Our Insights

About personal finance, investments and markets.
April 23, 2015

All markets are expensive? No, not all

A common refrain we hear from many investors is that all financial markets have become very expensive after the rally of the last 5 years. While this is undoubtedly true for large equity and bond markets like the US and Europe, we can still find opportunities off the beaten path that offer interesting risk-reward situations. Investors need to look elsewhere for ideas, away from the crowds. Where are the good assets that few are looking at? We will highlight one country here, that also helps to showcase our investment process. However, we shall not identify this country – if you are interested to find out which country we are talking about next, please do not hesitate to get in touch.

Cheap absolute valuation

The country in question has been trading in the same price-earnings range for the last 5 years and has not participated in the recent rally seen elsewhere.

Vietnam PE ratio

Cheap valuation relative to neighbouring countries

Based on market-cap to GDP (one of Warren Buffett’s favorite metrics), the country we are looking for is trading at a significant discount to other countries in the region.

Vietnam Market Cap of GDP

Favourable demographics

Demographics can provide a huge tailwind to GDP growth. Unlike Europe, China or Japan, the country we are looking for has a large cohort of 20-34 year olds. This group tends to be more consumption orientated (setting up a family, buying a house, etc) and thus has a disproportionate impact on growth. Demographics are good for another 10-15 years of growth in this case.

Vietnam demographics good for another 10y

Catch-up potential

Despite the country in question exhibiting a GDP-per-capita ratio that is 1/3 of that in Thailand, its use of some of the major consumption items is much lower. The market penetration of cars for example is significantly lower. In our view, the potential for higher car sales is huge.

Vietnam car penetration - Engl

Please read our Terms of Use.