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Deep value investing - 86 ideas for value obsessed investors – Q2 2018

After the bit of volatility so far in 2018 I thought you would be interested in a few deep value investment ideas from around the world.

 

This is what we screened for

To find the deep value ideas this is what I screened for:

  • All companies listed on the main stock markets worldwide (excl. China)
  • Daily traded volume of at least $100,000 (you must be able to buy or sell relatively easily)
  • Minimum company market value $30 million (to remove really small companies)
  • Sorted all the companies that met the above criteria by trailing 12 month Earnings Yield (Earnings Before Interest and Taxes (EBIT) / Enterprise Value) the best valuation metric ever tested worldwide

It is truly the 80/20 ratio when it comes to quantitative investing. You can compare it to any ratio, over most time periods, and it will nearly always give you the best returns of all the ratios you test.

 

Here is more information about Earnings Yield

You can read more about why Earnings Yield is the best ratio you can use to find undervalued companies here:

Price Index 6m & Earnings Yield - The 80/20 of quantitative investing

This simple ratio beats the world’s best value funds

The best valuation metric ever tested worldwide

Do TTM or normalized ratios give you higher returns? – data driven

 

Find more ideas like this

To find more companies like these, or others that exactly fit your investment strategy click here: I am interested sign me up

 

The following is what the deep value screen came up with:

Deep_value_Q2_2018_1

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Cheapest 15 deep value companies, as you can see some wild Earnings Yield numbers most likely related to once off items or something similar.

 

Deep_value_Q2_2018_2

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Next 15 deep value companies, still some wild Earnings Yield numbers but more believable.

 

Deep_value_Q2_2018_3

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Third group of 15 deep value companies, Earnings Yield still high but interesting companies, mainly in South Korea.

 

Deep value with a quality indicator – Piotroski F-Score

To get rid of junk companies I added a quality measure, the Piotroski F-Score.

When we first heard about the F-Score we were sceptical – after all it was developed in 2000 by a relatively unknown accounting professor.

Prof Joseph Piotroski, at the University of Chicago, developed the F-Score to improve the returns of a low (cheap) price to book value investment strategy.

It worked unbelievably well

It worked even better than I am sure he suspected.

If you invested in only those companies that scored best or highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 you would have outperformed the market by an average of 13.4% per year - and this over the whole 20 year period.

 

More information about the F-Score

You can read more about the Piotroski F-Score here:

This academic can help you make better investment decisions – Piotroski F-Score

Can the Piotroski F-Score also improve your investment strategy?

Use the Piotroski F-Score to seriously improve your returns

How to increase your returns on average 210.6% (max 363.0%) – Piotroski F-Score

Ever thought of using a fundamental stop-loss?

How to find cheap companies with good fundamental momentum

 

What the cheap quality screen looked like

This is what the screen looked like:

  • All companies listed on the main stock markets worldwide
  • Daily traded volume of at least $100,000 (you must be able to buy or sell relatively easily)
  • Minimum company market value $30 million (to remove really small companies)
  • Companies with a Piotroski F-Score higher than 6 (best = 9, Worst = 0). 
  • Sorted all the companies that met the above criteria by trailing 12 month Earnings Yield (Earnings Before Interest and Taxes to Enterprise Value).

 

To find more ideas like this

To find more companies like these, or others that exactly fit your investment strategy click here: I am interested sign me up

 

The following is what the deep value plus quality screen came up with:

Deep_value_Q2_2018_4

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Cheapest 15 deep value plus quality companies, as you can see still some wild Earnings Yield numbers but not as high as when you only looked at Earnings Yield.

 

Deep_value_Q2_2018_5

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Next 15 deep value plus quality companies, still high Earnings Yield numbers but interesting companies mainly in Japan and South Korea.

 

Deep_value_Q2_2018_6

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Third group of 15 deep value plus quality companies, Earnings Yield high but interesting companies.

You already know this already but it is always worth mentioning. The above ideas are just that, investment idea for you to research further. 

Wishing you profitable investing.

Tim du Toit

PS: To find more companies like these, or others that exactly fit your investment strategy click here: I am interested sign me up