Global stock market valuations separate the wheat from the chaff

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“All flights to Johannesburg have been delayed indefinitely due to inclement weather”. Those were the awful words that have just been uttered from the cockpit of a stationary aircraft supposed to fly from Cape Town to Johannesburg en route to New York. It is anybody’s guess whether I will still make it to the Big Apple in time for a long-awaited lunch with Barry Ritholtz on Friday.

But the delay at least gives me an opportunity to catch up on some reading and blog a few paragraphs. And also to place side-bets with fellow passengers on the South African Springboks winning the Rugby World Cup on Saturday. Didn’t I told you this when you could still get 3:1 odds instead of the Boks now being odds-on favorite – see “We are the champions …”

I post a global stock market performance round-up on a monthly basis – see “Are global markets on steroids” (September 30, 2007)” as an example. The dilemma with focusing only on historical returns, however, is that they at best represent a rear-view mirror assessment of future investment potential.

A far superior approach is to combine the performance ranking tables (and price charts) with a measure of valuation. And this is where I find Fullermoney’s global price/earnings ratio (PER) and dividend yield (DY) tables particularly useful. These are still historical figures, but nevertheless serve as a very useful guide to where over- and under-valued situations are most apparent. (Yes, I realize that it is much better to use prospective PERs and DYs, but I unfortunately do not have access to that data for dozens of countries around the globe.)

In order to view the PERs and DYs as at both September 5 and October 8, please click on the thumbnails below.

Ranking of global price-earnings ratios


Ranking of global dividend yields



In future I will incorporate Fullermoney’s PER and DY rankings in my monthly review of global stock market returns to better serve our needs to seek out the next global hot spot.

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