The STRIDE Blog

Market Update for Value Investors - March 2015

stride-blog-market-update-for-value-investors-march-2015-homeOur first market commentary for value investors seems to come at a very optimistic time in most markets. To demonstrate this: 

  • The FTSE100 just closed at a fresh record high (breaking the record twice this month) 
  • The NASDAQ is roughly 1% away from it's record dot-bomb high 
  • The DJIA has been setting new records most months in the past 2 years...
  • ...as has the S&P 500
  • The JSE All Share continues to break records 
  • The NIFTY is at record levels
  • Even the Nikkei is nearing it's 2000 peak

All this leads to a lot of market speculation as to whether we are reaching crisis / bubble levels again or whether these market are priced correctly.

Using our STRIDE engine, we've been working analysis at both a market and sector level so we can start to look at trends and see if there are any key leading / lagging indicators that might help us better understand market cycles. 

Please note: All the following commentary is based on the individual markets that we deem "Easy To Trade". As an example of this, our commentary on Africa shows only 1 market - the JSE - as this is the only easily accessible market on the continent. For more information, see our exchange coverage list. 

The STRIDE timing engine is a market cap weighted measure that looks at technical indicators in the market such as RSI, MACD, comparisons to SMAs and EMAs to build a picture on capital flows.

For further information on how the Market and Sector browsers work, watch the videos located on our library page.

ScreenShot2015-03-20at12.37.46

Timing and Valuation

  • Market Timing at the higher end of the "Normal" range
  • 9.2% below our Consider Buy price
  • 21.4% in the "roughly Fair Value" band 
  • 39 current targets on our list 

Commentary

What's interesting for us here is that valuations appear to be very high while market timing is only nearing the "Strong" mark and is a long way from the "Overbought" mark. This indicates that the market has been steadily climbing over the past year and, while strong, is not overheating. The extremely high valuations however, are worrying and this could be the reason behind the sluggish climb in timing overall. Saying that, as always, the US and Canadian markets always have opportunities waiting to be seized. What is also interesting to see is that the tech-focussed NASDAQ markets have the highest timing and the highest valuations - probably a result of all the recent tech IPOs, so possibly a warning sign of 1999-esque over-exuberance. 

ScreenShot2015-03-20at13.05.42

Timing and Valuation

  • Market Timing is "Strong" and heading to "Overbought"
  • 9.6% below our Consider Buy price
  • 31.6% in the "roughly Fair Value" band 
  • 23 current targets on our list 

Commentary

European valuations appear to be more reasonable than North America while market timing is nearing the "Overbought" mark. This indicates that there has been a flood of money into the market over the past year and this market is showing signs of overheating. The more reasonable valuations and the weaker euro are likely to go hand-in-hand with the flood of money into the market over the past 12 months and this is likely to continue in the short to medium term. There are currently 23 targets in the market so Europe is demonstrating ample opportunity for value investors to seize on. 

ScreenShot2015-03-20at14.06.33

Timing and Valuation

  • Market Timing is "Strong" and heading to "Overbought"
  • 11.5% below our Consider Buy price
  • 37.8% in the "roughly Fair Value" band 
  • 83 current targets on our list 

Commentary

Asian valuations appear to be more reasonable than North America and Europe while market timing is nearing the "Overbought" mark. This market level timing hides the full underlying picture as you have the Chinese markets which are well over the "Overbought" mark and other markets such as Australia that are currently "Weak" and quite a few markets (Singapore, Taiwan, Hong Kong) that are in the "Normal" band. The global recovery has had the biggest impact in this region but other country-specific factors have also had a large effect. Australia has been punished due to its reliance on commodities leaving a number of great opportunities in this market while China has opened the gates to external investors resulting in a huge influx of cash into market over the past 12 months and this is likely to continue in the short to medium term.  Indian businesses seem to be coming online again as the Rupee stabilises and we are starting to see new targets in this market on a daily basis. Overall, there are a number of great opportunities across the region and STRIDE is uncovering new picks continuously. 

ScreenShot2015-03-20at14.17.15

Timing and Valuation

  • Market Timing has only just "Strong"
  • 8.9% below our Consider Buy price
  • 50.2% in the "roughly Fair Value" band 
  • 4 current targets on our list 

Commentary

South African valuations appear to be quite reasonable while timing has just crossed over the "Strong" mark. The weak Rand has induced some foreign investment but generally the globe seems quite pensive about investing in Southern African businesses at present. There is a lot of focus on turning businesses over to indigenous people and, as such, a lot of nervousness around the future stability of some businesses. There is, of course, a lot of investment from the rest of the continent and from the South African community itself, and with limited pickings in the market and a growing economy, the activity in this market remains high. 

ScreenShot2015-03-20at14.46.40

Timing and Valuation

  • Market Timing on the high end of "Normal"
  • 7.9% below our Consider Buy price
  • 35.3% in the "roughly Fair Value" band 
  • 0 current targets on our list 

Commentary

The Mexican market is the only "easy to trade" market in South America and also has a lot of focus from it's neighbour to the north. High growth especially at a GDP per capita level has long since garnered international interest pushing valuations up. Our general view on this market at present is that returns are too low and that valuations factor in unrealistic growth going forward.

 

stride-asset-allocation-and-effective-portfolio-management-part-two

Topics: Global Markets News

cta-book-example.jpg

3D Value Investing: Triangulating The Best Investment Targets

3D Value Investing uncovers the best businesses for investment, the fair value of those businesses and the best times to buy in and sell out. This approach to long-term investing results in higher returns with lower risk.

Download your eBook now

Subscribe to Email Updates