U.S. stocks trade at higher valuations than international stocks.
Listing location, not just fundamentals, drives valuation premiums.
U.S. revenue exposure is associated with lower valuations.
Half of the valuation gap is due to U.S. exchange listing effects.
International stocks may offer superior relative value in the coming years.
Opinion
U.S. stocks appear overvalued beyond fundamentals, making it likely that valuation gaps will shrink over time.
This suggests that expanding exposure to international markets could be a more profitable long-term strategy.
Core Sell Point
As U.S. stock valuations become harder to justify, shifting investments toward international markets presents a compelling opportunity.
This report analyzes the persistent valuation gap between U.S. and international equity markets, exploring why U.S.-listed companies trade at a premium and what this means for investors going forward.
Valuation Disparity:
U.S. stocks consistently trade at higher valuations than international stocks, sparking debate over whether this is justified.
U.S. Exceptionalism vs. Mean Reversion:
Some argue U.S. stocks deserve a premium due to stronger earnings growth.
Others suggest the valuation gap is excessive, predicting mean reversion over time.
Factors Influencing Valuations:
A regression analysis of the top 1,000 global stocks examines how:
Size, quality, profitability, investment style, and sector exposure impact valuations.
Listing location (U.S. vs. international) and U.S. revenue exposure affect pricing.
U.S.-listed stocks trade at a premium relative to their foreign-listed counterparts.
Stocks with higher U.S. revenue exposure tend to have lower valuations.
Half of the valuation gap is due solely to U.S. exchange listing rather than fundamentals.
Investment Strategy Implications
Given that valuation gaps are largely driven by listing location, international stocks may offer better value despite lagging performance over the past decade.
International stocks generally have smaller market caps and lower U.S. revenue exposure, factors that may contribute to their relative undervaluation.
Conclusion
This report highlights listing location as a key driver of U.S. valuation premiums, rather than purely fundamental factors. As the valuation gap narrows over time, investors should consider increasing exposure to international markets to capitalize on potential upside.
[Compliance Note]
All posts by Sellsmart are for informational purposes only. Final investment decisions should be made with careful judgment and at the investor’s own risk.
The content of this post may be inaccurate, and any profits or losses resulting from trades are solely the responsibility of the investor.
Core16 may hold positions in the stocks mentioned in this post and may buy or sell them at any time.
