But don't take my word for it as I found an interesting research paper that proves it works by James Montier, currently a member of the asset allocation team at GMO.
(Be sure to read to the end of the article where I show you how you can find the exact same investments James
used in his
The paper James
wrote is called Going global: value investing without boundaries and was published on 16 September 2008 when James
was still working for the French bank Societe Generale
Does global value investing work?
wrote the paper after he
was asked if he
has ever seen any research that proves that value investing works at the global level.
With the paper he
wanted to prove his
idea that an investor should be allowed to invest anywhere in the world where the most attractive investment opportunities can be found.
used a combination of five ratios to find undervalued investments Price to earnings, Price to book, Price to Cash flow, Price to sales and EBIT to EV.
Each of these ratios was ranked across the universe.
All developed markets evidence (Europe, US, Japan) James
found a similar pattern when he
extended the analysis to all the developed markets.
combined the emerging and developed markets into a single universe, he
found that value continued to work.
also found you must be patient, referring to Benjamin Graham who said:
also looked at what would have happened if you ran a concentrated portfolio, and only bought the most undervalued 30 companies.
To find undervalued companies James
used a combination of five ratios:
Going global: Value investing without boundaries, James Montier
, 16 September 2008
You can read more of James Montier's
work here: James Montier resource page