Is there any trend suggesting that stocks outside the US are more frequently undervalued compared to domestic equities?

Summary: This article tackles a persistent question for global investors: are international stocks more likely to be undervalued than US equities? Using real data, regulatory sources, and a personal investor’s lens, I’ll break down valuation trends, show how to screen for undervalued opportunities, and compare the trade verification standards that often complicate cross-border investment. By the end, you’ll see not just where to look for undervalued stocks, but also the hurdles—legal, practical, and psychological—that shape this part of the market. Why This Matters for Value Investors If you’ve been actively stock-picking, you’ve probably wondered: am I missing out by focusing only on the US? Or, if you’re venturing abroad, are you actually finding more bargains—or just adding complexity and risk? This question is central for those hunting the most undervalued stocks, and the answer isn’t always straightforward. Cracking Open the Global Valuation Puzzle Let’s start with the obvious: US equities have, for the last decade, commanded a premium. The S&P 500’s price-to-earnings (P/E) ratio has consistently exceeded those of most developed and emerging markets. For example, as of late 2023, FactSet data showed the S&P 500’s forward P/E around 19x, while Europe’s STOXX 600 hovered near 13x, and MSCI Emerging Markets Index closer to 12x. That’s a big gap, and it’s tempting to declare “international stocks are more undervalued!” But here’s where nuance comes in. Step 1: Understanding Why Valuations Differ Let me share a classic investor’s dilemma. In 2022, I started screening for low P/E stocks globally. I was regularly pulling up Japanese, UK, and South Korean names with P/Es under 10, while US analogs rarely dipped below 14. But then I hit a wall: why are they so cheap? A few reasons keep coming up—many confirmed by big players like MSCI and the OECD: - Currency risk (think Japanese yen or Turkish lira volatility) - Slower earnings growth, especially in Europe and Japan - Political or regulatory uncertainty (Turkey, Brazil, China) - Lower liquidity and weaker disclosure standards For example, BlackRock’s 2024 Global Equity Outlook specifically cites discounted valuations in Europe and emerging markets, but flags corporate governance and geopolitical risk as major headwinds ([BlackRock Outlook 2024](https://www.blackrock.com/americas-offshore/en/insights/market-outlook)). Step 2: Screening in Practice (With Screenshots!) In my own process, I use platforms like Bloomberg and Morningstar Direct. Here’s a quick breakdown of what a practical screener setup looks like (imagine the following as a screenshot from Bloomberg’s Equity Screener): - Region: Exclude US - Market Cap: >$1B - P/E Ratio: 2% - Return on Equity: >8% The results? You’ll see banks in Italy and Spain, telecoms in Singapore, or industrial conglomerates in Japan—almost none of these names show up on a US-only screen. But, as I learned the hard way, many of these “cheap” stocks are cheap for a reason. For instance, a Turkish bank might have a P/E of 3, but the lira’s 40% annual depreciation and capital controls make it nearly uninvestable for most global funds. Step 3: The Regulatory and Disclosure Angle Here’s where it gets interesting for anyone serious about global investing. Trade verification and disclosure standards vary sharply by country, affecting both price discovery and investor trust. Let’s look at trade verification and reporting differences: Country/Region Verified Trade Standard Legal Basis Enforcement United States Reg NMS (National Market System) SEC Regulation NMS SEC, FINRA European Union MiFID II Transaction Reporting MiFID II Directive 2014/65/EU ESMA, National Regulators Japan JASDEC Trade Confirmation Financial Instruments and Exchange Act FSA, TSE China SZSE/SSE Trade Confirmation CSRC Securities Law CSRC Brazil BM&FBOVESPA Trade Confirmation CVM Instruction 505 CVM, B3 If you’ve ever tried to reconcile trade confirmations between US and, say, Brazil or China, you’ll know these regulatory differences often lead to delays, disputes, or even failed trades. The OECD has repeatedly flagged these disparities as barriers to cross-border capital flows ([OECD, “Stock Exchange Trading Rules”](https://www.oecd.org/finance/financial-markets/)). Expert Voices: A Buy-Side Analyst’s Take I recently spoke with Emily, a buy-side analyst at a global asset manager, who summed it up like this: “We see a valuation gap, especially in Europe and Asia, but we also see fewer activist investors, less transparency, and inconsistent rule enforcement. It’s hard to unlock value if you can’t trust the numbers or get your trades settled reliably.” Her team often assigns a “liquidity discount” to international picks, especially in emerging markets, and sometimes requires direct outreach to company IR teams just to get basic info. Case Study: A Real-Life Trade Dispute Let’s use a simulated (but realistic) example. Imagine you’re buying shares of a mid-cap Korean industrial on the KOSPI. Your US broker flags the trade as “pending” for three days due to a mismatch in trade date reporting standards between Korea’s KRX and US SEC/DTCC guidelines. Meanwhile, the stock price drops 7%. When you finally get confirmation, you’re left wondering: was the discount worth the execution headache? This is more common than you might think. In 2022, the World Federation of Exchanges (WFE) reported that cross-border settlement failure rates in emerging markets were nearly double those in the US and Western Europe ([WFE Annual Report](https://www.world-exchanges.org/our-work/statistics)). Putting It Together: Are International Stocks More Undervalued? Based on real screens, industry reports, and my own trading experience, here’s the honest verdict: - Statistically, international stocks—especially in Europe, Japan, and some emerging markets—do trade at lower valuation multiples than US stocks. - But these discounts reflect real risks: slower growth, weaker governance, and regulatory frictions (including differences in verified trade standards). - For diligent investors willing to dig into local disclosures and tolerate operational headaches, international markets do offer more frequent undervalued opportunities. But realizing these gains requires patience, extra due diligence, and sometimes creative workarounds. Conclusion & Next Steps If you’re on the hunt for the most undervalued stocks, venturing outside the US is almost a must—but it’s not a free lunch. The lower multiples abroad aren’t just market noise; they’re often compensation for real, sometimes hidden, risks. Before you jump in, get comfortable with local accounting and trade verification rules. Start with ADRs or country ETFs to get your bearings, then graduate to direct listings as you build confidence. My final thought? The global value gap is real, but it’s not easy money. Treat it as a research challenge—one that, if you’re willing to do the work, can absolutely pay off.

Gerald's answer to: Are international stocks more likely to be undervalued than US stocks?

Summary: This article tackles a persistent question for global investors: are international stocks more likely to be undervalued than US equities? Using real data, regulatory sources, and a personal investor’s lens, I’ll break down valuation trends, show how to screen for undervalued opportunities, and compare the trade verification standards that often complicate cross-border investment. By the end, you’ll see not just where to look for undervalued stocks, but also the hurdles—legal, practical, and psychological—that shape this part of the market.

Why This Matters for Value Investors

If you’ve been actively stock-picking, you’ve probably wondered: am I missing out by focusing only on the US? Or, if you’re venturing abroad, are you actually finding more bargains—or just adding complexity and risk? This question is central for those hunting the most undervalued stocks, and the answer isn’t always straightforward.

Cracking Open the Global Valuation Puzzle

Let’s start with the obvious: US equities have, for the last decade, commanded a premium. The S&P 500’s price-to-earnings (P/E) ratio has consistently exceeded those of most developed and emerging markets. For example, as of late 2023, FactSet data showed the S&P 500’s forward P/E around 19x, while Europe’s STOXX 600 hovered near 13x, and MSCI Emerging Markets Index closer to 12x. That’s a big gap, and it’s tempting to declare “international stocks are more undervalued!” But here’s where nuance comes in.

Step 1: Understanding Why Valuations Differ

Let me share a classic investor’s dilemma. In 2022, I started screening for low P/E stocks globally. I was regularly pulling up Japanese, UK, and South Korean names with P/Es under 10, while US analogs rarely dipped below 14. But then I hit a wall: why are they so cheap? A few reasons keep coming up—many confirmed by big players like MSCI and the OECD: - Currency risk (think Japanese yen or Turkish lira volatility) - Slower earnings growth, especially in Europe and Japan - Political or regulatory uncertainty (Turkey, Brazil, China) - Lower liquidity and weaker disclosure standards For example, BlackRock’s 2024 Global Equity Outlook specifically cites discounted valuations in Europe and emerging markets, but flags corporate governance and geopolitical risk as major headwinds ([BlackRock Outlook 2024](https://www.blackrock.com/americas-offshore/en/insights/market-outlook)).

Step 2: Screening in Practice (With Screenshots!)

In my own process, I use platforms like Bloomberg and Morningstar Direct. Here’s a quick breakdown of what a practical screener setup looks like (imagine the following as a screenshot from Bloomberg’s Equity Screener): - Region: Exclude US - Market Cap: >$1B - P/E Ratio: <12 - Price/Book: <1.5 - Dividend Yield: >2% - Return on Equity: >8% The results? You’ll see banks in Italy and Spain, telecoms in Singapore, or industrial conglomerates in Japan—almost none of these names show up on a US-only screen. But, as I learned the hard way, many of these “cheap” stocks are cheap for a reason. For instance, a Turkish bank might have a P/E of 3, but the lira’s 40% annual depreciation and capital controls make it nearly uninvestable for most global funds.

Step 3: The Regulatory and Disclosure Angle

Here’s where it gets interesting for anyone serious about global investing. Trade verification and disclosure standards vary sharply by country, affecting both price discovery and investor trust. Let’s look at trade verification and reporting differences:

Country/Region	Verified Trade Standard	Legal Basis	Enforcement
United States	Reg NMS (National Market System)	SEC Regulation NMS	SEC, FINRA
European Union	MiFID II Transaction Reporting	MiFID II Directive 2014/65/EU	ESMA, National Regulators
Japan	JASDEC Trade Confirmation	Financial Instruments and Exchange Act	FSA, TSE
China	SZSE/SSE Trade Confirmation	CSRC Securities Law	CSRC
Brazil	BM&FBOVESPA Trade Confirmation	CVM Instruction 505	CVM, B3

If you’ve ever tried to reconcile trade confirmations between US and, say, Brazil or China, you’ll know these regulatory differences often lead to delays, disputes, or even failed trades. The OECD has repeatedly flagged these disparities as barriers to cross-border capital flows ([OECD, “Stock Exchange Trading Rules”](https://www.oecd.org/finance/financial-markets/)).

Expert Voices: A Buy-Side Analyst’s Take

I recently spoke with Emily, a buy-side analyst at a global asset manager, who summed it up like this:

“We see a valuation gap, especially in Europe and Asia, but we also see fewer activist investors, less transparency, and inconsistent rule enforcement. It’s hard to unlock value if you can’t trust the numbers or get your trades settled reliably.”

Her team often assigns a “liquidity discount” to international picks, especially in emerging markets, and sometimes requires direct outreach to company IR teams just to get basic info.

Case Study: A Real-Life Trade Dispute

Let’s use a simulated (but realistic) example. Imagine you’re buying shares of a mid-cap Korean industrial on the KOSPI. Your US broker flags the trade as “pending” for three days due to a mismatch in trade date reporting standards between Korea’s KRX and US SEC/DTCC guidelines. Meanwhile, the stock price drops 7%. When you finally get confirmation, you’re left wondering: was the discount worth the execution headache? This is more common than you might think. In 2022, the World Federation of Exchanges (WFE) reported that cross-border settlement failure rates in emerging markets were nearly double those in the US and Western Europe ([WFE Annual Report](https://www.world-exchanges.org/our-work/statistics)).

Putting It Together: Are International Stocks More Undervalued?

Based on real screens, industry reports, and my own trading experience, here’s the honest verdict: - Statistically, international stocks—especially in Europe, Japan, and some emerging markets—do trade at lower valuation multiples than US stocks. - But these discounts reflect real risks: slower growth, weaker governance, and regulatory frictions (including differences in verified trade standards). - For diligent investors willing to dig into local disclosures and tolerate operational headaches, international markets do offer more frequent undervalued opportunities. But realizing these gains requires patience, extra due diligence, and sometimes creative workarounds.

Conclusion & Next Steps

If you’re on the hunt for the most undervalued stocks, venturing outside the US is almost a must—but it’s not a free lunch. The lower multiples abroad aren’t just market noise; they’re often compensation for real, sometimes hidden, risks. Before you jump in, get comfortable with local accounting and trade verification rules. Start with ADRs or country ETFs to get your bearings, then graduate to direct listings as you build confidence. My final thought? The global value gap is real, but it’s not easy money. Treat it as a research challenge—one that, if you’re willing to do the work, can absolutely pay off.