Original Episode: QAV 428 Club

Cameron 00:07
Welcome back to QAV, TK. Episode 428. Still in lockdown. It was just like Episode 427.  And you told me earlier that somebody said that it could go on for a long time. Norman Swan said something?

Tony 00:27
Yep, still. Still here still at home. He did…. Professor Norman Swan today…. You could just see the faces of the people interviewing him. They just dropped. It was like, they were talking about the COVID outbreak in Sydney. And I think we had 117 cases yesterday, and we’ve got 89 today or something. He said, ‘Yes, this could go on for 5 or 6 months in Sydney’. He said, ‘You may still… He’s in Sydney. So he said, ‘We may still be here until Christmas’, which was a cheery thought. Very surprising, because, you know, the government still says or maybe next week, maybe next week.

Cameron 01:02
Wow. So how are you holding up?

Tony 01:05
Yes, I’m good. Really. It’s been a bit of a holiday. I’m probably starting to get a bit bored now. It’s been three weeks. But now, I’m good. I’m just enjoying it. I was telling someone earlier today, I think I’ve saved about 2 hours a day by not going for walks and not playing golf and practicing golf, going to the gym, all that kind of stuff. So yes, I’ve just been catching up on all the old jobs and lots of the progress on QAV on three point trendline automation and Dylan’s back testing and all that’s been good.

Cameron 01:37
You’re getting some exercise in that?

Tony 01:39
Yes, I do about half an hour of stretching and tightening in the morning still, only just to keep my back in order… [crosstalk]

Cameron 01:46
Have you got a treadmill?

Tony 01:47
No, I was one down stairs, but we can’t use it.

Cameron 01:51
The gym now you should get one just delivered put it on the deck. [unintelligible 01:56] treadmill overlooking a bike or something. If you are going to there for six months?

Tony 02:00
Well, we can’t. Officially we can go for a 10k walk like you can go 10k radius. So I mean, I was [crosstalk 02:07] for the last couple of weeks because we had a COVID case in the building but that’s getting closer and closer to two weeks ago. So I think when that happens, I’ll feel a lot more comfortable going out into the local area.

Cameron 02:19
Right… Get going on walks. And I believe we’re starting a cooking show spin off from this. What’s cooking TK? We’re going to call it, you’ve been cooking? You told me.

Tony 02:33
Yes, Jenny and I both cook. We have been going doing like one big shop a week, which is like we used to do before we moved into the city apartment. And then cooking…. So you probably only have two meals a day. So calories have been rationed back since we’re not going out all the time. And we’re not exercising. It’s actually being good. [crosstalk 02:56] cooked on Sunday.

Cameron 02:59
I did not know that you knew how to cook. I’m shocked.

Tony 03:05
Oh, yeah, I raised a family, mate. You can’t not do that.

Cameron 03:08
[laughter] Yes fair point. Good stuff. Well, that’s good. I’m glad you’re keeping your spirits up. I’ll tell you what raised my spirits in the last week was looking at the open ended equity fund performance in Morningstar for the 2021 financial year. Some really great results there. Perpetual Wholesale Geared Australian 98% return. Ausbil Australian Geard Equity 86% return. AMP Capital Specialist Geared AUS Share A 70% return, Spheria Australian Smaller Companies 57%, PM Capital Global Companies 52, Pengana Emerging Companies 50%, Vanguard International Small Companies Index 49%. And then coming in at number 8 Spot QAV portfolio at 48%, leading Hyperion Global Growth Companies at 46%. If we were a fund, we would have come in at number 8 last year.

Tony 03:27
Yes, that’s pretty low for us. We should be aiming higher. I think we should be going out and gearing the fund.

Cameron 04:21
Would that make any difference?

Tony 04:22
Well, that’s what some of those, I think the top performer was geared, wasn’t it? So it should double your returns if you’re 100% geared.

Cameron 04:27
OK, is that how that works?

Tony 04:29
Yes, it’s a return on equity and I think they’re quoting return on equity. So if you’ve got lots of debt also exposed to the same strategy you should be making twice the returns. Think back when we had GEAR and our portfolio which was a geared Aussie Stock ETF… if you have a look at the share price graph of that and compare it to the ASX, it basically went up twice as fast and crashed twice as fast because of the gearing. Last year when the COVID cough was going on, we spoke about people gearing up to buy back in I wish I had, because like that kind of 48% return would have been much higher if we geared up to do it.

Cameron 05:10
Well, as I pointed out in my Facebook post on this, you know, I’m sure all of these funds have huge staff of full time highly paid highly skilled professionals working 80 hours a week devoting themselves running their funds. You spend, I don’t know, half an hour a week thinking about what QAV portfolio should do, over coffee looking at your window, and you beat 7 of them…. You beat all but 7 of them, I mean to say. Well, there you go. And I was surprised by this, actually. Because I thought well, the market had a great year last year’s. As we said last week best year recorded history for the ASX. Maybe in pre recorded history in the before times before we recorded things. The ASX did better, but, and yet those performances weren’t always thinking there would be like 300% and 400%, and all that kind of stuff but apparently they didn’t all just by afterpay. And hold on to it all year long.

Tony 06:22
Yes, well, I mean, to be fair to them, they’re probably operating a much bigger fund. So they wouldn’t have C6C and some of those smaller companies that we have true in their [crosstalk 06:33] But I guess to put it also in perspective, I doubt if there’s many people out there who are completely invested in one of those funds. They usually would spread themselves over a number of funds, just to balance out diversify the risk, which would have been the standard sort of financial advice but good luck for someone if they were holy spoilers invested in one of those funds but, you know, I’d be fairly certain those funds won’t be the top funds next year because there’ll be a dogs of the Dow in reversal sort of the thing that goes on with fund managers that one particular strategy, like gearing into overseas small caps has worked well this year, but it may not work next year. I know from my experience that the QAVs always up there in terms of its performance. It’s very rare that it underperforms that league table.

Cameron 07:28
But it’s a good point that you know, we’re buying some of the smaller stocks that they wouldn’t be able to invest in speaking of which, I think you know, I bought GLE a little while back, it’s moved. It’s done nothing. Then it rocketed up 3% out of nowhere today and then fell 6% an hour later, so Taylor and I were high fiving at 10 o’clock, and by 11 o’clock we were crying. So I thought it was him that sold. I thought it went up and then it was him or his mate Chris it got out as went up just to crash my my holdings. Alright, other news of the week Mark Mangano sent us a note one on Facebook, ‘Just want to say thanks as a completely novice investor, I’ve ended up with a 61.63% total return for the last financial year according to share site. Obviously not expecting that sort of return every year but QAV is definitely working well for me’. Congratulations, Mark.

Tony 08:34
He’s where is he on the fund table. He’d be number one wouldn’t he?

Cameron 08:39
He be number 1, 2, 3, 4?…. He’d be number 4.

Tony 08:43
Yes hold on, Mark, you might have a new career.

Cameron 08:47
Yes, he should email some of these fund managers and say, ‘Hey, you know, I need a job. You should hire me’. Buffett and the ABCs Tony… I read this interesting article saying that Warren Buffett warned the Bill and Melinda Gates Foundation CEO about the ABCs which he was talking about I think the foundation and you know, as he’s sort of leaving active participation in the foundation, he obviously had sort of an exit meeting with the CEO there and said to him that, ‘he sees the big threats to organizations like that, Arrogance Bureaucracy and Complacency’. ‘The ABCs – cockiness red tape and self satisfaction’, he said is the killer of all very large organizations. Although that was an interesting quote coming from Warren. He’s probably been inside many large organizations. It’s interesting to hear him say something like that. What did you think of that?

Tony 09:53
Yes, he’s been saying it for years. And if you look at how Berkshire Hathaway runs, he tries and keeps the admin [unintelligeable 10:00] It’s down to a really small percentage of the corporate overheads of total size. So I guess you measure by total sales, maybe but he’s always said that he’s got a team of… He used to talk about a team of 16, it’s probably more like 25 these days…. Head office doesn’t need reporting to come in from business heads on what they’re doing. You know, I got a problem ring him up, you need to make an investment, you got this much to do it yourself with but otherwise, give me a call this much leeway to do it yourself. Otherwise, give me a call. So, yes, it’s a very different way of running a business. And it’s a really good way of running your business when you think that big corporations and I’m looking out the window. Now those big towers in town. And, you know, they’re running corporate overheads, and maybe 10% of of sales or 10% of profits, even sometimes. That’s a huge drag on a business. You know, we both work for big businesses, we just see rows and rows and rows of workstations and wonder what they all do so and a lot of it’s doing business with yourself. It’s compliance, it’s HR, it’s all that kind of stuff. I don’t think Berkshire Hathaway has a HR department. It’d be HR departments in the trading companies, I would think but yes, Berkshire Hathaway doesn’t see a need to do it. So yes, it’s so refreshing way to run a business. It’s more like a small business running a big business.

Cameron 11:31
Yes. It reminded me the Arrogance and Bureaucracy thing of when I did work at Microsoft, because I saw a lot of that in Microsoft’s heyday, very arrogant, very bureaucratic. And it reminded me of; there was an email leaked recently that I saw that Bill sent to his senior executives at Microsoft, when Steve Jobs launched the iTunes store in 2005. I think it was just after I left Microsoft. Now 2003, I think it was, I was still there. And Bill was like, how did he do this? I have no idea, they had no idea was coming. Bill had no idea how Steve could have got the record companies to agree to it. And he was talking about the streaming apps that they were involved with then real etc, real networks, and how they just been completely Quantum Leaped by Steve and it was that kind of stuff at Microsoft, I think they just got very complacent to with their control of the world. And then Steve came along and launched the iPod, the iTunes Store, the phone, the iPad, and and then died and did the quad factor.

Tony 12:54
I can believe your story about Microsoft not knowing about the iPod before it was launched. Otherwise, they would have done it themselves first. So, I had a whole history of just copying whatever Apple did, including the operating system when windows came out.

Cameron 13:10
Yes, well, I remember, when the iPhone came out, Steve Ballmer, who was running the company at the time famously did a lot of press saying it was going to file the iPhone. Nobody wanted the iphone, Apple didn’t know anything about making devices, etc, cetera, etcetera. So he kind of signed his own resignation. [crosstalk 13:29]

Tony 13:32
And then he launched the Microsoft phone.

Cameron 13:35
Yes, which flopped. Ok. Over to you. Your trades. You wanted to talk about some trades you did last week and why you skipped retailers?

Tony 13:49
Yes. So last week, I flagged that I was going to do, a sale of virgin UK. And then I was going to ribuy with those funds because I was waiting 48 hours for the show to go out and giving people time to make their own decisions on what to do. I didn’t want to front run anything by talking about what I was going to buy before the podcast went out but I did give a list of four stocks that I was considering. And you know, one of the reasons for having 4 was that I didn’t know what was going to happen in 48 hours, one of them might go up or nine might go down or whatever. But what I found and I’m sharing this now not so that people should be doing what I did, but they can see my thinking behind what I did. So it’s not a recommendation in any sort of shape or form. But what I found was there was there was two retails on the listen to gold company. So there was JB HI-FI and a Grey Daze and there was Ramelius [phonetic 14:46] Resources and Silver Lake Resources.

Tony 14:48
So 4 companies…. I think from memory, the retailers may even have been slightly higher on the list or one of them may have been slightly higher, but I did skip over it and the reason why was; if you have a look at their share graphs, even though they’re still in buy territory, so they’re well above their sell prices and above their buy prices too by a long way, they’ve been trending down recently. So they’ve been dropping off. And I don’t like necessarily putting new capital into something which is in that situation. So even though it’s in a long term buy, if it’s trending down, I’ll wait and see if it turns around and and look to reestablish when it does get an uptick. But a gold miners were on the uptick situation.

Tony 15:33
So I went in bought some of those instead, I also already had some smallish positions in Ramelius and Silver Lake. So it was nice to add to those to bring them up to a sort of core weighting in the portfolio. And that was historically the case, because I don’t know for a long time, but hadn’t had into them for a long time. So that was good. The other thing I just want to sort of, I guess, talk about as amusing, so not necessarily a hard and fast rule at the moment, but something I’m thinking about if you have a look at the graphs for some of those, the Gold stocks in particular. And then we can compare maybe to one of the retailers but pull out say RMS, which we’ll start with first, just kind of call up and stock doctor [phonetic 16:16] here. You can see that, it’s clearly in a buy territory situation. But you can see that…. if you look at the high point, if you’re coming to this graph ratio just using our basic rules, which is used the high point, and then the one to the right, so the high points July 2020. And the next high point to the right would be September 2020. If you draw a line, you’ve almost got like a recent buy for this particular stock.

Tony 16:53
So even though it would have been in buy territory for a long time, going back to at least April 2020. And probably even going back further to December 2018, if not even earlier, because it’s been in a general uptrend for a while. I’m just sort of thinking about this idea of what I call a second peak. So rather than going back and looking at the buy line sign following the sell line and working out when it would have been bought. It’s also in a bua at the moment as well, which is starting to firm in my mind as being a nice test. If you’re coming into a company that has been in an uptrend for a while. And you’re wondering whether it’s sort of good to go into it again, I haven’t done much testing on that but just the thought and if you compare it back to say a dares.

Cameron 17:50
Hold on. Before you move off there, can I ask a question about Ramelius.

Tony 17:52
Yes, sure.

Cameron 17:53
So, there was a peak on the 31st of May when it hit $1.97. But then it dropped back at by the end of June to $1.695, and it’s still sort of around $1.69 now. Isn’t doesn’t that you know, sort of look like the bank situation where it’s dropped off for the last 5, 6 weeks.

Tony 18:19
Yes, it has. And I must admit, when I bought it, it was slightly picked up there, at the very last drop during the month. So it’s come back a little bit back to being a flatline but the point I was making is more about the factors back into a second buy situation.

Cameron 18:35
Yes, I thought that bit. You were saying just earlier that when things are sort of trending downwards, you want to wait until they do an uptick. I’m just not sure how this would look going by that rule but you said it was coming back up when you bought it. [crosstalk 18:50]

Tony 18:54
Yes, I’m pretty sure when I looked at it on Friday, when I bought on Thursday night, it was back up. So that last flatline was slightly up….

Cameron 19:01
Sorry, so I’m just moving to a 30 days daily view. So what was Friday the [unintelligeably 19:09]. This is dollar 60. So the dollar 64 on the night, it’s even lower, but then it came back up to dollar 71 and then drop back down.

Tony 19:23
So, at the moment it’s going flat. at one stage it was going up, amd it’s come back down again a little bit. But yes, now I’m generally happy that’s still in an uptrend. If you compare it to the retailers, they will probably even contrast that a bit more. [crosstalk 19:36] Yes, so you can see that, it’s definitely come back. And if you looked at the graph now it went to the highest point, there is no peak to the right. So it’s pretty hard to draw a buy line. So it’s dropped off from its high point. So that’s one of the reasons why I decided to leave.

Cameron 19:58
You mean hard to draw a second buy line.

Tony 20:00
A second buy line correct….. We can draw a buy line. It’s certainly in buy territory. But just this idea of getting another signal. A more recent signal I think is interesting. So anyway, that’s something are watching that was certainly in my mind when I was doing the research into these companies last week. Not recommended at all, not telling people they should sell if they already have these stocks. It’s by no means a recommendation either way. I just wanted to explain my thinking about what I did last week. It was kind of interesting.

Cameron 20:33
So let’s talk about HUM. I did say a couple of months ago, that HUM is a dumb name, but I went and bought it anyway because it had a good score. And then it hit some troubles. So for this Forum Finance business last week, I know that it’s up 3% today at the moment.

Tony 20:54
Yes. And I think sentiments got to be a bit of a guide here because it is sailing reasonably close to it sell line. I think it’s gonna be around sort of 94 cents, maybe it’s back up to $1. It got down closer to that last week when they made an announcement. But I was a bit disappointed. The announcement was a bit light on detail. I don’t know if they’ve made another one recently, since last week when I last had a look. To summarize, there’s a company called Forum Finance which the Westpac bank, are taking to court and trying to get wound up to repay some debts. Forum Finance is a company….. Again, there’s not much information out in the marketplace, but from what I’ve read is a company which arranges equipment leases and equipment finance.

Tony 21:53
So, it’s a middleman I guess, with the bank. So the bank will then Forum Finance money and and foreign finance will go out and break that down to the small parcels and allow people to buy equipment on leases, like photo copiers, printers. This is often a big thing in a catering field. So I think coffee shop you talking about the coffee maker, and the big Italian espresso machine might be on an equipment lease. And then foreign finance would make their money out of the gap between what they can borrow the amount for and what they can lend it for to the bearing customers. Now looks like Westpac are alleging that all of the invoices that a lot of the year, applications that foreign finance used from end customers to arrange loans were fraudulent. And I’ve confirmed that with a couple of the leading customers who are large, like some of the big retailers.

Tony 22:50
So the guy who runs the Forum Finance has left the country. Anyway, this is all playing out in the course at the moment. And I don’t want to allege anything at the moment until we get resolution but the strange thing was [unintelligible 23:06], which is high, I pointed out and our checklist came out last week and said they hadn’t exposure, because of all this of $12 million now. That’s pretty much all they said. They said that they had some of these equipment financing, I guess loans on their books, and they sold that in the past or somebody else. So it’s a bit hard to understand exactly what their exposure is but I guess what they’re saying is it somehow Forum Finance, if they’ve prosecuted fraud, and maybe also borrowed money from from harm, which is in the business of again, loaning people money, it’s a it’s a buy now pay later operator that’s been around for a long time. And people will know when from going into a Wychwood store and maybe putting a fridge on on 4848 months interest free terms, for example, that is often provided for by home which used to be called Flexi group. So we don’t have much information and one of the people on the Facebook group on on the QA, the Facebook group asked a question about it.

Tony 24:13
So that’s, that’s as much as I know, it’s kind of peculiar that harm having exposure if they sold that loan book to somebody else, but maybe there’s a clause in that sale agreement, which, you know, provides some kind of warranty to the purchaser. I’m not sure. But my response was until we know more information, we sit tight, and we look at the sentiment, which is turned up today. So maybe people are starting to work out that the raw million dollar exposure is may not be as bad as first thought.

24:44
Mm hmm.

Cameron 24:46
All right. Well, thanks for explaining that. I read I read the announcement last week as well. I was like yeah, what are you trying to tell me? Yeah, I don’t really know is this is this bad. yet? It actually I got The impression they didn’t really know, they were like, Listen, we got to put something out. We have an obligation, but we don’t really know yet what what it all means?

Tony 25:07
Yeah, possibly. And it’s oftentimes when the when the notice goes out and it’s pretty scant that they’re trying to comply with their obligations to keep the market informed. But they haven’t had time to run it the ground yet and work out what’s going on. So yeah, that could be the case.

Cameron 25:22
I’ve got the sell price in stock doctor, the alert set for 91.8 cents, by the way.

Tony 25:29
Okay, I just did a rule check. There’s about 94. But okay.

Cameron 25:34
Okay. Somewhere around that. Well, hopefully, I don’t have to worry about that. We’ll see. Yeah. The dogs of the doubt. 2017. You told me you pulled out an old spreadsheet.

Tony 25:47
Yeah, funnily enough, I was just like, tidying up by my folders in my files on based on my laptop over the weekend, fun times when you’re in lockdown. But one of them I came across was a an alpha from 2017, which had a list of 10 dogs of the Dow. And so I spent a bit of time working out how they went between now and then. And, you know, no, this is not the way the dogs are they I was meant to work that you hold on to it for four years. But anyways, the the the stocks in question were Domino’s Pizza, Telstra, vocus brambles, Harvey, Norman graincorp, Coca Cola, QB, or the skew metals and healthscope. And overall, those stocks were up on a compound basis, which are up 65% in total, which was about 13% compound growth. And the ASX did about 6% over the same time period. So they did double market, which was good, but nothing to sort of write home about really. And the interesting thing I thought was that if you took four askew metals out of that, that list which had tripled in value, or went up three and a half times in value, the the performance is even a little bit more anemic overall. So for those key medals had a compound growth rate of 46% per annum for those four years. And I just sort of struck home to me again, that, yeah, that the dogs of the Dow does represent value. But Fortescue metals has been a core holding for us in both a dummy portfolio, my own portfolio for a while now. So there are probably better ways of identifying the value stocks, in the contrary in stocks, which we do with q IV.

Cameron 27:40
Didn’t you just say that it’s done double market for the last four years? Isn’t that our isn’t that our objective as well? Double market?

Tony 27:46
Yeah, but that’s good point. But I think we would have achieved better than that. I haven’t gone back and had a look, but 13% kegger. over that. Four years is not great. I think we’d be getting a normal sort of 1918 to 20%. Over that four years. Right? Yeah. So possibly, we’re getting triple market over that four year period. Anyway.

Cameron 28:06
funny to think that FMG was considered a dog four years ago. Yeah. Now they rule the world. Yeah, for now. Let’s rolling it. Yeah. Bye. For now. Yeah. Yeah. All right. Yeah. Interesting.

Tony 28:21
When I talk about that, given we were talking about dogs down last week. Yeah. You’re stuck at the week, Tony. Well, I just I recorded a session with Phil Muscatello, today, a 10 minute sort of, we call I think he calls it the weekend stock update. So I did a deep dive into two stocks I did madusa mining, which I’ll just rehash, there’s a stock of the week. I also did a dive into Millennium services, which was our number two stock on the QAV index. I’ll come to that second. But I wanted to just go through these. And it’s in preparing for Phil show in I went back and looked at not just our scores and our numbers, but also annual reports and try to do a bit of a use search what was going on with the business. And it was actually a really interesting process. And I just wanted to outline it because it might be that, you know, when we talk about do your own research, once you get a download, it’s some people might feel more comfortable almost writing up a stock report. Rather than just saying, here are the numbers and here’s a score, at least it puts it into a sort of format that they’re probably used to getting from stockbrokers and reading in the paper and stuff like that. But anyway, long story short, I use the annual report from a do some mining, or use, they have a quarterly report because mining stocks must report quarterly. And then our QAV numbers to pull together a sort of profile for it. reducer is a Philippines gold miner. And so straightaway that highlights some of the risks which are going on at the moment. They’re in the Philippines, they’ve got sovereign risk. It’s a mine, which is overseas outside of Australian law and tax jurisdiction. So there could be some risk there might shine there, it will eventually I mean, the Philippines is, you know, still operating as a solid sort of country is COVID, rich. In a quarterly report, the management of mine called out the fact that there was COVID in the area, they’ve been in lockdown, but they’re still operating as normal had managed to put procedures around COVID in place, and we’re still forecasting there to reach guidance, which was good. So there’s a couple of risks there. It’s also a goldmine. So there’s a risk of the gold price that the gold price comes down and the profitability of the company will come down. And that means I went to the gold chart and had a look at it. But it’s still certainly in an uptrend as far as we’re concerned using a three point trendlines. The company’s commence paying a dividend in the last half, which I think is a big vote of confidence in the company by management, you don’t start doing that. If you think you might have to cut it at some stage in the future. And it’s on a 5% yield, which is pretty, pretty neat to 5.85%. And I had to look last week, that’s that’s unframed because it’s overseas income, but it’s still a high yield. I guess the other point to make at this point in time is that ronnie a month away from getting fresh figures from these companies, so if anyone wants to is considering buying things at the moment, they they certainly can, as I did last week in selling virgin UK and and buying some of the gold miners, but they also may want to wait for another month and see what the new results are. or certainly be aware of that. It’s coming up.

Cameron
Do you own MML?

Tony
I have a small holding an MML. And that’s because I was doing that champion challenger strategy where I’ve been testing a replacement theory of selling out of the lowest QAV stock in my portfolio and buying into the highest one and I’m only doing it for a small parcel of shares and MML was… GLE was higher on the list but was too small. But MML I could do, so I’ve got about $100,000 in email at the moment.

Cameron 32:24
That’s a small amount? I have a small amount of MML. A lot smaller than your small amount of MML. Anyway. I just thought I just thought I thought we should declare that we both own that’s.

Tony 32:37
Yeah, no, you’re right. I just wanted to make the point. It’s not a core holding, because it’s too small. Anyway, then I started to think about the business like the numbers in this business are amazing, the trades on a price to operating cash flow of less than 1.5. And it’s P/E is just over two. And its yield is over 5% nearly approaching 6%. Its net tangible assets are $1.21. And the share price when I had a last look was 86 cents. So this is like going down the street and having a local coffee shop operator ask you if you’d like to buy the coffee shop for less than the breakout value of it. And for one and a half times the cash flows. And you know, twice the P/E, so get your money back in two years. It’s like the buy of the century really is from the numbers point of view. And you sort of say, okay, what’s the catch? And he says, well, it’s in the Philippines, it’s not down the street. So you know, there is some risk involved. But I think I think the numbers are so compelling you take the risk really wouldn’t you want on a stock like this? I say anyway, I thought was interesting exercise and, and sort of laying out the risks and laying out the reason for buying it. There. There are other things in there as well. The financial health is strong. They’re doing explore exploration to extend the mine life, that’s a risk because single mine companies have a risk of the mine runs out of gold over a number of years. Excuse me, so they’re um, they always need to explore an area and try and find ways of finding new all loads to tap which which this is happening with Medusa. Yeah, so the share price graph is good. Consistently increasing equity was was good for this company. And then one of the quarterly reports or maybe the annual report, they said they’d paid down all the long term debt. So there’s no long term debt for this company. So you know, it’s pretty well, well situated. I think the other risk, one thing I didn’t like about it was that the directors only held 1% of the company. So given that so cheap, I was surprised they weren’t buying more into the company. So, you know, there’s some risk, but I think the valuation of this one’s very compelling. I just wanting to go through that process of writing a stock report almost, you know, 10 minutes stock report to see yourself to say, is the recent here’s the, here’s the valuation metrics, which I find compelling. And it was a good way of outlining it for people who might want to do that if they’re kind of new to doing their own research, it’s not a bad way of doing it.

Cameron 35:24
I’m trying to figure out how I’ve lost so much money on it. After listening to all of that. I bought it average unit cost of 94.5 cents. I’m just looking at it’s looking at its child stock doctor trying to figure out when it was ever 94.5 cents. Like how the hell did I pay that much for it? I bought it at market, I would have put it in that market order. And somehow I paid way more than it looks like it’s ever been. When did you buy it? I’m trying I’m just drilling down into stocked up to I’ll tell you in a sec.

Tony 36:01
It was. Yeah, it was 94 cents in February. According to the 11th of June 11th of June this year. Yeah. Wow.

Cameron 36:14
Yeah. It peaked on the 11th of June. I bought it the Curse of Cameron. Yeah. If you get if you look at if you look at the like 30 day chart, it peaked on the 11th of June. And it is not you just been falling since. Yeah. Welcome. Everybody wants to buy him ml I did you a favor. Yeah. hasn’t fallen five outside yet. half cents today. Say about seven percents. Since Yeah, but I mean, it’s dry. It’s been lowered. I was went down 80 cents, but it’s come back up. Yeah. Alright. That’s interesting. So it sounds like it’s a good, good opportunity. Yeah. And although we’re making recommendations, do your own research. But I then wanted to talk about mining services, which was one point higher on the on the acuity index from Medusa mining. So again, it’s a small company, so I’m not going to ever own this stock. Because you have it in the QAV portfolio. Yeah.

Tony 37:17
Okay, so in the dummy portfolio well, interesting thing about it when I was considering doing this one as the report to Phil for his podcast, I decided not to And long story short, I did the same sort of, you know, write up for it using the annual report. There’s no quarterly report for it, an industrial company, Millennium services is a is a cleaning and security outsourcing company. So it provides cleaning services, and security services to corporations. Like big retailers, for example. It’s had a good year, though, which is probably why it’s on top of our list that couple of things to note, when I was going through the figures, they did management did call out the fact that even though COVID had impacted some parts of the business, it actually had helped some parts as well, because they’re doing deep cleaning. They were doing deep cleaning in Victoria probably selling up again now in Sydney. And they are providing security services, you know, for quarantine, so, they may not continue on hopefully, touch wood. But the big thing that they outlined was they received a large amount of Jobseeker from the government. I’m just going to spend a minute here and call up their annual report. And from memory it was something like $27 – $29 million of job seeker. This was in the annual report. year ended June 2020. I’ve got an item in in the cash flow statement which says that there was a net receipt of government grants of $17 million and they refer us to note six in the financial statements. And if I go down to note six other income year so they picked up $21.8 million in federal Australian Federal government grants and picked up another $2.5 million from the New Zealand government for a total of a little bit from this Queensland state government but a total of $24.5 million and then I had to obviously make out some payments to to the workers, the people who are employed but the net operating cash flow. So net operating cash flow for the half was operating cash flow and stock doctor we have $35 million in net operating cash flow for the half compared with 120,000 for the half prior. This is December 20. I’m looking at and we don’t have the receipts from the government separated in stock doctor but we do see an operating other operating line of $33 million worth of operating cash flow So there was a lot of a lot of money’s coming in elsewhere in the reports, I talked about paying $7 million in extra payments to employees. So my sort of hiring, everyone else has said that they actually paid down a heck of a lot of debt last year to the tune of about 20 million bucks. And so nothing wrong with that, I guess, unless that money was meant to go for wages, but I’m not I haven’t done enough due diligence to know whether that’s the case or not. But anyway, the company received lots of money from the government and paid it paid off lots of debt. So it’s in a good financial situation going forward, it’s it seems to be a good company on most of the metrics. But my reason for highlighting all this is that I don’t think we’re going to see Millennium services as high up on the on the QAV checklist, next half when the next results come out, because of that big COVID payment to them, which went through the operating cash flow line. So I’m not saying we should sell it from the portfolio, I certainly wouldn’t. But yeah, I think it’ll be low down the list. If you look back on the operating cash flow, over the last sort of five or six years, the highest it’s been is $8.3 million. And then before that, after that’s been as low as negative 2.7 million, so without that sort of big job keeper payment, I’m suspecting it’s kind of dropped back into maybe one or $2 million of operating cash flow, which means it won’t score as well for us going forward.

Cameron 41:30
So anyway, it also might mean that when they report their results, their share price might plummet and breach of sell line or something, or we might have to get rid of it. I mean, what are the implications if we hold it?

Tony 41:42
If we hold it, I don’t think there are any many implications, I don’t think I’d be the first person to work out that they’re operating cash flows, you know, been supported by the government. And the company certainly been doing a lot of restructuring to try and reduce their costs anyway, over the last three years. I was reading about it when I was going through their annual report. But I just wanted to highlight the fact that, in some cases, net operating, operating cash flow can be something which is transitory. And so, again, like I never went to this stage of doing my research to buy this company, but I would be, you know, convincing myself that it was still a good company to invest in if I was buying this company, based on its inflated operating cash flow at the moment.

Cameron 42:31
Yeah, that’s what’s going on with them. But if you go back to what I’m looking at the five year chart to get back to 2017, the share price was up around $1.68. And then at the beginning of 2018, it just started to go through the floor got down and with lower 17 cents in May of 2019, and then started pick up just after COVID started to really pick up after that. So yeah, something apparently, oh, maybe they lost a big contract or something. Somebody changed with their business.

Tony 43:02
Yeah. So as I said that, like reading back through the annual report, they talk a lot about spending the last three years restructuring. So it’s, I would guess they had lots of debt, and have a bit of a near death experience a few years ago, which is probably the trough you’re talking about back in sort of 2019, maybe even earlier, as the share price dropped through 2018. And then they actually employed a restructuring specialist as the CEO who spent a lot of time rationalizing contracts. So not not renewing contracts that were low margin or even negative margin. And also invested in technology in terms of being able to attract, you know, who was signing off and who was signing on. And that sort of employee tracking is a big thing in these kinds of companies these days. And if you recall, we spoke to Yon reso, executive chairman of Dempster about how their product was used for health and safety tracking anyway. But I imagine it could also be used for this kind of employee tracking, if you’ve got someone working out as a shopping center doing the cleaning at night, you want to make sure that they’re there, they’re there, they’re productive, they’re safe, all that kind of stuff. So the company did invest in that kind of technology. So yeah, a bit of restructuring went on, was overburdened with debt. And now they’ve been able to pay down a large amount of debt, who knows maybe the p&l their results when it comes around next month actually really good, because the share price has been trending up. But I, I did want to point out just the anomaly in the QAV system that have something strange happens once off to operating cash flow, it can make something look very good to us. Right? Yeah.

Cameron 44:44
I see that going back to late 2018. The CEO resigned slash was fired by the sounds of it pushed and they replaced him with the guy who just resigned then back in May of this year when we talked to This one we were talking about the show once before we completed that restructure that you talked about.

2021-07-20

Tony 45:04
Yeah, yeah, that’s right. Yeah. In the in the notices, and you know, who knows if that’s true or not, but he, he moved on because he sees himself as being a restructuring specialist wanting to go into other situations like that into turn around. And I think they promoted maybe from within, but someone had been there for at least a year anyway, I think into the role. So they see it much more as a business as usual type appointment for him. Yeah. Anyway, interesting. I was looking at the analysis for your show, and I thought was worth sharing.

Cameron 45:41
But this isn’t the sort of thing that you’re going to start doing for all stocks

Tony 45:45
are, I kind of do it in a short handed way? cam. So I still just flick through the numbers and and sort of form the opinion based on that quickly. Sometimes I’ll go into the operating cash flow, if it looks a bit like Millennium services and say, well, hang on, why is it so so big this quarter, or this half? But there’s nothing that structured like that, that I’ll do, I’ll generally, you know, get the QAV score, do some research. And the research being, you know, maybe have a look at the annual report, and he doing you search, and then decide whether to buy or not. But, you know, I’ve been doing it for years. But it was just this process of going out and actually writing it out, which I found very interesting again.

Cameron 46:28
And in your experience, obviously, the job seeker situation is fairly unusual. Yeah. In your 30 years, have you seen things like this happen before where there’s an unusual amount of money that hits a business and then is gone the next year and creates a bit of a spike?

Tony 46:52
I can’t think of it from I can’t think of any other ones besides this. I’m thinking it might be the case, if there’s like a sale of a business and as a payment that comes, you know, as an urn out, maybe or a royalty from a mining company that spun off or something like that. That might be a case, but I can’t think of any specific examples. Hmm.

Cameron 47:14
And even in those cases, though, I mean, they get that money in and then we would assume they’re gonna use it to.

Tony 47:21
And that’s my point of service is they paid off a whack of debt. And that was the that was the biggest risk, I think was being over geared. So that seems to have cleared so we weren’t, we might even find that come the next results of share price goes up. Hmm, yeah. Well,

Cameron 47:36
it certainly gone up since we added it to the Q IV portfolio a week ago. So a couple of days ago, actually wasn’t even that long. Yeah. And that was big semi. Yeah, good. Okay. Thanks for the analysis. By the way, harm is now up. 4.12%. It’s gone up since we’ve been talking. So

Cameron 47:57
twice as bad. As gonna say if we were putting this out live, I would say it’s everyone jumping on but it’s not that. Well, the markets closed. Anyway.

Cameron 48:07
Yeah, I want to do a shout out to all the guys over in wha got an email after the last show from Glen Conroy over there saying, Hey, listen, you mentioned many meetups around the country. And if anyone else is doing in Perth, I’d be interested. And I said, Well, no one is but let me email everyone wi and I think we got like 20 guys, now that a get a go to a are interesting going to a Perth meetup. So that’s great. I’m trying to think there must be a better way of introducing when people sign up to QA v club, if they’re in a major geographical region or capital city, to introduce them into the pre existing QA v community that’s there and make introductions. So I’m going to try and figure out a better way of doing that. Like a mini Facebook group or a mini some sort of thing. So I can say, oh, add yourself to add yourself to that if you want to meet other members in your area, because I think this, this idea of old members and new members getting together for beer and pizza and going through checklists and scorecards, and all that kind of stuff is is terrific. I just want to figure out how to facilitate it. So if anyone has any ideas for a good way of doing that. Please let me know. While I’m talking about club members shout out to James Ed, Andrew, Doug, and I think cosman who have all posted scorecards to the Facebook group in the last few days. Doing a great job. Everyone’s it’s really taking off everyone sharing their results. I think James and Ed got together. They’re only little mini cube AV club and did it together and compared notes as they went. So that’s great. Whereas, so really excited to see people sharing this stuff and everyone else jumping on and you jumping on and providing feedback and commentary. And I agree with this. I don’t know about that. Where’d you get that from? It’s really, really exciting.

Tony 50:24
I agree. It’s good, isn’t it? It’s evolving. Well, it’s really well, I hope for us to get a group of like minded people helping each other.

Cameron 50:32
Yeah, and because I think we’ve been doing this long enough now that we’ve got enough people that have been around long enough, and they not only are comfortable with the process, but they’ve got the results like Mark mentioned earlier with his 61% return. And there’s been other guys who have reported this stuff we’ve talked about earlier, so they know what they’re doing. They know how to run it. So that’s great. They can teach others and spread the live. Speaking of spreading the love add in or out, Tony, we need to

Tony 51:07
I saw them getting used. It’s out. I saw the post last night actually replied on the Facebook group to someone who was asking you about it. And it’s a falling knife. I’ve got to get better at Facebook post because I found a couple of my posts are just gotten misplaced or putting into like, plugged into a different part of the thread than what I thought they were going to go to. So I did I did publish a graph in a and a note saying I had a falling knife. It was part of my latest download which was middle of last week or maybe Thursday because it had bumped up into a buy but it’s been going buy sell buy sell buy sell all the way down it’s certainly below it sell price now as well as being above its buy price. So it’s a falling knife. A Schrodinger Yes. Still, I

Cameron 51:54
think we talked about it a couple of weeks ago and we said a shorting it. So

Tony 51:57
it did still download at some stage between then and now and thinking okay, maybe it’s picked up enough to be a buy, but now it’s a falling knife.

Cameron 52:07
Right. Okay, AGD, Austral gold? no bueno. Okay, unless you have anything else, let’s get into the question where we’re an hour into this, and we haven’t done any questions. Yeah, for me talking about things. So yeah. Ben, hi, Cameron. First time question as a new listener investor. Welcome, Ben. Question about rule one, how much money or percentage is enough to trigger a sell to avoid losing money with brokerage each new stock I buy begins as a loss. But being so small, I’m up to about 10 stocks. Now. Some have dropped a couple of percent before shooting up and others dropped a few percent and stayed there. kindest regards loving the show so far. Cheers, Ben. And I thought it’s good because I actually don’t know the answer to this question, either. Because I’ve got some stocks, like some of the ones I’ve mentioned on the show that are like MML that have fallen. And I know we’ve talked before about well, how close are they to the sell line? So rule number one for new listeners is don’t lose money as Warren Buffett’s rule number one. But you know, it’s so I’m not really sure how, what I should be doing with these. I need this, Ben.

Tony 53:22
Yeah. And I think the first point that the Ben’s realized is that, I think probably every time I buy a stock, if I look at it, the next day, it’s gone down by at least the brokerage, and sometimes it’s taking a downturn that day. So it might be down by more in the short term, it’s just the sort of random nature of when you buy it. But overall, it will go up. So I don’t I tend not to look at things, you know, for a while after I buy them until there’s a trend that’s established. Because Yeah, you just worry yourself about nice down. 1% is down 2% is down 3%. Next is backup 5%. So, yeah, when you’re that close to the bite, it’s, it’s not worth looking at it. Right there. That aside, there is no real hard and fast rule with rule number one, I think, if you took the view that, like you, like you, in the case that you had with MML, you bought something and it’s down 6% or whatever it is, you know, if you sold it, and then you bought something else, and it dropped 3% and you sold it and you’ve bought something else it dropped 5% suddenly you’re down, you know, 14% in three trades. Whereas if you had bought it and wrote it out, because you think it’s a good buy, and the trend overall is up, you know, it may be 10% up so you’ve lost money. So I wouldn’t apply this sort of stop loss rule to anything I bought recently. And then in terms of other than that, it’s really I think it’s context based. So yes, I am I am looking at the three point sell line. If it’s getting down close to three point sell line, I might go a little bit negative in terms of what I paid for it to see if if sentiment turns around. But if it crosses the three point so long I’m selling. And I may have lost a bit more money than if I had just sold it out at breakeven. But that’s sometimes like up sometimes I go down. It’s kind of like a 50/50 bet. But it’s also the context of what what’s the share price doing, like we talked before about Look at that, look at those retailers, and they’re in a downtrend. If I hypothetically, if I bought a dais at the top, and even though it’s still on its uptrend, and it was now down 10, or 20%. And the downtrend looked like it was continuing, and I couldn’t see a reason for it to improve, I might be tempted to sell because of rule number one. So it’s context bias. It’s it’s on the flip side of that we’re now a month away from New figures. So I might hold on and see what the new figures say. Which again, could be worse the share price either way. But at least we’re operating with, you know, with some numbers then rather than five or six month old numbers. So it really is there’s no hard and fast rule. It really is context base. We had an experience with a dummy portfolio during the year that ramillies resources we bought in, put it in the portfolio, it went went up, it came back, it started to trend below our buy price, and I said sell it. That’s rule number one. So we’ve at least preserved their capital, but then it turned around and went for a run. So we would have, you know, made good money out of it. So it’s pretty hard to know what to do in applying rule one. If If I had to sort of sum it up, I’d say if I really thought the trend was going to continue down. And I was at my breakeven point with either Invoker or one, but I wouldn’t do it soon after buying the stock.

Cameron 56:39
How long would you Wait, do you think before you had that conversation with yourself?

Tony 56:44
A couple of weeks or a month? Yeah, right? Yeah. Okay. You know, there’s a different story. If the CEO resigns tomorrow, or the CFO resigns tomorrow, and there’s a you know, bad smell about the company, I’d sell it. But yeah, that’s for a different reason. Really.

Cameron 56:59
I’m looking at, you know, my own portfolio. There’s some stocks there that I bought roughly a month ago. Medusa is one of them. It’s down 6.3% since I bought and that includes brokerage by the way. I’m down at MTO motorcycle holdings is down 4.43% hums down 8.27% GLA is now down. 6% because I opened my bloody mouth and said it was going up and I jinxed it. But again, that that includes brokerage as well, which we then sort of trades on doing brokerage is actually you know, significant. So but you know, when I look at the sell prices for those, they’re way above the three point train line. So I’m like, Yeah, like, if I guess my rationale, what I’ve been talking to Tyler, about these sorts of things is, look, we bought it because it’s scored? Well, it’s good. Well, because we believed it’s a good company, it’s performing well, it’s generating cash, it’s got a good track record. I’m just going to ignore the market until it does something significantly, I bought it for the right reasons. I’m just going to wait and see what happens. Really, I don’t want to be too jumpy about it, you know?

Tony 58:11
No, exactly. That’s I think if you’re jumpy, you just accumulate losses. That way, if you if you saw all those positions, you’re booking your loss of, you know, maybe five to 10% on those on what’s maybe about a quarter of your portfolio, which is going to be a sizable loss, and then you may buy back into things that have the same iterative cycle again, so you’re just compounding your losses. So because you don’t know. Yeah, you don’t know. I think what gives you comfort when, when that happens, and when it happens to me is that if I looked at MML, for example, yeah, it was down 6%. The trend, the share prices, overall is good, it’s going up, even if I had to pick the wrong day to buy it. And the numbers are really compelling. They’re fantastic. So I’d be very confident to hold it through a, you know, a swing below while I paid for it.

Cameron 58:57
And then the other conversation that I had with him was about Myer, because it’s up 48% since we bought it a month, really. Thanks to Solly Lew. Yeah, but and he says, well, should we sell it? You know, take that when and reinvest it. And I said to him the other day, yeah, but you don’t know what you’re reinvesting it in. You know, it could. It could be some dogs, we don’t know. So it gets back to water your flowers and pull your weeds I think for something like that. Yeah.

Tony 59:25
And, and you’ve got capital gains tax. If you’re sowing something quickly. If you’re not holding it for more than a year, you’re paying twice as much capital gains tax. So there’s that issue. And look, you know, if you think about it, if Sony likes it and is investing heavily in the company, he doesn’t think it’s going to go down. Yeah, he’s a very experienced and successful trader. So that was also my thinking about Meyer as well.

Cameron 59:48
He might be trying to take a private again, might be trying to buy the whole thing. drive it all the way up to the moon. Could I say the Wall Street read it’s no Hey, good question, Ben, thank you for asking that to clarify that another one from Ben. He says as a fairly young investor similar age to your sons would Tony can, Scott sorry, would Tony consider certain stocks as better stocks to invest in when considering longer or short terms in the market? For example, what do you ever consider adding a metric to the scorecard highlighting a stock higher for potential growth over 30 years as opposed to say, five years I asked fairly navely as a 25 year old, I’ve had my first lesson understanding super and reading that super funds offer different strategies of investing depending on your age, for example, going to more cash as you get older, as a more safer, less risky away, as opposed to more money in the market for compounding potential over 40 years. hope that makes sense. Wondering what Tony’s thoughts are for QAV strategy for younger investors with a heap of time, as opposed to QAV for you old bastards 50 Plus, he didn’t say all bastards, I added that in but I yeah, I could read between the lines. Thanks,

Tony 1:01:06
Ben. Great question. And Geez, all I can say is I wish I was you starting out. Having such a level head on your shoulders and working out what to do. And yeah, standing super in investments. It’s fantastic. I mean, you’ve got such a head start on people like myself, and and probably you can as well that probably, definitely facetious. You can’t really you can’t wind back the clock and get that back. So you can’t i can’t under emphasize how important it is. They’re just starting at 25. But to answer your questions, the first one about if I knew something was going to be a better 30 year stock and a short term stock. Yeah, I definitely score it well, but I’ve got no idea. what’s what’s the stock the whole for 30 years. I’m thinking back was 30 years ago from now the 1990s. There’s a there’s There are so apples, Apple. Yeah. Well, that’s right. There’s one is Amazon is Apple, Google. Yeah. But there was also an MySpace headstock, pets.com. And pets.com. says, Well, at the time, but I was thinking like, Yeah, why would it be part of korsmeyer? Back then, but I’m not sure it would have been a great investment to hold for 30 years. So if you have any insight into what makes a good long term hold, let me know about it, I find it really hard to predict. You know, Fortescue metals wasn’t around them. But it’s been a great part of our cornerstone of our portfolio. So yeah, what I did think of was property was your own house. So benefit, if you don’t own your own house, or you’re thinking about when you might buy your own house, that’s certainly a long term hold. And it does give you the benefit, as we spoken about in some of the early shows of them, once you get your mortgage under control, to really gear into the market, and start to invest once you have your mortgage under control that property will give you a you know, maybe 910 11% return longer term, but the gearing ability of being able to borrow means that the ROI on your equity in the property is huge. So it’s a, it’s a bit different to the share market where use it’s much harder to get into, unless you have a property where you pay down the mortgage, and you can get into it without equity. So that would be where I’d be focusing your attention. I mean, it’s great to be invested in the share market, you should do that too. But if you if you can get your property underway, that’s a great 30 year hold. In terms of what you said about super, and you’re making good point. So the conventional wisdom with superannuation is if you think about superannuation, it gets offered to people who are employed, generally they have to tick a box and say, I want to go into a growth fund or a balanced fund or an Income Fund, or whatever. And the conventional wisdom is you go for into growth funds, your first 20 years and then balanced funds after that, and an income on retirement. And I’ve never really bought into that argument because I think he should be putting your money work at his best return. So I’ve always been fully invested in the share market using my system and haven’t tried to balance it away with, you know, other asset classes. I don’t like diversification. Having said that, you know, we do have property, we live in a nice apartment and all that. So we are somewhat diversified away from the share market, but really, we’re still part of the Australian economy. So generally, if one hurts one, it hurts the other. Anyway. So, Ben, I think you’re doing great. I don’t think he should go into a balanced portfolio as you get older. I think he’s staying in growth assets. The rescue, which the financial advisors will talk about is the day before you retire, the share market crashes and you go into retirement with a sort of an income than you thought you had and that’s certainly a risk but as people like Steve Sammartino have said you just take the dividends and keep going. Because, you know the dividends will if they do drop or drop much less than the share market does because Companies will do whatever they can to keep those dividends going. So yeah, I don’t buy into that stock market drop on the last day of working type argument. I think you can recover from that. And the flip side is, if you if you’ve been in a growth portfolio for a long period of time, when you get to retirement age, you’ve got a shitload of money. If it does drop by 20%, today, before you retire, you just shrug your shoulders and say, Okay, well, I’ll make that back in the next three or four years, or one year or six months, if you’ve got a great investment strategy, so it’s never worried me.

Cameron 1:05:34
I said to I read my reply to Ben, I said, it’s great question, last, Tony. But my guess is that if Tony knew what was going to do well over 30 years, he would buy it correct. You know, that’s the because, you know, you’re a long term investor, too. I mean, you’re a young guy, you plan to be around for at least another 30 years. So if you knew you would buy that, if he knew something was going to do consistently, well over 30 years, you would buy it, right?

Tony 1:05:57
Yeah, I would. And I haven’t been able to identify that. I mean, there’s, there’s the Peter Lynch approach, where if you look around with all the big brands that you use, you know, the the Myers and the credit card, the bank that you use, you get your mortgage worth and the utility you get your gas with, and all that kind of stuff and put a portfolio together of solid brand names. As my wife table before we were married before we were together, she did I cared about it wasn’t QA type numbers, but it did beat the index, because, you know, those solid companies continue to do well. They don’t continue necessarily for 30 years. I mean, some of those companies aren’t around anymore, like, CSR, for example, was one of her holdings got, you know, eaten up by I think, borrow from memory. And it’s had its ups and downs. So, yeah, it is possible to construct a portfolio for the long term, but I found it’s better to do the sort of investing we’re doing. If we do have to sell, you know, in six months or a year. Well, so be it. And as we say, to their best investment strategy is to buy TARDIS or to build a TARDIS. So you can go back and go forward and see what’s kind of worked, but we don’t have that, unfortunately. Mm hmm. Yeah, God, but I’d give her a TARDIS. Go back and see what what was up in the market. You go back to Julius Caesar, and live the adventure and all those.

Cameron 1:07:22
Yeah, I’d get back actually, to see my kids when they were five. Again, I go back to see Hunter and Taylor when they were five and Roman. Go back and spend time with my father. My grandparents, you know, that’d be more important to me than going and seeing Julius Caesar going spending time with my family that are gone, or kids when they were little stuff like that? Yeah, yeah. I go back. I go back when I met you 13 years ago, or whatever, and go, Hey, what is this thing that you do? Actually, tell me now? Don’t tell me 10 years from now tell me now. I’d be a little bit more pushy. Tom. Hi, Cameron. In the summary you sent out the graph for copper is the coppers futures. If the if you use the graph I’ve attached which I think is the current price, it’s a lot closer to the three point trend line. Any thoughts on this?

Tony 1:08:16
Yes, Tom? Toms correct. So he uses in stock doctors called XCU_ which is the physical cost of copper. And last last week, we use the copper futures when we graphed it. You do have the ability and stock doctor to compare one with the other. So if you go into the advanced graphing, you can put one in and then overlay it with the other using the Compare facility, which I did before. And last time is right, the copper physical graph is much closer to its sell line and the copper futures graph. They do have a very strong correlation. Historically, it’s only in the last sort of three months where the futures graph has gone up and the physical graph hasn’t. I have limited knowledge of the futures market. But generally speaking, I would think that those kinds of differences trade themselves away as the futures contracts get closer to the current date. So either the futures all come down or copper will go up is generally what happens. It’s, you know, it can’t it’s it’s forecasting, but it must be copper traders out there who think the price is going to go up because they’re buying futures contracts at a higher price to the current price.

Cameron 1:09:32
So I just trying to understand what you said there. So if I go I’m in the stock commodities thing. Is it copper physical? Is that the one I’m comparing copper futures to?

Tony 1:09:43
Yes. So let me go look at that myself. So I’m going into the stock doctors advanced charting section on the front page where it says markets and I’m clicking on commodities, and then XCU_ copper physical, they call it correct. That’s the one that But Thomas told us to look at.

Cameron 1:10:03
Yeah, I think he’s right. So if I do the three point trendline for that, in fact, it’s breached the sell line, I’d say today

Tony 1:10:11
Really? I don’t think so, I’ll do a compare. So the futures Stock Doctor code is HG#. I’ll just compare it to XCU_.

Cameron 1:10:26
unless I’m drawing it wrong, but or maybe it’s right on it.

Tony 1:10:32
Yeah. I have a look today, and it was just above it from what I can see.

Cameron 1:10:35
Or Yeah, just above it. Yeah. Nothing, you probably right. Just trying to get the line, right. So using still COVID coffers the low point March 2020. And then I’m using L2 at may 2020. Same as the futures L2

Tony 1:10:51
Yeah. So I’m using I’m using March 2020. And then may 2020.

Cameron 1:10:58
Yeah. So it comes in? Yeah, you’re right. The current prices, just a little bit above it, but it’s very bloody close.

Tony 1:11:06
Yeah. Interestingly enough that in the course of the day, the futures has dropped down as well. It must be a quite a volatile graph. When I had a look, today, when I was preparing it was up. Now it’s down anyway, it does track pretty close to the real copper price. But yeah, no good pick up there, Tom. And we’ll watch it because it does affect stocks, like C6C in our portfolio.

Cameron 1:11:31
Hmm. And let’s see what’s going on with that. At the moment. We’re up two and a half percent today. It’s come back quite a bit since its high Point in May, though, owns up quite a bit, come back over the last couple of months, slightly, but still up 250% since we bought it so you know. Right? Being good. We bought it at the end of October $1.15. currently trading at $4.03. Holy crap, that was a good call TK. That was a good call worked well

Tony 1:12:09
done. And like if I’m happy to sell it if it if the copper price breaches. So I have a look at the three point trendline calculator, a copper, I put the those two low points into a spreadsheet, I get $3.67 as my sell price, what’s it currently? Right $4.03? Yeah, so it’s a little bit a little bit lower. The sell price is a little bit lower than the current price.

Cameron 1:12:41
Yeah, well, I’m hoping you made a worthy sacrifice to the gods and Gods for that one.

Tony 1:12:49
Copy usually is a proxy for the world economy. And whenever the world economy grows, copper goes up because it gets used in law of construction. And that’s what’s driven since the COVID cough. But perhaps the Delta outbreaks is starting to slow that growth and people are taking your point of view that we might not grow as fast from here. I don’t know.

Cameron 1:13:13
All right, a good one. Thank you, Tom, Doug. Doug posted his scorecard to Facebook, but I noticed he had one stop there with an operating sorry, what have I written here? price to operating cash flow of 11. And he said I didn’t think we filtered for it just scored for it. This is for ppl. So I wanted to ask you, and I think I did I think you’ve answered this on Facebook, but just for the people listening in. So when I do a scorecard, the first thing I do is filter out everything with an operate a priced operating cash flow of greater than seven. And I just deal with the stuff that’s left. Do you do that? Or do you just keep them all in and make a decision based on their QAV score, regardless of the price to operating cash flow at the end of the day?

Tony 1:14:08
Yeah, the latter. So I do a download. I do sort by price, operating cash flow and then color code my download sheet. So the red ones are above seven, but I’ll leave them in. And then when I do my manually enter data and then do a sort to get to the the top scorers list. The filtering, the sorting process creates the list based on the QAV score and sometimes at the bottom of that list, there are companies with a price to operating cash flow higher than seven. If they have a very good quality score, they can they can sneak in. Not not often but right. They can Yeah. Right. That’s interesting. Okay. And also I’ll leave it in for the other other reason couple reasons cam so I’m here with him because if I read an article about a company in the paper, and I think I better go and check what that is in the queue. I have a list. I guess I could, I could see what it is, I could see that it was about operating cash flow of a price, the operating cash flow seven, if it wasn’t there, but I’d like to go through and see see them in the list still and say, okay, that one’s got a price operating cash flow of 20 is probably not going to be of interest at all. So I’m gonna leave it alone. That happened today, there was a an article by our friend Michael Goldstein, it was in. Well seen, one of the emails I’ve got today, talking about retail food group, which is a company I’ve owned in the past, and then went very close to going broke. And Michael, suggesting it might come back, I jumped, first thing I did was open up the spreadsheet jumping to my download list, look for it, and it had a price operating cash flow of 20. So I wouldn’t be doing any more further research on that, based on that. So that’s why I keeping all the price to operating cash flows. I don’t I mean, our QAV filter doesn’t download the whole, the whole stock market, because if it has a negative cash flow, we don’t download it. But there’s something like six or 700 stocks in that first download, which I still keep. Yeah, yeah,

Cameron 1:16:09
well, they I use a Andrew Flitman’s version of the sheet now. And they’re all still in there. I just filtered them out. So they’re hidden, but I can just clear all filters and still see them. But so would you do the manual data for stocks that have an operating priced operating cash flow greater than seven? You still do all of that? You know, I don’t get it. You don’t? Okay. Well, so you might as well be filtered out if you’re not going to do it.

Tony 1:16:35
No, because one of the things I do from time to time is I’ll go to that started the rate and my download lists where we’ve got companies which are above seven. And I’ll just have a look, you know, I’ve got positive sentiment, right. If they’re like point O nine, then maybe putting the manual into data room will flip them over into a onto the top scorers list. So yeah, I do. I do check the top entries in that list, which is just below the filtering.

Cameron 1:17:04
Okay, yeah. All right. Good to know. Well, thank you for picking me up on that. Doug. I learned something. I obviously missed that along the way. Last question from Glenn. I, by the way, Michael Goldstein headed his fund last financial year didn’t see him in the top list.

Tony 1:17:19
I did read an article in the paper saying you done really, really well. Yeah, yeah. Maybe it’s a different classification of fund or something. She get emotional. Talking about super funds. I don’t know. Maybe,

Cameron 1:17:32
Glen, one of the reasons to sell is the company issues new financials or updated guidance, which negatively affect its outlook, just trying to prepare myself for the next round of reporting and wondering if Tony could expand on this point further? Are the key measures in financial reports that are key to look for? The financial reports are long? And what’s this saying Knights was the Game of Thrones thing. knights of law, the Knights along in the dangers many other financial points along and there are key sections he will pay? Are there key sections he will pay attention to?

Tony 1:18:05
Yeah, well. So to answer the question Jeannette, like for at a high level generally. Usually, even before I get a chance to look at the company, the share price has reacted to the new figures. And if there’s something bad in May, it’ll the share price will drop. Before I even get a chance to do some analysis, it generally happens on the day that the results are announced that people are all over it and making their moves. That doesn’t worry me so much. I mean, I’m always happy to give up the first 10 or 20% of a share move. Which allows me time to do my analysis and bear in mind that stock Dr. Why have the numbers in there straightaway can take three or four days sometimes for those numbers to come in. The thing review may not report on the company’s announcement until the next day or the day after, or the weekend or something like that. So by the time we find out what the reason is behind the share price movement, the movements already happened. So that’s the first thing to know is to is to, I guess pay attention to what’s happening with the price. After that you didn’t, you didn’t want to go and you didn’t want to go and have a look at hopefully we’ve got numbers in stock doctor, I’d be focusing on the operating cash flow, I’d probably do a download and see whether it’s on our list or whether it’s it’s it’s gone up or down on our list, which is probably going to be because the operating cash flow. If it still scores Well, in the share price has moved I probably then think it was the the outlook the company’s given guidance of some kind either up or down dramatically. And then I go to their announcements and just I usually provide a presentation as well to go with the announcement. And I probably skim through the first couple of pages in that which would have the, you know we’ve done really good stuff in it. And we may not do as good in the future would be in there somewhere to perhaps if the share price went down or where we can hit the lights. Get the ball out of the park. Next half, which might be in there too, which would make the share price go up. So they’re probably the things I pay attention to otherwise, I’m just doing normal sort of download string company reporting season and, you know, looking at the list and making my decisions based on the numbers. I think I did want to Glen I did say that the share price, I’ll work it out before we do, which is true. But I’d also caution people from reacting in a knee jerk style to a share price, a quick share price movement, I’ve often found it beneficial to wait until I get the numbers and do my own analysis. And yeah, if a share price has dropped, I’ve, you know, lost a bit of money. But oftentimes, the the game, like the dance happens, where announcement happens, everyone just makes a knee jerk reaction to that sort of announcement in the first era of the market being open after the announcement, the share price will move dramatically involved and be volatile. And then it might settle down. And then calmer heads prevail, and you’ll see okay, well, okay, the share price is down 20%. In a couple of days, what’s going on here might be a time to buy. Now, it often happens that you get a bounce back from from that initial sort of it’s they’re almost like headless chicken. I mean, I’ve been at announcements when you know, these, these young guys and their pinstripe suits running with a handful of paper, get on their phones quickly and run out again. And they are the next announcement next company report. Because it is a is a tough time. There’s there’s like, you know, 20 companies reporting on the same day, you’ve got to be running around to get to understand what’s going on. And you’re making snap decisions, which may in hindsight, prove not to be the best one. So yeah. stay the course. Glen. I think I just outlined what I do. But yeah, generally, I’m just downloading from stock doctor. I’m basing decisions upon the not on the numbers, unless there’s some horrible, huge move in the stock price like it did drop 20% or 20%. And I start to do some research there, but generally that that’s not the case.

Cameron 1:22:06
And from memory, you’re normally doing two or three downloads a week during reporting season, but this time as you’ll probably be in lockdown, and won’t be playing golf. I’ll be doing them every day. When I go. Yeah, yeah. Well, let’s hope not exactly.

Tony 1:22:26
a month away. So hopefully I’m out of lockdown by them.

Cameron 1:22:29
Yeah, God, let’s hope so. Yeah. Well, that’s the night is long and full of Terrors is the Game of Thrones, quiet. I was trying to remember their financial reports too long and full of Terrors. Thank you, Tony. That’s it. It’s a full lead. 90 minutes. Good luck. Hope you you know, you’re allowed to, you know, get out or can’t get out soon.

Tony 1:22:56
Yeah, I can get out now and just don’t really feel it’s safe. But anyway, it will happen soon. And yes, for the past five years. I can put the roast on. In case people were wondering the Brisbane dinner with us not happening this week. Yeah, no, thanks for that now. Seems like every time I book a interstate holiday COVID happens. So I just it’s like, yeah, yeah, yeah. All right. Thanks. Bye. Have a good one. Thanks, Cameron. Bye.

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