Right after last week’s article was posted extolling the virtues of investing in one of the most geopolitically unstable regions in the world, I received the latest updates on global valuations.

Turkey is still on the list of ultra-cheap stock markets.

Turkey has a lot of risks, but with the market indexes trading with a CAPE ratio of less than half the world’s more developed markets. More importantly, the CAPE is a 10-year average PE adjusted for inflation, and, as low as it is, it is much higher than the current trailing 12-month PE of just 7.

The PE of the iShares Turkey ETF (TUR) is less than 5. The market is due for some mean reversion.

But the cheapest CAPE ratio in the world right now isn’t Turkey – instead, it’s to our south. Let’s take a trip and see if we can find some deeply undervalued stocks…

The prize for the country with the cheapest stocks goes to Colombia, where stocks trade with a CAPE PE of just 7.8.

The 10-year price-to-book value ratio is also the lowest in the world at just 0.7.

That makes perfect sense, given all the cocaine drug lords and worlds that run the place.

While that is still the perception for many, it is simply not true. This image has made for some excellent movies over the years, but that version of Colombia has all but disappeared. The Colombian government took an aggressive approach to ending the drug trade, and it is not a significant issue anymore.

To be clear, that does not mean that Colombia is risk-free.

There are parts of the country that only the most adventurous and incautious individual should visit. As is the case throughout much of South America, the chance of kidnapping for ransom is genuine.

Colombia is one of the oldest democracies in South America, but its elections have tended to be messy affairs with high levels of associated violence in recent years.

In the 2022 election, the nation turned to the left by electing Gustavo Petro, a former rebel.

He moved towards the center and rode a wave of disgust with existing leadership into the Presidency. All has not been peace and light.

Petro has a hard time getting his initiatives passed by the legislature. In local and regional elections in November, his party did not fare well. Center and right-leaning candidates scored easy victories.

Politically, we have a country with a great deal of unrest and occasional gusts of violence.

Combined with a low multiple of earnings and asset values, that sounds like a perfect combination for investment success.

Colombia is a middle-class nation with the fourth-largest economy in South America.

Like many countries in the region, it is resource-rich. In fact, Colombia is a leading producer of several agricultural commodities, including bananas, coffee, sugar, and palm oil. It has oil, gas, and coal. Columbia is also mineral rich, including several that are in high demand to feed the global green energy machine.

It also has a thriving electronic industry and a fast-growing appliances manufacturing industry.

Despite some political unrest, there is enormous economic upside.

Naturally, an exchange-traded fund, MSCI Colombia ETF (GXG), allows you to invest in Colombia.

You can also invest in shares of Bancolombia S.A. ADR (CIB). The bank is the largest in Colombia and has offices in Central America, The Cayman Islands, Puerto Rico, and Miami.

The bank has a generous dividend policy. The payout is variable based on performance, but if this year’s payout is half last year’s, shareholders will collect a yield of 5%.

The stock could easily double from the current level if the bank earns anything close to what analysts expect for 2024.

The bank is performing at a high level, with a return on assets of 1.79% and a return on equity of almost 17%.

Interest rates in Colombia have been among the highest in the world but should start coming down this year, and Bancolombia shares will get an enormous boost as that happens.

Low valuations, high dividend yield, and massive upside potential make Colombia’s largest bank a very attractive addition to an income portfolio.