Validea David Dreman Strategy Daily Upgrade Report

Validea's Contrarian Investor model, based on David Dreman's strategy, has upgraded two stocks: BANK OF EAST ASIA LTD (ADR) (BKEAY) and DEUTSCHE LUFTHANSA AG (ADR) (DLAKY). BKEAY's rating improved from 71% to 86%, while DLAKY's rose from 70% to 84%, with both now exceeding the 80% threshold indicating strategic interest due to improving underlying fundamentals and valuation.

Analysis

Validea's Contrarian Investor model, based on David Dreman's strategy, has upgraded BANK OF EAST ASIA LTD (ADR) (BKEAY) and DEUTSCHE LUFTHANSA AG (ADR) (DLAKY), signaling increased strategic interest. BKEAY's rating improved from 71% to 86%, and DLAKY's from 70% to 84%, both now surpassing the 80% threshold for strategic interest. These upgrades are attributed to improving underlying fundamentals and valuation, consistent with Dreman's approach to identifying unpopular mid- and large-cap stocks.

BKEAY, a mid-cap bank, passes key valuation metrics including P/E, P/CF, P/B, and P/D ratios, alongside strong EPS growth and yield. However, the model identified weaknesses in its earnings trend and return on equity. Despite these specific failures, the overall fundamental and valuation improvements drove the upgrade within the contrarian framework.

DLAKY, a large-cap airline, demonstrated strength in earnings trend, EPS growth, P/E, P/CF, P/B, current ratio, and total debt/equity. Conversely, it failed on price/dividend ratio, return on equity, and pre-tax profit margins. The upgrade to 84% suggests the model's positive assessment of its overall fundamental trajectory and valuation.

The moderately positive sentiment and bullish tone associated with these upgrades, coupled with a low market impact score, indicate a favorable but not immediately disruptive development. While neither stock reached the 90% "strong interest" threshold, their current ratings suggest they warrant further attention from contrarian investors.

Key Decisions for Investors

• Consider BKEAY and DLAKY for deeper due diligence, particularly for portfolios employing a contrarian or value-oriented strategy.
• Monitor BKEAY's earnings trend and return on equity for signs of fundamental improvement, as these were identified as weaknesses by the model.
• Evaluate DLAKY's profitability metrics, specifically pre-tax profit margins and return on equity, to assess the sustainability of its fundamental recovery.
• Recognize that while these upgrades indicate strategic interest, they do not yet signify "strong interest" (above 90%), suggesting continued vigilance is warranted.