The Sociology of Finance
Portfolio strategy

National Western Life: An Asymmetric Risk-Reward Opportunity

National Western Life Insurance (NASDAQ:NWLI) is a provider of life insurance and annuity products based in Austin, TX, with its business divided between domestic and international markets, particularly the Caribbean and Latin America. For a variety of reasons market participants have given the company an unjustifiably low valuation. In this article, I will describe the reasons why I believe investors give the company such a steep discount and argue that this unwarranted pessimism has created an attractive asymmetric risk-reward opportunity.

Disappointing Business Performance

In recent years, NWLI has exhibited lackluster performance:

NWLI Return on Equity data by YCharts

It is very reasonable for the market to be nonplussed by NWLI's business performance since the financial crisis. With ROE...

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