|
The Cambria Global Value ETF (GVAL) invests in the cheapest stocks in the world and rebalances the portfolio annually. They start with a universe of 45 countries in both developed and emerging markets. Next, they select the top 25% cheapest country stock markets using a CAPE ratio. The CAPE ratio is the Cyclically Adjusted Price Earnings Ratio which compares the current price to 10 Year average earnings. Studies have shown this is a superior method to the simple current year P/E ratios because single year figures can be distorted by economic cycles and other one-time events.
Once they select the 11 or 12 cheapest markets in the world, they then identify the 10 most undervalued stocks out of the 30 largest stocks within each country. They only select stocks with market capitalizations over $200M. You end up with a portfolio of approximately 120 of the cheapest companies in the world. As of March 31, 2020, the country weights were as follows: Spain 10.6% Portugal 9.7% Greece 9.3% Italy 9.2% Turkey 9.1% Brazil 9.1% Singapore 8.1% Russia 8.0% Britain 7.8% Norway 6.2% Poland 6.1% Other 6.8% What I really like about this ETF: A)I know we are always invested in the cheapest markets and the cheapest stocks in the world. B)Knowing they rebalance annually; I don’t have to worry about selling when it becomes overvalued like most funds and ETFs. C)It is always a good idea to have exposure outside of the U.S., especially when the U.S. market is one of the most expensive in the world. The S&P 500 trades at 20 times earnings and 3 times book value. GVAL trades at 6.2 times earnings and 0.75 times book value. If you would like to learn more: www.cambriafunds.com Disclosure: Long GVAL Questions or comments, feel free to email me at [email protected] Disclaimer: Askfinanceguy.com is not an investment advisor, brokerage firm, or investment company. This blog is for educational and/or entertainment purposes only. Use this information at your own risk. Do not consider anything on this page to be legal, tax, or investment advice.
0 Comments
Pershing Square (PSHZF) is a closed end fund that gives you an opportunity to invest alongside Bill Ackman, one of the great hedge fund managers. I have followed him for years along with others like David Einhorn, David Tepper, Dan Loeb, Ray Dalio, and Monish Pabrai. To invest in a hedge fund, you must be an accredited investor which means you must meet certain income and/or net worth requirements. In addition, the top performing funds can have minimum investments as high as $10 million. You can invest in Pershing for the cost of a pizza.
In the past month, we have seen the S&P 500 drop 32% from its all-time high on February 19th. As it is happening real time, it feels like something that has never happened before. The average market decline for a recession is 30% so the magnitude of the drop (so far) is very normal. The difference this time is it happened in record time. This is the fastest move from record high to bear market in history. You also have a long list of stocks that are down well over 50% or even 80% in the recreation, energy, and restaurant industries. The more debt a company has, the bigger the decline in the stock price. This tells you survival for many companies has become more important than growth or profitability. There is a dramatic shift in focus now from the income statement to balance sheet.
The market continues to be on a tear with the S&P 500 up 400% since the low in March of 2009. This works out to a compounded annual return of 15.9%. Can this pace continue? In the short term, maybe. In the long term, I seriously doubt it. Before I make my case about future returns, let me be clear:
In my previous post, I talked about the stock selection process. Specifically, finding a company that meets your criteria, estimating intrinsic value, establishing a margin of safety, putting it on a watch list, and waiting for your target buy price. You are probably thinking most of that is straight forward except for “estimating intrinsic value”.
With every investment I make, I insist on a margin of safety. Seth Klarman, a value investor with an amazing track record going back to 1982, wrote an excellent book called “Margin of Safety”. There are limited copies of the book and it is a favorite amongst value investors. For these reasons, a new copy sells for $1,300 on Amazon.
While the number of publicly traded companies in the U.S. continues to decline from 7,300 in the 1990s to around 3,700 today, the number of ETFs continues to grow. There are now over 5,000 ETFs traded globally and 9,400 mutual funds. Money continues to move from funds to ETFs and from active management to passive (indexing).
In my last post, I mentioned how brokerage firms are benefiting by paying you a very low interest rate on your idle cash. In this post, I will give you some ideas on where you can safely earn much higher returns on your cash. In some cases, 40x as much! (I had some accounts that were paying 0.05%. Moving them to 2.0% is a 40x improvement!)
Recently, Charles Schwab announced they would eliminate commissions on trading. Other major brokerage firms quickly followed with free trading. Commission rates have been falling for several years so it was just a matter of time.
Google (official name is Alphabet) is one of the FAANG stocks (Facebook, Amazon, Apple, Netflix, Google) that traditional value investors tend to avoid. FAANG as a group is considered too popular and too expensive for a value investor, but it’s probably not fair to group them all together. Amazon is an amazing company I would love to own but 70x earnings is too rich for me. Same thing with Netflix which trades at 100x earnings. Google however trades at 23.6x earnings.
|
RSS Feed