Keppler Value Review

by | Apr 28, 2009 | Multi Currency Investing

Our last multi currency lesson looked at why my portfolio is heavily skewed in Scandinavian currencies.  If you need refreshing,  see that lesson here.

Perhaps other investors are moving in this direction as well because we can see in Keppler’s quarterly major market review that he is ranking Denmark as poor value and has downgraded Norway’s value as well.

Extra investors pouring into the Danish and Norwegian stock markets could push prices overall too high.

If you are a new reader learn about Keppler Asset management here.

Here is a review of Keppler’s global major market value assessment:

Global equity markets continued to decline in the first quarter 2009. However, on March 9, a strong recovery started, which is still continuing at the time of writing.

For quarter one 2009, The Morgan Stanley Capital International (MSCI) World Total Return Index (with net dividends reinvested, December 1984=100) declined 10 % in local currencies, 11.9 % in US dollars and 7.8 % in euros.

Over the last fifteen months, the corresponding benchmark losses were 44.8 % (local), 47.8 %  ($) and 42.5 % (euro).

All but one market (Belgium) declined in the first quarter.

Belgium was able to eke out a tiny 0.1 % gain during the first three months, while Norway and Hong Kong gave up 0.4 % and 0.5 %, respectively.

This year’s worst performing markets were Italy (-16.8 %), Germany (-15.8 %) and Spain (-14.7 %).

Over the last fifteen months, all markets covered here suffered double-digit losses, with Canada (-33.1 %), the United Kingdom (-35.9 %) and Australia (-38.6 %) faring best.

Austria (-68 %), Belgium (-64.7 %) and Italy (-56.2 %) came in at the bottom of the range.

There was one change in our performance ratings last quarter: Norway was downgraded to “Neutral” from “Buy”.

The Top Value Model Portfolio currently contains the following eight “buy” rated countries at equal weights: Austria, Belgium, France, Germany, Hong Kong, Italy, Singapore and the United Kingdom.

Keppler’s current value ratings suggest that these markets offer the highest expectation of long-term risk-adjusted returns.

Keppler’s SELL CANDIDATES (Low Value) are: Canada, Denmark, Singapore, Switzerland , U.S.A.

Keppler’s NEUTRALLY RATED MARKETS are: Australia , Japan , Netherlands, Norway, Spain, Sweden.

Keppler went on to add in his quarterly review:

Never in the last 20 years have our implicit 3 to 5 year return projections been as high as they are now.  I would like to put in a word of caution on these estimates, however. They are based on the assumption that the underlying 15-year history of estimated intrinsic values may serve as a guide for the process of security pricing.

Readers who disagree with this assumption would have to make corresponding
adjustments. The chart below, which shows the history of our implicit estimates for the equally-weighted World Index suggests, however, that while the euphoria in the second half of the 1990s made our estimates look too conservative in retrospect, the current pessimistic world economic outlook makes them appear rather aggressive now.

Stock prices were much higher in 2000 than where we thought they should have been and are much lower now compared to where we thought four years ago they might be today, and where we currently think they should be.

Benjamin Graham’s margin of safety indicates that much better times may lie ahead for global equity investors.

Keppler’s value analysis suggests to me that equity markets offer good value now.  If history works as a guide, a recovery will come and investors enterng the market now have good value fundamentals on their side.


Here are the current value indicators for the top value markets.


Here are value indicators for the neutral and low value markets over the 1st quarter of 2009.


Here are quarterly performance results for the major markets



Remember however that the overall market value is just one of many filters we should use when we review value and select shares.

The seven steps we use in our reviews include

1: Are the shares traded in a good value market?
#2: Does the share trade at fair Price to Earnings and Price to Cash Flow ratios?
#3: Does the share pay a good value dividend?
#4: Do the share have a good value relative to their previous price?
#5: Does the company have rising earnings?
#6: Has the share price been rising?
#7: Is the company’s management good and is their product or service line in a wave of the future

Michael Keppler also reminds investors not to misinterpret the investment analysis implicit in the Country Selection Strategy.  A country is BUY-rated based on the valuation levels reflected in the MSCI benchmark index of country. A BUY rating therefore does NOT imply that any stock in that country would be considered an attractive investment.

For more details on Keppler’s analysis, contact Roderick Cameron at 1-212-245-4304 or email

To invest according to the Country Selection Strategy it is necessary to
construct diversified, risk-controlled, representative country portfolios in
every BUY rated country, weighting each country approximately equally in the
overall portfolio. It is not appropriate to instruct a stockbroker to simply to select stocks in the BUY rated countries.


Join Merri, me and Thomas Fischer of Jyske Global Asset Management, July 24-26, 2009 in North Carolina for International Investing and Business Made EZ