QAV 434 Club Transcript

Cameron 00:05

Welcome back to QAV Tony K. Ciao! Ciao tutti e ciao Tony.

Tony 00:11


Cameron 00:12

I did think this afternoon I was going to do the entire podcast in Italian but maybe not. How are you doing up there?

Tony 00:22

You need special training for that.

Cameron 00:24

Yes, in original Italian. Yes, I got stuck. I was in the car and I was going through it on my head. And then I realized I didn’t know how to say investing in Italian. So it all sort of fell there [laughing].

Tony 00:25

Yes. Yes, operating cash flow.

Cameron 00:39

How you doing? How are you surviving lockdown until at least at the end of September Gladys is saying now?  [laughing]

Tony 00:39

[laughing] She’s been saying that just a bit more. Just a bit more. She thinks we’re kids.

Cameron 00:53

[laughing] I hear that she finally in the last week made masks mandatory. So it’s pretty serious.

Tony 01:05

Let’s be clear.

Cameron 01:06

Are they not?

Tony 01:06


Cameron 01:07

I thought they were.

Tony 01:09

They are in the 12 LGA’s where it’s spreading. But there’s still cases in the rest of Sydney and all you have to do is carry a mask in the rest of Sydney.

Cameron 01:18

They’re not mandatory right across New South Wales, right across Greater Sydney.

Tony 01:22

No. [laughing. Like everything she introduces has a loophole. You can drive a truck through. It’s just ridiculous. It did get tired on the weekend. There’s now a nighttime curfew and the cops are pulling up people including 60 people who went to mass on Sunday night. So that’s good. But now if you’re outside the 12 LGA’s, which is the majority of Sydney, it’s pretty much business as usual. Just don’t get caught [laughing].

Cameron 01:51

And violent protests in Melbourne police shooting people with rubber bullets.  Yes. So it’s all going to hell in a hand basket.

Tony 02:01

It is very apocryphal, isn’t it? Now there’s a big storm coming in [laughing].

Cameron 02:05

It’s like end of days. Nearly as bad as our portfolio’s performance this financial year. It’s all going to hell.

Tony 02:13

I’m [crosstalk 02: 16] still trying to work that out.  Yes [laughing]. Yes, we had the iron ore price dropped by what? 35%. So that hit us. But yes, I need to just understand that a bit more.

Cameron 02:29

I tried to get my head around it for a while this morning. And then my brain started to melt- -out of my ears. So I gave up and just decided to take it at face value. Speaking of stuff, if you’re not already following the new QAV Twitter accounts, I don’t know if anyone uses Twitter still. I know you don’t. Because I went-

Tony 02:33

[laughing] No.

Cameron 02:41

I went and had a look at your account. I don’t either really. QAV pod- @QAVpod on Twitter. Just go follow us there. Give us a retweet every now and again. If you’d be so kind, maybe try and do a bit of brand building. Well, let’s get into news of the week. We got quite a few questions and we do have a guest coming on. Young lucky Duncan is coming on for a chat a little bit later. So let’s get into news of the week. Tony, where do you want to start? stock of the week?

Tony 03:22

Well, yes, you have a stock of the week is a Emeco Holdings. Code is I think EHL yes, EHL earthmoving equipment, renter or supplier, I guess to the mining industry. And announced its results and the share price plummeted. I think it went down about 16%. But it’s up today.

Cameron 03:45

So that was my day after I bought them. I bought them for my super…  Well at least they went down before you made them your stock of the week.

Tony 03:51

[laughing] Well now I know why your [unintelligible 03:56] is looking so bad [laughing].

Cameron 03:58

I bought them on like Thursday and Friday. They dropped like 15, 16%. And I was like oh my god. What?

Tony 04:04


Cameron 04:07

So why? What happened?

Tony 04:08

Oh, well, it was the results. So-

Cameron 04:12


Tony 04:13

Net profit was down. I read somewhere today when I was researching this. It was down quite a bit but I don’t think necessarily was. The numbers I read was it was down 10, 15%. So that’s never good because the analysts always expect it to rise. But Emeco has been going through a bit of a restructure over the last 12 to 18 months recapitalization paying down debt, all that kind of stuff. So plus, a lot of the equipment rental has been slowed down by COVID, particularly in Western Australia where it’s been difficult getting fly in fly out workers to get in there.  So I think yes, so there’s the fleet utilization, which is the amount of equipment that they rent out. was down from 64%, which is kind of usual down to about 59%. So it’s been a drop-off in activity with a company. So that’s why the share price dropped on results. But I think the numbers are really good. And in fact, I’m just sort of thinking about this today. I’m not sure when it happened. But I’m pretty sure there was a bit of consolidation going on in this industry maybe five years ago, maybe a little bit longer. And I think Kerry Stokes, who owns Westrac, which is a big equipment seller, to the mining industry, he ran his ruler, I think over at Emeco, I think he finished up buying a company called Boom logistics. Not really, he bought one of these equipment rental companies anyway.  So all those things have happened. And I’m going to go through the QAV numbers. The price I did that was $1.18 this morning, and that’s the 23rd of August, the company has a low price to operating cash flow of three times. And it has an NTA. So net tangible assets.

So we use NEPS net earnings per share of 97 for net tangible assets and 98 for NEPS. If the share price is $1.18, it’s basically being valued at the cost of the equipment that’s on the books. So you’re not paying much for the business side of things. It’s almost entirely the value of the graders and the bulldozers and the dump trucks and things it has on the books.  So it’s another sign that it’s probably right for a takeover, because you’re not paying much for the business side of things. Even though it’s been restructured and should do well going forward. That means though it is trading on a high PE of about 25 times. And that’s because the share price is being supported by the net tangible assets, and not by the operating side of the company.

However, most people are calling out a lot of growth next year. And the growth, the metric we look at is the growth over the PE ratio even though the PE ratio is high, we’re still scoring it at more than 1.5 times so that that’s telling me that we’re getting growth in excess of 30%. Maybe 35 40% is expected next year. And I’m testing my memory here with what he did. And I wouldn’t be surprised to see, given all the merger and acquisition activity in the market with a company with these kinds of characteristics might get snapped up as well. I could be wrong, it’s just that’s a bit of a prediction. And who knows, but if you are inclined to buy this kind of company and bolted on to an existing seller of equipment or lessee of equipment, now’s the time to do it, because the restructuring has been done. The numbers even though growth isn’t looking that great in the last 12 months for this company. And if COVID still keeps going, it won’t be looking good going forward, or they’re calling out good growth numbers. It’s a good time to buy it because the numbers are depressed based on that latest result.

But if we walk through the numbers and the pull apart, they’ve paid down a lot of debt. And that frees up capital. So they’ve started paying a dividend again, which is always a sign that management are confident that the profit’s here to stay, they’ve they’re going to do a share buyback. So that will support the share price as well. But they’ve also with paying down a lot of interest in the last 12 months, 12 months, that’s really supported net profit going forward, because the interest bill is much lower.  And that makes sense because they pay down lots of debt, which would take lots of costs out of the business, which means profit has to go up IV two, which is our calculation of value based on the future expected earnings per share is at $2.30.

So just under double the current share price. So it’s not picking up an extra point in our score. But it’s still a pretty good expectation of where the share price might get to. That’s a prediction.  However, if you look at it on a long term basis, say the last three or four years it’s actually come from a financial score of distress up to strong and then back to satisfactory with the latest results. So it’s actually been improving over the medium to longer term, which is a good thing. So yes, interesting company, do your own research, take a look. I think my gut feel says that the sell off after the results is overdone. And outside chance that someone will have a bid at the company at the moment. So who knows, but based on where people think earnings per share will be next year. That’s a pretty good rise in the share price. I think that’s probably about all the QAV quality score for those eight out eight out of 14 or 57%. So not overly high. And the QAV score over always is 0.18, and just one mentioned about that quality score, the financial health and Stock Doctor is satisfactory. So it’s actually gone down from stronger satisfactory with the latest results. So that’s dropped a score out of our quality score.

Cameron 10:27

Well, from your mouth to God’s ears.

Tony 10:33

[laughing] [crosstalk 10:32 10:34] [crosstalk 10:32 10:34]

Cameron 10:34

The day before the results the day the results came out. I bought it on the 18th, the same day there was… I did my analysis on the 17th bought it on the morning of the 18th then the results came out. Is that I mean was that a stupid thing to do? Should I have not bought it until the results came out?

Tony 10:54

It’s a hard one. Yes, if it was on the same day probably should have waited. But it’s tough.

Cameron 10:59

I didn’t. That doesn’t show up in my checklist. What day the results are coming out.

Tony 11:04

Correct. So I tend to ignore it. I think statistically, if the company was good before the results come out, it’s probably going to be as good or better. But there are cases where we’ve seen them go down like I’ve had some wins buying Suncorp before its results came out. And I’ve had some losses by and Bendigo Bank before its results come out. I don’t own Amiko, but you know would it been in a case of a negative here, but yes, it swings and roundabouts.

Cameron 11:33

Well, so I was going to sell it on Friday then I thought I’d wait till I talk to you about it today. Yes, I think you’ve talked me into holding on to it. Still [crosstalk 11:40 11:43]

Tony 11:43

If it goes down another leg, I’d sell it. But I suspect it’ll start to make its way back up. But it’s just the guess I’m not predicting. It’s up to you. I mean, look, just follow the share price if it keeps going up. Sure. Good. Happy Days.

Cameron 11:57

You’re right. Okay, well, there you go. JBH fell off the scorecard.

Tony 12:08

Yes. So their results came out. And it’s down the list now. What’s JBH? A few companies have done this. So with their latest numbers, so JBH has dropped down to a QAV score of- let me just say -QAV score of 0.05 So it’s gone down quite low.

Cameron 12:33

I bought them last week, too.

Tony 12:35

Yes, but I don’t think the share prices has dropped back, has it?

Cameron 12:40

I don’t think so. Not that I’ve noticed anyway.

Tony 12:43

No, I think it’s actually gone up a little bit. So yes, again, this will be the case if we hold it until it becomes a three-point sale or there’s bad news or someone leaves or whatever.

Cameron 12:54

Yes. Right.

Tony 12:54

Right. It doesn’t worry me that something drops off the buyer list and drops down. I kind of in some ways, like I don’t like it, but I’m happy to have bought it when it made it onto the buy list because that was the only half where it you know, had really strong operating cash flow.  I buy into it. So that’s happened with a couple of shares that we normally wouldn’t see on the buy list. We are this time round, I think QB came and went like in a day. Again, a company we wouldn’t normally see on the buy list, it’s sitting at about .09 now. So it hasn’t dropped too far down. And if the price drops off a little bit, it’ll come back onto the buy list JBH has dropped off. Yes, there are a few other ones there too. I don’t want to get ahead of myself but ASX has jumped onto the buy list as well which could be because of an abnormal reason. But that’s another example of a company which I suspect may be on for 6 months only, and then will next time, you know delivers a result that may not be there.

Cameron 13:59

Okay, now you wanted to talk about the struggles you’re having giving advanced notice of your trades? [laughing]

Tony 14:05

Oh, yes, it just became difficult during the company reporting season to let people have 24 hours notice, because the share price has moved quite a bit. I think the example was Chorus, which jumped 15%. And the day I was going to buy it and I waited 24 hours and bought it at a dearer price. So rather than give people that kind of notice, I think maybe what we should do is just to when you send out your weekly email list of stocks that we both own. So people know what our portfolios are not necessarily what how much we’re holding in them, but what the stocks are. And if we talk about a stock on the podcast, then we won’t trade it for 24 hours after it goes out. So we put the podcast out a couple of days later, after the recording. What’s the timetable?

Cameron 14:56

Yes, normally the next day.

Tony 14:58

Next day, yes, that’s fine.

Cameron 15:01

Right. So if we don’t talk about on the podcast, you can just trade

Tony 15:07


Cameron 15:07

You’re saying you’ll just trade real time.

Tony 15:09

Yes. But we’ll declare it in the email that goes out. We’ll say, this is the stocks, I’m holding, this is the stocks you’re holding. We’ll probably just mix them all up. So we don’t necessarily attribute it to your eye. But these are the ones that we hold. People can work it out. I hold the large cap and you hold the small cap. But anyway.

Cameron 15:26

No, not in my super fund. My super fund is limited to ASX 300. So I had to buy all big cap stocks. Okay. Yeah. My other portfolios, lots more obviously.

Tony 15:39


Cameron 15:40

Yes. My other portfolio is a lot smaller obviously.

Tony 15:40

Yes, sorry, that policy is based on what other people do like Stock Doctor, that’s how they do it. Right.

Cameron 15:45

Right. Yes. Well, we don’t want you to be penalized for doing the podcast. That’s not good. [crosstalk 15:53]

Tony 15:55

It’s been swings and roundabouts up until the reporting season. And this has been a very interesting reporting season with that big rotation out of resource stocks in particular. I’ve probably turned over a vast majority of the portfolio. I haven’t worked out how much but a large part of it. So it’s been an active reporting season, sometimes we just slide through and sell one stock and buy another one but this one I’ve sold a lot.

Cameron 16:22

And not really because it’s reporting season, just because commodity prices have been smacked around the head last year.

Tony 16:29

Correct, yes.

Cameron 16:30

Just coincidental that it happens to be happening in August, right?

Tony 16:34

Yes, correct. Yes.

Cameron 16:34

Speaking of commodities, copper, you decided that we should get out of copper finally the other day.

Tony 16:44

Yes, well, its underlying commodity, the physical copper graph went through its sell line. So I think it was time to take C6C in the dummy portfolio off the table. And I sold my shares in sand fire resources, which is partly a copper mine as well.

Cameron 17:01

Right. Okay, talk to me about AMP.

Tony 17:08

Well, there is a couple of stocks, which are on the watch list. So AMP has scored well, but it’s still in a looks like a falling knife type trend. But eventually it will boil them out and start to get some support and again that I suspect there’ll be people circling to break up the business and buy parts of it too. And yes, full declaration, my wife used to work there, she doesn’t now so I don’t have any insights, in particular, about what will happen with the company. But at the moment, it’s just turned up from the bottom. But we only have we don’t have enough points to look for a trend. But it’s possible in our next couple of weeks that we start to see a trend emerging a stock like AMP.  So that may well come onto the buy list, I always get this name wrong URW Unibail-Rodamco-Westfield. There is another one like that, the numbers look good, but the stock is still sliding. So that may well come on to the buyer list. At some stage in the next few months, or a few weeks even perhaps. And that’s been depressed, the numbers have been good. And it’s been depressed because the shopping centers have taken a hit with COVID as it goes through Europe. But if Europe comes out of lockdown, which it seems to be doing and there’s people shopping and moving around, then I expect you URW to to start getting support again. So that was another one. What else was there?

Cameron 18:37

Before we move on, can we go back to AMP? Like, I don’t follow that closely. I just see the headlines and the fin read the articles from time to time but it sounds like it’s in a huge mess. As a business, a lot of issues, not just the Hanes commission stuff, that sexual harassment issues, etc, etc. as an investment, though, you got to just ignore all of that kind of stuff. Again, you’re just looking at the numbers and ignoring all the noise about it.

Tony 19:11

Yes, definitely just looking at the numbers, and they’ve up for the first time in a long time they’ve become good numbers on in terms of our QAV checklist. It just isn’t it’s close to showing signs of an uptrend. So we can draw a sell-line and a buy-line but at the moment, it’s still a bit of a falling knife. But all those things you’re talking about, I mean, the Hein’s Commission was two years ago now. So they’ve certainly cleared ship after that.  The sexual harassment cases are the same, they’ve cleared ship after that. So they have a new CEO, they’re working through all those issues. Eventually with these kinds of companies, I get a bit like my like it’s so bombed out but they start to become good value and we’re not the only people to see that. We just tend to see it first because we focus on the numbers and leave aside the stories. But yes, I suspect ANP we will see some support for the stock and I wouldn’t be surprised again if we see some merger and acquisition activity around it too, going forward with the numbers it’s sitting on is compelling value.

Cameron 20:16

So in some ways businesses that are struggling culturally and have a taint about them are good for us cause we’re waiting for them to be bombed out husks, and then we buy them and wait for somebody to renovate them and put new furniture in.

Tony 20:41

Classic Buffett strategy, especially as a value investor. You just want me to tell you the goat story, don’t you?

Cameron 20:50

Yes, yes. Tell me the goat’s story.

Tony 20:52

[laughing] You don’t know it? There’s a book I read a little while ago, and I forget the title. But it was written by a British journalist who was accepted to Harvard MBA on a scholarship, because Harvard makes places available to sort of non traditional entrance into the MBA program. And he was a journalist. And I think it’s a one year or two-year degree. And at the end of it, you meant to present something that you’ve made or built while you’ve been at Harvard, right? So people generally present a business plan or they show how they’ve traded shares or whatever.  So this guy writes a book on what it’s like to go to Harvard and be an MBA student. Anyway, so there’s the reason why I bought the book was there’s one chapter on Warren Buffett, because Buffett every year goes and does a half day q&a session with the undergrads at Harvard. And so the long story short, the journalist is gleaned from the lecture and q&a by Buffett and then doing some more studies on him as part of the curriculum, that the secret to investing is to find a good company and wait for the CEO to sleep with a goat. And when the share price is depressed you buy it.

Cameron 22:15


Tony 22:15

[laughing] And of course that’s exactly what happened with some of the stocks that Buffett bought. CEO slept with a goat? No, there’s no goats involved. But the classic one is Amex. Back in the 60s, I think it was where there was a taint around Amex, because it got tied up with an olive oil scandal. So there was the Amex was someone had had a debt to Amex and it was collateralized around their olive oil stock. And this person was a bit of a shifty operator. So he used to take the Amex person around to dip the tank. So just like when I was working at Shell, you go around to a service station or distributor and you put a long pole into a tank. And the poll would change color at the level of the liquid. And you’d know how much volume was in the tank by the amount of discoloration on the stick.  So the same thing with olive oil. But this guy worked out if you put a tube in the olive oil tank and just put olive oil on the tube and dip the stick. It makes the uninitiated believe the tank’s full of olive oil and it wasn’t. And eventually the guy was caught out next have a bad debt ride off and there was a huge scandal about it. But Buffett realized that people were still out there shopping with their Amex cards every day, at restaurants and in shops. And so he bought the stock when it was bombed out based on the bad story.

Cameron 23:12

Right. Classic psychopath maneuver. By the way, I just finished writing a blurb for a new book that’s coming out in the US written by the guy who is the president of the CFO Leadership Council over there that had like 2000 members of CFOs. And he’s just written a book on psychopaths. And he quotes the psychopath epidemic. second paragraph first chapter, and asked me to write a little blurb for his book, but it’s really interesting. One part of his book, he actually interviews a guy who is anonymous, but the guy is a CEO and is been clinically diagnosed as a psychopath.  And he has quite a lengthy interview with the guy about how he thinks and how he operates and his career and the whole thing and it checked all the boxes that we talked about in how book it was fascinating-

Tony 24:40


Cameron 24:41

But it was great to see like a real interview with a real CEO psychopath.

Tony 24:46


Cameron 24:47

So this guy, who has written the book, Jack McCullough his name is. It’s all about for CFOs mostly, how do you survive in an organization if you think your CEO is a psychopath? Or how do you tell what do you do? You know, etc, etc.

Tony 25:03

And what’s the strategy? What do you do? Get out?

Cameron 25:06

Get out [laughing]. That’s pretty much it.

Tony 25:12

Yes. [laughing] It sounds amazing, doesn’t it?

Cameron 25:12

Sorry, he talks about-in our book at the end, I talked about screening processes for psychopaths in organizations. He said, he’s spoken to quite a few HR directors and people like that. And they’re all like, no, it’s never going to happen. They don’t think that there’s any need to do it because they don’t think they ever see any psychopaths. And he’s quoting the latest numbers, which says that up to 4% now… When we wrote the book, the numbers that people would quote, psychiatrists who work in the field would say about 1% of adults are probably, get a high rating on the psychopath scale.  Now, there’s new research now suggesting it could be as high as 4 or 5 or 6% of adults, but he’s talking about how studies say that about 15% of CEOs, probably high ranking psychopaths. So he said, like the HR people, if you’re interviewing for a CEO position, you’ve got roughly one in four, one and five chance that the people you’re interviewing are psychopaths, high ranking psychopaths in but they don’t see any need to implement a psychopath screener. So yes fascinating. It’s just good to have a book written by a guy who’s been CFO for 30 years. And he Said-I had him on my psychopath epidemic podcast last year – and he said he’s worked for psychopaths, every CFO he knows, has worked for psychopaths, either as CEOs or some other senior ranking position in the business. So yes.

Tony 26:49

And that makes sense. Because psychopaths make great CEOs, right? They’re just determined to get their bonuses and make the numbers work and take no prisoners and get the job done. And make sure the institution survives and all that kind of stuff, so…

Cameron 27:04

He asked this guy if he’s ever fired anybody, said he’s fired 1000s of people, and they all deserved it.

Tony 27:29


Cameron 27:29

And he literally…the guy asked him something about being a psychopath and how he feels about it if people know that he’s a psychopath. And he says, again, this is what I said they would say in the book, but look, I’m smarter than them. And I’m smarter than you. I’m smarter than everybody. It doesn’t really matter what you think. He literally said, I own you, you just don’t know it yet. You better just, you know, do what I tell you and fall into line. If you don’t like the way I run the company, get out of the company. Because I’m the guy [laughing] and all this kind of stuff. It’s just textbook psychopath stuff.

Tony 27:54

Right. Well, don’t talk to my wife because that’s what I’ve told her. I say when I walk into a room. I’m the smartest guy in the room [laughing].

Cameron 28:02

Right? I own you, you just don’t know that.

Tony 28:07

No, I don’t say that. [laughing]

Cameron 28:09

Do you actually say out loud? I’m the smartest guy in the room.


Tony 28:10

No, I’m just thinking but she always plays it back to me. Because she does

Cameron 28:15

Of course she does, that’s what is the job of wives is to play this stuff back to it. I was saying to Chrissy when I was reading the interview with this guy. What shocked me how much of the stuff that he said about himself. I could say about myself. But for different reasons. I think I have a lot of the same characteristics as psychopaths. I just don’t think I’m a psychopath, but like he doesn’t care.

Tony 28:34

Alright. That’s the only thing saving you from being a psychopath. Yes, that’s right. [crosstalk 28:46]

Cameron 28:52

No, I have empathy for people. I care about people. I go out of my way. I do nice things for people all the time, just to be nice, but yes I think so because well, I don’t care what people think about me. I don’t care what people think about me.

Tony 29:14

Yes, I don’t care either.

Cameron 29:15

I don’t care but I don’t think that makes us… I care what my family think and stuff like that.

Tony 29:18

Yes. [crosstalk 29:18]

Cameron 29:18

I think generally speaking, right [laughing].  Moving right along price alert for SWM single white males.

Tony 29:29

Yes. And another one Seven West Media, which has been again a perennial decliner in the stock market. But again, good numbers and it’s getting near its buy price. So it’s buy-line. So another one to watch for people.

Cameron 29:44

Yes, I think I have a look at the chart for that. Late last week. I’m just bringing it up. I seem to recall it not passing my sentiment check. Do you think it’s getting close?

Tony 29:54

No, I didn’t the last time I looked at it. Yes.

Cameron 29:57

So it’s not getting close. Well, it’s in a bit of a downturn too. I think that’s what’s a bit of a Josephine. That’s why I right gave it a no.

Tony 30:06

Yes. Speaking of those, HUM came back on the pay list too this week.

Cameron 30:13

So, I heard. I think we got a question in a Q&A.

Tony 30:18

Yes, OK.

Cameron 30:19

Yes, I think I had to sell but it’s popped its head up again above its byline.

Tony 30:24


Cameron 30:26

Well above it, yes anyway. It’s above the byline too.

Tony 30:32

Yes, I’m looking at Seven West Media’s graph. It’s just I think it’s just below it’s by price. Whether I put an alert in Stock Doctor at 46 cents and it’s currently 43 and a half.

Cameron 30:49

Right. But it was 47 at the end of July so that makes it a Josephine in my book.

Tony 31:00

Right yes, it’s currently in a short term downtrend, so we’ll see what happens.

Cameron 31:03


Tony 31:04

It’s not the buy yet but if it turns up it will be.

Cameron 31:07

  1. RMS is getting close to a sell you think?

Tony 31:13

I think it is yes. Again raised another alert I don’t know if we have new numbers for RMS you know just check that what we’re talking now we still we still have our ones in stock Dr. Price has gone up a little bit since I raised the alert but it’s still down a bit from its high.

Cameron 31:34


Tony 31:36

Yes. So I have an alert to the dollar 46 and it’s just gone back up to $1.52  so but it keeps going down though it’ll be a sale.

Cameron 31:46

so it’s getting caught up in the resources?

Tony 31:50

I think so, well gold prices has gone down and that’s getting close to a sell as well. But it’s gone down and it’s been bouncing around above it sell price so and gold isn’t really linked to copper in an iron ore and the other ones that are going down so normally it goes up in turbulent time so we’ll see what happens with gold.

Cameron 32:16

OK, you want to talk about BHP and ASX’s operating cash flow. You want to do that?

Tony 32:22

Yes, so BHP was another one that came on to the bar list but I’m not going to buy it because of the iron ore prices has dropped so we’ve seen both Rio Tinto BHP for the skews still earlier I’ll stocks are still there. But I want to see an upturn in the iron ore price, or at least get back above its buy-line before I’d be buying those stocks. ASX we had a question a couple of questions about it actually.

Cameron 32:49


Tony 32:50

I’ve got a zoom call tomorrow that values have organized with the CEO of ASX. So if I can I’ll ask the question. But if you look at… again, this is one of those companies which don’t normally appear on our top scorers list. Because the price the cash flow is usually a lot worse than what it is now. I jumped on it when it came on the list, which I often do, because sometimes these things don’t last, especially if the price is rising.  And then people pointing out, well, why’d you buy it for because there’s this big, almost, I think it’s $4.9 billion on the operating cash flow line, which no one can work out what it is, and I can’t work out what it is I went through the financial statements and the financial notes to the statements. I’m not even sure if it should be an operating cash flow item. So it’s one of the things I want to ask about, but if I call it up and have a look, it’s called something like a reverse purchase. Which doesn’t make much sense. Really. Look at that share price. Well, it’s doing well.

Cameron 34:01


Tony 34:02

People want reverse purchases.

Cameron 34:06

[laughing] Well, I’m looking at it’s the last couple of years of operating cash flow, you get June 19, 89 million December 19, 291 million June 21, 0.3 billion December 20, 929 million. June 21, 5 billion. That’s…

Tony 34:29

Yes, so something’s going on there. OK. So I think my initial reaction to it and I don’t know what this is, is that I know that the ASX has to hold assets because it acts as a clearinghouse so it if you buy shares, you’ve got two days to pay for it. And the money has to go through the SEC. So I think it has to hold a certain amount of security to allow those transactions to be done. With some kind of surety and safety, so if they fall over, for example, there’s some money there to, to make good if there’s a problem or to extend for a day if someone’s like paying that kind of thing.  And so I think it’s going to be tied up. And now I’m just trying to find the operating cash flow statement, which is, oh, my god annual reports, someone should take a knife to them, shouldn’t they? Where are the fricking numbers, I’ll just do a search. Okay. There’s only one match in the whole light pole annual report for operating cash flow, and it’s not the cash flow statement. Let me just call up cash flow. Here we go. Page 68. I should have started with back cap instead of the front.

Cameron 35:46

That’s what my wife always tells me.

Tony 35:49

OK, so that. So that item of $4.9 billion sitting in the operating assets in line with changes in operating assets and liabilities, which is part of the operating cash flow statement is called decrease increase in other financial assets at amortized cost. So that typically, and I’m not an accountant, that typically would be like a mark to market of a share portfolio, something like that, which I’m sure the ASX doesn’t do. But like I said, it does have securities, which it holds to make sure the market works properly. For settlements and clearing and the financial note two that says reconciliation of this line on the statement of cash flows on page 68 includes interest from discount securities, reflected within net profit after tax. So got no idea what that means.

Cameron 36:49

is waiting for you to explain it to me. I was

Tony 36:52

like what? Well, it’s an it’s an interest payment. And it’s from discount securities. But I don’t know what that means. But it’s some kind of interest amortization. Now, I don’t know why it’s in the operating cash flow statement. Typically, that kind of income would be in the financing statement or in the investing cash flow statement. So you know, that’s the operating cash flow statement is meant to be for receipts from customers. So I don’t know what’s going on there. And I’ll try and find out. If I can’t get a question in tomorrow, I’ll just email the investor relations people and ask them.

Cameron 37:28

I’m just sort of scrolling through the CEOs presentation deck that came with this, because I was pretty sure they’d have to mention it in here somewhere.

Tony 37:38

No, they don’t.

Cameron 37:39


Tony 37:41

There was another mention on it somewhere else in the finances, and it talked about some kind of reverse purchase agreement. So I don’t know what that meant. But I can’t find that. I’ll see if I can, OK, it says reverse purchase agreements are measured at the amount of the cash consideration paid for securities purchased Under the agreement are not recognized on the balance sheet is substantially all the risks and rewards of ownership are retained by the counterparty to the agreement. So that’s the other mention of what that for was saying 4.7 billion further down in the annual report. So that’s real gobbly, gook finance financing wording there. But again, that kind of wording to me suggests that they’ve done some kind of loan, or some kind of short term financing deal, which allows them to do some kind of transaction or to allow the clearing operations to operate, something like that. So I’ll need to dig into that.

Now, the question is, if you look at that, that line item. And I’m not in the cash flow statement here, I’m further down in the risk management notes in C three financial risk and the annual report. And I’m there because it’s talking about the financial assets of amortized costs, which that 4.9 billion was listed as, and it’s again, here as a reverse purchase agreement, and in 2020, that that line item was $6.6 billion. So it’s gone down from the last annual report. But that 6.6 billion is in appearing in 2020 in the operating cash flow statement.  So that says to me, this is some kind of request vacation, perhaps because of an accounting principle change, which they haven’t called the other I haven’t found yet. But here, it’s all quite strange.

Again, like as you know, I like using operating cash flow because you can’t do a whole lot to it. But there’s always an exception isn’t there where someone’s done something to it as opposed to using profit or PE ratios, or earnings per share as they are analysis tool because the profit can be manipulated in more ways and you can think of, and this is probably an example of that kind of manipulation, even if it’s inadvertent.  But yes, I just don’t understand, am I still I’m still holding on to my isec shares, if I’ve made a mistake in buying them, I’ll just trade them using the three-point trend lines. But if it’s a reclassification or some new accounting principle, and we keep seeing this operating cash flow item, going forward, and we get a decent answer as to what it is, then it’s what the operating cash flow is going forward. So we’ll see.

Cameron 40:39

So did you pick up this anomaly somehow, during your analysis of it?

Tony 40:49

No. I don’t go in and try and dig out the operating cash flow for that very reason that cash flows, usually fairly simple. And I can operate at speed during reporting season, when I see these numbers come in.

Cameron 41:00


Tony 41:00

If you’re using if you are using PE ratios or profit, maybe you got to sit down and do this kind of detailed analysis. And well, that stage the markets moved on the wagon trains pulled out of town. So yes, and this is an outlier. So one example in the whole of our investing universe. So far, I’ll dig down and find out what it is, but I’m not too worried about it. It will be if we don’t like it will sell the share. If we do like it, it’ll be there going forward. And if it’s something in between, I’ll just tried to share using three-point trend lines.

Cameron 41:33

And when you get on this conference call, you’re going to try and get the CEO of the ASX to explain it in English, too.

Tony 41:39

Yeah, well, he’ll probably defer to the CFO, and then I’ll get an answer later on. But

Cameron 41:44

When you speak to the CFO ask her if she thinks he’s a psychopath just for research.

Tony 41:49

[laughing] Just taking a phone call to ask her if she’s read

Cameron 41:53

It hasn’t come out yet. I can’t get the proof. You can ask her if she’s read the Psychopath Epidemic, though?

Tony 41:59

Yes.  If everyone listening to this hasn’t bought a copy of it. Or if you are going to, go to your local bookstore if you’re not in lock down? And just ask them if they carry it? Because they probably don’t, because they’re us publishers. Probably doesn’t care if it’s in Australia bookshop. But just put some pressure on, get it out there. How are we doing for time? All right. 10 minutes until the interview?

Cameron 42:26

Yeah, you want to keep going with BFG?

Tony 42:30

Yes, we might as well go through these updates. And then we can do questions after the interview if you’re like.

Cameron 42:34


Tony 42:34

If we have time.

Cameron 42:35


Tony 42:36

So BFG results. So Bell Financial Group results came out. And they weren’t that great in terms of the growth that happened. So the businesses had a great run, but obviously at some stage that’s going to stop, and the share price came off a little bit. Within year results. The QAV score is back 2.06 sites off the top scorers list, so we’re not going to buy it if we don’t already own it. The interesting thing was with a sell off, I wondered whether that qualified is bad news. So I was thinking about taking it out of the dummy portfolio. But it’s it’s sort of settled down a little bit now. And it’s starting to sort of slowly increase again. So I think we’ll watch it, but I’ll leave it in there for the moment.

Cameron 43:24

Right. OK, it’s down a little bit for us this financial year, down about 8.4% now, OK.

Tony 43:36

Yes. And that’s mainly happened in the last week, I think when it sold off after the results came out.

Cameron 43:40


Tony 43:42


Cameron 43:43

m i l and the qualified audit.

Tony 43:46

Yes. So interesting. So if you remember, we had EMI on the, in the in the vexa portfolio, the dummy portfolio and we took it out because they had a qualified audit. And they always admit, what’s the emphasis of matter. Regarding going concern? I think it’s a terminology. But this is a company which took a lot of government subsidies during COVID did a good job using that to pay that staff partially with that money, paid off debt with the rest of it, and is in a much better shape going forward.  However, in this latest results, which have come through during the week, it hasn’t been called out as a qualified audit item. But it is still being called out in the notes to the financial statements that there’s a whole list of things which could cause the company to have problems paying its debt is when they fall due and therefore may have problems being a going concern. But for some reason, it they haven’t ticked the box for qualification of the audit, but it’s in there as a key audit item. So I did post it in Facebook and asked our friend James Oliver, or James what he thought of it and he said there must have been a lot of discussions around that one and left it at that.  So I’m going to take it as still being a qualified or that because the issue is still there and the same wording is still there. I just haven’t ticked the box. So, yes, otherwise, millennium scores well, but I’m just not prepared to take the risk on it at the moment.

Cameron 45:19

  1. All right. What next? You’ve got…

Tony 45:27

Well I think the rest of it was just personal stuff that we could talk about, but why don’t we jump on to the questions then we’ve got a few minutes before the interview.

Cameron 45:35

We’ve goy five minutes.

Tony 45:36

Cameron 45:37

OK, let’s get into questions then. This is from Sue and Ben. Hi, Cam. Hope you and Tony are well, loving the show. I’ve heard dollar cost averaging mentioned a fair bit, but unsure how best to do it. How does this work with QAV. Does Tony add to his positions after buying in? What criteria has to be best for him to do this when building up a portfolio? What does Tony recommend? Also wondering what Tony’s advice is after hitting the 20 stock mark? If you have more capital to invest as he adds it to the highest QAV scored stock in his portfolio? What if none of scoring high but above sell-lines?  Thanks, guys, been a savior these lockdowns, the show is the highlight of our week. James, Sue and Be, I just think you need to get out or you probably can’t do that if this is the highlight of your week. I mean, I’m glad you like the show. And [laughing] I’m glad you look forward to it. But it’s yes, I like this show. But it’s not the highlight of my week. Really? Well, I-in case there are children listening to this one, I tell you what the actual highlight is, it’d be in the top five,

Tony 46:53

Right. But it’s not the highlight. So I have to work on another.

Cameron 46:58

You’d have to do a lot of things to be the highlight China, you’d have to have a sex change and, you know,

Tony 47:05

get out of lockdown.

Cameron 47:11

So I did send in some links to stuff that you’ve taught you. And we’ve talked about this before. And just a tip for people, particularly for the new people. If you go to the bible, and you go down to the bottom of the bible, you’ll see like the last page or two I’ve got episode guides, by topic, common topics, common questions that we get, like this kind of stuff. Tony has talked about it before. And I’ve put links to those episodes and time codes and some of them. So I did send that to sue and Ben. But you probably wouldn’t hurt to just recap quickly. Your thoughts on dollar cost averaging?

Tony 47:50

I can. You didn’t send me this question. I prepped for about two hours for the show based on the questions you sent me. You didn’t send me this question.

Cameron 47:57

It was in the notes, man. I may have added it to the notes this morning. What, you don’t check the notes?

Tony 48:05

Yes, I did. I checked them when you sit through the email link, but…

Cameron 48:07

Oh but then I added some after that, keep checking the notes [laughing] .

Tony 48:13

I was doing prep based on the questions you sent through. [laughing] Sorry, you print them out or something, do you? You don’t do it live.  make notes on the notes.

Cameron 48:25

That’s why you Warren Buffett, you get your secretary to write your emails or notes or something.



Tony 48:30

I wish I was, he just shuts the door and that’s it so I can think all day. Yes, so a couple of questions. $1 cost averaging yes, I do it from time to time, which is a bit of a discipline, if I have large positions to put into something. And the position sizes I’ve taken a stock could be quite large and just transferring money from my account to the stock brokers account has its limitations.  And so it might take me sometimes if I’m deploying new cash maybe a week to 10 days to transfer the money across to the broker who’s placing the order slowly. And that has its benefits and negatives, oftentimes, if it’s like new figures and everyone’s getting on board, then you’ll miss out on some of that quick growth.  But also sometimes in reporting season, we’ll see a stock start to rise and fall back again. So dollar cost averaging can work in that case, as well. But, generally, I try and stay fully invested and generally I’ll just trade and swap one stock for another.

So my order to the broker will be sell for the skew metals group and buy X Y Z with the proceeds.  And there might be some, a little bit of machinations there depending on the accounts that different things are held in and whatnot. So that’s that. Yes, sometimes I do it. If I’m deploying new capital, generally, I just swap stocks in and out as a back to back trade. In terms of what do I do when I’m fully invested, if I have you, I don’t want to hold more than 20 stocks, and I prefer to hold even 15 rather than 20.  I’m not afraid of the volatility, or having a smaller portfolio can lead to, but you have, certainly if people are starting out, I wouldn’t concentrate much below 15 stocks, if I’m fully invested I’ve got my portfolio 15 to 20 stocks, and I have new capital to put in there, yes, I’ll buy whatever is the highest thing on our QAV list to buy.

I guess the only caveat is you don’t want the pumpkin to outweigh a PE. So like I’m talking about, if I have new capital, it’s likely to be no more than sort of five to 10% of the portfolio. And so I can double white, something in the portfolio that’s at the top of our list. But if it’s like suddenly my long lost Uncle Warren Buffett dies and gives me a billion dollars, then I wouldn’t go and put it all into the one stock I’d average it out over the over the portfolio rally.  And there’ll be a few tricks there. Like I probably wouldn’t buy into something that wasn’t on the top score results, even if I still owned it could because it’s been going up. So there’s a few tricks there. But, generally, you’re not putting in that kind of overweight capital, you’re putting in sort of one position. And if I’m fully invested, I just buy something that was high on the list again.

Cameron 51:43

Right. OK, thank you, Tony. Thanks, Sue and Ben, hope that answers your questions. And do go and check out those other episodes where we’ve talked about this sort of stuff in in detail as well. Well, we have a guest on the show today, Lucky Duncan from stock market for Lucky was introduced to us by one of our Brisbane well, southeast Queensland anyway. subscribers, Mark Dpug Moore, a friend of yours, Lucky?

Lucky Duncan  52:17

Friend of a relative.

Cameron 52:18

Friend of a relative. Well, welcome to the show Lucky and happy birthday. I believe you’re turning 20 today and you’ve stead of having a party and going out and getting drunk with your mates. You decided to come on this show and talk about investing.

Lucky Duncan  52:33

That’s right. Well, no better day to talk about what you love, I think.

Cameron 52:38

Yes, exactly. Where are you based, Lucky?

Lucky Duncan  52:41

In Melbourne.

Cameron 52:43

Right. So you’re in week two, is it? Of lockdown there or three?

Lucky Duncan  52:50

I’ve lost count at this point.

Tony 52:53


Lucky Duncan  52:53

It’s all blurring together.

Cameron 52:55

Yes. That’s how Tony feels. Tony’s in week, nine or 10 or something.

Tony 53:01

Yes, week nine.




Cameron 53:02

Yes. All right. Well, let’s see. Start with a quick bio. Luck, y we already know you’re 20 and in Melbourne, tell us a little bit about yourself. What do you what do you do for work? Are you studying outside of running the website? Do you have other interests?

Lucky Duncan  53:17

Yes, well, I’m in my second year of study at Melbourne Uni doing commerce.

Cameron 53:23


Lucky Duncan  53:24

Yes, I have a part time job working at McDonald’s. It’s not ideal but God am I glad to have it at the moment during a lockdown.

Tony 53:32

Yes, good for you.

Lucky Duncan  53:34

You know for something to do.

Cameron 53:37

They still are open McDonald’s down there?

Lucky Duncan  53:39

Yes, thankfully. Yes.

Cameron 53:41

Well, that’s good. No, I think having a having a job while you’re studying. Really smart, gives you some money and gives you some good experience. So let’s talk about your interest investing where when it started, how its developed, etc. had it and the website tell us a bit about why and how that got set up.

Lucky Duncan  53:59

Yes, so I got started in investing when I was 15 right in the middle of high school and I think I sort of started because I asked myself the question, how do I want to live and more importantly how can I actually live the way that I want have to have the freedom of choice to live that way and so I started looking at making money in the stock market was the first place I turned.

Cameron 54:22

Did you have family that were active investors that prompted you or gave you a bit of a boost to headstart?

Lucky Duncan  54:30

No, not at all I am first stumbled across it on my own I didn’t have any help into it.

Cameron 54:35

Right? Well how did you get started? What was the first thing you did? Did you read a book did you watch a YouTube How did you start to educate yourself?

Lucky Duncan  54:41

I think I think it was a YouTube video. I it was probably how to make money overnight or something. I clicked on it and the rest is history.

Cameron 54:50

Yes, let’s make a video on YouTube called How To Make Money Overnight and get the advertising revenue from…

Tony 54:58

Please don’t tell me you’re buying Bitcoin at 15?

Lucky Duncan  55:02

No, I wasn’t there.

Cameron 55:04

Hey, if he did, he probably would be too rich to come on the show talk to us a bad thing. It’s gone up like 20,000% in the last five years.

Tony 55:14

Yes, good point. OK. What did your friends think about that, Lucky?

Lucky Duncan  55:19

Yes. So at the time, no one seemed to know much about it at all. And I talked to them, and they had all these sort of worries about it, saying don’t you need money to do that? And they’re just thinking about the money they could lose and how they didn’t think they were good enough at making a living out of it at all say,

Tony 55:38

Did you turn up to school with a peak cap and a briefcase and pull out the film review at lunchtime? And not quite?

Lucky Duncan  55:46

I don’t know, I didn’t. I didn’t talk to too many people about it. To be honest, I sort of kept it to myself a bit while I was fresh at it. But yes.

Tony 55:54

What gave you the confidence to start?

Lucky Duncan  55:56

I thought if you viewed it as something I had to do, eventually I thought that I have want to have the freedom of choice to do whatever I want. I have to eventually take that. take that leap. And so I just did it.

Cameron 56:08

Where did you get the money to invest at first? Is it pocket money? Birthday money, job money?

Lucky Duncan  56:14

Yes, little bit of pocket money when I first started, from birthdays sort of in my savings account? And when I tried to get a part time job, as soon as I couldn’t build that up over time.

Cameron 56:26

Well, you’re young Warren Buffett. He started like 10, I think, didn’t he, Tony? something like that.

Tony 56:35

Well, he started delivering newspapers when he was 10. Yes, and then working out how to leverage that by befriending the air hostesses in the apartment buildings who he would drop the papers off, and they would take up and down the stairs for him.

Cameron 56:50

So let’s talk about the website, then lucky. When did you start that? What’s the vision behind it? How’s it going, etc.?

Lucky Duncan  57:00

Yes. So when I was talking to my classmates, classmates about the market, then they had all these misconceptions about losing money and needing to have a PhD, or whatever I am, sort of got to me and I wanted to sort of help somehow and really use my knowledge for good, I think, and so I decided to create this website, where I really just outlined everything that I knew. And then it also pushed me to learn more and to sharpen up my skills and my knowledge. So really good fit. For me as well.

Cameron 57:34

I think that’s the best thing about publishing anything online, or in a book or in a film is it really makes you have to try and get your shit straight. You have to know what you’re talking about. Yes.

Tony 57:47

That’s a big step. I know, you’re new to investing, you’re doing it yourself. And you’ve decided to publish about it. That was what made you take that step.

Lucky Duncan  57:56

Yes, so the pace that I learned, just because I had to put my knowledge out there was so much greater than I would have been otherwise.

Cameron 58:09

And so tell us a little bit about your own approach to investing? What methodology do you put into practice when you’re thinking about buying something?

Lucky Duncan  58:21

Yes, I created my own strategy I used to, I use an analogy that I think would resonate with teenagers. And that’s of a road trip. So I imagine you’re going out into the stock market, you’re sending out on a on a road trip, and there are various things that you need for a road trip. And so I sort of split up the stock market into three different areas. And I think that any good strategy will have aspects of these three areas.

So the first thing for your road trip is you want to you want a car, and I imagine this as the company that you’re investing in the vehicle that’s going to take you from A to B and you want to you want to have a good car to drive it, you want to first of all make sure that it can actually get you there. And so I look at the growth of the company now. Is it? Is it actually expanding? Or is it declining? And then I look at, well, you want to you want to be safe while you’re on this road trip.  So how’s that? How’s the financial position of the company, in terms of the balance sheet and the debt and equity and all that? Yes, the other thing is, when you’re going out on this road trip, you want to get the most bang for your buck in terms of the car that’s taking you there, like ideally, you’re going out in a Lamborghini or a Ferrari or whatever. It’s not always feasible, you want to you want to buy these companies at a reasonable price. And that’s what makes the road trip worthwhile.

Cameron 59:46

Good analogy.

Lucky Duncan  59:47

Because yes, so the second aspect is, I called the driver which is I equate to sort of the technical side of the stock in terms of the bulls and the bears and who’s in control. You want to be with the trend in the stock and I outlined ways that you can analyze the strength of this trend and how you can find turning points where you want to get into the stock.  And final aspect is the road that you’re traveling on. And I equate that to the general market, like the overall macro economy and investor sentiment on a on a large scale. And I think that’s quite people overlook that aspects.  And it is very important because the majority of stocks follow the general market and everything can be looking good in terms of your car and your driver. But if the investor sentiment is poor, then you can get burned by the stocks if you’re investing at the wrong time. So yes, it’s absolutely important to consider all three aspects.

Tony 1:00:59

And so what kind of investor would you say you are? Is it? Is it a mixture? Are you value? Are you growth? What style do you like?

Lucky Duncan  1:01:06

I lean towards the value side, but I do consider growth as a major part of the stocks I’m investing in, because any value in the stock comes from its ability to produce cash flows into the future, and you want those cash flows to not only be constant over time, but actually increasing. And the greater the increase in cash flows, the more value you can get from yourself.

Tony 1:01:32

And has the journey gone well for you? Do you publish your returns at all?

Lucky Duncan  1:01:36

No, I’m not actually quite sure. I’ve never measured my exact returns, but I’d say anywhere from 15 to 20%. But I’m still quite, quite fresh from the market. And in the last five years thinking about the return of the market in general, I haven’t really experienced a huge bear market lasting longer than a few months. So yes, I haven’t really had all the ups and downs that you guys have been through as all these.

Tony 1:02:04

Yes, let’s terrific. So are you finding with the website, you’ve created that people are contacting you and asking questions and wanting to invest with you or invest like you?

Lucky Duncan  1:02:15

Yes, absolutely. I think it’s really good to hear that. Like, it’s actually inspired a lot of young people to invest in the market for the first time. It’s got a lot of positive feedback. And I’m really glad that I can actually help people out to get them to make that first step on their investing journey.

Tony 1:02:33

Oh, that’s really good. And of course, this the snowball effect will be better for you starting at 50.

Lucky Duncan  1:02:40

Yes, that’s right. Just really start the greater the snowballs are going to be in the end.

Tony 1:02:44

Yes, that’s a brilliant,

Cameron 1:02:46

What have you deduced from this experience over the last few years lucky about the way that millennial tend to think about investing, I’ve got a couple of sons that are 21 of them is an active investor. And I know that he’s very serious about investing over the next 20 years in order to set himself up. But I get the sense just from, you know, what they tell me about their friends and their cohort in general, what you will see in the media that millennial are mostly into bit coin and grew high growth stocks and a lot of sort of what we would say high risk, high reward type investment strategies. But your fingers probably more on the pulse, what do you think Millennial are looking for when it comes to investing?

Lucky Duncan  1:03:46

No, I think you’re absolutely right. And I think young people the first time they hear about the market is through social media and these claims of people making however much money in in a few days’ time and being lured in by these extremely speculative high risk, high reward situations and some pretty terrible advice.  Unfortunately, the stuff they may expose to and they don’t really get to hear the other side of it like how you want to be compounding over time and really gradually building up your wealth. I think if  they are hearing that it’s from their  grandparents or something and they think, what are you talking about these people on social media are making hundreds of dollars a day just in crypto currency or these growth stocks? Yeah.

Cameron 1:04:40

Yes. Either from their grandparents or from people who are old enough to be their grandparents like us.

Lucky Duncan  1:04:45

That’s right. Yes.

Cameron 1:04:47

Yes. Well, good on you for trying to educate them in a different way. Like, I guess that’s the challenge is that they think that slow and steady is antiquated and boring. They want to get rich quick as every generation does, every generation wants to get rich quick. I think it’s only by the time that you get to our age that you realize, well, Tony worked it out, let’s say to the 90, but you get to 50. And you go, Oh, OK. You’ve seen the get rich quick schemes fail enough times in your lifetime that you realize that it never works. It doesn’t work for most people. Anyway, it works for a very small percentage of people that get away with it. But it’s luck more than anything else.

Tony 1:05:32

Yes, well, they’re pumping it and then dumping it.

Cameron 1:05:36

So I think, having a good sort of long term strategy when you’re young and being able to stick to it, and having the wisdom to not get sucked into get rich quick schemes and pump and dump. So just stick to a strategy is great.  I did an interview with an old of mine on this show early on. His name is Steve Sammartino. If you should check out that episode and have a listen, because he started investing seriously when he was mostly in ETFs. But he started doing it when he was in his early 20s. And just stuck to it. And by the time he was in his mid-30s, he built up enough of a portfolio that he could retire from his corporate job and just go and do the things that he really wanted to do.  So those stories are out there of people that just got into it early took it seriously. He threw everything he had into it. And just let the compounding taking there over the next 10 or 12 years or whatever it was. Yes, so they’re inspiring and slightly depressing stories. If you don’t do that. It’s depressing. Yes, shit. Why didn’t somebody tell me to do that when I was 20? But you’re out there doing it so good on you.

Tony 1:06:58

Who are your heroes, Lucky? Who do you look up to for mentorship or advice?

Lucky Duncan  1:07:03

Oh, that’s a good question. Yes, one of my favorites is Peter Lynch, I think he wrote a book called one up on Wall Street, I’m sure you’ve heard of it. And in his book, he talked about the advantage that you and I will have over sort of Wall Street, Wall Street pros. And we use sort of our inside knowledge of these companies. And when we see companies out on the street, in the supermarket, at the department stores, you notice which products are taking off and which ones are really popular. And for 14 ages, they tend to be on top of on top of what’s trendy and fashionable. And that really gives us an advantage over everyone else.

Tony 1:07:58

Yes, It’s a good point. Like I was thinking about buying shares in the company when I first started using their product, and I hadn’t come across it before. But it happens to us all these two I started drinking luck scotch. But I think I missed the bottle. I didn’t buy the shares early enough. But check out the graph on lark whiskey at some stage.

Cameron 1:08:20

All right, good stuff, Lucky. Well, everyone out there. I know like our audience tends to be older, but they’ve probably got kids or grandkids your age. So we’d urge everyone who has teenagers to send them a link to stock market for it probably speaks their language more than we do on this show.

Tony 1:08:44

And yes, so before you go, we often get asked by parents, how do they motivate their kids to get taken interest in the stock market? What would be your advice to those parents?

Lucky Duncan  1:09:00

Think well, the thing for me that motivates me is that freedom of choice and I think sort of the value of money and having it having it work for you in terms of passive income and think if you can get your kids to understand the power of this compound interest in generating passive income where you don’t have to work really powerful.

Tony 1:09:23

How do you do that? Is that reading Rich Dad Poor Dad?

Lucky Duncan  1:09:27

Yes, I did read that. But it’s really a lot of books sort of sparked my passion for it, seeing how the pros did it and how it was something that actually works when you stick to it.

Tony 1:09:39

And what about the mechanics of it? Like how would you tell one of your younger friends to start investing? How do they know what sort of platform do they go on? What kind of broker do they use? How small can you start with? What’s your advice there?


Lucky Duncan  1:09:51

Unfortunately, teens can’t actually directly invest in the stock market. You have to be 18 or over but what you can do is create what’s called a custodial account, I believe it’s under the parent or guardians name. But the teenager is the beneficiary. Once the teenager does turn 18, the account transfers into their name. So the parent has to make all the decisions in Medicare and provide the funds that can’t be can’t be the teenager, but there’s nothing to say how involved the teenager can be in that process.  If you have a good relationship with your parent, then you can you can be collaborating on the process deciding which stocks to invest in together, which approach do you want to take? And I think that’s a really good idea.

Tony 1:10:40

I think one of the big things I’ve noticed in my investing career is that when I first started out pre internet, I started with a stockbroker, he was a friend of a friend, and became a friend. And you’d asked him the question, how much money do you need to start with, and he would say about $80,000 to cover the costs, and diversification, all that kind of stuff. And back then, if you were investing in the share market, it would cost you know, sort of 1.2% for trade so and you had lots of other costs you had to incur.  Anyway, thing I’ve learned over the years is that with stock broking being disinter mediated by the Internet, and now just in the last couple of years with the advent of El Toros and net wealth and South wealth, and all those kinds of things, and Robin Hood in the states and superhero here and that’s become a… the amount you need to start off in the market has become quite small. And I think that’s the message that needs to get out to teenagers.

Lucky Duncan  1:11:44


Tony 1:11:44

How small do you think you can go to still make it worthwhile to start?

Lucky Duncan  1:11:51

Yes, well, you have to find the right broker. So depending on who you’re with, you can be charged $20 commission on your trades, which is when you have middle funds to begin with that really eats into your return. So you have to consider that you know, but I think I think you can start with $1,000 and find a broker that doesn’t have enormous commissions, and that we’ll be able to build that up significantly over time.

Tony 1:12:19

1000 bucks. So that’s the threshold with all the kids out there.

Lucky Duncan  1:12:23

Yes, nice round number.

Tony 1:12:25

Get 1000 bucks together, go to your platform and start investing as soon as you can.

Cameron 1:12:30

Maybe learn a few things first, and then start investing.

Lucky Duncan  1:12:33

That’s right. Yes, the way I like to think about is that your teenage years are the best years for you to get that experience and actually learn, because I mentioned, when you’re a teenager, and you lose, say, like 20% of your money as a teenager that you know, a few $100 it’s not too big of a deal. You can earn that back by working for a few hours, but when you’re 40 or older, and he lose 20% of your net worth that’s quite significant. And you’d be saying to yourself, I wish I made these mistakes earlier.

Cameron 1:13:11

Yes, that’s a good point.

Tony 1:13:13

Yes. Good advice.

Cameron 1:13:14

All right. Well, thanks again for coming on and chatting. Lucky. Congratulations on the site. Well done. And yes, we urge everyone with teenagers or young adults out there to send them to stock market for And get them on the right track. Good on you, mate. And what are you going to do for the rest of the night? How are you celebrating your birthday tonight? watching Warren Buffett’s last AGM for three hours? That’s what Tony does every year on his birthday.

Lucky Duncan  1:13:46

Yes, I don’t know about that.

Tony 1:13:49

I just saw they released I think another nine hours of film that didn’t make it into the Becoming Warren Buffett documentary on YouTube, if you want to watch that.

Cameron 1:13:58

Oh, the guy. There’s no better way to spend your birthday.

Lucky Duncan  1:14:03

Yes, well, there are many options these days in Melbourne.

Cameron 1:14:07

That’s true. Yes, well, stay safe. Lucky. Enjoy the rest of your day, mate. Happy birthday.

Lucky Duncan  1:14:13

Thank you. And thank you for having me.

Tony 1:14:15

Well done. Good luck, mate.

Cameron 1:14:18

All right. Well, Tony and I just went and got ourselves some scotches. So it’s good. It’s it’s the whiskey hour now on QAV.

Tony 1:14:25

Yes, it is. That’s right. I joined a couple of scotch whisky associations during the lockdown. I’m quite stocked up at the moment.

Cameron 1:14:34

So you told me last week that you’re drinking less during lockdown, buying more?

Tony 1:14:41

Yes, that’s right. I’m having a couple of scotches at night. I’m just sitting on them for about four hours. It’s quite nice. It’s good.

Cameron 1:14:49

How many did you have before lockdown?

Tony 1:14:53

A couple of Negron i’s, a couple of scotches, a couple of bottles of wine. A couple of bottles of wine. A couple of bottles of wine? Oh between Jenny and I. No, I’m exaggerating. A couple of glasses of wine anyway.

Cameron 1:15:06

Yes, OK. Oh, well I’m drinking Talisker storm. What have you got there? What are you drinking? Do you know?

Tony 1:15:14

I’m drinking something called toffee shot.

Cameron 1:15:16

Oh, that sounds good.

Tony 1:15:18

Yeah, it’s from the Single Malt Scotch Whiskey Association. So they put together their own cask. They don’t tell you where the whiskey comes from. But they source it.  I tell you generally this is a Speyside.

Cameron 1:15:36


Tony 1:15:37

They tell you about it. Give you some tasting notes, etc. Yes, and it’s from a first fill X bourbon barrel, and it’s nine years old. And they sell like 100 bottles or 200 bottles, whatever the cask holds.

Cameron 1:15:57

And then what does everyone else get? When are we going to get the QAV whiskey? That’s what I want to know.

Tony 1:16:05

Yes, we should.

Cameron 1:16:06

We got to talk to Nico about getting…

Tony 1:16:09

Well, we can take some orders. I think it costs $4,000 at Archie Rose to get a barrel and make your own blend.

Cameron 1:16:17

Right. The Archie rose people we were sitting on the table with the [crosstalk 01:16:23] Yes. Lovely folks. Won a bunch of awards too.

Tony 1:16:27

Yes, no, it’s good. All right, they put out a nice Negroni, too, which I’ve been drinking.

Cameron 1:16:32

They put it like in a bottle, they’re growing it in a bottle?

Tony 1:16:35

Yes, but it’s made of like, it’s called Australian Negroni or something like that. It’s got some Australian wildflowers in it. Yes.

Cameron 1:16:44

Lovely. All right. Well, if we slurred while we answer the next few questions, you know why.

Tony 1:16:53

We’re having fun.

Cameron 1:16:54

And I’m just going to try and remember which questions I sent you this morning. And which I added in later.

Tony 1:17:00

How about I read them. So I know where we are.

Cameron 1:17:01

Yes. [laughing]. I got nothing to do. I’ll just turn the air conditioner back on and mute my microphone. Why don’t you tell me which one you want to do? And I’ll read it out.

Tony 1:17:14

All right, Daniel’s question.

Cameron 1:17:15


Tony 1:17:16

So you sent me a use, by the way, people I got this note this morning saying we’ve got two questions. [laughing] One o’clock, we had 10.

Cameron 1:17:26

Yes, well people jumped. I said that on Facebook, we’ve only got one question. And then people jumped on. And I found a couple of email over the weekend that I’d missed. And people email me on the weekends. I’m not reading email on the weekends. Daniel. Hi, mate. couple of questions for the show. One when adding to a position or topping up? Is it from this price that Tony would apply his 10% rule? rule number one he’s talking about here. So if you’re adding to a position or topping up, it’s the price that’s your buy price that the 10% rule applies to, yes.

Tony 1:18:01

Yes, it’s the average. If we’re adding to it. It’s the average price. Correct. And look, it’s these these questions assume… [laughing]

Cameron 1:18:14

assume that you actually have a rule when you…

Tony 1:18:16

Correct. Yes, I have some guidelines, a framework. I don’t really have scientific rules on all this.

Cameron 1:18:21


Tony 1:18:21

And if I appear to be really slick about it, I mean, it hasn’t bothered me, because if one shares in a 20 stock portfolio drops by 10%, it’s 10% of 5%. The portfolio is down by half a percent. I mean, it’s just noise.

Cameron 1:18:39


Tony 1:18:39

Your portfolio can move by more than that in a day anyway, just normally. So don’t get too tied up on these rules, guys.

Cameron 1:18:47

Yes. What did you see? I ended up after I did the Edit last week. I gave last week’s episode, the title of Rule Number Two. Rule number one is never lose money. Rule number two is but don’t drive yourself crazy thinking about it like. Don’t get obsessive. Like I have been over the last couple of weeks.

Tony 1:19:08

I saw that and I thought hang on, rule number two is don’t forget the rule number one.


Cameron 1:19:12

Yes, I changed it to just don’t drive yourself crazy monitoring it, hitting refresh every 30 seconds like I have been. [laughing]

Tony 1:19:26

Yes, What can happen is that as we see with some of these stocks will go down 11% your sell at now go back up. So take your time, consider the context and situation as well.

Cameron 1:19:38

Yes, like so the EHL you were talking about earlier?

Tony 1:19:41


Cameron 1:19:42

Took a hit. But really still good company. And you think the market might have overreacted. So…

Tony 1:19:49

Yes, so if it keeps going down. Sure. Sell it. But yes. So the rules aren’t hard and fast with this.

Cameron 1:19:57

Yes. Well, part two to Daniel’s question is I’ve noticed, as Tony has mentioned, stocks can move around a fair bit a few days before results. And it makes him curious as to whether or not there’s insider information being shared never, never, never would happen in Australia, Daniel, never, but not to divert from the point has he ever thought to put a market in at safe minus 5% a few days before to stop any unexpected losses, the market audit of market order, of course, would have to be in more liquid close spread stocks to stop any downside protection and to let the upside run if we should be pleasantly surprised.

Tony 1:20:39

So I guess what he’s saying is, if you’re coming into a company reporting, do you put a stop loss and in case the users bad? And I don’t do that? No. And maybe I should, but I don’t do it. Again, because yes. As we said, the company might score well drop for a while, and the market realized that they got it wrong and, and buy into the company. And don’t forget, if the numbers are good, and the share price is depressed, that’s a good time to buy.  So yes, I don’t do that the only time I’ve ever sold the stock coming into reporting season. And I won’t say the name of the stock because I may get it wrong. I’m pretty sure it was definitely a retail I’m pretty sure it was. Anyway, I won’t say the name of the stock that, well, it’s just I could have it wrong that’s all because it’s going back a while. And we’re drinking scotch.

Cameron 1:21:35


Tony 1:21:36

And [laughing] so the market started to slide in the stock. And it’s never good looking at a particularly for a retailer. Because we’re any really big stock, but retailers in particular, because there’s so many ways to pick up if a retailer is having problems that they’re slowing down the payment of their suppliers and not reordering stock to the same levels. Maybe they’re taking longer to pay their bills, maybe they’re putting people off. We’re giving them less shifts, that kind of thing.  So it doesn’t take long for something unusual to get out in the market. And this retailer, it stock was sliding going coming into the results, and I sold it and it was the right move. But that’s one stock in the history of my investing. So, yes I’m not too worried about it. Maybe I shouldn’t be but again, it’s one stock and if it drops 10% it’s noise as far as your overall portfolio is concerned.

Cameron 1:22:42

Right, OK, thank you, Daniel, what do you want to do next, big man?

Tony 1:22:49

OK, we got Well, there was I’ve got a question for people. So there was a question from Dean who I don’t think is a subscriber but lobbed in an interesting question anyway, which we don’t normally look at. But do you want to read that one out?

Cameron 1:23:05

OK so Dean asks, he’s talking about operating leases. He says the accounting standard for leases changed a year or two ago. And one of the impacts of the change was that as a result of the change, operating leases had to be accounted for on balance sheet. If the statement of cash flows is sorry, in the statement of cash flows. This then meant that the cash flows from operating leases change from being an operating cash flow to a financing cash flow. For large entities with large rental costs.  For example, Maya this then meant that operating cash flow increased substantially as the cash outflow from leases moved from operating to financing. I was just wondering if Tony changed his processes as though when this occurred in looking at price to operating cash flow, because all things being equal businesses would have looked much better value when in reality, the improvement would just be due to a change in accounting standard.


Tony 1:24:01

Yes, look, it’s a good question. I don’t have an answer for I certainly haven’t changed the way I look at operating cash flow. And again, this is a bit like the iecex [phonetic] example where things have moved in a cash flow line and it’s pretty arcane. So I did go through and research it. Yes, doesn’t make a lot of sense and got a question sometimes these things like the generally accepted accounting principles, which are… I don’t know group of academics get together and decide to change the rules on accounting, it’s like they really help with are they really hingedly they’re doing really care but anyway, they they’re talking about how a business accounts for leases.

One of the big things that happened when I was working was that there was a process called sale and leaseback so if you were a retailer and you own the stores outright on the property under Nathan, you could sell that off, and then do a deal with the buyer to buy it back at a decent yield for the purchase for the person who purchased the property of you.  And that actually improved your return on equity, something we’ve spoken about in prior shows, which was a metric everyone was focusing on.

So was it the best thing for the company? Maybe, maybe not. But it was the best thing for management to get their bonuses because everyone was being measured on ROI.  So this is sounds like it’s trying to address that in terms of accounting for leases, if it goes into all sorts of arcane examples about how do you amortize the least cost, if you’re continuing to if it’s a long lease, if you’re continuing to continuing to use it, if you don’t think you’re going to sell it, or move out? All these kinds of things.  So it has mean that operating costs have improved a little bit, because the essence is that what was a rental cost is now being moved somewhere else in the cash flow statement, which means operating cash flow goes up. It’s very arcane. I’m inclined to think that there was a step change. And if you can see it yourself, if you look back in Stock Doctor. On some of our retail companies like Maya, JB Hi-Fi etc., their operating cash flow did go up a couple of years ago. And they’ve kind of stayed level since.

So I’m inclined just to let that slip through and ignore it. Largely, maybe it does give the retailers a bit of a bump, but maybe they should have had that bump all the way along to so I’m not going to really care about it. But I wanted to talk about this because I wanted to just throw it out there. I know there are people out there who have better accounting skills and me and more knowledge on these kinds of subjects. If they want to weigh in with some advice, that would be great. I’m not inclined to do something like you know, discount the operating cash flows on retailers, because then we’re, again, starting to mess around ourselves with a line item, which I like, because it’s been fairly pure and we don’t need to do further analysis on it. But be interested to get other people’s takes on it.

Cameron 1:27:07

OK, I think Dean who sent this question in but won’t hear your answer, because he’s not a subscriber. I think he’s, I think he’s an auditor with a bit different phone to James.

Tony 1:27:24

OK, well, James might have an opinion about it, too.

Cameron 1:27:29

That’d be great. All right.

Tony 1:27:30


Cameron 1:27:31

Thank you for that one. Now, where do you want to go?

Tony 1:27:34

What do we get? I want to I can we got some questions from Facebook, which we can go through in a sec. But a couple of things that people have sent us which are worth reading out through in the read out some of those. Actually, you might not have listened to the Howard Marks quote, but-

Cameron 1:27:53

No, I don’t think so.

Tony 1:27:54

OK, so I think it’s might have been Steve maps had us through a quote from how it was sent us through a quote from Howard Marks, latest epistle. And something struck me as being very in line with QAV so this is the quote, Howard Marks says many investors think their job requires him to develop a macro outlook, and invest according to its dictates. Successful stock pickers or Real Estate Buyers often make pronouncements regarding the macro outlook, even in the absence of evidence linking their investment success to accurate macro forecasts.  Nonetheless, since macro developments are so influential, many people think it’s downright irresponsible to ignore them when investing yet macro forecasts are likely to either turn out to be unhelpful or useless. And he goes on to say that macro forecasts aren’t very helpful and he would never hire an economist that his company Oak tree capital. So I thought that was a great quote. Thanks for sending that one through. Do you have the quotes there from Quora which someone sent through a couple of weeks ago?

Cameron 1:29:11

No, that was weeks ago.



Tony 1:29:13

Yes, they’re good. So Jeff, thanks to Jeff for sending through these tips. This is a list of investing tips that he found on Quora, Q U O R A. The average investors returns are about 40% of what the index produces. This is often precisely because they assume this time is different. Every time an event like a virus or 911, or crash happens, they sell out. The dead performed or living in investing. The dead outperformed the living in investing those who forget about their investment accounts to the best amongst the living. They can’t panic by definition. [laughing]. The average British or American person only has about $10,000 invest into retirement, and most don’t have a workable alternative like a passive income generating business.

Cameron 1:30:11

That makes me think I caught up with Peter Elliot, my old friend. Yesterday at four, he and his partner up in the Gold Coast. They’re from Melbourne, they came up when Melbourne got out of lockdown, and now they haven’t been able to go back but we were talking about he was going on about Paul Keatings great gift to Australia, of superannuation,

Tony 1:30:26

Superannuation, it’s true. Very true. And that’s the difference between Australia and America and Britain and Canada and all those places they don’t have. I have a super system. They have 401 K’s and that kind of stuff. But I’m not as knowledgeable about the British system, but certainly the US in the Canadian system is miniscule compared to Australia and largely optional-

Cameron 1:31:00


Tony 1:31:01

Which we’re not volunteering.

Cameron 1:31:03

Forced savings for retirement.

Tony 1:31:06

Correct? Yes. On average, a stock market correction happens every two years. So falls of 10 to 20% or above a very normal, there have been countless 35 to 50% correction since 1941. To true the NASDAQ has been no other markets in the last 30 years going up by about 12% per annum. It decreased by 70%. After 2000 and another 50%. During 2008. It took about 14 years to recover from 2000. That didn’t stop the long term investor from doing well though, if they weren’t patient enough. The S&P 500 has historically gone up in about 70% of years. It has never been down over a 25 to 30-year period. Which is true. So long term investing. I thought they are interesting, some good, good tips and points there.

Cameron 1:32:07

Yes, well, I’ve got a quote from Nikola Tesla, that I actually used on my Renaissance show last week talking about Leonardo da Vinci. But it also made me think of QAV. This is Nikola. I’m reading Nikola Tesla’s autobiography at the moment, which is a trippy read. I got to say he was a trippy guy, man. He had some out their ideas and explanations for his own genius, but it’s almost like if he was doing LSD or if he was tapped into something, man, but it’s crazy.  But anyway, when Thomas Edison, his frenemy, died. He wrote, there was all these glowing obituaries for Thomas Edison in the media. And then there was Nikola Tesla’s obituary for Edison, which goes like this. He had no hobby, cared for no sort of amusement of any kind, and lived in utter disregard of the most elementary rules of hygiene. His method was inefficient in the extreme for an immense ground had to be covered to get anything at all unless blind chance intervened. And at first I was almost a sorry witness of his doings, knowing that just a little theory and calculation would have saved him 90% of the labor. But he had a veritable contempt for book learning and mathematical knowledge, trusting himself entirely to his inventors’ instinct and practical American sense.

Tony 1:33:37

So I went to Edison’s place in Florida when I was there holding once. It’s really good Museum, the Edison Museum, but you pick up on the fact very quickly that Edison’s strong suit was finding somebody else’s invention, taking out the patent and inserting them into the ground. Basically, he didn’t do a whole lot of inventing himself. Or he invented the lawyer process, basically.

Cameron 1:34:03

Yes. Well, and it was Thomas telling us the thing I was telling Peter earlier yesterday that, I grew up hearing the story of Edison trying 1000 different combinations to come up with the right filament for the live Melbourne. It always gets sold, as well. That’s a testament to his perseverance and American ingenuity and the whole thing, Tesla’s like, he could have done it in 15 minutes if he just read a bloody book on physics. [laughing] No, it’s not something to be proud of.

Tony 1:34:43

Yes, well, there’s a plenty of examples like that. And perseverance is the other theme that comes out that there was a story about his factory burning down and he, lost a whole heap but just moved on straightaway to rebuild the factory to that one. fell into the swap one. The next one stood up. He were the thought that experimental light bulb factory would burn.


Cameron 1:35:11

But the thing I took out of in terms of investing is like a little theory and calculation and some machine learning and goes a long way to our method, your method of investing, right? There’s some-

Tony 1:35:26

You’re 90% ahead of the population, aren’t you?

Cameron 1:35:28

There’s some theory and science behind it. You’re not just throwing mud at the wall and hoping it sticks, which I think is why most of us invest.

Tony 1:35:36

Yes, not necessarily reinventing, not necessarily inventing the wheel from scratch or time to.

Cameron 1:35:41

Yes, well, that’s how it came into the Vinci story. And I apologize for people at home who don’t care, but I’m going to tell it anyway.

Tony 1:35:50

It’s their highlight of the weekend [laughing].

Cameron 1:35:52

[laughing] Listening to you is the highlight, listening to me they just fast forward through everything I say probably. Da Vinci. in the first 3040 years, he was alive he because he didn’t get a formal education, because he was the bastard’s son of the family. He kind of poopooed people with a real education. And he’s in the 1414, late 1480s, fully 90s, in the corner, Milan and a Ludovico Sforza, which is surrounded very surrounded by the most preeminent thinkers of Italy at the time, very educated. And they’re always quoting from the classics, which people had at that stage.  They’re quoting Cicero, and Aristotle, etc., etc. And he wrote in his notebooks where they can quote, but what do they really know, I know from personal experience, because I go out there, and I do my own research. But then he started to get his hands on more books. Because the same year he was born 1452 was the year that Gutenberg invented the printing press, or the first year, he came out with the Bible anyway, the Good Book Bible, which was the first book that he printed.  And so by the time divino, by the time Da Vinci is in Milan, in the 1490s, there are hundreds of printing presses in Italy, and millions of books being churned out classics that have been translated into Italian, from their original Greek or Latin. And he’s able to get them and then he starts noting in his notebooks, the collection of books, that he’s building up on science and technology, and biology and art and everything.  And then he starts to go well, it’s a combination of personal observations and experience, and taking the preexisting theory. So you don’t need to work it all out from yourself, you can take the theory, test it in the real world and see if the theory holds up, and, or not. And so this is like 100 years before Galileo, he wasn’t the first person to combine theory with, you know, firsthand experience and observation and experiment, Roger bacon was doing in the 1200s and grace, a tester in England, the sort of 12th century 13th century.

But, you know, he is one of the first guys that really started to understand what we now think of as some of the basics of the scientific method, taking theory, combining it with observation and experiment writing, revising. Fortunately, he never published his notebooks. He never really put it out there. So it took a few 100 years before everyone else caught on to what Da Vinci was already doing. But I just thought it was interesting, this progression where-first of all, he’s like, screw these guys with all their book learning. And then he starts to go, OK, now, well, there is a place for book learning in theory.

Tony 1:38:54

I think that’s important. I mean, I think society progresses because of the iconoclast. So go, I can do better than these idiots. It’s like Keith Moon turning up to the who rehearsal saying I can drum better than him, and getting the gig it’s just that sort of these guys are all idiots. I’m better. That’s a key part of I think that improving things really. Sure. And if 100 people do that 99 aren’t better and they fail. They haven’t lost anything but the one person here who is us genuine talent progressive things. Yes.

Cameron 1:39:30

Speaking of you, so you’re basically drawing analogies between yourself and Keith Moon there, Tony. Saying you’re Keith Moon of investing. Is that where you’re going?

Tony 1:39:38

[laughing] The sloppy drummer of investing yes.

Cameron 1:39:41

You’re not going to drink yourself into an early grave like Keaton.

Tony 1:39:45

Maybe a light one but now…

Cameron 1:39:46

You have ever driven a car indoor swimming pool, Tony, when you’ve been having-

Tony 1:39:50


Cameron 1:39:51

Was that Keith? Was that one of the other…

Tony 1:39:53

Oh, yes. definitely.

Cameron 1:39:54

Brian Jones died in this when we built it and yeah, train Rolls Royce. He was Keith and Trevir Rolls Royce in this movie, I tell you, he’s still, I think he’s my favorite drummer of all time, I mean Jimi Hendrix drummers up there as well. I can’t remember his name off the top of my head but and Ringo I think doesn’t get enough credit but…

Tony 1:39:59

Yes.  I don’t know, Zach’s much better than Ringo? Charlie? Zach?  Yes, Zach. Yes, Ringo’s Zach now drums for the WHO.

Cameron 1:40:25


Tony 1:40:28

His classic quote is Keith god Ringo could keep time or dad could keep time Keith is gone.

Cameron 1:40:36

Yes, Just with his fill his frills and his fills and his flair. And he’s a joy to listen to. He’s just really brings a whole new dimension to it.

Tony 1:40:46

There’s a great clip on YouTube of the Isle of Wight concert from the 60s with the Who.

Cameron 1:41:03


Tony 1:41:03

And something breaks down on stage. I think it might have been Daugherty’s microphone or something. And they take 20 minutes to fix it. And Keith and Townshend just play off each other with riffs.


Cameron 1:41:04

Just go at it.

Tony 1:41:05

Just go at it. It’s brilliant.

Cameron 1:41:07

Have you seen the clip of them? In the studio recording? I think it’s better you bet or something one of those. And just Keith clowning around while they’re recording the vocal harmonies. He’s just, it’s just hilarious to watch. Like, it just it looks like it was a lot of fun.

Tony 1:41:26

Yes, definitely.

Cameron 1:41:28

Are we done? Is this our wrap up conversation?

Tony 1:41:31

We’ve got a lot to go through this. I worry about the Facebook questions. Should we do those quickly?

Cameron 1:41:36

Which ones?

Tony 1:41:37

Oh, there was a, there was one from? Let’s have a look. We had one from Alice about the QB graph. Yes.  Yes. So I think you- just in a nutshell, I think QB is a buy. However, according to its graph, wherever it’s QAV scores, 09 when I looked at today, so it’s fallen off, the top score is less because of its score, but it may come back on again,

Cameron 1:42:02

if you draw on the sell-line for this.

Tony 1:42:05

So I don’t like sell-lines or buy-lines that kind of double intersect. So I’ve moved the sell-line to start from the low point and then go through the right most elbow on the graph, if that makes sense. I’ll call up and tell you.


Cameron 1:42:21

Yes, right. So the last cell line sort of has been surpassed by the new sell-line, which goes through that last elbow.

Tony 1:42:30

Yes, correct.

Cameron 1:42:31

Well, yes just…

Tony 1:42:34

So because I think it was actually from memory, it was a buy or sell at the same time. That’s taking a bit of time for this to come up. And yes, so I’ve got in terms of the buy-line, I’ve got 28th of the second is H1. And then it goes through 31stof may 2021. And it keeps going along that little downturn there. But that was also the first sell-line, which happened at the same time. So the L1 I’m using is January 2021. And then, at the same time as the buy-line was intersecting in June 2021, so was the sell-line.  so first of all I want the buy to come after the sell, the sell only come after the buy-line. So I’m now using July 2021, is L2. Right. But also, because I don’t like that, if we keep with the old one that sort of goes through and continues up and we’ll get crossed again, pretty soon. I think by the upward trend; I’d rather just have two points on the line rather than this sort of climbing graph that has a couple of cells on it. We just want the one sell point really.

Cameron 1:43:57

So 30th of July 2020. one’s not really a trough. Correct, because the 30 the June number is lower than it but you’re using it anyway. It’s like a…

Tony 1:44:07

Yes. So yes, I call it an elbow. Yes.

Cameron 1:44:12

So that’s OK. So it doesn’t have to go through a trough. Yes. And so for the buy-line, you’re using 31 January is the high point, I assume.

Tony 1:44:25

Oh no, for the February for the buy-line February 2020.

Cameron 1:44:29

Yes, cause that’s and then there’s a flat line.

Tony 1:44:31

May 21.

Cameron 1:44:34

There is a flat line between January 20 and February, right.

Tony 1:44:39

Yes, it’s actually the same line anyway. But it does have to be within 8%. Yes

Cameron 1:44:44

Right. And then May is H2

Tony 1:44:48

Yes, correct. Which also again, follows the line. So it’s also May, it’s also June. So that trough you were talking about before is both a buy and a sell which is why I’m happy pushing the buy-line out to that elbow in July. So I want the sell to happen after the boy.

Cameron 1:45:07


Tony 1:45:11

But anyway, it’s all moved because the latest QAB score I had was. 09.

Cameron 1:45:18

Yes, OK.

Tony 1:45:20

Yes. So that was the first one. We had a question on ASB, which I think is quite a bit below us by price. I’m getting a price of 270. For ASB, do you want to have a quick look at that graph?

Cameron 1:45:35

Yes. I think everyone jumped in on the Facebook group with this I think from memory and gave some really good answers, which is great to see love it. I got to say love what’s going on with the QAV community?

Tony 1:45:51

it’s good, isn’t it?

Cameron 1:45:52

Smart folks jumping in correcting my mistakes. helping everyone else out. It’s good. It’s really good.

Tony 1:46:00

OK, so I have a h1 for ASB, which is our stall limited of November 2019. And h2 of August,

Cameron 1:46:11

November, you’re not starting yet.

Tony 1:46:13

So we have September is 434. Yet November’s is 420. They’re pretty similar. They’re going to be similar lines anyway, but I’ll use the second one in November. And then h2 is August. And so that gives me a buy price of around about 270. Share price is rising to meet it but it hasn’t got there yet.

Cameron 1:46:39

Currently 251 I’ve got.

Tony 1:46:41

Correct. Yes. OK. ASB… So I forgot who asked that. But someone asked if Micheal Hill Jules had a qualified audit. And it looks fine to me. So there was I think they’re might be getting confused with the key audit matters, which is not qualifying the audit. So it looks fine to me…

Cameron 1:47:00

That was Cosman that asked that question.

Tony 1:47:03

Thank you. I’ve just got some notes here. So I’m sorry if I forget people’s name, but Andrew did ask a question about IV calculations. Do you have the handy or shall I just paraphrase?

Cameron 1:47:15

No, I do. Hold on a second. I’m just doing screenshots of those last charts for everybody. OK.  Andrew, asked, looking at just about every other investment approach, and even most famed investors themselves. It seems that a lot of emphasis is placed on an IV price for…

Tony 1:47:39



Cameron 1:47:39

I’ll do it. I’ll do it the Da Vinci thing.

Tony 1:47:41

They know another thing.

Cameron 1:47:43

I’m Keith Moon. A lot of emphasis is placed on- that’s going to be the title of this episode by the way, The Keith Moon of Investing – is placed on an IV. And again, it seems that a lot of emphasis is placed on an IV price for a stock for both buying and selling. I believe Tony’s approach is that an IV can be quite hard or impossible to predict accurately. And being in the checklist. I know it factors into the scoring of a stock. This makes sense to me. I was wondering though, if there was an IV figure in mind as accurate as we could get it? Would this make the buy and sell decision a bit easier when the share price was flirting with its three-point trend sell- line?

Tony 1:48:26

Yeah, now good question. And definitely the case if we could. And if you recall, one of the things we talked about putting our portfolio on the straw man was we had to nominate an IV price. I couldn’t do it. Because you’re supposed to do that in straw man. And look if I could get an IV with any sort of certainty or with any sort of confidence, and I would but as we as you know. the checklist, we use a number of different methods for valuing stocks and MTA book value book plus 30, consensus forecast, Stock Doctor forecasts, our IV one and IV two.  So it’s more like a heat map to get evaluation and other effects our QAV score rather than saying this is the price that we’re going to buy and sell it based on our IV calculation.

I think what gives me confidence that that’s the right approach in most circumstances is the fact that if you look at what Buffett did, and what he does, now, he moved away from being the deep value investor that Ben Graham taught him to be when he hooked up with Charlie Manger who convinced him to become an investor who paid the right price for a quality stock.  And if you look at a lot of his investments after that period, they’re in companies which have incredibly predictable cash flows, our predictable profits and incomes. You know and he still does today like he tried to take over Gillette. He has a big stake in Heinz and Procter and Gamble and those kinds of companies and Coca Cola or obviously, so these are companies where it’s, you can with some confidence predict out in 10 years’ time what their earnings might look like, and therefore discount it back into a current IV. And I guess the equivalent in the Australian share market would be stocks, like, say, Coles and Woolworths, where that they’re going to just always grow at whatever at inflation plus a bit, not much. And it’s been someone else’s to say that supermarkets grow because of immigration into the country.

So inflation plus immigration, so basically, Coles and Woolworths, and I’m talking about times of when there’s not a huge amount of inflation when food prices go up anyway, but basically, those kind of big retailers, and you probably throw some of the oil companies into that as well, like shell where I used to work, they just grow by the number of new stores that they have on the new petrol outlets, they open. And I tend to just open sort of 5% every year, or there about. And I do it in the growth corridor or so you’re thinking of the Caroline springs and Melbourne and the pack and I’m corridor, and Sydney is probably the Liverpool corridor down Southwest. But those kinds of places. And so they’re there, their earnings are very predictable.  And so you can say, with some kind of certainty for the next 10 years that give or take, Coles and we’re going to have an extrapolated learning experience based on the last periods. And it’s up to you how long you go back four or five years, or 10 years, or whatever. And so the kinds of companies that Buffett’s been buying, and even in the last sort of recent period, he’s been buying heavily regulated industries, like railroads, and like power companies, where their incomes are basically set by government mandate, you can charge this much to haul freight in the US, because they want to control a monopolistic type of infrastructure.  And we can charge this much on upon that to retail end users for power usage. And Buffett likes that because it means he can predict what the earnings are going to be for those companies going forward. And he can discount it back into what their valuation is today.

So he has solved the problem of not being able to have a good handle on IV by only investing in companies where you can have a good handle on IV, we could do the same. But then we’re limiting ourselves to a very narrow portion of the of the stock market, a very narrow portion. And if you sort of take the corollary of that, then the rest of the stock market is up for grabs, and is very unreliable in predicting its cash flows out and then discounting them back.  So that’s why I’m not a big fan of us, informs my decisions, but it doesn’t, it’s not the be all end all of my investing decisions, because it’s just so inherently difficult to do.

Cameron 1:53:02


Tony 1:53:10

And if the person who asked the question I’ve forgotten his names can, Andrew Sorry, can enlighten me, that’d be great. But I just don’t think it’s possible.

Cameron 1:53:19


Tony 1:53:19

It involves a crystal ball and or time machine. And we have neither.

Cameron 1:53:25


Tony 1:53:26

Now look, having said that, there are some people who know, an infinite amount about a very narrow subject. And they can say, Well, I expect that the shoe shop, or the coffee shop is going to have this kind of demands placed on it, because coffee beans are expected to rise in year three, and competition will rise in year four, and all that kind of stuff. And I can therefore predict those cash flows and discount them back. Sure. But that’s, again, that limits yourself to a very narrow range of the investable universe.

Cameron 1:54:01

And my understanding of the way that Buffett and Charlie have worked over the last 50 years is that they spend all day every day, just reading reports about the companies that they’re looking at. So they have a much better chance of getting an accurate guess dummett of IV because it’s all they want to do is just sit there and look at numbers.

Tony 1:54:32

But, but the fact is that they limit what they look at to what they think they can predict.

Cameron 1:54:38


Tony 1:54:38

So it’s a very narrow universe of things which have great, they call it the moat. So if you think about the stocks which have a moat, the moat once they can uncover those, the moat makes the earnings very predictable.

Cameron 1:54:53


Tony 1:54:53

They won’t be subject to inflation or competition.

Cameron 1:54:56

So they look at prices.


Tony 1:54:58

They limit themselves to prices.

Cameron 1:54:59

So they limit themselves to a smelly… Smelly? There you go, one scotch and I can’t even talk. A fairly small not a smelly fall. They might have a smelly fall, a fairly small universe of stocks. And then they spend all day every day analyzing those stocks. Now you’re not that kind of investor, you don’t want to spend 18 hours a day reading financial reports seven days a week.

Tony 1:55:26

Correct. But it’s not just that because everyone coming out of business school has been taught to invest that way, guess what they’re doing? They’re trying to apply Buffett’s logic and trying to find companies with moats and trying to predict their cash flows. And yes, I don’t want to play that game. That’s where the crowd is. And but I’ve been doing it for 80 years, and they’re good at it. So you’re competing against the best.

Cameron 1:55:52

And that’s not your kind of lifestyle decision either. Right.  You got other stuff you want to do with your life.

Tony 1:55:59

Yes, as a great interview before with Laughlin says he’s working out he wants to invest so he can be free. It’s not the other way around. Yes. So he can live

Cameron 1:56:08

Yes. Well, speaking of living, I think this is a two-hour show. So I’m suggesting that we just skip everything else. And yes apologies to those questions we didn’t get to this week. Try and get to them next week. Particularly as I put a shout out for questions on the show on that Facebook this morning. I apologize. But we will get you next week. And I’m looking forward to seeing everybody in Brisbane at the Brisbane dinner on Wednesday night. Sorry, Tony won’t be there. But we’ll try-

Tony 1:56:39

I’m very jealous.

Cameron 1:56:41

If he’s free. We might try and Skype him in and just rub it in there. We’re all enter dinner while he’s locked in lockdown. Yes, we had hundreds of people streaming across the border yesterday. So it’s only a matter of time before we’re in the situation again, too. I think so. We’ll enjoy it while we can. Yes [crosstalk 01:57:09].  All right. Thank you, mate.

Tony 1:57:14


Cameron 1:57:14

Just before you go, the stand not so good at the end.

Tony 1:57:19

No, it wasn’t no. I think the first three or four episodes were brilliant. And I just went back to that sort of old trope. And yes, it’s from a book that’s what 30 or 40 years old and old trope of God versus the devil, which I found pretty hackneyed. really disappointing. I remember when I read it, it didn’t come across to me like there was more like, good versus evil. And yes, one personality type against another personality type. But I don’t play with it. Whether it was the producers did that or whether actually I just read Stephen King originally.  But yes, the first episodes were great because it really developed that the characters and took their time to get to where they had to go, which I found really interesting and enjoyable. And then I just went down to you know, orbs with lightning bolts coming out of them attacking the devil and they’re just like, Yes, please. Yes.

Cameron 1:58:15

That’s a shame. Well give a play for Mayor of East town. Oh, good, is it?  Well, we haven’t finished and I think we’ve got a couple more episodes to go but yes really good so far. And if for no other reason than just watching her performance. It’s a I told Hunter. My actors want to be actors and it’s just a masterclass in acting like she is just insanely good at this character who’s a fairly deplorable character. And she’s doing a flawless American accent through it. Guy Pearce is good in it as well. He has a sort of a smallish role, but she’s just so good. And Jean smart, who plays her mother in it is just delicious. As this irascible, sarcastic sardonic mother alcoholic, mother figure, just good Yes

Tony 1:59:16

I think It’s time to watch it.

Cameron 1:59:17

Yes, it’s on Netflix. Kate Winslet, she’s old, like she’s old now. She’s middle aged. I mean, younger than us, but still old. If you think of her in the Titanic, she’s old but she’s just so good. Oh great.



Tony 1:59:31

I’ve been watching Ricky Gervais stuff. I finally caught up with Afterlife, which I thought was pretty good.

Cameron 1:59:39

It’s great.

Tony 1:59:39

Two seasons.

Cameron 1:59:40


Tony 1:59:41

And I watched something called Special Correspondence last night with Eric Banner in it and Ricky Gervais.

Cameron 1:59:46

I don’t remember that being any good. It was a movie, right?

Tony 1:59:49

I liked it. It’s a five out of 10. But yes it’s worth watching. It’s not my usual standard thing. [crosstalk 01:59:58] No, it was a bit of a high concept movie but still.

Cameron 2:00:02

I saw him. Did you know about the talking Sopranos podcast?

Tony 2:00:07


Cameron 2:00:07

Michael Imperioli who played Christopher Malta Santai and Steve Shaw Ripper who paid Bobby Baccala have been doing a podcast since they were in lockdown in the US, where they just go linear episode by episode and then they get all the cast and crew on to talk about the making of Sopranos and whatever. But they had Ricky Gervais on and I watched the YouTube of that episode over the weekend. He’s a huge Sopranos fan he says best television show ever made, bar none and not just the best but like for the fact that it went on so long and was just so consistently good. Where his model is two seasons in and out because you can’t do more than two the old Fawlty Towers model but yes, he was just talking about what he loves about the show so much.

Tony 2:00:09

Oh good.

Cameron 2:00:28

But yes, it’s good seeing him talk about something I talked to he talked about Afterlife as well. Yes, a lot but which I think is really quite a mature show for him.

Tony 2:01:08

It’s good, isn’t it?

Cameron 2:01:10

He took it to a whole another level.

Tony 2:01:12

That sounds like the West Wing podcast with what’s his name? The guy who played Will Bailey.

Cameron 2:01:18


Tony 2:01:19

Episode by episode. I quite enjoyed that.

Cameron 2:01:21

Yes, I listened to that for the first six months or something and the guys from Scrubs do a Scrubs podcast the main two guys that play JD and Turk do a podcast which I’ve listened to one or two. But yes the Sopranos one is, it’s quite good. And if for no other reason that they have a million stories about Tony Sirico, Paulie Walnuts in real life, like…

Tony 2:01:45


Cameron 2:01:45

I don’t know if how much you know about Tony Sirico. But yes, he’s a real gangster. he’s a real deal. So like, he’s totally crazy, like crazier than Paulie Walnuts in real life by the sounds of it. And a lot of his real mannerisms made it into the show. Like he’s a germaphobe. He’s always, always washing his hands with sanitizer. 20 years before COVID so he was way ahead of the game. And yes, like, just had Carrie’s mouth spray like mouth freshener weed spray in people’s mouths. If he felt; they had bad breath. He’d give them a couple of bursts of they’re just really funny character.

Tony 2:02:24

He had those mannerisms though like he used to clench his hands, talk with his hands clenched.

Cameron 2:02:30

[laughing] I love Paulie Walnuts. He was good.

Tony 2:02:34

So good. And the hair grey temples. Yes.

Cameron 2:02:38

Well they have a thing on their podcast called the winger meter. As the as the series progresses they ask where are the wings? because his wings just got bigger and bigger as the seasons went crazier and crazier all the way back.[laughing] Yes anyway, check that out. If you’re looking for something fun.

Tony 2:02:56

[laughing] Yes, I love the sopranos. It’s good stuff.

Cameron 2:03:00

All right. I’ll let you go, have a good night. Oh, wait, what’s on the menu tonight? What are you cooking?

Tony 2:03:07

I don’t know. I haven’t thought about it yet. I was thinking maybe veggie cassoway with some chicken sausages, but we’ll see.

Cameron 2:03:17

Wow, sounds fancy. All right. Very easy. Have a good one, mate. Cheers.

Tony 2:03:23

Yes, you too.