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Sunday, January 11, 2015

Country Value Rankings

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.

The Covered Calls Advisor has developed a method for determining the relative investing worthiness of twenty countries and two regions around the world.  The "Country Value Rankings" table below is based on a weighted-average ranking system.  The eight factors used to calculate these rankings are as follows:

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.

From the chart above, the resulting overall market ratings for individual countries and regions are:
Very Bullish (Above 25 total points) -- None
Bullish (20-25 points) -- Singapore and China
Slightly Bullish (15-20 points) -- South Korea, Switzerland, Taiwan, Emerging Markets, Sweden, and Hong Kong
Neutral (10-15 points) -- Malaysia, Germany, Australia, Russia, EurAsia, U.S., and United Kingdom
Slightly Bearish -- Canada, Italy, Spain, France, Mexico, and Japan
Bearish -- South Africa
Very Bearish -- India and Brazil

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 currently ranked 14th of the 24 ratings and the overall rating for the U.S. is Neutral.

This Country Value Rankings spreadsheet is detailed in terms of both the methodology 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 email your comments and questions (to the address in the top right sidebar of this blog). They are always welcomed.

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,