EZ Value Investing – Older Can Be Better V


Ease in finding good value global investments is an important reason why older can be better.

I am in Florida now and yesterday was speaking to a friend who is in the Florida agricultural business.  There have been a host of agri problems here: blight, bad weather, labor difficulties, all greatly complicated by government interference.  This grower shared a common refrain saying  “Sometimes I feel like selling everything and moving to a mountain top in Tennessee.

I sent that farmer this photo of Merri and me at the first dwelling we restored decades ago in North Carolina as a reminder why it can be much better here, this time of year.

farm

Click on image to enlarge.

Of  course in Florida, the summer is hot!  There are few places that are perfect all the time.   Yet I understand the root of this farmer’s desire, which is to simplify life.

This is nothing new.  Henry David Thoreau shared thoughts on this matter in his book “Walden”:   “I went to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I had not lived. I did not wish to live what was not life, living is so dear; nor did I wish to practice resignation, unless it was quite necessary.”

In short my farming friend, Walden and most of us would like to simplify life.  As we get older, this becomes easier as we have fulfilled our social obligations and can escape the maddening crowd.

Yet we must still pay the rent or at least the taxes and have food and utilities, etc.   Even in simplicity we have to take care of our finances.

How can we clean up our portfolios to lighten our lives by simplifying the task of investing our savings in a complicated, cluttered, convoluted  world?

One way is to invest in ETFs. (Country Index Exchange Traded Funds).

One value approach I am using is to find equity value like big money managers do and track the equity value analysis of Keppler Asset Management.

Keppler’s equity market analysis makes global value investing easy.

Keppler Asset Management is one source of data we use to examine global market values. We have followed the analysis of our friend, Michael Keppler for over 20 years.

Michael continually researches international major stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return. He compares each major stock market’s history.

From this Keppler, develops his Good Value Stock Market Strategies. His analysis is rational, mathematical and does not worry about short term ups and downs.

He, in my opinion, is one of the best market statisticians in the world. Numerous very large fund managers use his analysis to manage funds such as State Street Global Advisors.

The overall market value is one of many filters we should use when we review value…each leading to specific shares.

Michael Keppler warns investors not to misinterperate the investment analysis implicit in the Country Selection Strategy. A country is BUY-rated based on the valuation levels reflected in the MSCI benchmark index of country. A BUY rating therefore does NOT imply that any stock in that country would be considered an attractive investment.

To invest according to the Country Selection Strategy, it is necessary to construct diversified, risk-controlled, representative country portfolios in every BUY rated country, weighting each country approximately equally in the overall portfolio. It is not appropriate to instruct a stockbroker to simply to select stocks in the BUY rated countries.

One easy way to invest in the good value markets is with Country Index Exchange Traded Funds (ETFs).

A Country Index ETF is similar to an index mutual fund but is a share normally traded on a major stock exchange that tracks an index of shares in a specific country. ETFs do not try to beat the index they represent but try to emulate the performance of the index.

A country ETF, provides diversification into a basket of equities in the country covered.   The expense ratios for most ETFs is lower than those of the average mutual fund.

Keppler’s good value developed markets as of October 2014 were Australia, Austria, France, Germany, Hong Kong, Italy, Japan, Norway, Singapore and the United Kingdom.

For example the iShares MSCI Australia (symbol EWA) is a Country Index ETF that tracks the investment results the Morgan Stanley Capital Index MSCI Australia Index which is composed mainly of large cap and small cap stocks traded primarily on the Australian Stock Exchange mainly of companies in consumer staples, financials and materials. This ETF is non-diversified outside of Australia.

Currently iShares has Country Index ETFs that cover most of Keppler’s good value markets.

Developed Value

Symbol         ETF               Country

EWA         iShares MSCI Australia

EWG         iShares MSCI Germany

EWU         iShares MSCI UK

EWQ         iShares MSCI France

NORW      iShares MSCI Norway

EWI         iShares MSCI Italy

EWO       iShares MSCI Austria

EWJ         iShares MSCI Japan

EWH       iShares MSCI Hong Kong

EWS         iShares MSCI Singapore

Keppler’s good value emerging markets as of October 2014 were: Brazil, Chile, China, Colombia, the Czech Republic, Hungary, Korea, Malaysia, Poland, Russia, Taiwan and Thailand.

FXI China

THD Thailand

EWZ iShares MSCI Brazil

ICOL Colombia

EWT iShares MSCI Taiwan

EWM iShares MSCI Malaysia

EWY iShares MSCI South Korea

ECH iShares MSCI Chile

ESR iShares MSCI Hungary Czech Poland Russia

One benefit is that investors can buy very small lots of a country ETF so it is possible to invest in all 22 good value countries for quite small amounts.

Have a relentless search for value. Be sure to allot enough time for the value of your investments to emerge. Give the day to day management to professionals who can make decisions without letting their emotions get in the way.

Another easy way to invest better than most professionals is with the ENR Global Growth ETF Portfolio.

enr portfolio

ENR Global ETF Portfolio (click on image to enlarge) (2)

This portfolio offers one of the easiest but least expensive ways to invest in value.

Statistics show that more than 75% of all active money managers fail to beat a bellwether index in their sector over short and longer term periods.

Most actively-managed stock funds can’t beat the stock market nor can they beat investors who use indexing.

Indexing is an investment strategy that aims to equal a specific market index as closely as possible.  Traditional investment managers aim to outperform their targeted benchmark.

The ENR Global Growth ETF Portfolio fills the second tier role and is currently invested in the following ETFs:

* PowerShares Intl Dividend Achievers ETF

* SPDR S&P Dividend ETF

* Vanguard FTSE Emerging Markets ETF

* Vanguard FTSE All-World ex-US Sm-Cap ETF

* First Trust Dow Jones Global Sel Div ETF

* iShares MSCI ACWI

* iShares International Select Dividend

* Vanguard Total International Stock ETF.

For investors seeking a low-cost European private banking relationship combined with a low-cost portfolio, this is among the most competitive ways to gain global diversification.

You save on taxes.  Actively managed funds exert a heftier tax bill on your portfolio than passive products.

Then there’s portfolio turnover. Every time a manager makes a trade, there’s a cost.  ETFs invest in the shares that compose the index and do not trade.  During 2013 actively managed funds in the US turned over 85% of their holdings. Remember that this activity resulted in poorer average results than the indices for 75% of these funds.

As this is a new portfolio, ENR back tested the portfolio after deduction of fees. You can see the comparison with the MCSI World Index in the chart above.

For more information, contact Thomas Fischer at Thomas@enrasset.com

Investing discipline is rare in the real world. Simple investing is even more rare.  Having a disciplined investment manager like ENR Asset Management and ETFs are easy low cost ways to clean up your savings and lighten life’s load.

Gary

(1)  See details on the portfolio at ENR’s November Market Update


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