Which overseas market is a good hunting ground for value stocks?

[karlmarx]

The good-to-own businesses on SGX are too expensive (or not cheap enough), while the cheap ones are mainly of poor quality (too much debt, not growing, no market leadership, etc). After years of bull run since 2008, it seems that value stocks has all been found and are value no more.

I am considering to prospect in other markets but I'm concerned with forex (paying on exchange spreads and potential losses when the currency moves against you), and the quality of financial reporting (how much of what it says can be trusted?).

Which market has a stable exchange rate to SGD and has relatively strong regulations to police errant companies? I see some interest in HKex. What about Taiwan or South Korea? I am less keen on Malaysia and Indonesia.
 
Which market will you recommend? And how do you deal with those 2 concerns?

Thanks in advance.

[Wildreamz]

Personally feel that USA has the most innovative companies that have the potential to change the world and a long tradition of shareholder oriented culture (lots of buybacks etc), and they have been very consistent to deliver that. That coupled with the institutional investors, relatively better corporate governance, makes them a really good market to invest in. Problem is their 30% dividend withholding tax, not very attractive for local investors who loves high yielding companies.

Forex wise, USD is considered hard currency, so I think the risk is limited there. Coupled with the impending interest rate raise, I don't think the dollar is risky at the moment, but who really knows? People use to think that the RMB will keep increasing as recent as 2013 I think?

I see interesting stocks in other countries as well (India, China, Germany etc). I feel SGX market too small, with not much innovative companies and venture capital. Although there are a couple mid and small cap company that seems to be undervalued, not much institutional investor to move the price. And when they do move in, they typically just privatize the entire company.

[BlueKelah]

@karlmarx @wilddreamz: there should be a distinction between growth and value stocks. Not mutually exclusive but most of the time growth stock which seem to be what u are lookin for will unlikely to be undervalued.

If u want company that is growing , low debt with good market leadership , then no matter where u look u not gonna find much undervalue unless market tank.

It's a double edge sword, overseas market stocks can make big move up, but can also kena shorted down VERY FAST.

Sent from my MotoG3 using Tapatalk

[Wildreamz]

True that there is a nuanced difference between value and growth stock. I see value more in terms of long term stability of owners income, and growth potential. Not necessarily present asset value which many value investors value as well.

Because sometimes market can remain undervalued or overvalued over long periods of time. If a company has mediocre prospects about increasing cash flow over the next 10 years, and are just sitting on valuable assets that may or may not depreciate over time, they may still underperform and destroy shareholder value.

[psslo]

The good-to-own businesses on SGX are too expensive (or not cheap enough), while the cheap ones are mainly of poor quality (too much debt, not growing, no market leadership, etc). After years of bull run since 2008, it seems that value stocks has all been found and are value no more.

I am considering to prospect in other markets but I'm concerned with forex (paying on exchange spreads and potential losses when the currency moves against you), and the quality of financial reporting (how much of what it says can be trusted?).

Which market has a stable exchange rate to SGD and has relatively strong regulations to police errant companies? I see some interest in HKex. What about Taiwan or South Korea? I am less keen on Malaysia and Indonesia.
 
Which market will you recommend? And how do you deal with those 2 concerns?

Thanks in advance.

Same sentiments here. I'm exploring the Japanese market now. It has quite a good number of quality stocks at reasonable valuation. Value wise, it has lots of net net stocks. Market booming now due to falling Yen, Olympics a few years down the road.

[karlmarx]

I don't try to categorize stocks as 'value' or 'growth;' i only try to see if they are of good quality and priced attractively. To me, any stock can be 'value' so long as it is good and cheap.

I do agree that quality stocks become more widely available at bargain prices mainly during market downturns. But i'm not talking about getting bargains on stocks the likes of Coca Cola, Singtel, or any one of the Jardines. WB often says he prefers great businesses at reasonable prices, rather than so-so businesses at great prices. I look for so-so businesses at great prices because i can't identify great businesses and what i'm saying is there isn't much of the former in SGX. Those that are selling at great prices either has too much debt, inconsistent or no profitability, unpredictable demand for its goods/services, or all these problems. Buying these cheap stocks make no sense because it is clear the businesses are going to struggle (or are already struggling) to survive. Those with strong balance sheets and are consistently profitable are selling at premiums.

I feel frustrated in my search for value in SGX and i wonder if anybody else feels the same way too? Or am i asking for too much and wanting to pay too little?

[karlmarx]

Same sentiments here. I'm exploring the Japanese market now. It has quite a good number of quality stocks at reasonable valuation. Value wise, it has lots of net net stocks. Market booming now due to falling Yen, Olympics a few years down the road.

Which broker do you use for transactions? Do you let the broker handle the forex and you pay in SGD? If so, is the exchange rate used by the broker reasonable? Thanks in advance.

[psslo]

Same sentiments here. I'm exploring the Japanese market now. It has quite a good number of quality stocks at reasonable valuation. Value wise, it has lots of net net stocks. Market booming now due to falling Yen, Olympics a few years down the road.

Which broker do you use for transactions? Do you let the broker handle the forex and you pay in SGD? If so, is the exchange rate used by the broker reasonable? Thanks in advance.

I use Std Chartered cash trading (no risk to them) which in turn offers me low brokerage fee. To trade the Japanese mkt, you have to convert S$ to yen at bank rates which unfortunately is not the most competitive. However, there is no custodian fee.

[weijian]

hi karlmarx,
To effectively answer your dilemma, IHMO, I think you will need to have a good grasp of your temperament and knowing "where is your edge". There is a time for everything - a time to be conservative and a time to be aggressive. The key is having the wisdom to know when to do what.

To at least survive in different markets, one need to understand each market's characteristics - For eg. (1) Southeast Asian markets are largely made up of GodFather's investments and so the first question is always "what is the structure?" (2) US markets are deep, liquid and exciting but I am competing against at least 100 thousand CFAs. I am competing against David Einhorn and Bill Ackman, do I stand a chance? (no chance!) (3) The Japs have a lot of net-nets but maybe the accounting (valuation) is a suspect to start with or we will never get to see the cash.

Of course, you could be someone like the legendary Peter Cundill! (you could check out his book if you haven't done so: https://www.amazon.com/Theres-Always-Som...0773538631)

[karlmarx]

Hi psslo, thanks for your sharing and inputs. I was browsing the exchange website of Japan (and several other countries) and realised there is so much that we have to become acquainted with. While i hope that the singapore market will continue to offer interesting prospects, i am resigned to the possibility that i will someday have to look abroad for value.

Hi weijian, thanks for your advice. I can see that you have spent a lot of time looking at other markets. Were you also unable to find what you want locally? Certainly i'm not looking for excitement, nor aggressive; which is why i have concerns about having forex exposure. I'm looking for value and i'm willing to wait a few years for the ideas to bear fruit. But your input made me realise i might have been impatient with the absence of value in the local market (just can't stand not having the next investment idea, right). I will try to get the book you mentioned. Thanks.