What are we looking for?
Potentially undervalued companies from around the globe.
The screen
Global markets have been mixed recently with many regions considered to be fairly valued. The eurozone has shown relative strength over the past month, bouncing back following uncertainty with Greece's place in the European Union. In order to uncover potentially undervalued global companies with room to grow, my colleague Lawrence Ullman and I used Bloomberg to list the top 20 stocks from around the world with market cap above $1-billion (U.S.) and the best mix of:
- Price-to-earnings ratio
- Price-to-cash flow ratio
- Price-to-book ratio
- Price-to-sales ratio
- Three-month consensus earnings estimate revision
As an attempt to avoid value traps, we also limited results to companies with return on invested capital (ROIC) greater than 5 per cent, three-month estimate revisions no worse than negative 15 per cent and price changes over the past one- and three-month periods no worse than negative 10 per cent.
More about the Ullman Group
The Ullman Group is an independent provider of strategic private-capital-management services to high-net-worth individuals, corporations, endowments, charities and foundations.
What we found
We used Bloomberg to perform a back-test starting July 31, 2000, re-selecting an equally weighted portfolio of the top-20 qualifying stocks every three months.
Over the 15-year period, this strategy would have generated an annualized total return of 17.4 per cent (U.S.) compared with 4.5 per cent for the MSCI World Index.
The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Investors should contact a professional or do their own research before investing in any of the stocks shown here.
Craig McGee, CFA, is a portfolio manager and Lawrence Ullman, MBA, is a director, wealth management and portfolio manager with the Ullman Group at Richardson GMP in Toronto.