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Monday, November 12, 2012

Country Value Rankings

About once a quarter, the Covered Calls Advisor calculates the nine factors used to determine the current "Country Value Rankings" for 22 countries. Today's results (shown in the table below), provides a value-oriented and objective framework that assists this advisor to make decisions regarding overweighting and underweighting specific countries and regions in the Covered Calls Advisor's Portfolio.

A comprehensive approach to asset allocation extends beyond diversification solely by asset classes (i.e. stocks, bonds, real estate, commodities, etc.). It should also include diversification by global geography. Behavioral finance research has clearly identified the profound tendency of most investors to succumb to "home-country bias". Legendary investor John Templeton was a leading advocate for developing a globally oriented value investing perspective to achieve investing outperformance.

Note: For expanded view, left click on this spreadsheet

The Country Value Rankings table above is based on a weighted-average ranking system. You will notice that there are nine categories (and one factor for each category) used in the analysis of each country as follows:

The next-to-last column on the Country Value Rankings spreadsheet shows the Weighted Average Summation Total for each country.  The average for the 22 countries is shown as 13.02 which is a Slightly Bearish overall World rating.

The overall market ratings for individual countries are:
Very Bullish -- China
Bullish -- South Korea and Singapore
Slightly Bullish -- Malaysia, Russia, Hong Kong, Australia, and Taiwan
Neutral -- Emerging Markets (EEM) and Germany
Slightly Bearish -- Mexico and Canada
Bearish -- Europe/Asia (EFA), U.S., France, and Japan
Very Bearish -- South Africa, United Kingdom, India, Brazil, Spain, and Italy 

Future investments in the Covered Calls Advisor Portfolio will be overweighted in these higher rated countries. It should also be noted that the U.S. is ranked 14th of the 22 countries rated, so U.S.-based companies selected for investment will be those with significant exposure to sales in countries/regions with relatively high expected GDP Growth.

This Country Value Rankings spreadsheet is detailed in terms of both the methodolgy used and the resources used to capture the information for each country. If you are interested in these details and would like further information or clarification, please share your comments and questions in writing. They are always welcomed. Click the 'comments' link below to post your feedback. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog.

Hopefully, this information is helpful in your thinking and analysis of your own equities selection methods related to your covered calls investing process!

Regards and Godspeed to All,