781 | 566 | 1141 | 331 | 3442 |
| Historical Low Price-Sales | 62 | 153 | 115 | 1 | 40 | 1 | 31 | 9 | 37 |
| Historical Low Price-Book | 60 | 156 | 101 | 1 | 52 | 3 | 29 | 11 | 35 |
| Peter Lynch Screen | 31 | 75 | 40 | 0 | 34 | 0 | 3 | 2 | 24 |
| 52-week Lows | 2104 | 5228 | 3311 | 206 | 899 | 93 | 557 | 208 | 1687 |
| 52-week Highs | 1608 | 1690 | 3378 | 238 | 1542 | 193 | 672 | 108 | 318 |
Table 1
GuruFocus Premium members can access all of our value screens, including the All-in-one Screener that allows one to screen for stocks based on his or her own investing strategy.
Disclosure: no positions.
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