Nobel Prize-winning Yale Economist Robert Shiller recently appeared on WealthTrack and offered some of his thoughts on where he’s been finding value in the stock market.
Shiller said that overall, he thinks stock valuations are high, but not “super high”. He says he has been buying stocks, and has about 50% of his assets in stocks. Shiller uses the 10-year cyclically adjusted price/earnings (CAPE) ratio to look for cheap sectors within the market, and he said that lately four sectors have been looking particularly cheap: healthcare, industrials, consumer staples, and technology. And he says he’s particularly high on one country because of its low CAPE: Italy. Shiller also talks about the housing market, which he says is more momentum-driven than the stock market. He thinks the housing market will continue to improve for another year or more, though perhaps not as quickly as it has in recent years — but he also discusses the difficulties of economic and market forecasting.
Validea’s Benjamin Graham-inspired portfolio is up 16.2% annualized since its late 2003 inception vs. 6.0% for the S&P 500. Check out its holdings here.