Under the Radar: From Overlooked to Overperforming - Global Markets Await

We like to look at places that the rest of the world, especially Wall Street and all the instant experts on the Internet, are ignoring.

Right now, all eyes are on, and have been on, US markets.

The United States has gotten everything right over the past decade, and the rest of the planet has been, as Bogart used to lament, at least two drinks behind.

We recovered from both the Great Financial Crisis and COVID quicker, flooded the zone with cash from every imaginable source, and inflated lovely asset bubbles while Europe and Asia staggered along.

US markets went to the moon, while even the best foreign markets never broke free of gravity.

At the end of the GFC, US stocks were 41% of the global market, which has swelled to about 65% today.

The last time US stocks were this dominant, Lyndon Johnson was still in the White House, college kids were going “Clean for Gene” and Bobby Kennedy Sr. was mulling over a run for President.

William McChesney Martin Jr. was the Fed Chair, Gerry Tsai was the hottest fund manager, and Jamie Dimon turned 12 years old.

US stocks were all the rage and then delivered a whopping return of zero for the next 14 years, with several disastrous bear markets along the way.

The S&P 500 SPY lost about 4.5% a year on average.

International stocks outperformed US stocks by a dangerous margin, with a revitalized Japan leading the way higher.

That does not mean that it will happen again, right?

After all, we just elected a pro-business, low-tax President and interest rates will be moving lower.

Not only can it happen again, I would suggest it is likely to happen again.

I might also suggest you Google GOOGL “Richard Nixon,” “Arthur Burns,” and “The Nifty Fifty” when you can.

The world loves the US stock market right now, and no one is considering Europe or Asia as investment opportunities.

That means that it is Under the Radar, and we are interested.

While economic growth outside the United States has been somewhat sluggish, this does not mean there has been zero growth.

Several companies have shown outstanding growth, and we want to start our international expedition in search of excess profits there.

My favorite growth measures are not earnings-related. It has long been my theory—and it holds up to rigorous testing—that the best growth measures are revenues and book value growth.

If revenues are high and cash has been reinvested in the business in a manner that grows the company’s net worth, that is sustainable growth.

A good accountant can make earnings appear to be whatever they desire, but the amount of stuff sold and the bottom-line net worth of the business are much harder to twist.

The income statement is the story, but the balance sheet is the finale.

Turkcell Iletisim Hizmetleri A.S. ADR TKC is a great example of a sustainable growth company that is way off anyone’s radar screen. Turkey is hardly a hot topic of conversation around the water coolers of Wall Street or any other street in the United States.

Turkcell is a digital communication company operating in Belarus and Northern Cyprus. The company offers cell service, data, TV, and digital services over its network in its core markets.

It is growing like crazy, with revenues increasing by 42 percent annually over the past five years and the company’s value rising even faster, with book value rising by more than 60 percent a year.

The company is still in a hyper-growth phase with no signs of stopping.

The beauty of Turkcell lies in its ability to evolve. This is not your average telecom giant stuck in a rut of traditional services. Turkcell has embraced digital transformation with open arms, rolling out fintech solutions, digital subscriptions, and even cloud services. Couple this with its early investments in 5G, and you have a business poised to capture a huge slice of the digital economy in Turkey and surrounding countries.

Despite the noise around Turkey’s economic challenges, Turkcell has delivered consistent revenue growth and maintained fair profit margins. It is a cash-generating machine, and management has not forgotten about shareholders, doling out reliable dividends year after year. Add to that a valuation that is downright cheap compared to global peers, and you have a stock that ticks all the right boxes.

The stock has been moving higher but trades at a very reasonable valuation of just 15 times trailing earnings. If they come close to hitting this year’s earnings estimate, the stock will be trading at a single-digit P/E.

Growing earnings and an expanding multiple can create a wildly profitable combination in Turkcell shares for investors willing to look outside the United States for opportunities.

It is not always easy to be beautiful.

In fact, sometimes, it requires the help of surgeons and a collection of medical devices.

Many of these devices are made by InMode INMD, an Israeli company that manufactures minimally invasive technologies and devices for aesthetic repair and touch-ups without surgery, scars, or lasers.

This Israeli-based medical device company has carved out a sweet spot in the aesthetics industry with its minimally invasive and non-invasive body contouring and skin-tightening solutions.

InMode has built a reputation for delivering products that providers and patients love, and the financials prove it. The company boasts outstanding margins and a fortress-like balance sheet with zero debt and a growing pile of cash. Management has shown they know how to run a tight ship and are committed to rewarding shareholders, evidenced by their share buyback program.

The aesthetics market is not slowing down anytime soon, with growing demand fueled by rising disposable incomes and a global shift toward non-invasive beauty treatments. InMode’s innovative product pipeline keeps it ahead of competitors, ensuring a steady stream of revenue growth.

Over the last five years, sales have grown at over 30% annually, and InMode’s net worth is growing at almost 60% a year.

At its current valuation, InMode is a steal. You are getting a high-growth, high-margin business that throws off cash and operates in a market with tailwinds for years to come.

U.S. investors are ignoring the rest of the world.

Europe, in particular, is out of favor.

The economy is a mess. The stock markets are moribund.

The only rational choice is to start shopping for high-growth bargains and undervalued asset conversion opportunities (more on this next week)