What Countries Are Cheap For A Value Investor To Buy Now?

  • Country selection is a viable way to approach global equity investing.
  • The value factor works across country markets as well as within countries.
  • There are currently large differences in valuation between countries, both in Emerging Markets as well as in different regions.
  • Single-country ETFs are a good way to Price Compare.

What Countries Are Cheap? What Should a Value Investor Buy Now?

This is the first commentary in a series about the relative attractiveness of different country stock markets. With everything that has been going on in Ukraine and Russia over the past several days, much has been written about the opportunity (or lack thereof) that comes as a result of these types of geopolitical events. Most of the commentary surrounds the fact that Russia is now very cheap relative to other regions and countries, and thus represents a good opportunity. In a previous whitepaper, we looked at using Value as a factor when investing across countries, and found it to be effective in generating outperformance vs. the benchmark. The full text can be found Here.

As investors who are biased towards factor tilts, we thought it would be interesting to look at the valuation of the 32 countries in our universe based on 3 basic criteria: Forward Price/Earnings Ratio, Trailing 5 Year Price/Earnings Ratio, Price/Book Ratio.

The table below includes rankings of each country based on each individual factor, as well as a composite rank that is the average of the 3 factor ranks. In addition, just for the sake of completeness, we included the actual measure of forward P/E so that readers could identify and measure any significant differences in valuation between countries. This data is as of 2/28/14, and is prior to the flareup in the Ukraine.

Valuation ranks as of 2.28.14. Source, Accuvest Global Advisors, MSCI

As you can see, based on the composite rank, Russia is the cheapest country, followed by Turkey, Korea, Brazil, China and Austria. The most expensive countries are Mexico, Switzerland, US, Sweden, Canada and Malaysia.

At first blush, it might seem that Emerging Markets are relatively inexpensive, and therefore represent a good place to allocate capital. The truth is, value is only to be had in certain of the EM countries. In fact, 5 of the 10 most expensive country markets are EM countries (Mexico, Malaysia, India, Chile and South Africa).

So, in answer to the question posed at the beginning of the commentary, a value investor should be looking at single-country ETFs that invest in Russia ( ERUS), ( RSX), ( RBL), Turkey ( TUR), Korea ( EWY), Brazil ( EWZ), China ( MCHI), ( FXI), ( GXC), ( YAO), ( FCHI), ( KBA) and Austria ( EWO).

The next installment in our series will look at ideas for building a portfolio of high momentum countries. That list will look quite a bit different than this one.

Russia’s Online Retail Leader Says ‘Amazon Has No Chance’

Photograph by Sergey Fadeichev/ITAR-TASS

Russia has become the it girl of e-commerce. Even amid a slowing economy, the country’s online shopping increased 26 percent last year, to 510 billion rubles (about $14 billion), according to Moscow’s Data Insight, and could double by 2015. That has made the country an intriguing target for foreign players such as , , , and China’s Alibaba Group, while boosting the fortunes of such local companies as search engine and Super Sale-like Ozon.

The dark horse leading the race right now is Ulmart, an online retailer that reported $1.2 billion in sales last year. It has succeeded by doing what Amazon does not. Instead of wooing customers with low-cost home delivery, Ulmart encourages them to pick up their orders at urban outposts and warehouses that double as stores. While Amazon ships on such partners as , Ulmart keeps its own fleet of 190 trucks. The St. Petersburg company ships fast-moving items in bulk from suppliers to urban outlets instead of breaking apart the shipment and repackaging it at a mega-hub. Where Amazon’s Jeff Bezos racked up $3 billion of losses in his early years, Ulmart’s chairman and major shareholder, Dmitry Kostygin, says his site has lost around $30 million in its first five years. “It’s in the ‘illions,’ but with an m,” he laughs. And yet Ulmart’s three-tier distribution and fleet allow it to bypass Russia’s byzantine postal service, turn around orders in as little as seven minutes, and accept cash in a country where many are reluctant to use credit cards. While Amazon has expanded deliveries and may be testing the waters in Russia, Kostygin says he’s not worried. “In this market,” he says. “Amazon has no chance.”

That prognosis may prove to be premature in a country where e-commerce makes up less than 2 percent of retail sales. But it points to the strength of the hybrid model that Ulmart’s co-founder and chief executive, Sergey Fedorinov, has built with Ulmart Outposts and Kibermarket stores. It also illustrates the intensity around Russia’s e-commerce business right now. Kostygin and Fedorinov were together in New York yesterday to promote the company to journalists. That follows an unusual press release earlier this month in which Ulmart announced it was shelving plans to become the “first major retailer in all of Europe” to accept Bitcoin as payment after the Bank of Russia warned that could promote illegal activities, such as money laundering or the financing of terrorism. Ulmart’s push comes at a time when Ozon CEO Maelle Gavett has also raised her public profile and Russia’s government is making it tougher for locals to buy goods at foreign sites.

Ulmart chairman Kostygin knows firsthand the power that foreign rivals wield when it comes to having capital and known brands. As chairman of the hypermarket chain Lenta, Kostygin tussled with TPG Capital when it took a controlling interest, though in yesterday’s interview he cited the U.S. private equity giant’s stake as a sign of Russia’s openness to foreign players. (Lenta is expected to raise at least $1 billion in its initial public offering on the London Stock Exchange.)

On one level, Ulmart’s formula is simple. Its product mix focuses largely on electronics, and its network sticks to the cities of “European” Russia, an area, about three times the size of Texas, where much of the country’s wealth and consumption are concentrated. Ulmart currently has three national hubs that average 12,000 square meters, or roughly 129,000 square feet, with plans to build two hubs almost twice that large this year. (Many of Amazon’s 100 fulfillment centers worldwide exceed 1 million square feet.) Customers can pick up or order goods at 30 urban warehouses, each of which range from 2,000 to 3,000 square meters. They can also have their orders sent to one of 250 outposts that are only 100 square meters or pay extra to get home delivery a day or two later on one of Ulmart’s 190 trucks. Those living in other parts of the country are subject to the vagaries of Russian Post, a system so sclerotic that Kostygin says it can take two weeks just to cover the 400 miles between Moscow and St. Petersburg.

Ulmart is not the only Russian player relying on pickup points to deliver goods ordered online. Ozon, the site that most resembles Amazon in look and product mix, also has a vast network of offline centers. While Ulmart sells 55,000 different products, Ozon.ru’s menu is well north of 2 million.

Unlike Fedorinov, Ozon CEO Maelle Gavet has tried to build her business across Russia’s nine time zones, which increases delivery costs. For years, those advantages were muted by a generous duty-free policy that let consumers order up to 1,000 euros at a time on foreign sites and have them shipped tax free. That has now changed, with lower limits and new customs rules that prompted and to suspend deliveries in January, resuming only after officials promised to simplify the process. Kostygin, for one, supports the tougher policy, saying “we’ve had considerable abuse of these rules, mostly by entrepreneurs who arrange shipments for their corporations without customs clearance.”

While smart distribution has helped make Ulmart a leading player online, Russian e-commerce is still at an early phase. Whether a company that now gets half its sales from electronics, such as iPhones, and its “MicroXperts” house brand will continue to dominate as more foreign players and consumers get into the game remains to be seen. CEO Fedorinov acknowledges that distribution is only one factor in success. With such children’s products as diapers and electronic toys becoming more popular on his site, he’s looking at expanding into new categories such as kids clothes and plans to take Ulmart’s distribution model to all of Russia over the next few years. He’s also made moves to create an Amazon-style marketplace for third-party retailers and talks about the power of big data and new customer tools. “What we have is not simply a model for Russia or selling electronics,” Fedorinov says. “The logistics component and platform could work anywhere in the world.”

Amazon And The BBC Make Ripper Of A Deal

Best Deals have struck a deal with the BBC to revive the cancelled crime drama Ripper Street. Thanks to Amazon’s financial input, the new season will be streamed on Amazon Instant before it airs on the BBC.

The deal shows the power that online streaming companies now have. Being able to create original content and having the financial clout to revive shows that still have a loyal following.

Ripper Street was cancelled last year after two seasons by the BBC who said it “didn’t bring the audience we hoped”, and stars Matthew Macfadyen and Jerome Flynn as police detectives in the 19th Century at the time the ripper stalked the streets of Whitechapel, East London.

The new season will begin shooting in May and will premiere first on the Amazon Prime Instant on-demand service which will also have the first two seasons available to stream.

The BBC were Cock-a-Hoop with the news, drama boss Ben Stephenson said it was an, “an exceptional opportunity” to bring back the show. He said: “This deal gives fans another series of the show they love at excellent value to the licence fee-payer, ensuring that the BBC can also commission an entirely new, yet-to-be-announced drama series.”

Speaking for Amazon, head of Amazon instant video international content acquisition, Jason Ropell said, “We’re delighted to have secured not only the highly popular first two seasons of Ripper Street for our Prime Instant Video customers, but we can also confirm today that we will making season three, news that we know will delight the millions of fans of this brilliant British drama.”

CNN Student News - February 26, 2014

From a report in the Venezuelan capital, cnn student news brings you two very different views of the country’s government. We also look at the pros and cons of a U.S. government proposal regarding food ads in schools, and we examine how a 12-year-old’s invention with LEGOs could change the world.

On this page you will find today’s show Transcript, the Daily Curriculum, and a place for you to leave feedback.

TRANSCRIPTClick here to access the transcript of today’s CNN Student News program. Please note that there may be a delay between the time when the video is available and when the transcript is published.Click here for a printable version of the Daily Curriculum (PDF).Media Literacy Question of the Day:

What sources would you consult for credible information about a country’s government?

Key Concepts: Identify or explain these subjects you heard about in today’s show:

1. “Day of the Barricades”

2. distracted driving

3. Braille

Fast Facts: How well were you listening to today’s program?

1. What was the “Day of the Barricades” in Venezuela? Why are some in the country protesting against President Maduro’s government? What kind of government does Venezuela have? How has the president responded to the protests?

2. What rules regarding food advertising in schools are being proposed by First Lady Michelle Obama and the Department of Agriculture? According to the video: What is the reasoning behind this proposal? How has the American Beverage Association, which represents several large soft drink brands, responded to it? What do critics say about the proposal?

3. What is Google Glass? Why are lawmakers in several states considering banning Google Glass for drivers? How has Google responded?

4. What did Shubham Banerjee invent using LEGOs and some other materials? In addition to the fact that it’s built using LEGOs, what sets his invention apart?

5. To what extreme measure did the International School of Beijing go to allow its students to have a place to play? Why did the school do this? How much did the dome cost? How do officials ensure that the air inside the dome is clean?

Discussion Questions:

1. Why do you think that the Venezuelan government’s move towards socialism is so polarizing? What impact might this form of government have on different groups of people?

2. Do you think a federal government ban on public school ads for certain foods is a good idea? Explain. How might a ban on these foods impact schools and students? What role, if any, do you believe that schools should play in their students’ eating habits?

3. If you were a legislator, would you vote to restrict or ban the use of Google Glass for drivers? Why or why not? What arguments would you anticipate from your opposition?

CNN Student News is created by a team of journalists and educators who consider theFEEDBACK Common Core State Standards, national standards in different subject areas, and state standards when producing the show and curriculum. We hope you use our free daily materials along with the program, and we welcome your feedback on them.Click here to submit your Roll Call request.

We’re looking for your feedback about CNN Student News. Please use this page to leave us comments about today’s program, including what you think about our stories and our resources. Also, feel free to tell us how you use them in your classroom. The educators on our staff will monitor this page and may respond to your comments as well.

Thank you for using CNN Student News!

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Analysts said Britain’s biggest online retailer was feeling the squeeze as traditional players such as John Lewis and Dixons raised their game - particularly with “click and collect” services.

Accounts filed by the US parent company show Promo Code's UK sales were $7.29 billion (&;4.46 billion) - a rise of around $800 million on a year earlier. British revenues rose by $1 billion to $6.48 billion in 2012 and by $1.4 billion to $5.35 billion in 2011.

Taking into account changes to the dollar-sterling exchange rate, UK growth is estimated at 14 per cent last year on a like-for-like basis - down from 22 per cent in 2012 and 31 per cent in 2011.

"The competition is a bit stronger for them in electricals," said independent retail analyst Nick Bubb, pointing to Dixons’ decision to match Amazon on price and John Lewis’s move to offer "click-and-collect" at its Waitrose food stores.

"What has been a drag is the books and entertainment market is pretty mature," added Bubb, who reckoned falling CD sales and other traditional entertainment products - once at the heart of Amazon’s business - have pushed down on revenues.

Amazon remains Britain’s biggest online retailer, but Bubb said “mathematically, arithmetically, it gets harder to keep growing” at double-digit rates.

The web giant has come under fire for tax avoidance because it processes sales in Luxembourg but there in no sign the row has hit the UK. Amazon had a foreign tax bill last year of just $173 million on $30 billion of international sales.

Amazon declined to comment.

chinese chinese lunar new year cardsp>Good morning. Microsoft Corp. is said to be close to picking Satya Nadella as its new CEO. Mr. Nadella, who currently runs its cloud and enterprise business, would provide CIOs the assurance of continuity, particularly with regard to the direction of the company’s cloud strategy. Michael Cherry, an analyst with Directions on Microsoft, says in this case, “CIOs will not likely need to worry about new leadership of that [cloud] division or a change in direction.”

BusinessWest

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