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Warren Buffett's Market Indicator Eclipses 143% Ahead of Easter

- By James Li

On Thursday, the day before Good Friday and the Easter holiday weekend, Warren Buffett (Trades, Portfolio)'s market indicator reached 143.5%, approximately 4.5% higher than its April 1 reading of 139.2% and 5% lower than the all-time high of 148.5% set around March 30, 2000.


In observance of the holiday weekend, the New York Stock Exchange was closed on Friday. Meanwhile, Asian markets like Japan, China and South Korea traded higher on the heels of strong news from tech companies.

Asian markets spring forward ahead of Easter weekend

The Nikkei 225 Index advanced 0.5% to 22,090.12, driven primarily by gains from technology companies. CNBC columnist Saheli Roy Choudhury said early Friday morning that shares of Nintendo Co. Ltd. (NTDOY)(TSE:7974), owner of popular franchises like Super Mario, Pokemon and Zelda, jumped over 12% on news that Chinese social media giant Tencent Holdings Ltd. (TCEHY)(HKSE:00700) won approval to sell the Nintendo Switch game console in China, "one of the largest video game markets in the world" according to Reuters.

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The Chinese markets also advanced: The Shanghai Index rose 0.63% to 3,270.80 while the Shenzhen Index rose 0.93% to 1,778.81.

Buffett's top holdings remain overvalued

The Berkshire Hathaway Inc. (BRK-A)(BRK-B) CEO's favorite market indicator considers the ratio of the Wilshire 5000 full-cap price index to the U.S. gross domestic product. As of Friday, the total market cap is 1.435 times greater than the U.S. GDP, suggesting significant overvaluation. Based on the current market level, the U.S. market is expected to return -2.1% over the next eight years.

Figure 1 illustrates the predicted and actual returns of the U.S. market since 1970. According to the chart, the predicted returns can range between -9.80% in the most-pessimistic case and 2.70% in the most-optimistic case.

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Figure 1

Berkshire's top holding, Apple Inc. (AAPL), closed at $203.86 on Thursday, approximately 10% above its median price-sales value of $184.62 and approximately 12.68% off its 52-week high of $233.47. Buffett's conglomerate also has bank holdings where the stock is trading near 10-year highs, including Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM).

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Value screeners identify opportunities around the world

Even though the U.S. market remains significantly overvalued, investors can still find good value opportunities across global exchanges. Table 1 lists the value screener record as of Friday.

Screener

USA

Canada

UK

Europe

Asia

Oceania

Latin America

Africa

India

Graham Net-Net

231

57

53

252

616

9

8

12

40

Undervalued Predictable

58

6

43

113

66

8

45

6

12

Buffett-Munger

34

4

26

72

89

2

24

3

44

Peter Lynch PE

31

1

14

43

53

0

7

3

8

Peter Lynch PS

104

7

36

115

75

8

28

24

39

Peter Lynch PB

162

24

57

170

109

7

35

24

58

Lynch p2ebitda

197

8

49

193

112

7

16

17

47

Hist Low PS

30

2

16

51

46

0

20

4

27

Hist Low PB

51

2

27

64

53

2

26

9

23

High Div Yield

53

5

8

96

42

14

20

7

6

Magic Formula

4709

551

2181

6956

13418

578

1088

383

3461

52-week Low

865

110

309

1123

2156

92

343

147

800

52-week High

2042

254

1042

3028

2543

191

520

99

501

3-year Low

375

62

142

540

1075

38

140

65

488

3-year High

1475

153

761

2088

951

135

427

65

276

5-year Low

255

34

108

356

738

22

83

54

315

5-year High

1318

140

722

1925

713

125

401

52

257



Table 1

Premium members have access to all our value screeners, including screeners that implement strategies from Benjamin Graham, Peter Lynch and Buffett. We have launched new versions of each screener, which also includes our popular All-in-One Guru Screener.

Disclosure: No positions.

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