Tags: Arends | value | investment | emerging

Experts: Value Investment Opportunities More Bountiful Overseas

By Dan Weil   |   Monday, 11 Aug 2014 09:27 AM

While value-oriented investments appear to be in short supply in the United States, the terrain looks better abroad, experts tell Brett Arends of The Wall Street Journal.

Remember that it's when things look dire that you find your best value investments. "There are no bargains in the absence of fear," Rob Arnott, chairman of Research Affiliates, tells Arends.

He's optimistic about stocks and bonds in emerging markets. The MSCI Emerging Markets stock index has returned more than 4 percent so far this year. The Barclays Emerging Market Local Index of bonds also has returned more than 4 percent so far this year.

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Value investors should check out stocks in Russia, Japan and the United Kingdom, Josh Strauss, a partner at Pekin Singer Strauss Asset Management, tells Arends, explaining that share prices are cheap in those countries based on fundamentals.

Joachim Klement of Swiss investment firm Wellershoff & Partners believes that stocks are cheap in Austria, China, Peru, Colombia and Greece. Those markets could double in real terms over the next five years, he notes.

"These investments all involve substantial risks. The markets are often small, volatile, thinly traded and dominated by a few stocks. Investors should approach them as speculations," Arends writes.

"Conversely, you could just follow the lead of Mr. Buffett . . . and hold a lot of cash while you wait for better opportunities."

Perhaps the finest value investor of them all, Warren Buffett, has said that pricing power is the key element to look for in a company.

"The single most important decision in evaluating a business is pricing power," he told the Financial Crisis Inquiry Commission in 2010.

"If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you've got a terrible business."

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