Global Valuation Updates!

Quick housekeeping…

First, we hope you guys love the new redesign!  If you ever need any help you can ping help@theideafarm.com.

Second, the archives have been totally rebuilt – there are so many gems in the library now it should be much easier to find what you’re looking for.

Lastly, don’t forget it’s easy to get a free subscription!

If you send me an email with a link or attachment to a piece you think readers would love, and I use the piece, I will happily give you $100 off your subscription.  This is worth a free quarter of the Farm at current levels.

Send all emails to mebane@theideafarm.com with “RESEARCH” in the subject line.

Now onto the Quarterly CAPE Ratio Updates!  

After another monster year of performance in 2017, many countries are still quite cheap.  But some countries are expensive too…let’s go right to the stats!

Median CAPE Ratio: 18.6
25% most expensive: 27.3 (U.S. in this bucket)
25% cheapest 12.6

Average of Foreign Developed 21
Average of Foreign Emerging 17

We’ve mentioned this a lot in the past but bears repeating.  We use the MSCI Investable Market Indices below, but MSCI also calculates their Standard Indices too.  IMI includes more companies and in general is more representative of the entire market.  It really makes no difference for any of the countries except the very smallest ones, such as Greece and Egypt.  For both series the CAPE ratios are almost always near identical, with one glaring exception – again, Greece, which depending on the series you use has a CAPE ratio of -7 or 2.

So, this is one reason we have always used a valuation composite across the variables below.  If one is giving a screwy result, or perhaps a market has a structural bias to one variable, we want to average it out.  So, in this case Greece is cheapest on CAPD, CAPB, and CAPCF, just not on CAPE.

The cheap stuff is still dominated by Europe…but some other names have been creeping in over the past year…

Here it is in Excel too.

MSCI Investable Market Indices

CAPE CAPD CAPCF CAPB Average Rank Dev or Emerging Real Drawdown %
Russia 5.8 28.2 3.7 0.8 3 E -74.33
Czech Republic 9.8 12.3 4.6 1.3 3 E -38.70
Portugal 13.8 18.5 4.5 1.2 4 D -55.43
Spain 13.6 19.7 6.4 1.4 6 D -18.27
Poland 12.9 28.4 6.1 1.4 7 E -28.99
Brazil 12.9 25.9 7.9 1.5 8 E -29.67
Italy 17.0 26.1 5.1 1.0 8 D -40.18
Egypt 14.3 29.0 7.8 1.7 12 E -53.97
Greece -6.7 7.5 1.7 0.3 12 E -96.44
Singapore 13.9 29.0 10.7 1.5 13 D -4.58
Norway 15.6 31.4 7.4 1.8 14 D -1.33
Israel 14.6 35.3 9.8 1.6 14 D -19.21
Turkey 11.9 40.9 9.1 1.7 15 E -36.40
Colombia 16.8 30.7 11.7 1.4 17 E -28.33
Austria 19.4 46.5 7.5 1.3 18 D -33.46
Hungary 15.3 60.9 7.1 1.8 18 E -16.43
U.K. 16.5 32.0 9.8 2.2 18 D 0.00
Korea 16.0 94.0 8.7 1.5 20 D -1.87
Malaysia 16.7 35.8 11.1 1.9 20 E -2.70
Australia 18.6 24.6 12.5 2.1 21 D -0.36
Finland 20.2 28.8 11.3 2.2 22 D -49.93
France 20.9 37.6 10.6 1.9 22 D -3.31
Taiwan 21.3 33.7 10.6 2.1 22 E -5.03
Chile 18.6 41.4 10.8 1.9 22 E -20.29
Hong Kong 18.1 42.2 13.6 1.6 23 D 0.00
Germany 20.7 45.1 10.2 2.2 25 D -3.94
China 16.4 51.0 11.4 2.2 26 E -12.37
Canada 21.9 40.5 11.1 2.1 26 D -0.04
New Zealand 23.8 29.9 12.4 2.4 28 D -0.12
South Africa 20.3 39.7 13.8 2.8 29 E -2.78
Thailand 21.2 43.9 12.8 2.8 31 E -8.28
Belgium 25.3 40.0 14.0 2.2 31 D -6.17
Japan 28.8 77.4 11.6 1.8 32 D -0.68
Mexico 22.2 62.1 11.0 2.7 32 E -5.26
Sweden 21.5 40.2 15.1 2.7 32 D -5.39
Indonesia 20.3 50.1 13.7 3.4 33 E -5.45
Peru 18.5 52.3 17.6 3.2 34 E -17.68
Netherlands 23.9 49.7 14.2 2.5 35 D -2.76
Philippines 23.0 67.1 15.0 3.1 37 E -28.79
Switzerland 26.1 44.5 18.7 3.2 38 D -0.55
Ireland 37.6 65.9 16.7 2.3 38 D -29.59
India 23.2 98.7 15.7 3.5 40 E -19.38
U.S. 30.5 77.5 17.5 3.8 42 D -0.54
Denmark 36.3 97.2 21.5 4.4 43 D -2.39

SECTORS

S&P 500 Current P/E
Discretionary 35
Energy 17.9
Financials 26.2
Health Care 30.5
Industrials 25.9
IT 31.6
Materials 32.1
Staples 23.2
Telecom 23.7
Utilities 23

Good investing,
Meb Faber
theideafarm.com