ASX Shares What's looking cheap on the ASX in 2020?

I've done a fair bit of research into the CAPE ratio.

The problem with it, as in pretty much every other measure used for timing purposes, is that whilst it may be useful over the very long term, it isn't so good for short term timing.

Doing a 25 year back test via Portfolio Visualizer does produce much less volatility and good returns.

Test Market Timing Models

But the CAPE ratio has basically recommended being 40/60 shares/bonds since 1996, except for two 48 month periods of 60/40 from 2009-2010, and 2012-2013.

As a predictor, it has been more wrong than right pretty much every year.

That said, I for one am very happy that I used the CAPE ratio as part of my decision about asset allocation and am currently sitting at close to 40/60 in the growth (ie global) portion of my portfolio.

It's why that portion is only 3% down over the past two weeks, as opposed to the 10.5% down of the Oz dividend portion.

As for what is cheap on the ASX, whilst I'm tempted to re-allocate in anticipation of future falls, I wouldn't be game to tip any new funds into equity, especially OZ equity, until the Coronavirus is far more resolved.

In anticipation of a bunch of rate cuts to come, I've just sold out of my monthly fixed income account and will add that to the sovereign bonds.

 

These?

View the list of Exchange-traded Australian Government Bonds.

 

Does Market-Timing Ever Work? | PWL Capital

 

@ Redwing.

Nope. I'm not smart enough for direct bond buying.

I used to use the Vanguard wholesale fund equivalent of VAF, but when I was talked into selling everything in preparation for setting up a discretionary trust (BTW, worst advice ever), I switched my bond allocation to a 50/50 split between the Pimco Australian Bond fund and the Pimco Global Bond fund.

Both are active.

As mentioned in the bond thread I started a while back this is because (historically) over the long term bonds end up returning pretty much the underlying yield. Capital growth like they have experienced over the past few years tends to fritter itself away.

Pimco (again historically) have chosen to take profits in the form of notably higher distributions than the Vanguard passive funds.

Naturally the current low interest rates are a concern. But whilst the chances of even lower interest rates over the next year or so were maybe 50/50, I think the pandemic panic makes it a virtual certainty.

There was an interesting link here recently (which I can't find) that showed that proportionally bonds do even better in a very low interest rate environment because the difference between, say, a .25% drop from 1.25% to 1% (20%) is so much greater than the difference between the same drop .25% drop from 4.25% to 4% (6%).

Of course the reverse is also true.



In any case, I'd be happy at the moment not to lose more capital.

I wouldn't, however, touch corporate bonds with a bargepole.

Given the danger of the coronavirus is much more in the real economy than even the GFC, the massive levels of corporate debt look to be very vulnerable.

 

Donaldson Capital: Rising Dividend Investing: The Great P/E Debate: A Stopped Clock and Other Wild Eyed Guesses

From almost two years ago. USA focused by can be considered in general. Been a long time since I was a regular visitor to the site which goes back a far bit.

Has snippets across most matter and probably to the extent of quoting somewhere the well known poem by John Burr Williams to reinforce (substantiate?) the author's views.

Dividend lovers rejoice!

 

Thinking of taking a punt on CUV which is up 8.5% today.

 

Majority of the banks are in range !!!!

 

ASX

 

VAS was looking good this morning but not as good this afternoon. Lots of people buying and pushing the price up.

 

I think VAS did well today because it was lifted by the banks going up

 

At one part today CBA was just above below 59--60 dollar range went and made a cup of tea came back and it was in the 64 dollar range so i think we are going to see wild swings like this for a while ,i know nothing about VAS ..imho

 

Yes I saw CBA go under $58 today, seems cheap but still double the price it got down to during GFC. For me it's safer to buy VAS than CBA

 

That's good just stick to what you understand as both will do well in the long run ..

 

Out of interest are people using a lot of fundamental analysis to determine fair value atm for blue chip shares? I guess in this market that goes out the door and you can pick up good stocks based more on an intuitive sense of what represents fair value with realistic expectation of further declines but long-term upside.

 

I think you have to be careful doing fundamental analysis the the moment, because all the data is historical and we are entering a virtually unprecedented event at the moment. As far as fundamental things to look for low debt to equity ratio, good cash reserves and strong revenue would be a good place to start.

Then I would be thinking more about the macro environment. Who will win and lose from all this, in the short and longer term. Depends a lot on how you think things will play out. All sounds like too much hard work mixed with a high risk of being wrong. I am only holding index tracking funds these days, and while I am well in the red I am still sleeping like a baby.

 

I wouldnt go near the banks.

-low rates=less profit
-increased compliance costs
-reduced pricing power thanks to emergence of several fintech neo banks
-possibility of negative interest rates. Check out Deutsche Bank to see what happens to a bank in a negatives rate environment

Banks already needing liquidity from the RBA per their announcement today.

Things not looking good.

 

Everything is up today!

 

And maybe down tomorrow and/or........

Best to temper one's enthusiasm I feel.

 

Don't worry mate it could crash 5% tomorrow. I just had an order for Santos filled at $3.60 and will try and flip them for a small profit.