By Agency Reporter

Tuesday, 18 Jan 2011

Even after global stocks rallied by 10 per cent last year, valuations around the world fell the most in a decade, leaving companies in Norway, Italy and Mexico the cheapest of all.

Bloomberg News reported on Monday, that the average price-earnings ratio of global equities dropped, as profits in the 45-nation MSCI All-Country World Index rose faster than the gauge, which has rallied to the highest level since August 2008.

Investors are finding bargains outside the United States, where the biggest two- year rally since the Internet boom has sent the Standard & Poor’s 500 Index’s income multiple to almost a seven-month high.

Yara International ASA in Oslo trades for 11.8 times annual profit and analysts say income will rise by 36 per cent this year, giving it a price-to-earnings growth ratio of 0.3, or 79 per cent below the global average, data compiled by Bloomberg show.

Bergamo, the Italy-based Unione di Banche Italiane SCPA sells at a so-called PEG ratio of 0.3 based on forecasts that profit will almost double. Analysts say Mexico City-based America Movil SAB, trading 35 per cent below its valuation before the 2008 financial crisis, will post growth every quarter through the end of 2012.

“We have money in Norway, we have money in Mexico,” says David Winters, the Mountain Lakes, New Jersey-based manager, who oversees the $1.43bn Wintergreen Fund that beat 94 per cent of peers in the past five years.

“What we try to look for in each one of these countries is, where are the gems, what are the companies that really have what it takes for you as a shareholder to do well.”

Winters, Huntington Asset Advisors,’ Madelynn Matlock and USAA Investment Management Company’s Wasif Latif, are speculating companies will overcome Europe’s sovereign debt crisis and a drug war in Mexico that killed more than 15,000 people in 2010.

Mexican stocks are 11 per cent cheaper than at the end of 2009, while valuations on Italy’s benchmark index dropped 56 per cent and Norway’s fell 78 per cent, the data compiled by Bloomberg show.

Of the 45 nations in the all-country index, only Egypt and Ireland will see earnings fall this year, according to analyst estimates compiled by Bloomberg. That’s the fewest since 2004. The gauge rose by 0.2 per cent to a two-year high on January 14, completing its seventh straight weekly advance, after European officials stepped up efforts to solve the debt crisis and Japan pledged to buy bonds to aid Ireland and Greece. The measure slipped 0.2 per cent at 10:30am in London.

The price-earnings ratio for the MSCI index of developed and emerging nations slid 24 per cent in 2010, the most since 2000.

The 2010 decline was the biggest ever in a year when the index gained, Bloomberg data going back to 1995 show.

“We’ve had record-setting quarter after record-setting quarter, you’d think we might catch up, but we just don’t,” said James Paulsen, chief investment strategist at the Minneapolis-based Wells Capital Management, which manages about $342bn.

“It is the legacy of the 2008 crisis. Investors just can’t believe we’re actually recovering.”

Norway’s OBX Index rallied 18 per cent in 2010, helped by a 46 per cent advance in Oslo-based Marine Harvest ASA, the world’s largest salmon farmer. Mexico’s IPC advanced 20 per cent, led by a doubling in Mexico City-based drug seller Genomma Lab Internacional SAB. In Italy, the FTSE MIB Index slumped 13 per cent, data compiled by Bloomberg show.

Source: Punch