Dejavoo,I'm afraid you might be disappointed to learn that the...

Dejavoo,

I'm afraid you might be disappointed to learn that the list of stocks I own hasn't changed much over the past 6 months (or the past year, or the past 2 years for that matter).

My portfolio is weighted as follows:

SGN 7.6%
SLM 5.7%
DTL 5.7%
GWA 5.5%
ARP 5.4%
TLS 5.2%
WHG 5.1%
COF 5.1%
CPB 4.7%
BSA 4.3%
ASW 4.3%
ASZ 3.8%
ORI 3.7%
MCP 3.5%
SFH 3.0%
SKE 2.9%
QBE 2.8%
COU 2.8%
CPI 2.7%
MYR 2.5%
WOW 2.5%
TWO 2.4%
AAU 2.2%
EMB 1.9%
KOV 1.6%
3 OTHERS 3.1%
(The 3 OTHERS are stocks I am curently acquiring)

Of this list only about 10 I believe are undervalued, the rest have now appreicated to a point where I won't buy more at their current valuation levels.

The ten or so that I think still present good, defensive value are (in no particular order of preference):

SGN, TLS, WHG, COF, BSA, ASZ, SFH, SKE, MYR, WOW, TWO, AAU, EMB

(NB.I am not recommending or advising you to buy any of these; I am simply saying that according to MY investment process and philosophy, that these stocks I like for MY personal financical cicrcumstances.)

I have to say that I have been struggling to find value in the past 6 months.

I have a real issue with the school of thought currently prevailing among equity market strategists and financial journalists that says: "historically, stock X traded at a valuation multiple of 16 times, and today it is trading at just 13 times, therefore it is about 20 to 25% undervalued."

I am convinced that the world of financial markets has changed forever and the dramatic imbalances in major pockets of the global economy mean that the equity market should not - and will not - trade at the ritzy sort of valuation multiples that we saw in the decade leading up to the GFC.

I am of the view that something like 12 times is the new 15 times as a crude "fair value" benchmark. Before the GFC I was prepared to pay 12x P/E (7.5x EV/EBITDA) for good-quality industrial stocks. Given how accident-prone I think markets are post-GFC, I now believe 10x (~5-6x EV/EBITDA) is the level where I START to feel some margin of safety.

Trouble is, I'm not finding much in the way of mouth-wateringly cheap stocks right now, unless I trawl around in the arcane world of microcaps, but then one has the liquidity issue with which to contend...

(My experience is that when I am forced to spend my days reading through the annual reports of $10m market cap companies because everything else looks fully valued, then that usually precedes some sort of market fall; sometimes it takes weeks, months or even years to occur, but my sense is that I won't be waiting for years for renewed buying opportunities...unlike the Great Bull Market of 1995 to 2007 when black swan economic events were rare, in the new global macroeconomic paradigm, it is clear to me that there are now many black swans hiding all over the place.)

As one famous stock picker once said, "creating wealth from the stock market involves a lot of waiting."

I am firmly in waiting mode; the upcoming interim dividends will be the first batch in about 3 years that I won?t be reinvesting straight away.