According to GuruFocus’ Global Market Valuation pages, countries with high projected market returns include Singapore, Turkey and Indonesia. As such, five stocks with high profitability potential over the second half of the year are Erbosan Erciyas Boru Sanayii ve Ticaret AS (IST:ERBOS, Financial), Haw Par Group Ltd. (SGX:H02, Financial), PT Indofood Sukses Makmur Tbk (ISX:INDF, Financial), T Tuborg Bira Ve Malt Sanayii AS (IST:TBORG, Financial) and PT Waskita Karya (Persero) Tbk (ISX:WSKT, Financial) according to the All-in-One Screener, a Premium feature of GuruFocus.
A recap of Buffett’s market indicator and its applications to global markets
Berkshire Hathaway Inc. (BRK.A)(BRK.B) CEO Warren Buffett (Trades, Portfolio) pointed out that the ratio of total market cap to gross domestic product is “probably the best single measure of where valuations stand at any given moment.” Although U.S. markets sank over 2% on Friday on the heels of state governments rolling back reopening measures due to resurging coronavirus cases, Buffett’s market indicator for the U.S. stood at 143.4%, close to the June 1 level of 144%.
Table 1 summarizes the market cap to GDP ratios and the implied annual returns for approximately 20 global regions.
| Country | Total market/GDP ratio (%) | Implied market return |
| Turkey | 19.22 | 17.80% |
| Singapore | 82.17 | 16.40% |
| Indonesia | 26.95 | 14.70% |
| Mexico | 22.83 | 13.40% |
| Spain | 52.23 | 12.60% |
| China | 55.17 | 12.30% |
| Russia | 43.63 | 11.70% |
| India | 57.1 | 11.40% |
| Australia | 99.2 | 11.40% |
| Hong Kong | 961.32 | 11.10% |
| UK | 92.3 | 10.80% |
| Italy | 12.93 | 10.20% |
| Belgium | 69.99 | 7.40% |
| Korea | 67.79 | 7.10% |
| Brazil | 52.33 | 6.80% |
| Canada | 111.47 | 6.50% |
| France | 78.97 | 5.80% |
| Germany | 42.52 | 5.00% |
| Netherlands | 97.68 | 4.90% |
| Sweden | 143.91 | 3.80% |
| Switzerland | 286.36 | 3.70% |
| Japan | 149.32 | -1.20% |
| USA | 142.6 | -2.10% |
Table 1
As Table 1 illustrates, Singapore, Turkey and Indonesia have the top-three projected annual market returns.
Buffett and Munger underscore investing in profitable companies with low valuations
Buffett and co-Berkshire manager Charlie Munger (Trades, Portfolio) listed four key criteria for good companies at fair prices: strong business predictability, expanding profit margins, no meaningful long-term debt and low price-earnings to growth ratio. Specific filters applied include a predictability rank of at least four stars and a five-year operating margin growth rate of at least 2%.
Erbosan Erciyas Boru Sanayii
Erbosan Erciyas Boru Sanayii engages in the pipe manufacturing business. GuruFocus ranks the Turkish industrial company’s profitability 9 out of 10 on several positive investing signs, which include a five-star business predictability rank, expanding operating margins and a return on equity that outperforms 89.34% of global competitors.
Erbosan’s valuation ranks 5 out of 10: Although the company’s price-earnings ratio of 2.65 outperforms over 98% of global competitors, the company’s price-book ratio of 1.26 outperforms just over 55% of global industrial product companies.
Haw Par Group
Haw Par Group manufactures a wide range of drug brands. GuruFocus ranks the Singaporean health care company’s financial strength 9 out of 10 on several positive investing signs, which include triple-digit interest coverage, a strong Altman Z-score of over 18 and debt ratios that are outperforming over 90% of global competitors.
Haw Par’s profitability ranks 8 out of 10, driven by a high Piotroski F-score of 7 and an operating margin that has increased approximately 3.3% per year over the past five years. Despite this, the company’s return on equity and three-year revenue growth rate are underperforming close to half of its competitors.
The IVA International Fund (Trades, Portfolio) owns approximately 5.3 million shares as of the March-quarter filing date.
PT Indofood Sukses Makmur
PT Indofood Sukses Makmur operates in the raw materials and processed food businesses. GuruFocus ranks the Indonesian packaged food company’s profitability 8 out of 10, driven by a high Piotroski F-score of 7 and operating margins that are outperforming 83.88% of global competitors. Despite this, three-year revenue and earnings growth rates are outperforming just over 53% of global peers.
T Tuborg Bira Ve Malt Sanayii
T Tuborg Bira Ve Malt Sanayii markets and distributes beer, malt and soft drinks domestically and internationally. GuruFocus ranks the Turkish beverage company’s profitability 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and a return on assets that outperform 89.85% of global competitors.
PT Waskita Karya
PT Waskita Karya provides services for construction, toll roads, property development and energy. According to GuruFocus, the company’s profitability ranks 9 out of 10 on the heels of expanding operating margins and a 4.5-star business predictability rank.
Disclosure: No positions.
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