Other than Banks and Insurance stocks, there has been a clustering of sectors that are repeatedly showing up on my various value screens.
By and large it consists of various UK Retail stocks, construction type companies, utilities and pharmaceuticals. If you had been invested in any of these areas over the past three to five years, chances are you would be not be in a happy place at present.
From this list, my next round of research is going to concentrate on the following:
Construction Oriented stocks: (Grafton, Persimmon, Abbey, Titan Cement)
UK Retail (Marks & Spencer, Kesa, Home Retail Group, Game Group)
Utilities (E.On, Endesa)
Pharma: (Astra Zeneca, Sanofi, Novartis)
Banks: (Barclays, Unicredit, Intesa San Paolo, Danske Bank)
To this I will also add OPAP and Ladbrokes – both gambling stocks (one Greek and one UK based).
For me the recent carnage in he market is the resumption of the Cyclical Bear within an overall Secular Bear market. While most folks in the market are obsessed about falling prices, a bear market also brings a compression of valuations. More than anything, that is what is at play presently.
The MSCI Europe is now trading at a Graham & Dodd PE of 12 (http://mrmarket.eu/). A recent report by Morgan Stanley strategist Graham Secker finds a similar level of valuation in European indices (http://ftalphaville.ft.com/blog/2011/08/08/646841/equity-markets-and-growth-scares/). I do believe that there is value emerging in some large cap US names (such as Microsoft, General Dynamics for example), but for now I am focusing on European names. MSCI Europe is trading at approximately 1.4x. Since 1988, the lows tend to come in about 1.2x, (however in reality this is not long enough a data series to be conclusive in terms of long term value).
For now, investors, should I belive switch off the Bloomberg/Reuters price feeds and switch on their stock screens.