International Value Indexing

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ThisDinosaur
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Joined: Fri Jul 17, 2015 9:31 am

Re: International Value Indexing

Post by ThisDinosaur » Wed Oct 18, 2017 9:01 am

Yeah, I've noticed that some of the best values have some of the smallest markets. I noted earlier in the thread that the Russian's benchmark index is 20-30 companies, vs. 500-3,000 companies for US's most popular index funds. This particular problem gets better the more internationally diversified I get though. Even if my single largest holding is some Korean company, it will likely never be more than 1% of my total portfolio.

I suspect the absence of a Czech ETF may be part of the reason their market is so cheap. Its inconvenient for lazy foreign money to get there.

ThisDinosaur
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Joined: Fri Jul 17, 2015 9:31 am

Re: Brazil vs. Greece

Post by ThisDinosaur » Wed May 16, 2018 8:58 am

I'm considering adding another country to this list. And, at the moment, I'm considering Brazil (EWZ) vs. Greece (GREK).

The argument for Brazil is that its CAPE is 12-15 right now, and I don't have much other exposure to South America.
OTOH, its priced at twice book value.

The argument for Greece is mainly the PB of 0.7, and my subjective impression that its a very contrarian bet right now. (Is the negative CAPE 10 from negative average earnings?)

Thoughts?

jacob
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Re: International Value Indexing

Post by jacob » Thu May 17, 2018 11:03 am

I think Greece is mainly a bet on what kind of deals the Greeks can negotiate with the EU (~the Germans). The Greek situation is ongoing/unresolved.

Also, note that bookvalue is similar to earnings in that people can make up whatever they want (if you want the "right" number you have to do it yourself ala Graham's Security Analysis). For example, "goodwill" can be counted as bookvalue ... as can old junk if valued at acquisition cost. Case in point, the book value of a used RV >> resale value. This also holds for some people's collection of yarn :P

One factor I'd add to this strategy is the country's credit rating.

ThisDinosaur
Posts: 930
Joined: Fri Jul 17, 2015 9:31 am

Re: International Value Indexing

Post by ThisDinosaur » Thu May 17, 2018 1:58 pm

As per S&P:
Brazil's credit rating is BB- , outlook "stable"
Greece's credit rating is B, outlook "positive"

I would expect a country whose securities market is undervalued to also have a poor credit rating. The theoretical advantage of CAPE10 is that it is backward looking and quantifiable, whereas a credit rating is a forecast. Forecasts are consistently unreliable.

Although maybe an upward trend in credit rating over time would function as a momentum signal?

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