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Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

(Getty Images/Comstock Images)
(Getty Images/Comstock Images)


Where to buy: The world's cheapest stock markets Add to ...

Mr. Bowman is a portfolio manager at Wickham Investment Counsel Inc. michael@wickhaminvestments.com

What are we looking for?

The world’s cheapest stock market. This screen would appeal to investors looking for an equity index that represents value.

The screen

My colleague Allan Meyer and I looked at some of the major stock markets around the world using a couple of different criteria.

One was the price-to-earnings ratio (P/E), which is the most common measure of the value of a stock or index. In general, a low P/E assumes the index is undervalued, and a high P/E shows an overvalued index. We have shown the trailing P/E, which is based on earnings of the past 12 months, the most standard such measurement. We have also shown the forward P/E ratio, which is based on the consensus of analysts’ forecasted earnings over the next 12 months.

The price-to-book (P/B) ratio works in conjunction with the P/E, in that a lower P/B can indicate the index is also undervalued.

We have also shown the index dividend yield, and total return year to date.

What did we find?

According to legendary investor Jim Rogers, and our screen, Russia’s stock market is extremely cheap with a P/E of 5.8, and it trades at less than its book value. You have an inexpensive market, and a robust macro story coupled with strong earnings growth. Russia’s debt is 10 per cent of GDP compared to the United States’, at 100 per cent.

All the BRIC countries – Brazil, Russia, India and China (represented here by Hong Kong) – still represent acceptable value. These countries hold 40 per cent of the world’s population, and 25 per cent of world GDP.

We have also included the newly named MIST countries – Mexico, Indonesia, South Korea and Turkey. The Istanbul exchange has shown a remarkable 1 year return of over 41 per cent yet it still trades at only one times book, with a very respectable P/E ratio.


Major stock markets ranked by P/E (lowest to highest)

Benchmark Country P/E Ratio Forward P/E
RTSI$ Index Russia 5.8 5.6
HSI Index Hong Kong 10.8 10.4
XU100 Index Turkey 12.3 10.1
UKX Index United Kingdom 13.2 10.3
DAX Index Germany 13.7 10.0
SPX Index United States 14.3 12.2
SPTSX Index Canada 15.3 12.8
SENSEX Index India 15.8 13.2
MEXBOL Index Mexico 18.3 15.1
JCI Index Indonesia 18.3 13.2

Source: Wickham Investment Counsel Inc., Bloomberg


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