How to Find Global Value Investing Opportunities

How International Value ETFs and Mutual Funds Can Simplify Research

Getty Images / Ariel Skelley.

Value investing is an investment strategy that involves purchasing stocks below their estimated intrinsic value. Over time, studies have shown that value investments tend to outperform growth investments by a significant market. The approach has helped billionaire investor Warren Buffett and others outperform the S&P 500 benchmark on a regular basis. But, finding high-quality value investments can be an arduous task even for experts.

In this article, we will take a look at a simple technique for identifying potential international value investments in a fraction of the time.

Following the Experts

Most retail investors don’t have a technical background when it comes to crunching numbers and identifying undervalued investments. Fortunately, there are many tools designed to make it easier for investors to identify and analyze these opportunities, including websites like ValueWalk and GuruFocus. But, investors looking for a starting point may want to consider public records as a great place to mine for value investing opportunities.

Exchange-traded funds (“ETFs”) and mutual funds are required to publish their portfolios to the public, which means that investors may want to take a look at international value ETFs for ideas. These lists of value stocks are a great starting point for further analysis rather than starting with the entire universe of stocks.

Of course, investors could also consider purchasing international value ETFs themselves for diversified and low-cost exposure to value stocks.

Some popular international value ETFs include:

  • iShares MSCI EAFE Value ETF (EFV)
  • ValueShares International Quantitative Value ETF (IVAL)
  • iShares MSCI International Developed Value Factor ETF (IVLU)

    Some popular international value mutual funds include:

    • Tweedy Browne Global Value Fund (TBGVX)
    • Hartford International Value Fund (HILAX)
    • Delaware International Value Equity Fund (DEGIX)

    Investors should be sure to read the prospectuses associated with these ETFs and mutual funds for an idea of the strategy used to quantify ‘value’. For example, some funds may focus purely on price-earnings ratios, while others may use qualitative factors like stock buybacks.

    Reading the Filings

    Retail investors can also take a look into the holdings of hedge funds that aren’t structured as ETFs or mutual funds through their regulatory filings. For example, investors may want to see what investments are being held by legendary international investors like George Soros. The most important filing to look for is the 13F-HR filings, which are required quarterly and annual SEC filings that detail a hedge fund’s holdings that pass certain thresholds.

    These filings can be found using the Security and Exchange Commission’s EDGAR tool that lets users search through 21 million filings for free. Alternatively, investors can use third-party aggregators like Whale Wisdom to avoid reading through a lot of legalese and identify potential opportunities.

    Again, these stocks could be a great starting point for further research.

    Further Research

    Retail investors that have compiled a list of potentially undervalued opportunities should follow-up with further research into each individual stock. For example, an investor may eliminate stocks based on earnings history or other factors to narrow down the list or conduct a discounted cash flow analysis on each individual stock to identify the most undervalued opportunities with the greatest potential for upside ahead.

    There are many different online tools that can help with the process, including:

    • Old School Value: Stock analysis software and valuation tools designed to help investors discover, interpret, and invest in value stocks.
    • GuruFocus: Free in-depth analysis of financial metrics including discounted cash flow analysis tools and a plethora of different financial ratios.

      Investors may also want to consider building their own financial models in Microsoft Excel or other spreadsheet programs to increase flexibility over time. While many websites offer summary statistics for value metrics, personal financial models are a great way to gain further domain knowledge and create unique investment strategies.

      The Bottom Line

      Value investing is one of the most common techniques for selecting promising investment opportunities. Rather than starting with a blank slate, investors may want to consider looking at value-focused ETFs and mutual funds for a starting point. The next steps would involve narrowing down those choices based on additional criteria or digging into each individual opportunity to find the most undervalued stocks with the greatest potential for upside.

      Investors may want to check out a number of different resources to help with their analysis, including value investing tools like Old School Value’s spreadsheets and GuruFocus’ dashboard of financial metrics and discounted cash flow analysis tools.