Author Topic: Anything cheap?  (Read 1198 times)

jleo

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Anything cheap?
« on: July 02, 2018, 08:32:37 PM »
With current P/E ratios at record highs is there anything out there ETF wise that is a good deal? I have been looking into Emerging markets, everything seems expensive and I hate paying retail.

jacoavluha

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Re: Anything cheap?
« Reply #1 on: July 02, 2018, 09:27:04 PM »
Emerging markets selling now for about the same price they were 11 years ago is pretty cheap.

MustacheAndaHalf

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Re: Anything cheap?
« Reply #2 on: July 03, 2018, 09:21:48 AM »
You could take a look at Shares MSCI EAFE Value ETF (EFV) with a 0.39% expense ratio and 13.25 P/E ratio, if your goal is a lower P/E ratio.

terran

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Re: Anything cheap?
« Reply #3 on: July 03, 2018, 03:50:54 PM »
Playing devils advocate here -- what makes you think your expectation of future returns (buying things with a low(er) P/E ratio) is more accurate than the rest of the market? Sometimes things are cheap because they're of lower quality and won't serve you as well in the future.

Systems101

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Re: Anything cheap?
« Reply #4 on: July 03, 2018, 04:28:47 PM »
P/E is above average, but nowhere NEAR a record high, even smoothing 2008-9 as CAPE does.  Even if it was, CAPE explains perhaps 40-50% of valuation:
https://www.starcapital.de/fileadmin/user_upload/files/publikationen/Research_2016-01_Predicting_Stock_Market_Returns_Shiller_CAPE_Keimling.pdf

Lower than normal interest rates mean the earnings yield is still a decent premium to the yield on bonds, so you're being paid to take the risk, and many times the earnings yield is below bond yield because the market assumes stocks will capture value based on earnings growth (proof left as an exercise for the reader)

To terran's point, the value (lower P/E) factor has been significantly underperfoming the market over the last decade to 2016:
https://www.msci.com/www/blog-posts/the-value-factor-marks-a-decade/0313945437
...and pretty much had a crummy 2017 as well:
https://www.factorresearch.com/research-factor-olympics-2017

But that doesn't mean active management can outperform, since prediction is hard:
https://blog.thinknewfound.com/2018/06/the-raw-materials-for-active-management/

...and you start out concerned about high CAPE and then dismiss emerging markets where CAPE is more reasonable than the US:
https://www.researchaffiliates.com/en_us/publications/articles/679-pundits-predicting-panic-in-emerging-markets.html

The statistics are against active management.  "good deal" is a judgement call and is active management.  Do only enough active management to determine bond vs stock and domestic vs international exposure and then ... stop.  Get passively managed funds to meet those allocations.

hodedofome

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Re: Anything cheap?
« Reply #5 on: July 04, 2018, 09:28:27 PM »
I own some GVAL, about the best one can do if looking for cheap. Buys the cheapest countries each year.

ChpBstrd

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Re: Anything cheap?
« Reply #6 on: July 06, 2018, 01:01:14 PM »
"Expensive" can have several definitions:
1) Low ROE for stockholders based on E/P or CF/P
2) Low dividends or yields
3) Low potential returns compared to the risk involved

These are not one and the same.

If #1 is the problem, emerging markets or value stocks would be the solution as some have suggested.
If #2 is the problem, growth stocks might be a better deal than dividend stocks or fixed income, as has been the case for a long time now.
If #3 is the problem, protective put options or trailing stop loss orders can dramatically reduce your downside risk while keeping the upside potential, albeit at a price, plus the "getting back in" paradox.

Hedge funds attempt to address all 3, but as with all active management this is more often the marketing promise than the realized result. You will have to choose your priorities.

chasesfish

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Re: Anything cheap?
« Reply #7 on: July 08, 2018, 06:35:27 AM »
Four months ago I would have said REITs...they're back to being more fairly valued.

If you want to take individual stock risk, Disney is pretty attractive...but you can google 100 reasons to not buy a company who's customers line up to pay them millions of dollars daily.

Emerging Markets and International have trailed for a while...but trade wars

Financial.Velociraptor

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Re: Anything cheap?
« Reply #8 on: July 08, 2018, 10:41:02 AM »
I think AXS is very attractive at the current price.  I already have a full position and will not be adding more.