Core Insights - The article emphasizes a macro-style, passive, index-based investment approach focused on capital preservation and value orientation [1] Group 1: Investment Strategy - The investment strategy is characterized as all-weather, aiming to withstand various market conditions [1] - The approach includes a contrarian bent, suggesting a willingness to go against prevailing market trends [1] Group 2: Background and Experience - The individual has over 35 years of investment experience, managing and advising on family portfolios valued in the eight-figure range [1] - Educational background includes a B.S. in Industrial Engineering and an MBA in investments from the University of Illinois, Urbana-Champaign [1] - The individual has accumulated over 11,000 hours of investment management and research experience [1] Group 3: Community Engagement - The individual is passionate about improving financial literacy and investing skills among individuals [1] - Engagement includes writing for platforms like Seeking Alpha and Advisor Perspectives, as well as presenting at universities and community organizations [1]

Core Viewpoint - The valuation of Westpac Banking Corp (WBC) shares is a significant concern for investors, particularly those interested in dividend income, with current share price around $37.19 and various valuation methods suggesting different worth [1][11]. Group 1: Investment Appeal of Bank Shares - The financial/banking industry is favored by Australian investors, with major banks operating in an oligopoly, making them attractive for dividend investors seeking franking credits [3]. - Other popular bank shares on the ASX include Bank of Queensland Limited (BOQ) and National Australia Bank Ltd (NAB) [2]. Group 2: Valuation Methods - The Price-Earnings Ratio (PER) is a common valuation tool that compares a company's share price to its earnings per share, with WBC's current PE ratio at 19.4x compared to the sector average of 18x [4][6]. - A Dividend Discount Model (DDM) is considered a more reliable method for valuing bank shares, relying on past or forecasted dividends and a risk rate [7][8]. Group 3: DDM Valuation Results - Using a DDM approach with last year's dividend of $1.66 and various growth and risk rates, the valuation of WBC shares ranges from $34.05 to $48.64 when considering gross dividends [11][12]. - The average valuation from different growth and risk assumptions yields a valuation of $35.10 [11]. Group 4: Considerations for Investment - Investors should assess WBC's growth strategy, focusing on lending versus non-interest income, and consider economic indicators such as unemployment and consumer sentiment [14].

Core Insights - Vanguard is recognized as a leading ETF provider due to its mutual ownership model, which allows fund shareholders to own the funds and Vanguard itself [2] - The company operates at cost, resulting in a significantly lower average expense ratio of 0.07%, compared to the industry average of over 0.40%, leading to substantial long-term savings for investors [3] - Vanguard manages over $8 trillion in assets, offering a wide range of passively managed index funds that provide comprehensive market exposure [4] Fund Summaries - **Vanguard International High Dividend Yield ETF (VYMI)** targets high-yielding stocks in developed and emerging markets outside the U.S., with a focus on financials, consumer staples, and energy. It has an expense ratio of 0.17% and a 30-day SEC yield of approximately 4%, providing geographic diversification with over 1,500 holdings [5][7] - **Vanguard Information Technology ETF (VGT)** offers exposure to major players in the AI sector, with top holdings including Nvidia, Apple, and Microsoft, which together account for about 45% of assets. The fund charges an annual fee of 0.09% and has a 30-day SEC yield of 0.42%, covering over 300 companies in the tech space [8][10] - **Vanguard Small-Cap Value ETF (VBR)** focuses on small U.S. companies with depressed valuations, charging a low expense ratio of 0.07% and offering a 30-day SEC yield of 2.03%. The fund holds over 800 stocks, providing diversification and targeting sectors like financials and industrials [11][13] Investment Strategy - The combination of these three funds provides a balanced approach to investing, offering international income, domestic growth, and contrarian value exposure, which can complement each other across different market cycles [14]

Core Viewpoint - The valuation of Commonwealth Bank of Australia (CBA) shares is a significant concern for investors, particularly those interested in dividend income, with current share price around $155 [1][2]. Group 1: Investment Appeal of Bank Shares - Australian investors favor bank shares, including CBA, ANZ Banking Group, and Macquarie Group, due to their stability and dividend income potential [2][3]. - The banking sector operates in an oligopoly, with limited success from foreign competitors like HSBC in penetrating the market [3]. Group 2: Valuation Methods - The Price-Earnings (PE) ratio is a common method for valuing shares, comparing a company's share price to its earnings per share [4][5]. - CBA's current PE ratio is calculated at 27.5x, significantly higher than the banking sector average of 18x, leading to a sector-adjusted valuation of $102.65 [6]. Group 3: Dividend Discount Model (DDM) - The Dividend Discount Model (DDM) is highlighted as a more effective valuation method for banks, relying on past or forecasted dividends [7][8]. - Using last year's dividend of $4.65 and various risk rates, the DDM yields a valuation range for CBA shares between $98.33 and $100.66 [11][12]. - Adjusting for fully franked dividends, the valuation based on a gross dividend payment of $6.80 results in a share price valuation of $143.80 [12]. Group 4: Growth and Risk Assumptions - Different growth rates (2% to 4%) and risk rates (6% to 11%) yield varying valuations, indicating the sensitivity of the share price to these assumptions [13].

Core Insights - PayPal (PYPL) stock has underperformed in recent years due to softer growth and increased competition, but its large user base, strong brand, and solid margins keep it relevant for investors [2][3] - The stock is currently trading at a lower than average valuation, with a significant decrease in its Price-to-Sales (P/S) ratio, making it a potential value buy [3][5] - Despite a 32% decline in stock price this year, operational efficiency and strategic pricing are enhancing margins, with a reported 7% revenue increase in Q3 2025 [5][6] Valuation and Performance - PYPL is trading at a P/E ratio below the median of the S&P 500, indicating a potentially attractive valuation [5][10] - The stock's current P/S ratio is 37% less expensive compared to one year ago, suggesting a significant discount [5][10] - The company has maintained strong operating margins, averaging 17.9% over the past three years, despite facing challenges in transaction volume growth [10] Growth and Competition - The company has experienced modest growth, with management raising its full-year EPS forecast to $5.35-$5.39, although the stock remains down over 30% year-to-date [6] - Ongoing competition and concerns regarding transaction volume growth in core segments are contributing to its discounted valuation [6][8] - The favorable aspects for the company include operational efficiency improvements and strategic pricing, particularly in its Braintree segment [6] Historical Context - PayPal has faced significant historical drawdowns, including a 20% decline during the 2018 correction and a 31% drop during the Covid pandemic, highlighting the stock's volatility [8] - Despite strong fundamentals, the stock has experienced substantial declines in adverse market conditions, indicating that risk remains a factor even in favorable environments [8]

Core Insights - The current market presents a unique opportunity for international deep value investing, with significant discounts in international stocks compared to U.S. equities, particularly in Europe and Asia [2][4][5] Valuation Discrepancies - As of late 2025, international stocks are trading at their steepest discount to U.S. equities in over two decades, with the MSCI EAFE Index at approximately half the forward price-to-earnings multiple of the S&P 500 [2][4] - The deep-value segment of international markets is in the bottom decile of historical valuations, indicating extraordinary cheapness [4][5] Market Dynamics - A decade of U.S. market dominance has led to skepticism towards international markets, despite their current undervaluation [5][6] - The Federal Reserve's interest rate policies have strengthened the dollar, making international assets less attractive, but this creates opportunities as the dollar normalizes [6][7] Investment Strategy - The value factor, which involves buying companies at a discount to their intrinsic worth, has historically delivered superior returns, especially when combined with international diversification [8] - An asset-based approach is crucial for identifying deep value opportunities, focusing on companies trading below the value of their actual assets [9][10] Regional Opportunities - Europe is experiencing a structural change with increased infrastructure and defense spending, creating opportunities in construction materials and industrial sectors [13] - Japan's corporate governance reforms are leading to improved capital allocation and shareholder returns, unlocking previously ignored value [14] - Emerging markets, particularly Brazil and India, present extraordinary value despite current challenges [15] Specific Company Examples - LEG Immobilien SE operates in the German residential housing market, benefiting from a structural housing shortage and maintaining strong financial performance [22][23][24] - Aida Engineering Ltd is positioned to capitalize on the transition to electric vehicles and fuel cell technology, trading at a valuation that reflects stagnation rather than growth [29][34] - KNOT Offshore Partners LP operates specialized shuttle tankers with contracted cash flows, trading at a valuation that suggests significant undervaluation [39][45] Historical Context - Historical patterns indicate that periods of deep value underperformance often precede substantial returns for value investors [20][50] - Current market conditions resemble past cycles where undervalued, fundamentally sound businesses eventually gained recognition [55][58]

Core Viewpoint - The article discusses the valuation of bank shares in Australia, particularly focusing on Bendigo & Adelaide Bank Ltd (ASX: BEN) and ANZ Banking Group, emphasizing the importance of dividend history and franking credits in investment decisions [1][2]. Valuation Techniques - The Price-Earnings (PE) ratio is a common method used to value bank shares, comparing a company's share price to its earnings per share [3][4]. - Analysts often compare a company's PE ratio with its competitors to assess whether the share price is overvalued or undervalued [4]. - The principle of mean reversion is applied to calculate a sector-adjusted PE valuation by multiplying profits per share by the sector average PE ratio [4][5]. Dividend Discount Model (DDM) - The DDM is highlighted as a suitable valuation method for banks due to their stable dividend payments, contrasting with growth-focused industries like technology [6][7]. - Key inputs for the DDM include the dividend per share, annual growth rate (assumed at 2%), and the required return rate (assumed between 6% and 11%) [7][9]. - The valuation formula for DDM is Share Price = Full-Year Dividend / (Risk Rate - Dividend Growth Rate), and it is recommended to calculate with various growth and risk rate assumptions [8]. ANZ Share Valuation - The current share price of ANZ is $35.46, with a calculated PE ratio of 16.5x, compared to the banking sector average of 20x, leading to a sector-adjusted PE valuation of $42.35 [5]. - Using the DDM approach, ANZ shares are valued at $35.10, which increases to $35.74 with an adjusted dividend payment of $1.69 [10]. - Various growth and risk rate scenarios yield a range of valuations, indicating the sensitivity of share price to these assumptions [10]. Investment Considerations - Analysts emphasize the importance of qualitative research, including understanding growth strategies, economic indicators, and consumer sentiment, before conducting quantitative analysis [11].

Core Insights - The current market environment reflects a structural shift, moving from a phase of liquidity-driven growth to one where fundamentals and discipline are paramount [3][5][13] - Companies that relied on cheap capital and speculative growth narratives are facing significant pressure as interest rates rise and credit conditions tighten [3][6][10] Market Dynamics - Unprofitable tech firms, over-leveraged consumer companies, and small-cap stocks dependent on low-cost debt are leading the market decline [1][3] - The previous rally was not based on solid fundamentals but rather on liquidity and narratives, particularly around AI, which has now shifted to a focus on cash flow and balance sheet strength [4][5] Investor Behavior - A divide is emerging between institutional investors, who are trimming risk and raising cash, and retail investors, who continue to cling to previous narratives [7][12] - Professional investors view cash as a strategic asset, while retail investors often react emotionally to market movements [7][8] Strategic Recommendations - Investors are advised to raise cash in overextended positions and focus on companies with strong fundamentals that can sustain themselves without relying on capital markets [9][10] - The market is expected to undergo a cleansing phase, where excess positioning is eliminated, leading to potential opportunities for patient investors [10][12] Future Outlook - The path ahead is likely to be volatile, with a potential for a short-term crash as leverage and optimism unwind together [10][13] - The next cycle will favor those who are prepared and disciplined, as the market resets and rewards quality over speculation [12][13]

Core Viewpoint - The article discusses the valuation of Westpac Banking Corp (WBC) shares, highlighting the importance of understanding both the price-earnings (PE) ratio and the dividend discount model (DDM) for potential investors [1][7]. Valuation Methods - The PE ratio is a common tool for valuing shares, comparing a company's share price to its earnings per share, with WBC's current PE ratio calculated at 20.5x against a sector average of 20x [4][6]. - A sector-adjusted PE valuation for WBC shares is derived by multiplying the earnings per share ($1.92) by the sector average PE ratio, resulting in a valuation of $38.08 [6]. Dividend Discount Model (DDM) - The DDM is presented as a more effective valuation method for banks, relying on recent or forecasted dividends and assuming consistent or modest growth [8][10]. - Using last year's dividend payment of $1.66 and a blended risk rate between 6% and 11%, the DDM yields a valuation range for WBC shares from $34.05 to $48.64 when considering gross dividends [11][12]. Growth and Risk Rates - Different growth and risk rate assumptions yield varying valuations, with a 2% growth rate and a 6% risk rate resulting in a valuation of $40.25, while an 11% risk rate drops the valuation to $17.89 [13]. Market Context - The financial/banking industry is favored by Australian investors, particularly for dividend income, with major banks operating in an oligopoly, making them less susceptible to foreign competition [3].

Core Insights - The author is a mechanical engineer with a B.S. in Mechanical Engineering and an M.B.A in Finance, indicating a strong technical and financial background [1] - The author employs evidence and factor-based investing strategies in their personal portfolio, suggesting a disciplined investment approach [1] - The author occasionally speculates on individual stocks believed to be undervalued, indicating a willingness to take calculated risks for potential gains [1] Analyst's Position - The analyst has a beneficial long position in the shares of BND, either through stock ownership, options, or other derivatives, reflecting confidence in this investment [2] - The article expresses the author's personal opinions and is not influenced by external compensation, ensuring an independent viewpoint [2] - There is no business relationship with any company mentioned in the article, which may enhance the credibility of the analysis [2]