Alcon Inc. (ALC) Stock Forecasts

Summary

As global markets struggle in the environment of sticky inflation, high interest rates, and the lingering battle between Russia and Ukraine, one thing has not changed: U.S. stocks are more expensive than global stocks on numerous valuation metrics. Consider P/E ratios. The trailing P/E ratio on the S&P 500 is 20, above the global average of 13 and well above the 6-11 average P/Es for emerging markets stocks. A review of yields tells a similar story. The current dividend yield for the S&P 500 is 1.6%, versus the global average of 3.7%, and Asian, Australian and Latin American yields of 4%-8%. The foreign region that does not completely fit the pattern is the Middle East. The average P/E on a Saudi Arabian stock is a high 17.0 and the yield is a low 1.8%. This can be blamed on high oil prices. Generally, investors are willing to pay a higher price for North American securities because of the transparency of the U.S. financial system as well as the liquidity of U.S. markets. What is more, global returns can be volatile across individual countries, given currency, security, political, and geopolitical risks; indeed, U.S. stocks (ETF SPY) have outperformed EAFE (ETF EFA) year-to-date, as well as over the past five years. Even so, we recommend that growth investors have approximately 5%-10% of their equity allocations in international stocks to take advantage of the value, and we have been adding global stocks to our Universe of Coverage.