The U.S. market is in second to last place on the global market list at a whopping 0.6% in projected annual return, implying that the market is over-valued and will be going flat in the near future. It may be time to invest in international stocks to get more bang for your buck.
On our website underneath the drop-down menu "Market," there are a few pages that you will find most useful if you are interested in keeping up with the international market and where the U.S. falls on the list.
Global Market Valuation will show you, in chronological order from the highest to lowest, which markets will potentially bring a higher percentage of annual return.
Singapore is number one on the list, at 13.8%, Australia comes in second at 9.1% and Italy in third at 7.6%.
The right side of the chart shows emerging markets, with China at 31.7% and Russia at 26.6%.
The Global Market Value page is not the only place on the site that gives information about the current state of the U.S. market. If you hover over Markets once more and click on Shiller P/E, you'll see that the ratio is 62% higher than the historical mean of 16.6%, which tells us the market is currently over-valued.
This isn't a warning to stay away from the U.S. market completely. In fact, it would probably be a disaster if everyone abandoned the market completely. In order to be a successful investor in the U.S. market, it would be more beneficial to invest in stocks that are under-valued.
One way to indicate whether or not a stock's price is too high or just right is to take a look at the Peter Lynch chart, which can be found at the bottom of a stock's summary page. The chart looks like this:
The trick is to buy shares when the green line is below the blue line. The blue line is Peter Lynch's earnings line and the green line indicates the actual price. According to this chart for Abercrombie & Fitch (ANF, Financial), this stock is under-valued.
Gurus that own this stock: Joel Greenblatt, Richard Snow, Ray Dailo, Paul Turdor Jones, John Burbank, Chuck Royce, Dodge & Cox, Steven Cohen.
Insider trades: Director Craig Stapleton bought 10,000 shares at a trading price of $37.30
This is an example of an ideal buy. The price of AllianceBernstein Holding L.P. (AB, Financial) is $27.16 and Lynch values it at $28.40. Although it is a mild difference, it is still under-valued. If you want to find out more about the Peter Lynch number, you can do so here.
Gurus that have bought this stock include: Ronald Muhlenkamp, Murray Stahl and Jim Simons.
Insider trade: Director Weston Hicks sold 5000 shares, at a trading price of $25.80.
