Hi folks,

The All Ordi­nar­ies fin­ished up over the five-day peri­od, despite Albo’s warn­ings that we’re fac­ing a dif­fi­cult eco­nom­ic peri­od and Trump’s talk about bomb­ing Iran back into the “stone ages”.

The S&P 500 is also up over the five-day peri­od, climb­ing from around 6,400 to close at 6,582.69.

So, let’s get into my week­ly updates and see where we are at.

All the Best,
Cam

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QAV MYTH KILLERS

The P/E Ratio Is the King of Valuation Metrics

In the year 2000, Enron had a P/E ratio of around 60. Wall Street ana­lysts were trip­ping over each oth­er to slap “Strong Buy” rat­ings on it. For­tune mag­a­zine named it “Amer­i­ca’s Most Inno­v­a­tive Com­pa­ny” for six con­sec­u­tive years. The P/E ratio said it was expen­sive but wor­thy of the pre­mi­um. The busi­ness, it turned out, was a spec­tac­u­lar fraud. With­in eigh­teen months, it was rub­ble.

The P/E ratio did not see it com­ing. It nev­er does.

The First Metric You Learn Is the Least Reliable One

One of the first met­rics you’ll encounter when you start your invest­ing jour­ney is the P/E Ratio — the price-to-earn­ings ratio. It’s cal­cu­lat­ed by divid­ing the cur­rent share price by earn­ings per share (EPS), and it’s every­where. Ana­lysts cite it, finan­cial jour­nal­ists lean on it, and it’s the first num­ber that comes up when­ev­er some­one asks whether a stock looks “cheap” or “expen­sive.”

Which makes it a prob­lem. Because it’s also one of the eas­i­est num­bers to manip­u­late.

Why People Believe It

The appeal is obvi­ous. The P/E ratio is sim­ple. You can look it up in three sec­onds. It gives you a num­ber, and num­bers feel objec­tive. A P/E of 10 feels like a bar­gain. A P/E of 50 feels alarm­ing. This appar­ent clar­i­ty is enor­mous­ly com­fort­ing in a world that’s oth­er­wise messy and unpre­dictable.

There’s also the his­tor­i­cal pedi­gree. Ben­jamin Gra­ham, the god­fa­ther of val­ue invest­ing, used earn­ings as a core part of his val­u­a­tion frame­work. And when Gra­ham is your intel­lec­tu­al ances­tor, the idea car­ries real weight.

But here’s the thing about earn­ings: they’re a man­age­ment deci­sion.

The Levers Behind the Number

Let me put it this way. If you offered me a 50% share of your cof­fee shop for $100,000, the first ques­tion I’d ask is: how much cash is the busi­ness actu­al­ly gen­er­at­ing?

If you told me $200,000 a year in cash flow, I know I’d get my mon­ey back quick­ly — in rough terms, about a year, with zero over­heads fac­tored in. That’s a con­ver­sa­tion worth hav­ing. If you told me the busi­ness was gen­er­at­ing $10,000 a year, I know it’s going to take twen­ty years to get my mon­ey back. And twen­ty years is a long time. Think about what the world looked like twen­ty years ago. We were car­ry­ing Nokia 3310s and think­ing Nap­ster was a per­ma­nent lifestyle. A lot can change.

Cash flow tells me some­thing real. Earn­ings tell me some­thing that was con­struct­ed.

When we start­ed doing the pod­cast, Tony explained the prob­lem with earn­ings this way:

“What I’ve found over the years is that the fur­ther you go down a com­pa­ny’s finan­cial reports, the more it becomes a man­age­ment deci­sion as to what fig­ures get put in there. Oper­at­ing cash flow, at the top of the state­ments, is the hard­est thing to manip­u­late. Earn­ings are not. A man­ag­er can pull lots of levers across the three account­ing state­ments — pro­vi­sions on the bal­ance sheet, adjust­ments to depre­ci­a­tion, deci­sions about good­will amor­ti­sa­tion — to make their num­bers look how­ev­er they want them to look. Some­times they do it to hit a bonus tar­get. Some­times they do it to make next year’s com­par­isons eas­i­er. I’m not say­ing all man­agers are crooked. But it’s human nature to present your­self in the best pos­si­ble light.”

This is why the big scan­dals — Enron, World­Com, HIH in Aus­tralia — are always earn­ings scan­dals. Nobody fakes the cash com­ing through the front door. That’s much hard­er to hide.

What We Use Instead

When you start using QAV, you’ll see we focus on a met­ric called Price-to-Oper­at­ing Cash Flow — which we call PROPCAF.

Unlike earn­ings, oper­at­ing cash flow is the real mon­ey a busi­ness is gen­er­at­ing from its actu­al oper­a­tions, before the accoun­tants have had a chance to finesse it. It sits at the top of the cash flow state­ment, and com­pa­nies are legal­ly required to report it. The fur­ther down the finan­cial state­ments you go, the more room there is for inter­pre­ta­tion. Oper­at­ing cash flow sits right up there at the top, in the clear­est pos­si­ble air.

Over years of regres­sion test­ing our check­list, we’ve found that PROPCAF is one of the sin­gle most pow­er­ful met­rics we have. When we strip every­thing else out and test our met­rics indi­vid­u­al­ly, PROPCAF by itself deliv­ers the most out­per­for­mance of any sin­gle vari­able. Every­thing else we check — man­age­ment own­er­ship, finan­cial health scores, rev­enue trends — adds to the result, but PROPCAF does the lion’s share of the work.

We Don’t Completely Ignore P/E

To be clear, we haven’t thrown P/E in the bin entire­ly. One of our check­list items looks at whether the cur­rent P/E is the low­est it’s been over the last three years — which is a use­ful sig­nal that a stock is cheap rel­a­tive to its own his­to­ry.

But we’re not using P/E as a north star. We’re using it as a sin­gle data point in a much more rig­or­ous frame­work. One instru­ment on a large dash­board, not the whole instru­ment pan­el.

The Question to Ask

So the next time some­one tells you a stock looks cheap because the P/E is low, ask them one ques­tion: What’s the oper­at­ing cash flow look like?

Because earn­ings are what man­age­ment wants you to see. Cash flow is what’s actu­al­ly hap­pen­ing.

At QAV, we’ll always take the real thing.

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STOCK ANALYSIS OF THE WEEK

I’ve found a few things to buy this week (sur­prise! Oil Stocks!) and you can see my Light posts here.

I also added some­thing to the U.S. Light port­fo­lio this week. U.S. Light and Club mem­bers can read about it here. Not an oil stock!

On the full Aus­tralian pod­cast this week, Tony did a deep dive on oil stock BRK. See the pod­cast link down below if you want to lis­ten to his analy­sis.

On the Amer­i­can episode, I did a deep dive on Pit­ney Bowes (PBI). Real­ly fas­ci­nat­ing sto­ry. Been around 100 years, they han­dle the stamp­ing and sort­ing of snail mail for busi­ness­es large and small. See the pod­cast link down below if you want to lis­ten to my analy­sis.

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BUY LIST

Each week, we pro­duce a buy list based on our val­ue invest­ing sys­tem that we share with our QAV Club mem­bers. The intend­ed pri­ma­ry pur­pose of this buy list is for club mem­bers to use as a ref­er­ence for com­par­ing their own buy list. In the­o­ry, all of our buy lists should look pret­ty sim­i­lar each week.

QAV Val­ue Invest­ing Buy List (AU) 2026-03-29

Below is a link to the US list for this week (avail­able to our U.S. Club mem­bers):

QAV Val­ue Invest­ing Buy List 2026-03-31

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PORTFOLIOS

We com­pare our per­for­mance to what we think is the most rel­e­vant bench­mark (SPDR 200 in Aus­tralia, S&P500 in the USA), but if you’re new to invest­ing, these com­par­isons might not mean much. Instead, you can com­pare our per­for­mance to the top-per­form­ing Super Funds in Aus­tralia and see why an ama­teur active investor (who has a sys­tem to fol­low) can out-per­form most of the “pro­fes­sion­als”.

AUSTRALIAN

QAV DUMMY

Five Year Report: QAV’s port­fo­lio has deliv­ered approx­i­mate­ly 16% total returns over the peri­od, sig­nif­i­cant­ly out­per­form­ing the ASX 200 bench­mark which sits at around 9%, a mean­ing­ful 7 per­cent­age point advan­tage over the broad­er mar­ket index.

Month­ly Report: Over the past 30 days, the QAV port­fo­lio declined approx­i­mate­ly 3.96% while the ASX 200 bench­mark fell around 3.78%.

No changes to our port­fo­lio this week.

For FY26: The QAV port­fo­lio is up approx­i­mate­ly 16.2%, sig­nif­i­cant­ly out­per­form­ing the ASX 200 bench­mark which is up around 3.0%. This rep­re­sents an out­per­for­mance of rough­ly 13 per­cent­age points and 5x mar­ket.

QAV LIGHT

All Time

The QAV AU Light port­fo­lio cur­rent­ly deliv­ers an 18.02% total return com­pared to the ASX 200’s 9.57%, rep­re­sent­ing an out­per­for­mance of approx­i­mate­ly 8.45 per­cent­age points.

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Financial Year to Date

The QAV AU Light port­fo­lio has deliv­ered a strong 22.99% return for the finan­cial year to date, sig­nif­i­cant­ly out­per­form­ing the ASX 200 bench­mark which returned 3.02%.

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Last 30 Days

Over the past 30 days, the QAV AU Light port­fo­lio deliv­ered a return of approx­i­mate­ly ‑3.2%, while the ASX 200 bench­mark fell around ‑3.8%.

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Last 12 Months

Over the past 12 months, the QAV AU Light port­fo­lio deliv­ered a total return of approx­i­mate­ly 28.8%, sig­nif­i­cant­ly out­per­form­ing the ASX 200 bench­mark which returned around 11.7%.

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Become a QAV Light Member today and start your investing on the right track

If you want to find out what we’re trad­ing in QAV Light each week, sign up to become a mem­ber. You’ll get an email from me every Mon­day let­ting you know what we’re buy­ing and sell­ing in that port­fo­lio. You can choose to copy our trades or not. It’s the eas­i­est way to start your rules-based invest­ing career… and you don’t even need to know the rules. I’ll fol­low the rules for you. It’s a good first step to even­tu­al­ly becom­ing a QAV Club mem­ber and learn­ing how to run the sys­tem by your­self.

(Note: Amer­i­cans inter­est­ed in join­ing QAV Light or Club please go here instead.)

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AMERICAN

QAV DUMMY

Since incep­tion (Sep 2023), our port­fo­lio is +94% vs the S&P 500 +48%. Not quite dou­ble mar­ket but pret­ty close.

Our U.S. port­fo­lio for the last 30 days was ‑7% vs ‑4% for the S&P 500.

No trades this week.

QAV LIGHT

In Decem­ber I start­ed our U.S. Light port­fo­lio, and it’s out­per­form­ing the index — it is cur­rent­ly +2% vs the S&P 500 ‑4%. It’s had a par­tic­u­lar­ly good month, +5% vs the index ‑4%.

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THIS WEEK’S EPISODES

Drilling for Dol­lars: BRK, the Strait of Hor­muz, and America’s $41 Tril­lion Hole — QAV AU 913

Prof­it­ing from Chaos – QAV Amer­i­ca 46

STOCK NEWS AND UPDATES

COMMODITIES

No sig­nif­i­cant com­mod­i­ty sta­tus changes this week.

DISCLOSURE

Please review our trad­ing and dis­clo­sure pol­i­cy.

SIGNING OFF

Well, that’s anoth­er week of dig­ging deep into the num­bers and stay­ing focused on what real­ly mat­ters — find­ing qual­i­ty com­pa­nies at sen­si­ble prices. While every­one else is chas­ing the lat­est shiny object, we’re build­ing wealth the old-fash­ioned way — by build­ing a port­fo­lio of one under­val­ued qual­i­ty com­pa­ny at a time.

I’m off to Bundy with the fam­i­ly for a week, so if I’m slow reply­ing to emails or pub­lish­ing buy lists or what­ev­er, you know why. I’ll be doing kung fu on a beach, drink­ing Bund­aberg Gin­ger Beer and chas­ing sol­dier crabs with Fox.

SSDD!

• Cam

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That’s it for the week!

QAV A GOOD SHAREMARKET!

Got a ques­tion? [email protected]