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The World's Cheapest Stock Markets Right NowBy
Friday, April 25, 2014
My friend Meb Faber literally wrote the book on "global value"...
His book Global Value: How to Spot Bubbles, Avoid Market Crashes, and Earn Big Returns in the Stock Market just came out.
Meb and I were in the Bahamas together this week, speaking at a private conference. I was looking forward to his speech...
You see, I am big fan of Meb's work. I started reading his blog years ago. He and I were studying the same things in the markets at the same time... but honestly, I thought his work was better than mine. So I got in touch with him, we compared notes on a lot of things, and we quickly became friends.
Meb's speech covered a lot of ground... but I found his latest list of the best stock market values in the world today the most interesting thing he talked about...
"Greece is the world's cheapest stock market, trading at 4.5 times earnings," Meb explained. (That number is based on Meb's preferred method of value, called "CAPE" – the cyclically adjusted price-to-earnings ratio.)
"Russia is also extremely cheap – right behind Greece." Meb showed the world's top ten cheapest countries... Beyond Greece and Russia, it was mostly smaller European countries, plus Brazil.
"Nobody wants to invest in these places today," he explained. "But the thing is, history shows that future stock market returns are higher when starting valuations are lower."
It makes sense... If you buy cheap, then you can make a higher return. So why can't people do it?
Meb explained recently on his blog why people can't pull the trigger. He used Russia as an example. He said:
1. All of the headlines are negative.
2. The investment has declined, usually by A LOT.
3. All of the trailing fundamentals are really bad.
4. People can find many reasons why "this time is different" for the value metrics not to be reflective of the current situation.
5. There is a small (but real) risk of the investment going to zero.
6. It is not popular (or patriotic) to own the investment.
7. Buying the investment, and it going down more, would pose serious career risk (or divorce risk).
8. The banking consensus is all sell-rated.
9. Flows are out.
Russia checks all of these boxes and then some.
Meb is putting his money where his mouth is... He's buying Russia, and Greece. But not by themselves, of course... He recommends diversifying...
Specifically, Meb is buying stocks in these countries through his fund – called the Cambria Global Value Fund (GVAL).
In this fund, Meb buys stocks in the cheapest countries in the world. Greece, Russia, Brazil, and some smaller European countries are the top holdings.
Remember, Meb figured out what works here... He wrote the book on global value. And now he's investing based on that in the Cambria Global Value Fund.
Having the guts to buy the world's cheapest markets is tough. But as Meb's book proves, it's the right way to invest.
I suggest getting to know Meb's work through his blog at www.MebFaber.com. Check out his book at www.GlobalValueBook.com. And learn more about his global value fund at www.CambriaFunds.com.
If it's too gut-wrenching for you to invest in these cheap countries, consider buying Meb's fund instead... he takes the guesswork and the emotional difficulty out of it for you.
I have no personal stake here... I just think Meb is a smart guy... and I believe him when he says that buying a diversified handful of the world's cheapest markets really works...
Check it out...
Good investing,
Further Reading:
In one of our best Stansberry Radio interviews ever, Meb talked to Porter Stansberry and Aaron Brabham about shareholder yield, global investing, and where the best opportunities are today. Listen to the episode (or download the transcript) right here.
Brett Eversole says "your best opportunity for a safe 'yield' today is taking your money OUT of the U.S. dollar... and putting it into a safe currency the world has left for dead..." Click here to learn more about this currency – and how you can earn 10%-plus in non-traditional "yield."
Market NotesONE OF THE BEST TRADES OF THE PAST DECADE Our September 2011 note about airlines is turning out to be one of best pieces of advice in DailyWealth history. It's an incredible demonstration of how "bad to less bad" trading works...
Back in September 2011, we cited the trouble with airline stocks. Airlines sport thin profit margins, they're subjected to wild swings in fuel costs, and they require lots of capital expenditures to keep the business running. This makes them horrible long-term investments. But from a trading viewpoint, it's worth knowing that airlines go through major "boom and bust" cycles. These cycles can be traded for big gains. You simply have to buy these stocks after they've been crushed... and when nobody wants them.
At the time of our write-up, airlines had just experienced a big bust. Many airline names, like giant Delta Air Lines, had lost over 40% of their value in just a few months. Sentiment toward the sector was horrible. This, we speculated, offered a chance to trade a "bad to less bad" rally.
As you can see from the chart below, our call was well-timed. Delta has more than quadrupled in price since our note. Most other airline stocks have registered similar gains. It's one of the best "bad to less bad" trades of the past decade.
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