On Halloween, the U.K. and China stock markets remain undervalued despite geopolitical concerns giving investors an early scare.
According to Berkshire Hathaway Inc. BRK.ABRK.B CEO Warren Buffett (Trades, Portfolio)’s favorite market indicator, the ratio of total market cap to gross domestic product, the contribution to the expected annual return assuming mean-reversion is 0.37% for the U.K. market and 16.74% for the China market based on current market valuation levels of 114% and 41%. On the other hand, the expected annual return for the U.S. market is -2.2% based on the current market valuation level of 145.3%.
Dow tumbles during early morning as trade optimism fades
The Dow Jones Industrial Average traded at an intraday low of 26,948.76 Thursday morning, dipping below 27,000 and down 237.93 points from Wednesday’s close of 27,186.69 on renewed worries about a long-term trade deal between the U.S. and China. Bloomberg News reported, citing unnamed sources, Chinese officials grapple with President Trump’s “impulsive nature” and the risk that Trump might call off the trade deal. Despite this, Trump said in a tweet, China and the U.S. are “working on selecting a new site” for the signing of phase one of the trade deal, which represents approximately “60% of the total deal.”
Although shares of Apple Inc. AAPL, the top holding of Berkshire, increased 1.7% on the heels of reporting strong September-quarter earnings, declines in Caterpillar Inc. CAT and Micron Technology Inc. MU, a major holding in Mohnish Pabrai (Trades, Portfolio)’s U.S. equity portfolio, offset strong gains in the Cupertino, California-based tech giant.
Value screeners identify opportunities
GuruFocus’ value screens continue identifying good investing opportunities even when geopolitical issues like Brexit and the U.S.-China trade war crowded the trick-or-treating atmosphere. Table 1 details the value screener record as of Oct. 31.
| Screener | USA | Asia | Europe | Canada | UK / Ireland | Oceania | Latin America | Africa | India |
| Graham Net-Net | 151 | 512 | 193 | 43 | 41 | 11 | 6 | 14 | 54 |
| Undervalued Predictable | 40 | 85 | 114 | 7 | 47 | 5 | 43 | 3 | 18 |
| Buffett-Munger | 23 | 99 | 60 | 3 | 27 | 0 | 20 | 3 | 44 |
| Historical Low PS | 16 | 141 | 64 | 1 | 23 | 0 | 32 | 8 | 34 |
| Historical Low PB | 56 | 144 | 66 | 1 | 33 | 2 | 37 | 8 | 46 |
| Peter Lynch Screen | 26 | 56 | 28 | 0 | 13 | 0 | 5 | 5 | 25 |
| High Dividend Yield | 60 | 38 | 135 | 6 | 17 | 4 | 19 | 12 | 11 |
| 52-week Lows | 1546 | 3869 | 1633 | 162 | 540 | 54 | 413 | 159 | 979 |
| 52-week Highs | 2420 | 2354 | 3271 | 224 | 1218 | 213 | 619 | 127 | 589 |
Table 1
Disclosure: No positions.
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