Market Update for Value Investors - April 2015


The market still seems to be steaming ahead in April, although there has been some cooling toward the latter end of the month, ultimately keeping everything roughly flat or with low single digit growth. The notable exception to this being Hong Kong, which is 13% up for the month. 

  • The FTSE100 hit 7,100 for the first time this month
  • The NASDAQ is over 5,000 consistenly
  • The DJIA is settling over 18,000 
  • The S&P500 is over 2,100 consistently
  • The JSE All Share went over 55,000 for the first time
  • The NIFTY is 10% down from it's record 9,000 set last month
  • The Nikkei peaked over 20,000 for the first time but has settled down to 19,520 in the last week.
Global markets

Is the market headed for a crash?

So, the speculation of the stock market bubble popping continues. But 'all-time highs' isn't a concern at all. If you look back in history, you see bull runs that fly through 'all-time highs' again and again - that's how the market works. It's a question of value and growth. The Conference Board’s Leading Economic Indexes for most major economies point to growth ahead and the current earnings season in the US currently has 73% of businesses coming in ahead of analyst estimates - but it's too early to call the season with over 200 companies reporting today. 

It's interesting to see how the markets have evolved from last months analysis.  

Please note (again): 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.


Timing and Valuation

  • Market Timing has moved into 'Strong' territory
  • Down to 7.8% below our Consider Buy price
  • Down to 20.6% in the "roughly Fair Value" band/li>
  • 37 current targets on our list 


Valuations have moved even higher in North America and this is mostly due to the recent spate of IPOs. These have been most concerning from a value perspective as the number of loss-making businesses that are listing for record valuations is dwarfing the 1999/2000 tech bubble. In fact, around 80% of current listings are posting losses, which is especially concerning when you see huge, established cash cows getting their share prices trimmed by 10-20% for missing analyst estimates of earnings by 1%. The flip side is loss-making businesses surging ahead in valuation for shady metrics like "Average Monthly Users". Ultimately, if you're investing for the long-term and using sensible approaches to vaulations, you will always be fine. A correction seems far away at present, but I remember several pundits saying that towards the end of 2007 too. 


Timing and Valuation

  • Market Timing has cooled to "Normal" while valuations have climbed (mostly due to lower earnings)
  • Down to 8.6% below our Consider Buy price
  • Down to 30.5% in the "roughly Fair Value" band 
  • 25 current targets on our list 


European valuations still appear to be more reasonable than North America and the market has definitely cooled. We see two new targets in the list and there are some seriously great businesses up for grabs at very reasonable valuations. The flow of money into the European market has definitely slowed down and we see the 'wall of money' sloshing over to Asia at present. The Euro has stabilised for now and is even showing some signs of a small recovery, so it's no wonder that the Timing has cooled. We still think that Europe is a great investment target, especially with the Euro at these levels. 


Timing and Valuation

  • Market Timing has hit "Overbought"
  • Down to 10.4% below our Consider Buy price
  • Down to 36.2% in the "roughly Fair Value" band 
  • 70 current targets on our list 


Asian markets have surged in the last month, particularly in Hong Kong, China and Japan. Even so, there is still fantastic value to be found in Japan and all across the region. Australian markets are still very unloved with timing currently weak and almost 22% of businesses coming in below our Consider Buy mark. Opportunities from Japan, Malaysia, Singapore, Australia and Taiwan are hitting the target list continuously and we feel there is tremendous value to be found in these markets at present. 


Timing and Valuation

  • Market Timing has swung firmly into "Strong" territory
  • Up to 11.3% below our Consider Buy price
  • Down to 45.5% in the "roughly Fair Value" band 
  • 2 current targets on our list 


South African valuations appear to still be quite reasonable while timing is "Strong". The weak Rand continues to induce some foreign investment but generally the globe still appears quite pensive about investing in Southern African businesses at present. This is a very interesting dynamic, whereby valuations seem sound but the businesses don't appear to be making the grades to put them on the timing list. A lot of businesses are flushing out surplus cash or spending it on expansion as 'sitting' on cash basically equates to losing money in SA. As such, overall Strength and Intrinsic Value has dropped and we find it difficult to justify investment in this market at these levels, especially considering how the Rand continues to weaken against the major basket of currencies. 


Timing and Valuation

  • Market Timing still on the high end of "Normal"
  • Dropped to 6.7% below our Consider Buy price
  • Dropped to 29.7% in the "roughly Fair Value" band 
  • 0 current targets on our list 


Mexican GDP growth has fuelled a lot of investment over the past few years and attractive interest rate yields have also pulled a lot of cash into the Mexican market as it offers a fairly stable economic outlook with decent returns. The weakening Peso has been of concern of late, slowing the flood of money into the country. The market seems stable but valuations are very high and there are currently no 2D or 3D targets in this market. 

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Topics: Global Markets News


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