Watch the video with Andrew Stotz or read about how to use the Global Equity FMVR Snapshot below.
Global Equity FVMR Snapshot: ‘The World Markets in Your Hand—Every Week’
We’re going to show you how to use our Global Equity FVMR Snapshot, what we like to call “The world markets in your hand—every week.”
This product is a weekly update on the world markets, including developed and emerging markets, as well as major regions and countries. It’s a one-page document that covers the way we invest, which is based on fundamentals, valuation, momentum, and risk: what we call “FVMR”.
Get it in your inbox every Monday. Carry it. Print it. Put it on the wall. Use it. Take it to a meeting. You’ll always be up to speed on the global equity markets.
Now, how do we invest?
FVMR: The Four Elements
Look at this diagram. We split it down the middle. On the top half, we look at earnings. On the bottom half, we look at price.
We believe that management is responsible for the earnings and investors are the people who drive the prices.
We think that profitability shows whether a company is managed well. And, of course, we prefer high or rising profitability.
This is on the bottom of the diagram because it’s related to price and it’s driven by investors. In fact, management probably shouldn’t worry too much about valuation.
When we look at investing, we want to look for companies that have good fundamentals at a low price. But, of course, we know it’s rare to find that combination so we want to look at both of them in tandem.
We are looking for positive momentum, which can help us avoid “value traps”.
You can see that momentum appears on the upper half of this diagram, where it refers to earnings momentum. It also appears on the bottom half, where it refers to price momentum. We look at both.
As with momentum, there are elements of risk that apply to both earnings and price.
We accept the fact that some investments are just going to be solid and stable, and that would mean low risk. They may not be the cheapest. They may not even have the best fundamentals or momentum. But, sometimes, a low-risk investment can be very attractive.
FVMR in Context
We’re going to use four columns and take you through the Global Equity FVMR Snapshot step by step. The first element we’ll look at is fundamentals, then valuation, then momentum, then risk.
What you’re going to see here are two major fundamentals that we look at, which are return on investment (ROE) and dividend payout ratio (DPR).
For instance, the world ROE right now is at 12.3%. Where is the lowest ROE? In Japan.
If we want to look at DPR, we can see that developed, non-U.S. countries are producing a DPR of 51.2%. That’s compared to, for instance, the world DPR of 42.6%.
This is price to earnings (P/E) and price to book (P/B).
For P/E, we can see, for instance, that emerging markets are trading at 11.3x P/E, whereas North America, mainly the U.S., is trading at 16.2x.
If we look at P/B, we can see that Asia is trading at just slightly over book value, compared to the U.S. which is now trading at 2.3x P/B.
We can see a valuation gap there. Eventually, this gap will close. Either the U.S. will come down or Asia will come up.
We look at both earnings momentum and price momentum.
For earnings momentum, we’re looking at 2015 actual results and expectations for 2016, which come from a consensus average of analyst estimates. Then, we look at short-term (one week) and long-term (one year) stock price performance.
We can see here that the world EPS growth in 2015 was slightly under zero at -0.7%, and we can see that Latin America is expected to grow the fastest in 2016, at a rate of 27%.
As far as price is concerned, we can see that the one-year price performance of Asia has been crushing, -16.2%. And we can see that Japan has lost the least during that time, -0.4%.
We look at gearing (also known as balance-sheet risk), and then we look at price risk. This is the standard deviation or the volatility of that particular market or region.
We can see, for instance, that the prior 12-month (PTM) gearing in Asia was 24.7%—meaning, Asia is not highly geared compared to the rest of the world.
Then we can see that the volatility over the last month has been quite high for the world at 20.5%, versus over the past year, at 13.9%.
Have you ever heard people on CNBC and Bloomberg saying, “Oh, there’s a lot of volatility these days!” Well, that’s what they’re talking about.
We can also see that Asia has the lowest volatility right now at 14.7%. You can see at the top that the world volatility is at 13.9%.
When you combine all markets in the world and all stocks, your volatility is naturally going to come down. So when you’re comparing volatility, you want to look at similar regions or countries.
The World Markets in Your Hand
With our Global Equity FVMR Snapshot, you’ll get a weekly update like the one below on the world covering developed and emerging markets and major regions.
You’re going to understand fundamentals, valuation, momentum, and risk, and the way we look at them.
What YOU will get:
- The Global Equity FVMR Snapshot updated weekly on world, developed, and emerging markets, as well as major regions and countries
- One page that covers Fundamentals, Valuation, Momentum, and Risk – FVMR. The same framework used to advise institutional investors and fund managers around the world
- Access to the FVMR framework that has been developed by a team of financial professionals with more than two decades of experience, led by Andrew Stotz, CFA who has been awarded the best analyst in Thailand—twice!
- A PDF sent to you every Monday. Carry it with you, print it out, put it on the wall. Use it!
- The world markets in your hand—every week! You’ll always be up to speed on global equity markets
The Global Equity FVMR Snapshot is free for everyone signing up within a limited time period. Sign up now to not miss out on getting it for free.
NOTE: You’ll have to fill in the form below to receive the Global Equity FVMR Snapshot even if you’re already subscribing to the China or Korea Equity FVMR Snapshot and/or a founding member that get our newsletter.
DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.