Value Screeners Seek Good Opportunities Ahead of Valentine's Day

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="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.” data-reactid=”11″>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.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Dow shows some love 10 days before Valentine’s Day, Asian markets remain undervalued” data-reactid=”18″>Dow shows some love 10 days before Valentine’s Day, Asian markets remain undervalued

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="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).” data-reactid=”19″>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.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Table 1” data-reactid=”36″>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.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Figure 1” data-reactid=”46″>Figure 1

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Undervalued-predictable and Buffett-Munger strategies continue outperforming in significantly-overvalued U.S. market” data-reactid=”47″>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.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Table 2” data-reactid=”52″>Table 2

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="See also” data-reactid=”53″>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.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Table 3” data-reactid=”58″>Table 3

Disclosure: No positions.

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This article first appeared on GuruFocus.
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