Societe Generale’s Graham Rea deep value stock screen has been overweight on Japan for most of the year, marking it as one of the few regions where value was starting to reappear, but the screen underperformed in July, losing 0.8% in Japan compared to a 2.7% gain for the Japanese benchmark.
Graham & Greenblatt stocks long-only performance
“The good performance in recent months and the underperformance of other regions has reduced the weight of Japan in the deep-value screen to the lowest level this year,” write Societe Generale analysts Andrew Lapthorne and Georgios Oikonomou. “Nevertheless, Japan still represents the highest weight in the screen.”
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Graham Rea screen beat the benchmark everywhere except in Japan, has its best performance in the US
The Graham Rea screen beat the benchmark everywhere except in Japan, with the best performance in the US where it gained 1.7% in July. Even so, the US remains the worst performing region for the Graham Rea screen going back to 2005, and the second worst after the eurozone if you look at the last year because you’re still picking up part 2013’s huge run.
The largest US stocks that made it into this month’s Graham Rea screen were luxury leather goods company Coach Inc (NYSE:COH), agricultural equipment manufacturing firm Deere & Company (NYSE:DE), oil and gas company Noble Corp plc (NYSE:NE), and supermarket chain Safeway Inc. (NYSE:SWY).
Deere & Co shows up in both Graham and Greenblatt screens
The Greenblatt Magic Formula screen had similar results, beating the benchmark in every region except Japan, but it had higher returns across the board and managed to stay positive for the month in Japan. It’s best performing region was also the US where it gained 6.0% in July, followed by the UK with a 2.5% gain.
The only stock to make it among the top Greenblatt Magic Formula and Graham Rea stocks was Deere & Company (NYSE:DE), but the Greenblatt screen included a lot more US stocks in general. One particularly controversial stock that showed up in this month’s Greenblatt Magic Formula screen is Herbalife Ltd. (NYSE:HLF), whose stock price tanked ahead of Bill Ackman’s latest presentation which he said would prove the company is a pyramid scheme, rebounded literally as Ackman was speaking, and has since fallen back to about $50. Whatever your opinion of Herbalife as a company, it seems like an odd inclusion for Greenblatt’s Magic Formula, since the whole point of his method is to give individual investors an easy, routine way of picking stocks and the Herbalife situation is anything but routine.
Quality & Income Screen