Ignoring the Global Noise

When investors run their attention to global investing the noise levels tends to grow exponentially. It is bad enough to hear all the churn and chatter surrounding domestic politics and events but now you add all the other nations and corporations to the din. It is not just the US Congress that roils markets in the short term but the Japanese Diet, Italian Parliament and Chinese Politburo get involved. It is no longer just the Federal Reserve but the European Economic Commission and a host of central bankers all with their own agenda. The noise level can be overwhelming at times and it becomes difficult to ignore the whirling macro considerations. Even more so that just domestic only investors value investors with a global approach have to keep their heads down and focus on company valuation and eschew most of the big picture stuff swirling around their heads. All of the economic and political concerns will eventually be reflected in stock prices on the various exchanges and bourses around the planet and that is where asset based value investors can gain a huge edge over those who attempt to decipher macro-economic considerations. In developed and larger emerging markets when things look dire and the word is ending stocks will often trade very cheaply compared to book value and we can emulate our pig farming friend Mr. Womack and break out our checkbooks. When happy days are here again and the local and regional l economies are headed to the moon we can book our gains at multiples of asset values and head off in search of the next depressed opportunity. It doesn't take a brilliant economist right now to figure out the Greece is still a mess. You also do not have to be a leading historian to figure out that Greece is probably not going to cease to exist and that the rest of the European Union is not going to leave them to wither and die. At some point things in Greece will get be better than they are today. An astute investor can look at some of the Greece based shipping stocks that trade for a fraction of book value as a result of both local and global industry concerns and figure that both Greece and the shipping industry will eventually recover. When they do .stocks that trade at around half of book value like StealthGas (GASS) and Star Bulk Shipping (SBLK) will trade at much higher prices. Those with a strong stomach for volatility could buy a few shares of National Bank of Greece (NBG) every time Athenians take to the streets and riot over economic conditions and probably do pretty well over the next decade. It is not necessary to understand the implications of the more accommodative posture of the Canadian Central Bank to understand that Montreal based Resolute Forest Products (RFP) is a very cheap stock. The company is the renamed Abiti Bowater post-bankruptcy and they are the leading producer of newsprint in the world. While that business is in decline it is stabilizing somewhat and it will take decades for the much proclaimed death of newspapers to occur if it ever actually does die entirely. The also produce coated papers in North America and have a large wood products division that sell to the furniture and construction industries. IN 2012 they made an acquisition that increased their pulp business. They have even used their output from their mills to provide electricity generation at profit. The stock trades at less than 50% of book value and you do not have to predict what the Canadian Dollar will do against the US dollar or Japanese yen to figure out that this is a very cheap collection of well-run assets that will trade a lot higher someday. You do not have to be an expert on Asian economic policies to figure out that selected Korean stocks are very cheap. While you do have to have a fair degree of confidence the kook to their north will not do something stupid, buying Korea Electric Power (KEP) at less than 40% of book value and Worri Finance (WF) at less than 60% should provide handsome returns when the growth rates in Asia inevitably pick up at some point in the next ten years. There is a lot more opportunities when you expand your view outside the United Sates but there is also a lot more noise to ignore. Focusing on asset values and applying liberal doses of discipline and patience can allow you to profit from the noise driven mistakes of others.