VNQI (Global ex-US Real Estate): Is this a bargain or not?

[KJVanguard]

P/E = 8.2x
P/B = 0.9x

Selling with a single-digit P/E and for less than book, the valuations certainly appear compelling. Is there something that I'm missing, or is this fund the cheapest thing you can possibly buy from Vanguard?

Certainly makes their (US) Reit Index look obscenely expensive by comparison. Or is this an apples to oranges comparison?

[nyanchu021]

Yes I think reits and ex-is stocks are undervalued
But I don’t know when these index or etfs outperform the us counterparts

Now my allocation weights eafe other than us index but I wonder whether this decision is correct or not

[Valuethinker]

P/E = 8.2x
P/B = 0.9x

Selling with a single-digit P/E and for less than book, the valuations certainly appear compelling. Is there something that I'm missing, or is this fund the cheapest thing you can possibly buy from Vanguard?

Certainly makes their (US) Reit Index look obscenely expensive by comparison. Or is this an apples to oranges comparison?

Not sure about the comparison between IFRS Book Value and US GAAP Book Value. My sense is the latter may be more conservative.

The global fund includes a lot of RE companies (REOCs not REITs) which are valued as ordinary stocks.

Usually the metrics on REITs are discount/ premium to NAV (book value) and dividend yield. Because of the stipulation that 90% of earnings (roughly speaking) has to be distributed, PE is not meaningful.

You don't give the comparable figures for the US REIT sector so it's impossible to make a comparison here -- and are these prospective or historic?

Given however that generally international companies look quite cheap compared to American companies (taken in the round) this might, or might not, reflect a greater discount on RE assets.

The Lowy's (Westfield shopping centres) sold themselves to Rodamco (French/ Dutch) for something like $30 bn? That may have been estate planning (he is in his 90s) OR it might have been a call on the market OR it might have been a call on shopping centres in particular (they have big ones in the UK, and in the USA and Australia). So it's not clear whether the smart money is buying, or selling, on that trade.

[garlandwhizzer]

PE 8.2. PB .82! VNQI has had much more attractive valuations than VNQ for way more than a decade but in spite of that VNQ has massively outperformed it. But these numbers are outrageous and they come from Vanguard which is a reputable firm. They are also much better than VWO, VXUS, and VSS which presumably employ the same accounting standards as VNQI. It also paid out about 4.3% dividend in dollars last year. I haven't owned VNQ for a long time because I believed it to be overvalued and I'm not a great fan of sector funds. But I'm gong to pull the trigger modestly and move some money from DM and EM into VNQI, about 10% of my INTL exposure. The numbers may continue to look more and more appealing even as the fund goes down more in value but I can't resist.

Garland Whizzer

[nedsaid]

PE 8.2. PB .82! VNQI has had much more attractive valuations than VNQ for way more than a decade but in spite of that VNQ has massively outperformed it. But these numbers are outrageous and they come from Vanguard which is a reputable firm. They are also much better than VWO, VXUS, and VSS which presumably employ the same accounting standards as VNQI. It also paid out about 4.3% dividend in dollars last year. I haven't owned VNQ for a long time because I believed it to be overvalued and I'm not a great fan of sector funds. But I'm gong to pull the trigger modestly and move some money from DM and EM into VNQI, about 10% of my INTL exposure. The numbers may continue to look more and more appealing even as the fund goes down more in value but I can't resist.

Garland Whizzer

Garland, thanks for this. I will put VNQI on my watch list. You know me, always looking for a bargain.

[apex84]

I don't know if it's a bargain, but have a small allocation to real estate in which I split US/international 60/40 (same as my equities).

[Portfolio7]

I don't know if it's a bargain, but have a small allocation to real estate in which I split US/international 60/40 (same as my equities).

Likewise with respect to the 8% of AA I carry in REITs: roughly 60% VNQ / 40% VNQI

[packer16]

The one note about VNQI is that the largest country exposure is 24% of AUM in Japan, 23% China/Hong Kong, 8% Australia, 7% Germany & 6% UK. So you are buying about a 50% weight in Japan/China. Also, a good number of the Chinese and Japanese firms are developers these are more akin to homebuilders than firms holding cash flowing real estate (their P/L driven by sales of resi units versus rent from existing properties). This may be why the P/E is low. Also, book value under IFRS is based upon appraised real estate values vs. cost plus improvements for US GAAP. If you were buying majority US/European assets, I would agree it is cheap but you are buying at least 50% of its assets in higher risk locals & good mix of home builders. These assets may do well but you are buying typically highly levered real estate in Japan/China with some lower risk locations.

Packer