Gavekal Capital: 1/4 Of All MSCI World Stocks Are Trading Above 30x PE and 4x BV

Thursday, March 26, 2015

1/4 Of All MSCI World Stocks Are Trading Above 30x PE and 4x BV

Way back in August, we blogged about how not a single sector in the MSCI World Index was trading below 20x P/E. Well, seven months later that still holds true and valuations in the developed markets have only trended high. Back in August, two sectors (information technology and health care) had an average P/E ratio over thirty. Today, four sectors (health care, information technology, telecommunication services, and consumer staples) have an average P/E ratio over 30x and materials (29.4x) is just a small hop from reaching the 30x threshold. Amazingly, excluding the stocks that have a 0 or negative P/E, of which there are 128 stocks, almost exactly one quarter of the stocks in the MSCI World Index are trading at or above 30x P/E and another 30% of stocks are trading between 20x-29.9x earnings. Only about 6% of all stocks are trading at a P/E ratio below 10x. In that vein, only 11% of stocks are trading below 1x book value. Meanwhile, just over 1/4 of all stocks are trading above 4x book value.

MSCI World Index Valuations By Sector

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
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