As pointed out by Warren Buffett (Trades, Portfolio), the percentage of total market cap relative to the U.S. GNP is “probably the best single measure of where valuations stand at any given moment.” GuruFocus has taken this comment a step further and applied it to the global markets. Twenty different global markets were analyzed, including the U.S. More information the valuations can be found at the following link: Global Market Valuations. An interesting aspect of the global valuations is that the U.S. markets have the lowest projected annual returns over the next eight years, with an implied annual return of 0.9 percent, including dividends.
With this information, I scanned the global markets in the search for better value. Using the investing gurus for guidance, I used the GuruFocus All-In-One Screener to find the most widely held stocks by the gurus on the global exchanges. Access to data from stocks trading on the global exchanges is available through a Global Membership at GuruFocus. A 7-day free trial is available for new and existing subscribers to GuruFocus. While screening for international stocks, I searched for stocks on both the European and Asian exchanges. A separate article with the widely Asian stocks will be available soon. Here are the results for the most widely held stocks by the gurus trading on the European exchanges:
Novartis (XSWX:NOVN)
Market Cap: CHF 214.6 billion; P/E: 25.20
Business Predictability: 2/5; Financial Strength: 7/10; Profitability & Growth: 7/10
Novartis is headquartered in Basel, Switzerland and trades on the SIX Swiss Exchange. It also trades on the NYSE in the United States under the symbol, NVS. The company provides healthcare solutions that address the evolving needs of patients and societies worldwide. Its broad portfolio includes innovative medicines, eye care, cost-saving pharmaceuticals, preventive vaccines and diagnostic tools, over-the-counter and animal health products. The stock is priced at CHF 88.30 and up 23 percent year-to-date. It is currently overvalued with a P/E of 25.2 and no earnings growth. Its P/S ratio of 3.94 is 24 percent higher than its 10-year median ratio of 3.17. The stock on the Swiss exchange is held by seven gurus we follow, with the Vanguard Healthcare Fund holding the largest position of 8.48 million shares, representing 0.35 percent of the shares outstanding.
Roche Holding AG (XSWX:ROG)
Market Cap: CHF 240.63 billion; P/E: 21.00
Business Predictability: 1/5; Financial Strength: 7/10; Profitability & Growth: 6/10
Roche is headquartered in Basel, Switzerland and trades on the SIX Swiss Exchange. It is a pharmaceutical and diagnostics company. It researches and produces medicines in oncology, infectious diseases, immunology, metabolism, and neuroscience. Roche also participates in in-vitro diagnostics, and diabetes management. The stock is at CHF 283.20 and is up 12 percent year-to-date. It is currently overvalued with a P/E ratio of 21.00 and with an average annual EPS growth rate of 8.53 percent over the past five years and EPS growth of -4.4 percent over the past twelve months. The stock is currently held by six gurus we follow, with PRIMECAP Management holding the largest position of 10.4 million shares representing 1.22 percent of the shares outstanding.
Sanofi (XPAR:SAN)
Market Cap: €116.84 billion; P/E: 28.10
Business Predictability: 1/5; Financial Strength: 7/10; Profitability & Growth: 7/10
Sanofi is headquartered in Paris, France and trades on the Paris Stock Exchange. It also trades on NYSE in the United States under the symbol, SNY. Sanofi is a global healthcare company focused on patient needs and engaged in the research, development, manufacture and marketing of healthcare products. The stock is at €88.76 and is up 18 percent year-to-date. It is overvalued in relation to its high P/E ratio and negative earnings growth over the past five years. EPS has turned around for the past 12 months and are up 22.4 percent. According to the GuruFocus DCF Calculator, EPS would need to consistently grow at a rate of 19.94 percent to justify its current price. The stock on the Paris exchange is held by six gurus we follow, with the Vanguard Healthcare Fund holding the largest position of 2.55 million shares, representing 0.19 percent of the shares outstanding.
GlaxoSmithKline Plc (LSE:GSK)
Market Cap: CHF £69.01 billion; P/E: 14.80
Business Predictability: 2/5; Financial Strength: 7/10; Profitability & Growth: 6/10
GlaxoSmithKline is headquartered in Brentford, UK and trades on the London Stock Exchange. It also trades on the NYSE in the United States under the same symbol, GSK. The company creates, discovers, develops, manufactures, and markets pharmaceutical products, such as vaccines, over-the-counter medicines, and health related consumer products worldwide. The stock is at £14.49 and is down 10 percent year-to-date. It is fairly valued and trading near its 10-year median P/S ratio of 2.92 with a current P/S ratio of 2.86. It is also fairly valued if the company can maintain its average annual earnings growth for the past 5 years of 11.5 percent. The GuruFocus DCF Calculator shows that EPS needs to grow at 10.19 percent to justify the current price. The stock on London Stock Exchange is held by four gurus we follow, with David Herro of the Oakmark International Fund holding the largest position of 18.4 million shares, representing 0.38 percent of the shares outstanding.
SAP SE (XTER:SAP)
Market Cap: €71.54 billion; P/E: 22.30
Business Predictability: 5/5; Financial Strength: 9/10; Profitability & Growth: 9/10
SAP is headquartered in Walldorf, Germany and trades on the Frankfurt Stock Exchange. It is also trades on the NYSE in the United States under the same symbol, SAP. The company provides enterprise application software and software-related services worldwide with more than 95,000 customers in about 120 countries. The stock is at €57.63 and is down 7 percent year-to-date. It is now trading at fair value near its 10-year median P/S ratio of 4.17 with a current P/S ratio of 4.21. Its P/E ratio of 22.30 is justified if SAP can keep its 5-year average annual EPS growth of 18.7 percent. According to the GuruFocus DCF Calculator, EPS will need to grow at an annual rate of 16.45 percent to justify its current price. The stock trading on the Frankfurt Stock Exchange is held by four gurus we follow, with David Herro of the Oakmark International Fund holding the largest position of 6.76 million shares, representing 0.57 percent of the shares outstanding.
Investor AB (OSTO:INVE B)
Market Cap: Kr195.32 billion; P/E: 3.30
Business Predictability: Not Rated; Financial Strength: 6/10; Profitability & Growth: 5/10
Investor AB is headquartered in Stockholm, Sweden and trades on the OMX. The stock trades OTC in the United States under the symbol, IVSBF. Investor AB was founded in 1916 and has been controlled by the Wallenberg family for nearly a century. It is a private equity and venture capital firm operating through four business areas including core, private equity, operating, and financial investments. Its largest core investments are SEB (OSTO:SEB A), Atlas Copco (OSTO:ATCO A), ABB (OSTO:ABB), and AstraZeneca (AZN). The stock is at Kr 255.40 and is up 17 percent year-to-date. It is undervalued trading at a 19 percent discount to its book value with a P/B ratio of 0.81. The book value per share has been increasing an annual rate of 8.8 percent over the past five years. The stock is owned by four gurus we follow, with the Invesco European Growth Fund holding the largest position of 656,253 shares, representing 0.09 percent of the shares outstanding.
Compagnie Financiere Richemont SA (XSWX:CFR)
Market Cap: CHF 43.33 billion; P/E: 18.70
Business Predictability: 1/5; Financial Strength: 7/10; Profitability & Growth: 8/10
Richemont is headquartered in Geneva, Swizterland and trades on the SIX Swiss Exchange. The stock trades OTC in the United States under the symbol, CFRUY. The company is involved in the design, manufacture and distribution of luxury goods. Its well-known brands include Cartier, Piaget, Montblanc, and Chloe. Chris Davis (Trades, Portfolio) of Davis Selected Advisers recently commented that Richemont’s powerful brands provide pricing power and act as a barrier to competitors. The stock is at CHF 82.20 and is down 7 percent year-to-date. It is about 7 percent undervalued in relation to its 10-year median P/S ratio of 3.85 with its current P/S ratio at 3.57. The stock is held by four of the gurus we follow, with David Herro of the Oakmark International Fund holding the largest position 8.63 million shares, representing 1.65 percent of the shares outstanding.
With the U.S. markets being shown as overvalued according to Market-Cap/GDP Valuation and the Shiller P/E, it is a good idea to also look to the global markets to find value. The following article provides more information on international investing: Why Investing Internationally Can Help Your Portfolio. GuruFocus provides the tools to screen for and analyze stocks trading on the exchanges in Canada, UK & Ireland, Europe, Asia and Oceania. The ability to research stocks trading on the exchanges in India, Pakistan, Indonesia, South America, and Africa is on its way.
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