Watch the video with Andrew Stotz or read a summary of the country profile on Korea.
Four Pillars of GDP: Trade deficit hurting GDP growth
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Overall, the GDP growth in Korea is relatively slow but tracks other major OECD countries. Quite positive growth in private consumption, the main driver of the economy, was offset somewhat by a starkly negative trade deficit.
High EPS Growth Expected
Like years past, the infamous “Korea discount” remains a fact of life. Still, 2017’s expected price-to-earnings ratio of 9.6x is about 4 multiples lower than the 2016 average, so there may be value in that haystack.
Some investors may take a wait-and-see approach to the new political establishment. Jae-in Moon became president on 10 May 2017, following the impeachment of former president Geun-hye Park.
But the consensus EPS growth estimate for 2017 is a massive 40%, an attractive data point to be sure.
A. Stotz Four Elements: Korea is the most attractive market
Overall, Korea is the most attractive stock market in Asia considering all our four elements: Fundamentals, Valuation, Momentum, and Risk.
Fundamentals: Poor due to low profitability.
Valuation: The “Korea Discount” remains a factor.
Momentum: Massive earnings growth and good price momentum.
Risk: High beta to Asia ex-Japan.
Strong performance in Materials and Consumer Discretionary
Top 3 largest sectors: Information Technology: 33% of the market; Consumer Discretionary: 14%; Industrials: 13%.
Best sector & stock: Energy: +17.5%, GS Holdings Corp.: +27.4%.
Worst sector & stock: Utilities: -0.7%, Korea Electric Power Corp.: -2.2%.
Article by Dr. Andrew Stotz, Become A Better Investor