QAV 435 Club

Tony 00:04

COG, COG, COG.

Cameron 00:06

[laughing] Welcome back to QAV Sifu Kynaston, Episode 435 recorded on the 30th of August 2021. How you doing Sifu?

Tony 00:21

Seafood? I’m good.

Cameron 00:22

Sifu, S I F U. That’s what in our kung fu classes we call our teacher, our master. You’re the Sifu of this dojo.

Tony 00:34

[laughing] I don’t know about that. Jenny’s probably the Sifu here.

Cameron 00:37

Well, she’s not in the dojo, you’re the Grand Master of QAV.

Tony 00:44

And you’re the grasshopper.

Cameron 00:46

I’m the grasshopper, yes.

Tony 00:47

Cause I feel like-

Cameron 00:49

I’m the white guy with…

Tony 00:51

Going to fill a tub with boiling water and put two dragons on the outside of it.

Cameron 00:55

[laughing] Yes. I’m the grasshopper and I have the scars to prove it.

Tony 01:00

[laughing] You’re that great Mad Magazine take off of Kung Fu. When you can steal the pebbles in my… Oh, two out of three. [laughing]

Cameron 01:15

[laughing] We’re talking about a TV show that no one’s ever seen and a magazine that no one’s ever seen or remembers.

Tony 01:21

I remember them both very fondly.

Cameron 01:25

We’ve got some big news. Tony, do you want to start with our big exciting news?

Tony 01:30

Yes, so I guess by the time people hear this we’ll be licensed with an AFSL authorized rep agreement. So that’s a great relief for me. So we can talk more openly about stocks and not get pinged by ASIC and shut down, and it’s also means we can go back to putting a buy list out which is I think, what a lot of people have been asking for and we can now deliver. So I’m really happy that we can do that really excited by what the future holds because of it. I’m relieved, it’s all over. I had to sit a couple of exams, and it required a fair bit of study.  So that’s been keeping me busy for the last four or five weeks. It wasn’t… the exams weren’t hard; they were multi-choice open book. Who knows. But I was into the first module, which was a general sort of intro into being a financial planner, and thought, I’ll just take the test and see how I go, I’ve got 70%, right. But you need 70% for a pass. So I thought I better go and study this, and then did the second one, we had to have 100%, and got there eventually got 92% the first time and then reset the test again the next day and pass. So all good.

Cameron 02:46

That’s good. So to be clear, you’re not a financial planner-

Tony 02:49

No.

Cameron 02:49

But we’re allowed to talk about general stuff like stocks.

Tony 02:54

Yes, we were authorized to talk about securities and offer general advice.

Cameron 03:00

Right.

Tony 03:00

Which you often hear about when people do these kinds of podcasts. They say this is general advice only.

Cameron 03:06

And I want to give a shout out to a number of guys that helped us on this path over the last few months. Steven Mabb sent us some links. Murray Bruce was helping us out QAV club members, and then Phil Muscatello, linked us up with the guys that we actually got our license done with or through. So shout out to all those guys for generously helping out and getting us to this place.

Tony 03:33

Thanks very much, guys, and we went for a long time, at least six months making contact with people and I’d send off emails and call them up and tell the secretary Yes, we’re doing a finance investing podcast, and we’d like to get licensed, like never heard anything back. [laughing]

Cameron 03:47

[laughing] Nothing. No. Crickets.

Tony 03:53

Yes, well… We finally found some people. So it’s good.

Cameron 03:58

Yes, that’s good. So we’ll be able to do a lot more moving forwards, which I hope will be useful for people. I wanted to say that we had a great Brisbane dinner last week. I want to thank all the guys that came along. There’s about a dozens of us there and had a big Chinese meal. Great guys great conversation, as always, as always super impressed with the QAV community and even my sons Hunter and Taylor came along, and Hunter, who hasn’t been very involved in QAV. He said afterwards as we’re walking back to the car. Wow, congratulations.  I got to say that’s an incredible group of guys. That’s really impressive and he really enjoyed sitting in and hearing the conversations.

So yes, and I really encourage people who don’t have a QAV local meetup in their area, set one up, jump on our Google Groups. If you’re a QAV club member, get a link to those through the QAV club member resources page, and set one up because I just think it’s a really powerful tool, particularly when you have the more experienced members getting together with the newer members and they can help them, and as Chrissie has always told me because she’s a teacher, the best way to learn something is to teach it.

Tony 05:13

Yes.

Cameron 05:13

So, yes, I think you found that over the course of the show, right? As you’ve had to teach QAV, you’ve had to think-

Tony 05:21

Yes.

Cameron 05:22

-in a different way about stuff. Yes.

Tony 05:24

And not just that, too. But I think the tools have improved, I was doing a lot more a lot more manually than what we do now.

Cameron 05:33

Yes.

Tony 05:34

So that’s good, and I think that’s probably one of the key things from the meetup groups that I’ve observed is that, someone will say, Hey, here’s my shortcut to do that. Probably, don’t bother doing that do this.

Cameron 05:44

Yes.

Tony 05:44

Here’s a bit of code that will help you do this quicker, or whatever, which is really great. So…

Cameron 05:48

Yes.

Tony 05:49

That’s really useful.

Cameron 05:51

I also want to give a shout out to Chris, new QAV club member who last week picked up some errors in both the AF version of the checklist and the bible. So we sorted those out well done to Chris for picking them up. If you haven’t seen the post that I did on our Facebook group, check that out. At the very least, download the latest version of the AF checklist if you’re using that version. 1.7.7 is the latest version that fixes that, I don’t think it would have made a huge difference in how we’re scoring things. Maybe the order… I did some back testing on it looks to me like the the top with the new version, my top 20 is still the top 20.  But they’re ordered slightly differently. The scoring is a little bit different. But hopefully it didn’t cause anyone too many problems. The… Oh you saw a foe take of first steps last week, Tony, I think you wanted to

Tony 06:48

I was just talking about personal issues that people may know that I have a horse breeding business and normally foals birth overnight. So you never see it. But I was just working away last week, or maybe the week before and got a FaceTime from the guy at the stud. He said quick jump on, there’s foal’s birthing, and it was like 11 o’clock in the morning, which is really unusual. So I got to see it.  Take its first steps, which I never do before. Normally, you wake up in the morning, and there’s a video and a bit of a blurb about how the birth went. But it’s amazing. It really is, to see a big thing come out of a bigger thing. And-

Cameron 07:30

[laughing]

Tony 07:31

And just nature. Gets up almost straightaway and tries to walk and yes. It’s tough.

Cameron 07:38

Yeah. mazing stuff. All right, what do you want to talk about now?

Tony 07:45

Ok, so let me go through my list. Well let me talk about musing. So one of the things I’ve been thinking about in the last little while and is about whether we should… I’m doing this trial on rotating stocks out the lowest scoring stock out of my portfolio and replacing it with the highest on the list, and a lot of that sort of research and thinking is leading me to look at whether when something gets to about a threshold of a QAV score of 0.05, whether it doesn’t become an automatic sell.  And so I’m also thinking, I’m wondering whether like people have asked, why not we trade based on the IVs we set for stocks, but this might be the way to do it. Like if we’re prepared to buy something when it’s above 0.1, and maybe if it gets to, say, a 0.05, which is probably going to be double the value of was when it was a 0.1 that might be our IV metric, we’re buying it when it’s less than 0.1, oh sorry, above 0.1. So it’s maybe 0.2 maybe it’s 1.1 and then selling it when it gets to be much lower than the one and say 0.05 as well.  I’m thinking that might be our buying and selling according to our IV and I did some back testing so I went back 12 months and now that we have least 12 months of the downloads in the current form. I can go back 12 months and look at what the stocks were like then and then run forward and put the current prices into that spreadsheet and see what they’re like now-

Cameron 09:38

Yes.

Tony 09:38

And certainly… I took all the stocks that were 0.05 or had a lower score, and certainly some of them performed well during the years since then. Stocks like Macquarie Bank or Macquarie group and NIC nickel mines both had good years, and both were on 0.05 or they were, about a year ago, but if I took all the stocks that were a 0.05, they only returned 4% for the year against the boom year like the ASX is up 26% or something in that same time period.  So, overall they’ve underperformed. So it’s always been my experience that you let them run until they turn down, and I think I need to do more research if I can identify the Macquarie groups and the Nickel mines at 0.05 like maybe there’s another metric we need to look at, like forecast growth or something like that. Or dividend yield something which makes them attractive still, but certainly as a group, those stocks are worth selling, I think. So more research is needed. But I just thought I’d flag that maybe people give us their input.

10:47

right. So you’re not suggesting that we start exercising that yet.

Tony 10:54

No.

Cameron 10:54

Needs more needs a little bit more research,

Tony 10:57

needs more research, but I’m just throwing it out there as an answer to some of the questions that are being asked around, you know, how do you know when something is fully valued? Shouldn’t you be selling it then? I think a very, very good questions, and also too, as some sort of early findings from my testing of a small part of my portfolio in a challenge type environment where I’m turning stocks over month on month. Yeah, but I’ll do some more research and come back with a hard rule on that one.

Cameron 11:25

Okay, great. Well, that’s interesting. I want to thank Michael Dumbrell for his review on Apple podcasts. He wrote impressed my understanding of investment results have increased substantially since founding this podcast, the Facebook group is awesome as well with everyone sharing their ideas. So thank you, Michael, for that it all helps. If anyone else wants to leave a review, we’d appreciate it.

Tony 11:50

Very much. So hey, I

Cameron 11:51

Hey, I had an idea early today, I happened to be in a trophy shop, and I was thinking we should have a trophy that we hand out every year at the end of the financial year. For the QAV members with the best results for the year. What do you think the QAV trophy, good?

Tony 12:11

Yes.

Cameron 12:12

Yes. I don’t think you’re allowed to compete, but… [laughing]

Tony 12:20

I don’t need the trophy. I’ll just I’ll just take the cash. Thanks.

Cameron 12:26

But, yes, so I’m going to get a trophy. I’m going to get it a nice classy looking trophy that look good on your mantelpiece or on your desk. QAV club member of the Year for best results. So if you if you’re not actively tracking your results in Stock Doctor or Navexa or Sharesight or something like that, now’s the time to do it. It’ll obviously have to be on an honesty basis because we’re not getting we’re not going to ask you to send us your list of trades and get it audited, but…

Tony 13:02

Which means it won’t be a very expensive trophy.

Cameron 13:05

[laughing] But so yes, I’m going to do that. I think that’d be fun.

Tony 13:10

Yes, good idea.

Cameron 13:11

What else you want to talk about?

Tony 13:14

Just quickly, I spoke last week about Emeco Holdings and how it reminded me of the past when a couple of other equipment hire companies were taken out, and I was talking about Seven Group buying and I thought that was Boom Logistics but I looked it up after the show, it was Coates equipment hire-

Cameron 13:31

Right.

Tony 13:31

Which is part of part of their business now and in that same sort of space as Emeco. So you just want to get that straight in case people before people come in with questions. Why did you mean this? That’s pretty much it. You’ve sent out an email saying that. I’m meant to be the Keith Moon of investing. We should pay homage to the great Charlie Watts who passed away during the week as well.

Cameron 14:00

He did, like the next day, I was sort of kicking myself that we didn’t mention Charlie when we’re talking about great drummers in the episode last week.

Tony 14:07

Yes. [crosstalk 14:08]

Cameron 14:12

That’s going to be the title if this weeks episode. Charlie Watts [unintelligible 14:16] [laughing]

Tony 14:17

Sitting in the background, be amused at all the front man, and well drive the machine.

Cameron 14:23

No, because you see, I think the difference between Keith and Charlie is Keith was very innovative with his drumming and he brought a lot of flair a lot of flash to it. You’ve got a fair amount of innovation that you’ve done. I mean, flashy like Keith, you’re more chill like, Charlie, maybe we’ll call you Charlie moon. Or…

Tony 16:13

[crosstalk 14:45]

Cameron 16:43

yeah, I could never afford it. Beta was just struck me as very unranked and roll.

Tony 16:54

Yeah, it’s even worse in Toronto too. I mean, they have StubHub and the scalpers. You know, they’ll buy tickets, there’s no limitations on that. I’ll put them on StubHub and like you can pay. If he wants to the front row seats, the Pearl Jam or something? You’ll pay 1000 bucks for it for a ticket.

Cameron 17:14

Yes, Warren Buffett would say what could I turn that into over 20 years?

Tony 17:18

No.

Cameron 17:18

I could not make a thousand bucks.

Tony 17:22

[laughing]

Cameron 17:22

That’s why you’re not Warren Buffett.

Tony 17:24

True. Yeah. But now I can talk about seeing Pearl Jam from the front row.

Cameron 17:28

Yeah, well, Chrissy opened for Pearl Jam. Did you know that?

Tony 17:31

No, wow. Yeah. Well,

Cameron 17:34

Yes.

Tony 17:34

Wow, guess you’ve found your new hero.

Cameron 17:36

When she lived in Seattle, she was in a band. She played violin in a band that opened for Pearl Jam once.

Tony 17:41

Oh my god. Wow.

Cameron 17:43

And she went to Mike McCready’s house afterwards, and he owns a bunch of I’m probably gonna butcher this but I think the story is, he owns a bunch of really rare Stradivarius type and equivalent violin. So he gave her a tour of his very rare violin collections, like, 600 year old violins and all that kind of stuff.

Tony 18:10

Is that like, come to my place and look at my etchings.

Cameron 18:14

[laughing] Probably. What else have we got? You want to do your pulled pork of the weekend? See what you can crash this week? Yes. [laughing]

Tony 18:24

[laughing] Well, someone asked the question on Facebook group about C O G COGstate

Cameron 18:34

Yes

Tony 18:34

So that’s going to be my pulled pork, and it was up 15% on Friday, and I think last time I looked at, it was down about 5%. Again, so holding my breath. [laughing] And I I hasten to add that when I did this, this morning, we still don’t have the latest numbers in Stock Doctor, even though the results are out, which drove the price up on Friday. So like, the numbers will need to be updated by people, and chances are by the time I hit this here, new numbers will be out.  But anyway, I got the question that

was asked on Facebook, which is worth exploring, and so I’ll focus on that is that the company on a abnormal basis lost money on a normalized basis it made money and yet the results were well received. So-

Cameron 19:26

Yes.

Tony 19:26

What’s with that, was the kind of the question the gist of the question on the Facebook group, and so that’s what I wanted to focus on. So just a little bit on COG. First of all, it’s an equipment leasing firm, a bit like Forum Finance that we talked about before that was had the problems with the the principles, defrauding the bank NAB bank, I think from memory going overseas.

Cameron 19:49

Allegedly.

Tony 19:49

So similar sort of company in that it. It loans, big business, money to buy equipment usually secured against the equipment and often times, from what I can tell probably a bit rural based, so farm equipment tractors, things like that, but it’s at least part of the business. I’m not sure if it’s the it’s the overall business. But what I wanted to focus on is, it’s what’s called a roll up in the investing game, and so what how it was this company’s popular is because it’s going around buying small leasing firms and then bolting it on to their own business.  And roll ups have been done for a long time in the stock market.

They work best when a listed company has a PE ratio, which is higher than the companies that’s taking over, and so the basic arithmetic is that, like if you owned a coffee shop, and I own a coffee shop, and they both traded on the same price earnings ratio, which they probably would if they are unlisted and are both similar, I’d have to raise as much capital as I have now to buy you out, and so one plus one equals two, right? I didn’t have to go and borrow money, or if.  I was listed, issue more shares and then buy you out. But if coffee shop number I had a PE ratio that was twice coffee shop number B, then it’s much easier to take over coffee shop number B, you still have to issue shares, but only half the number you’d have to issue if they were if they are both on the same P, and so having a higher P ratio is really helpful if you’re taking over a company, and in the equipment roll up space, this company trades on a PE of around just under 15.

So it’s about 14.9 did my numbers, and it mentioned somewhere in the in the presentation I read today that most of the companies in the space have their unlisted trade on a PE of about seven.  So it’s about half that.

So this is a case of one plus one giving you three so they can go and take over, you know two companies that an unlisted company could take over for the same sort of issue in capital, and so that’s how roll ups gain momentum, and they’re loved in the investment community because they can just keep going until there’s no more equipment companies left, and it’s kind of arbitrage between high PE ratio and low PE ratio goes, and so it’s almost like value investing in reverse. They’re getting valuable acquisitions because it’s costing them half what it would cost, unless the competitor to buy these companies out.

So yes, it’s a good business plan. The cautionary tale comes at the end when they finished all the roll-ups, and it’s a mature business, and there’s cases where companies have fallen over when they’ve reached that stage, and the classic example is ABC learning, which was a roll-up of childcare centers, done by a Queenslander by the name of Eddie Groves, who had one of the more fashionable mallets to come out of Queensland, and very naturally, I think they were aggressively rolling up all these childcare centers, which traded on very low multiples, and because he was listed, he had a higher PE ratio and could issue script easily and take them over. When that sort of started to reach maturity, he was under all the pressure from the investment community to keep growth up, and so that put pressure on a lot of accounting anomalies which came out once the company finally collapsed. But when a roll up reaches sort of maturity, there’s no one left to buy, they’ve got a… it’s very hard for them to get the same sort of growth out of the existing businesses that are getting when they are buying them cheaply. So that’s just one thing to watch out for. I don’t know if we’ll be in COG when that happens. But yes PE, that happens.

There are people doing it in the market in different ways. It’s a bit like Weiss tech, which is a bit of a market darling, and I think its share price went up like 50%, after its results came out last week. Another sort of high priced tech company, it’s a freight logistics company. But it’s been going around the world buying other freight logistics software, sorry freight logistics software company. It’s been going around buying other companies that produce logistics software for freight companies, and using its high PE to do that, and again, who knows what will happen when they run out of companies to buy, they’ve got to then get good growth out of their mature business, and that’s hard to do.  So, but on the way up, it’s a great ride, you get big share price appreciations.

So I just want to make that clear about COG. The second thing is to look at its results and they’re not in Stock Doctor yet, but the results that were on their website. First of all, they’re unaudited, which is kind of a bit of a surprise because most companies are releasing auditor results now and it’ll certainly have to be audited by the time it gets into the annual report, which will come out in the next month or so, and the results contain to two issues which are worth highlighting.  The first one is that there was a going concern clause. So the directors called out the fact that if you looked at the numbers, the way they’re presented, then there’s a, you could draw the conclusion, the company wouldn’t be able to pay its debts going forward, they have a reason for that which I’m satisfied is a reasonable reason, and it’s got to do with accounting principles with these kinds of equipment, leasing companies, and they call out the fact that debt is treated as short term, because it’s issued in the year that they equipments leased.  And it’s amortized into that year, and the asset is amortized over its lifespan, which might be three or four years.

So you have this mismatch between current liabilities and current assets. So you have lots of long term assets and lots of short term liabilities. But the reality is, the lease will match the life of the equipment, and so it’s all tickety-boo. So I kind of get that argument, give them an OK tick on that. But it’ll be interesting to see what the auditors say about that. So I flagged the fact that this could be a qualified audit, when the audit report comes out.  That’s the first thing. Second thing is that there was also a big write down of intangibles for this company, which is why, as someone pointed out on Facebook, the company made a loss if you look at the P&L, but it’s called an abnormal year, or an abnormal loss, and so if you look at the ongoing operations, they’re quite profitable. The abnormal loss again, it looks like a bit of an arcane accounting treatment.

So I’ll be interested in what our friends the auditors have to say about it. But basically, it’s a right down to the curb because this, they’ve been centralizing the new equipment lease businesses they’ve been buying into their existing one.  And the accounting treatment for that is that the one that they purchase has to be written down, even though it’s still essentially going operating as it was but part of a new business, and because technically, the old business has been closed, and it’s been wrapped up into the new one.

So there was an abnormal write down of amortization for the goodwill on those past couple of purchases. Again, makes sense management explained that that makes sense. But it’d be good to see what the order was coming out with. QAV numbers are good for this one, albeit, we still have December 20 figures so they may change QAV score 0.25, quality score 82% and some of the highlights, I won’t go through the whole lot. Financial health is strong.  The price the cash flows is only 3.3 the net equity per share is $1.09. There’s no IV2 so this is not being covered by any brokers or many brokers, which is something I like because it allows us to form an opinion and get in there before the broker community have a look at it. Little yield 1.9%, but not great. But directors hold 20% which I thought was good, that’s a big tick for me, and using the current PE, it’s not the highest or the lowest, so it’ll get a score of zero, which I don’t think will change when the new figures come in, and it’s been in an uptrend for a while. So it’s not a new-three point trendline uptrend. So that’s COG, have a look at the new results and watch out for the audit report when it comes out too.

Cameron 28:17

I think the biggest thing on the scorecard that you didn’t mention is the fact that their CEO isn’t currently hiding in Athens. So that’s good. [laughing]

Tony 28:28

[laughing] Well, I wouldn’t mind betting that the Forum Finance customers are on top of their call list at the moment, it might be an opportunity for them, yes.

Cameron 28:36

[laughing] By the way I was just having a look at the price today COG that is it’s only down two and a half percent. So your pulled pork’s actually clawing back some of that…

Tony 28:51

[laughing] I’m not sure if it’s my pulled pork or my email when I send it to you. I guess you’re in into your inbox in the morning saying I’m going to do this stock of the week. Somebody is monitoring the Chinese hackers [crosstalk 29:03]

Cameron 29:06

Speaking of anomalies and numbers, though last week, we talked about ASX’s cash flow, ASX the company that is and I know, you then spoke to Baillieu and you had a bit of an update on all of that you want to quick I know it’s not in our notes, but can you just…

Tony 29:22

Yes, sure. From memory, there’s about $5 billion of operating cash flow, which looks a bit unusual, and that particular in the operating cash flow jumped up from about 1 billion last halves to 5 billion this half and jumped on a presentation that the CEO of at the ASX did at values and he said I asked the question in the chat, but it didn’t get time to be answered.  But anyway, during the presentation he said that the ASX changed from cash accounting to accrual accounting, and so that’s the first thing to note that some sometimes that means that assets are treated differently and they they’re brought to book earlier than they would be if it was straight cash accounting. I think that’s part of the problem or part of the issue with this one.

So that particular line item and I spoke to Alex Hay later on in the day about it and he said yes, what’s what happens is it’s one of two things it’s either the money flowing through the system in the ASX, so you have T plus two settlements. So we buy a stock we have two days to pay it. So there’s always a certain amount of money circulating within the ASX, he said, that’s either being because of accruals counted all in one go. For the end of end of half numbers, or there’s a certain amount of security the ASX has to hold to enable that order flow properly.  Because you’ve got to be able to know that if I pay my stock broker and stock broker gives it to the ASX has kind of reached the next broker and then back out to the person who was selling the share.

So the ASX has to hold a certain amount of security in the system to take into account any timing glitches or any delays, or even in the worst case, you know, stock broking going bankrupt or something like that, and so they have to hold a large amount of security.  And Alex thinks that could be a combination of both of those two things, or either or, and the fact they’ve gone from cash to accrual means that those securities are being booked at the end of the half in one guy. So I think it will be the case that going forward, we’ll see it stay there. It’s financials are the hardest ones to I guess get your head around in terms of operating cash flow, like it’s pretty easy. If it’s a retailer or industrial company or a factory. It’s basically just the sales coming in as the cost of goods for those sales.  But when it comes down to financials, you have all these funny instruments that are in there, the accounting plays a big part… How they treat the assets, like we just saw with COG, if they have leases, how they’re treated against the asset backing for those leases. So I, my rule of thumb has always been just to take operating cash flow at face value.

So someone said, Well, it wasn’t, we normally wouldn’t have the ASX on our buyer list, because that $5 billion dollars wouldn’t be there, and it would have a price to cash flow much higher than what we would normally look for.  But still, my rule of thumb is if it’s there, it’s there. If it goes forward, it’s there. It’ll stay on the buy list. I’m I certainly don’t have the accounting now to be able to back out things like that and know how to separate them or treat them, and there’s also the counter argument, which is what if it is the money flying through the system? It is a kind of operating cash flow, it’s cash, it’s there. It’s just not coming in as a receipt to the ASX. So yes. I as a sort of one hour a day investor, I’ll leave the cash flow the way it is, rather than trying to be a you know, nerdy accountant and pull these things apart, and even if I get this wrong, it still can be traded on a three point trendline basis if I get it wrong. So time will tell.

Cameron 33:21

Right. Bottom line is nothing to be overly concerned about in ASX.

Tony 33:26

No, I don’t think so.

Cameron 33:27

So yes, Alex Hay, for new listeners, has been your broker of Baillieu for 100 years.

Tony 33:33

Correct. He’s one of the major partners in the firm. So he knows what he’s talking about.

Cameron 33:37

Smart dude. Yes.

Tony 33:38

Yes.

Cameron 33:39

Did you want to talk about ANP?

Tony 33:41

I just quickly, I mentioned that last week that I couldn’t make a second trough to get a sell-line up to date. Which case I’d go back up the graph until I had two troughs and which means it was a sell a while ago. But it has continued to turn up. So I’m just going to call it out. There’s something to watch. Right? If we do get a second trough with AMP, and it keeps going up, it’s probably a good time to buy.

Cameron 34:04

Right.

Tony 34:05

And the gutsier people who like we did with talking about what the banks last year after they reported mid-year, I think last year, we could see in the numbers that we’re going to do well, and I think I am he’s probably in that space now. So it’s getting close to time to dip our toes in the water there. I think I just want to see some more confirmation. There’s another falling knife in it share price graph.

Cameron 34:27

Right.

Tony 34:29

Two more things we didn’t talk about. Three more things.

Cameron 34:32

Oh, you Steve Jobs.

Tony 34:34

Yes, that’s right. One more thing.

Cameron 34:35

One more thing.

Tony 34:36

Yes. Three more things we haven’t talked about. The first one is and I think I don’t think we talked about this but pull me up if we have. Someone asked the question about whether return on equity should be part of that checklist, and so I did another 12-month trial on that. I just want to let people know what the results were. So again, I went back to a buy list from 12 months ago and I broke it up into in two, three bands, return on equity that was negative because sometimes our stocks have a negative ROE.  Because they’re in turnaround mode, I put like that was one band, the second band was stocks ahead narrow we have between zero and 20%, and the third band was an ROE above 20%, and you know, for a long time investors get taught to look for companies, which are always above 20%. So that’s why I broke it up that way, and then I looked at, you know, how they tracked how each of those three bands traveled over the last 12 months.  And the surprising one was that it was the middle band that outperformed so the one between zero and 20%.

So if I looked at all stocks in that period, so the wireless was about the, I think the 8th of August 2020. I did this analysis a couple of weeks ago, overall, for all stocks on the buyer list that there was like 45% return over that period. Across the bands, though, that the stocks have had negative ROE, we returned 32%.  And, sorry, 33%, the stocks have had more than 20% ROE, we returned a 40% performance over that time, and the middle band had 52%. So I have always felt that I’m agnostic towards ROE, and I think this kind of confirms it, and I’ve been through the reasons for that, I think a lot of investors focus on ROE. So it’s become a bit of an overbought metric, if you like so much investors focus on it, which drives the price up for those stocks. But also to I think it’s become a gained metric that, if a CEO gets said gets told their bonuses based on the RFP, they can do a couple of things to improve that metric without necessarily improving the business.  And so that’s another reason why I don’t always focus on ROE, and but this analysis, it’s only 12 months, it’s only one look at it. So I hasten to add, it’s not a great statistical analysis. But it says to me that ROE is not something we should put the checklist.

Cameron 37:03

Right. Good. Thanks.

Tony 37:05

The second thing I want to mention was I have been thinking about putting into the checklist, some kind of metric that tracks companies which start paying a dividend for the first time as as a bit of a vote of confidence by the board in the company going forward, and oftentimes, when I’ve noticed when I see that the share price does take a big leap up. But I haven’t been able to work out a good filter for it in stock doctor, so I’m just trying a couple of them. The ones I’m trying is I’m using a filter for dividends per share, greater than zero currently, and a two-year growth over the last lap prior two years of greater than 100%.  That’s not always throwing up companies which go from no dividend to a dividend. Because some companies do grow their dividend more than 200%, like Fortescue Metals Group.

So it’s not a perfect one, and then the other one I’m looking at is companies which have a zero yield 0% yield this half, but their forecast is positive. You will have to wait six months and see whether that is the right list or not.  But ideally, I want something which people may, you know play around with and come back to us with a solution for which says yeah, here’s here are the stocks which have paid a dividend for the first time as half if we can sort that out. That might be it’s worth researching at least but it might go into the checklist.

Cameron 38:30

Well, it might be a good question for me to throw to my new friend Victor de Pasquale, Lincoln indicators, the head of customer something training product, something great. If you ever need to know how to do anything on Stock Doctor come to me, yes.

Tony 38:47

So there was those two things are the third one I want to talk about Shell scenario planning. I’ll do it quickly. This goes way back to when I was talking about the oil price and the oil industry, maybe a month or so ago. I just wanted to call out it’s an economic framework, I guess.  So, you treat it with a bit of a grain of salt. But it’s really interesting if people are interested in in economic framework. So when I was working at Shell, Shell has, and still has a reputation for being a fantastic economic forecaster, and I guess, business plan developer, and I started off with a very broad based global framework for what they think is going to happen in the next five years, and Shell is a one of the biggest companies in the world. It’s selling a product which is used all over the world.

So it’s plugged into, seriously plugged into most economies in the world.  And it has this reputation for producing great economic framework scenarios, and you can go and Google it and look it up. It’s they make it readily available. Back when I was working at Shell back in the late 80s early 90s. To use the framework then, and I usually produce, I think it was four at that stage, it’s two currently, as code sort of competing ideas about where the, the world might go to economically in the next five years, and back then, and then I wait for one to dominate, and they sort of then align up all their business planning around that sort of global framework, and back then the framework that dominated was called Global mercantilism.

And back in the late 80s, it was predicting that barriers to trade would come down, we trade war with China, and Vietnam and, and India and places like that, that inflation would go down because of that, and all those things that flowed from that, and that led them to invest more in any emerging countries like Vietnam, Indonesia, places like that, South America, which treated them, which they did very well.

So I just wanted to call that out that the current two dominant scenarios, which are worth at least having a flick through mountains, and ocean, so one is mountains, one is oceans, the mountains, one says, basically, they say that the global economy is going one of two ways in the next five years, it’s either going to retreat back into big superpower economies, and there’ll be less trade going on in the world, or it’s going to be an ocean of small countries still trading with large ones or smaller ones, much continuing like it has in the last sort of 20 years, it looks to me more like it’s going to go the mountain route, which means that countries retreat into themselves, there’s less trade between countries, there’s less outsourcing of cheap labor going on. Kind of like I guess, if you look at it, in terms of countries, China retreats into its shell in America retreats into its shell, and we don’t have that.  So the free flow of trade that we’ve come to know, unlike in the world economy, which means that inflation will start to rear its head. If we can’t get t-shirts from Bangladesh anymore, we’re going to pay more for t-shirts, right?

So that in the longer term means inflation, and there’s all kinds of implications for inflation on the companies we invest in and on us as investors, the share market usually doesn’t like inflation, interest rates go up, and inflation becomes a drag on the economy.  So read it as a background, I kind of like it as a framework, it’s not going to make any changes to how I invest because of it, but just wanted to flag it as a really interesting resource for people to have a look at.

Cameron 42:32

Terrific. I can’t I can’t imagine, how we would decouple from China, but who knows.

Tony 42:41

Well, we already are. They’re not taking our coal anymore or our wine or baby formula. Yes, they’re putting a clamp on iron ore. Are you being sarcastic, are you?

Cameron 42:53

No, no, I’m not. I see those things as just, them throwing their weight around and reminding everybody who’s boss, but I can’t see it. going too much further. But who knows?

Tony 43:08

Who knows? Yes, I certainly don’t. But yes, if people are interested, just a really interesting read.

Cameron 43:14

Oh, thank you for that. Questions.

Tony 43:19

Yes.

Cameron 43:24

Hey, it’s your show, man. We’re just here going along for the ride. Brad asks, hi Cam, Is there ever a scenario where sentiment is discounted? To some extent? I’m thinking tightly held companies without much float? Sometimes a few tiny trades makes it look like Armageddon? Yes. Well, I saw that recently with GLE. Yes.

Tony 43:49

Yes, right. Well, that’s what we have the three times average position size has to be a third of average daily trade volume to try and get us out when things Armageddon happens. But yes, with these kind of smaller companies and with these larger companies that have small floats, yeah, it’s going to happen.  No, I wouldn’t discount sentiment in those cases, it may be even more important in those companies. But the couple that I’m more familiar with are like some of the large market cap companies that have two dominant shareholders, and a very small float. So I’m thinking of the likes of AGG AngloGold, and Yanco. Why I am by both of those, I’ve invested in the past and bitten twice by the same thing that I guess Brad’s talking about. You go in there and it works both ways. So with a small float and two large shareholders, if there’s a small amount of purchasing on the way up the share price can rock it up quickly.  But as soon as that reverses, and you try and go out it drops like a stone so yeah, it’s that taught me to really obey the average salary to rule in investing, and potentially, you know, you may even need to have a bigger margin of safety for these kinds of companies. So that’s pretty much all I can add, I wouldn’t modify the sentiment rules. If anything, I would modify having a bigger margin of safety with the ADT rule.

Cameron 45:20

The guys at the Brisbane dinner wanted to suggest that we add a new checklist item, has Cameron bought the stock recently?

Tony 45:25

[laughing] Well, now that we have to go no go. We have an authorized rep license fund, so we have to declare stocks.

Cameron 45:36

Oh, Which reminds me, I was supposed to add all of our stocks to the newsletter this week, which I didn’t. I’ll have to set a reminder to remind myself of that next week. I’ll send…

 

Tony 45:47

Yes, I think through all our requirements, that can be done. Going forward. Yes

Cameron 45:51

I’ll have a checklist that I go through. From now on, make sure that’s all included. John asks, from Tony’s experiences, the market just hit all-time highs, where does he feel we are in the cycle?

Tony 46:06

Well, let me ask John, where he feels we’re in the cycle. I personally, I think we’re about 11 o’clock in the cycle, and I enunciated some of those thoughts over the past months about inflation about interest rates? The question is, how long does it take to get from 11 to 12? o’clock? And that’s the million-dollar question that no one knows, and also, how far does the market go up before it comes down between 11 o’clock and 12 o’clock, as I’ve seen before, in the GFC, in the .com boom, that last leg up can be 80 to 100% rise in the market.  And if it drops, half, you still, made a lot of gains in that last year.

So yes, I think it’s getting very toppy. valuation wise, the PE ratio that if you look at the average PE in the market, it’s not too bad. So one thing that might happen is that there’s a correction rather than a route in the market, and I’ve got to say that, if that happens between now and Christmas is usually the hunting season for corrections in the market.  There’s a lot of academic research around the old adage seller may and go away, which doesn’t always happen, and it’s an adage that you can’t trade by. But it reflects kind of the psychological psychology of northern hemisphere investors if you if you think about that, so they’re on their summer breaks at the moment. This is like our Christmas holidays in Australia, right? No one’s at work. In North America, people are at their beach houses, their cottages by the lake. Certainly we’re in Toronto in Canada, where I had a lot of experience of it firsthand, and I literally D camp for a month or six weeks, because they’re on school holidays.

They often go back to school on Labor Day, which is coming up I think Labor Day is Monday week in the States. So it’s usually I think the first Monday in September or something like that. It’s the last big holiday of the summer, universities or startup after that schools will go back after that. People will reluctantly go back to the office if they can and start working again after that.  So generally by October, there can be a correction in the market so that people get to grips again with you know, what’s been going on over the summer while they haven’t been paying attention. That’s kind of the loose psychology of it. It’s doesn’t always correct in October, but if you look back at all the major crashes from 2009 it’s always October.

Cameron 48:27

87?

Tony 48:28

87 was October, the GFC. I think Lehman Brothers went bankrupt in October or there about.

Cameron 48:34

Yes.

Tony 48:36

So there’s something about it. I don’t know if it’s like death three times in last 100 years. So it’s certainly not worthwhile selling a million and going away, but that’s the average.

Cameron 48:47

And, you’ve told us you like to be always invested, and you play it by ear?

Tony 48:54

Well, yes, I mean, what’s the alternative? If you try and time the market, you can’t do that. You may miss that last leg up, which goes up for a long time, interest rates are still low, so you make up for years. There’s plenty of government support around when interest rates are low so Reno’s when that’s kind of when the Jackson Hole convention happened on the weekend and Jerome Powell came out there’s a bit of a dove in terms of interest rates so he’s willing to support the economy going forward if there’s more COVID for example.

Cameron 49:23

By the way that’s where I’m retiring to.

Tony 49:25

Jackson Hole?

Cameron 49:27

Yes, you ever been there?

Tony 49:28

No.

Cameron 49:30

Magical little place. Really great. Yes.

Tony 49:34

I thought it was a joke about Jackson Pollock.

Cameron 49:38

I don’t always make jokes, Tony it’s judiciously. They’re not always good jokes. No great. Chrissy and I did a big road trip in the US. 10 years ago, we stopped in Jackson Hole and it’s near the Grand Tetons or the big titties as I always refer. Because that’s what they’re supposed to be. But yeah, jack In whole, just really quite little town country town with country bars and its great.

Tony 50:08

So hard to see why all the bankers and business leader the world would go there for a holiday for convenience

Cameron 50:14

Yes, Harrison Ford lives two years his range there, I didn’t run into Harrison on that trip. We just we missed each other. It was a timing thing. But yes.

Tony 50:22

We’ll have a conference there some time.

Cameron 50:24

I think we should do that. When we when we’re up and running in North America. We’ll have our conferences there. Yes.  Well, following on from psycho questions, Daniel also asks if you take any extra precautions in these times and then he says, I guess The Iceman just does what he does.

Tony 50:40

Correct. I don’t do anything different. You know, the, the numbers can still be good. Leading right up to the crash, there’s always a buy list. I haven’t ever haven’t been like Warren Buffett who shut his investment partnership in whenever it was 69 or something until I can’t find anything to buy, I’ve never experienced that at all.

So yes, I wait for the shares to start to come down and use the three point trendline to trade our way out of it.  As we did with the COVID cough last year, try and miss out on the on much of the bottom and then barbecue on the way um, so that that’s how I time the market, I guess, but that the market times me rather than me timing the market. Because otherwise you do things which I don’t think is, is a good way to invest, which is you hold cash, and which is a form of timing the market and then you get you know, if you’re holding 20% cash, it means your returns are 20% lower when cash is paying less than 1%.

So, you know, for me being in the market all the time getting an extra 20% return is is the insurance or is the payoff for being fully invested, and if it turns down on you, well, you’ve got that buffer, obviously.

Cameron 51:51

Because it’s also why you always tell me in private the Buffett’s an amateur.

Tony 51:56

[laughing] No I do different with Buffett on holding cash, but he’s holding cash for different reasons. I mean, he’s holding cash. So you can be the banker of last resort when the downturn happens, which is kind of what we’re talking about, he’s waiting for a crash with the cash. So but you know, he’s also running a company worth $100 billion, it’s different way to invest in someone who’s running millions or tens of millions.

Cameron 52:24

How much? How much time? [laughing] I did tell you the QAV dinner, we decided to start a book one day we’ll find out and we’ll see who wins. There’s another trophy for who get guesses.

Tony 52:41

well, that when someone gets hurt, the price should go to me I think for having it despised. So I was thinking about this like, like one of the things like when I was doing my studies in essentially the to become a authorized to provide general financial advice, you do two modules in the financial planning syllabus, and there’s a dozen modules or something to do. So it’s not just all about securities. But the general one was, you know, genuinely trying to financial planning.

So I talked about insurance and mortgages and providing advice and all that, and I was blown over by one of the statements of our teaching financial planners, and the statement was something along the lines of your job isn’t to maximize and investees your clients returns Your job is to minimize the risk, and I thought you’ve got to be kidding me, and just think about that for a minute.  That’s really telling the financial planner minimize risk, so you don’t get sued. It’s protects, but in minimizing risk and lowering returns, you actually increase E, you actually provide more risk in the portfolio, right? Because, you know, I’m retired if I’m retiring at 65, and I’ve got 15 years of you ever expected life to go. My find that in my financial planner says look, you know, you’ve brought up this nest egg, let’s just put it in the index, you get 9% per year, you’ll get a good dividend yield. Sure.

So it’s kind of double every eight years.  So you get you know, if you have 100,000 at 65 and a half 200,000 when you die, or yes, we can take a bit of a risk here. It’s going to be volatile, but you got to make 20% which means it’s going to double every three and a bit years. So it’s going to be worth 32 times that because you know 15 is three is five doublings of every three years it’s going to be worth $3.2 million $100,000 and okay if you die and it’s worth 3.4 it’s still better than 400,000 so you know the financial planning industry is tits up on us about it’s just ridiculous, and they teach that. Anyway, that’s my rant

Cameron 54:49

explains a lot. Mark any thoughts on the movement of M ye down the QAV lis [phonetic] score down from point 232 point one two after June This trend still looks good, though. Yeah, well,

Tony 55:04

Yes, well. So for Mark’s benefit, I won’t make this the pull apart, I won’t go into a full detailed analysis of mastermind. [laughing]

Cameron 55:12

And for my benefit too.

Tony 55:14

And for you benefit too, OK. Yes, so two things have happened the share price has risen, and of course, that means the price to operating cash flow inverts is the inverse of that. So it goes, it drives the QAV score lower, which is fine. That’s a good thing. The other reason which may be behind the decrement in the QAV score is that the results for mastermind were down this year, both in terms of revenue was down and profit was down, and it was explained away for very valid reasons. Because of COVID. It provides contracting into the mining sector. It’s a mining, consultancy and engineering firm, and particularly in the coal industry, I think, and lower coal mines have been hit by COVID and anti by China and have been closed down and so that the work has dried up. However, all that was fully flagged and investors seem very comfortable going forward, that masterminds are solid company and has good prospects.

Cameron 56:17

Right. Good. OK. Thanks, Mark Duncan, would anyone care to venture- this is on Facebook -would anyone care to venture as to which sell-line is the most appropriate for CDD?

Tony 56:31

Okay, I’ll have a look. I haven’t looked at that one yet. So it’s Cardno from memory, isn’t it? c D, D,

 

Cameron 56:37

C, D, D is Cardno, Cardno Limited, and that’s a weird looking chart. Sort of bottomed out, ran COVID. A little bit after COVID, and then it’s had a really big spike coming on since the beginning of 2021.

Tony 57:00

Yes, Happy Days. Hey. Yes, so I think the sell-line is going to be quite low compared to the share price. Yes, I’m going to look at the bottom, I start with the lowest point on the graph, we’ve got two which are very close. June 2020, is at 24 cents, and March 2020s, at 24. 5. So during 2020s, the lowest and then if I go to the right from there, the next one is at 29 cents, which is more than 8%. So that’s going to be L2. So L1 one is 30th of June 2020, and L2 is going to be… Well, technically, it’s September 2020. But we’ll move it across to October 2020. So we don’t cut the share price line there.

Cameron 57:02

Yes.  Yes.

Tony 57:49

Which means the buy price is going to be sub 50 cents when the share price is currently 99 cents.

Cameron 57:55

Yes.

Tony 57:55

Yes.

Cameron 57:57

Yeah. So, you know, if somebody owned CDD, and it started to retreat, technically, you know, they’d have a long fall, which I know people are always very uncomfortable with.

Tony 58:12

Yeah, and like it’s, it’s I forget that, and it’s hard because if it comes off 10%, DSL is 10% just merely a setback, and it gets another leg up. So apropos my musings before cardno is still trading on a QAV score of point one, three, as of today, so it’s not like it’s point O five or lower, and which I would consider to be quite risky. So it’s still I think it’s still it’d be a hold for me, anyway.

Cameron 58:43

And a lot of people have asked that limit the money for me a question coming up about this. But if you look at something like this, its prices, more or less tripled, since the beginning of the year. Is it too late to buy in? It’s still got a positive QAV score, it’s still got positive sentiment, but it’s at least a five year high. Looking at my graph here. You know, I think people are often concerned as if we missed the boat here. Should we buy something that’s had a massive spike like that? Even if it’s goes well?

Tony 59:16

Yeah, just go by. It’s let’s say it’s point one, three, so it’s not going to be the first thing I buy. But yeah, I’d still buy. Absolutely.

Cameron 59:25

I mean, I’m worried about the fact that

Tony 59:26

rule number one, you’ve got rule number one to look, you know, protecting your site, scan and drop no more than 10% before you’re out. But yeah, it scores well. It’s got positive sentiment, I’d still buy.

Cameron 59:40

Yeah, you wouldn’t be scared off by the fact that it’s had a massive run.

Tony 59:46

No, I wouldn’t it has. Okay, so you can view this in two ways. It has had a massive run off the COVID bottom. But like if you look back at its prior peak, which was December 17. Which was a price of 93 cents. It’s not even 10% above that yet. So yeah, not that I’m saying you should base an investment decision on that. Well, I’m just trying to put some perspective into it. Yeah.

Cameron 1:00:12

Yes, OK.

Tony 1:00:12

Yes.

Cameron 1:00:12

Thank you, Mark Duncan. No, that was Duncan. Thank you, Duncan, Mark, we’ve got like 12 questions from marks today. I don’t know if they’re the same marks or different marks or, you know, it’s like Mark from the Gospel of Mark. We just gave it the name mark. We don’t know who actually wrote it. I just add names to the questions that come in.

Tony 1:00:35

Even Matthew, Luke and one yeah

Cameron 1:00:37

So do you mind the old Python thing you mind if we call your Bruce. [laughing]

Tony 1:00:40

[laughing] Bruce.

Cameron 1:00:44

A Mark asks, hi Cam, Tony’s previously discussed how his quality and value scoring is not appropriate for ETFs and LIC’s, what about REIT’s?

Tony 1:00:55

Yes, so REIT’s, I still use the same scoring system for them. But they very rarely, I can’t think of a time when they’ve appeared on my buy list. I can think of probably one over the last 10 years, and that was a REIT called APN Convenience Store, APN REIT, and I think it was spun out into one called APN Convenience Store, and along the way, it was a good score on our metrics, and the reason for that is that it generally a real estate investment trust is what we’re talking about when we talk about REITs, and sometimes they called AREIT’s Australian real estate investment trusts.  They’re basically a fund manager who goes around buying property of different classes, and then putting them together into a fund and then trading that fund on the share market.

So it’s like an LIC, but for real estate, and generally, the operating cash flow is the rent and rental yields less than 10%, they usually between like about three and 7%, depending on what stage of the cycle you’re at, and if that’s your operating cash flow, then the price to operating cash flows can be around 20, or more 2025 for most of the most of the life of these rates, and so they never, never pass that first hurdle with us, doesn’t mean that they’re a bad investment, and  I could probably do some research and work out what the price to cash flow could be as a threshold, it’s more appropriate to reach but I just never have.  And one reason why I haven’t is– it’s always in the back of my mind, what happened to REIT when the GFC hit, and they all tanked really, really badly. Because they all have all the gearing. REIT’s often have a lot of gearing in them.

Otherwise, but mainly because if you’re getting a… they’re a great investment to gear, it’s like a family home or an investment property, you’re going to get rental income, you know, it’s going to rent, it’s a quality property. So you can afford to go well, in the case of investment properties that we would invest in, you can afford to go to the bank and say, I’m going to buy this property, lend me the money, and they say, sure you’ve got this income coming in to back it up. We’ve got security over the property. So yes sure, what do you want. Same thing happens on a large scale with these REIT’s, they issue bonds or whatever, instead of going to the bank. So they gear up.  And the downside of that is, of course, when there is a downturn or a sudden calamity in the financial system. They get really squeezed, and one of the one of the really bad parts about the GFC is for a long time prior to the GFC. retirees were told our real estate investment trusts as safe as houses and they pay a good yield, like you’re getting 7% from them, because they’ve got great properties or they get good yields from their tenants, and like, you know, there was a lot of capital loss during the GFC when they all went down significantly because of the gearing. So I haven’t ever bothered to try and work out a way to invest in rates I’m quite happy playing in the in my circle of competence. The non-REIT universe, not saying that REIT’s aren’t something that’s good to invest in. But it just doesn’t fit my profile.

Cameron 1:04:11

I remember in my late teens down in Melbourne, I worked for a year or so for like little private investment firm Pamacorp, it was run by a couple of guys called Mark Letton and Mark Stanley that I think both got themselves in hot water later on, as it turned out, but one of the things they were doing just after the Paul Keating’s recession that we had to have was when shopping centers had collapsed. They were going around and just they were doing a value adverse play buying all of these shopping centers when people were trying to offload them. [laughing]

Tony 1:05:03

Yes.

Cameron 1:05:03

And I think they did very well at that.

Tony 1:05:04

Well, that’s often been the start of people’s fortunes as having, as we talked about with Buffett having cash to go into the market when there’s blood in the floor.

Cameron 1:05:14

Yes.

Tony 1:05:15

Real estate definitely goes in cycles, and that happens every 10, 15 years or so for sure.

Cameron 1:05:20

Yes.

Tony 1:05:21

Yes, and I just pulled out some numbers to answer the question in more detail. A couple of the big REIT’s that we can talk about. Goodman is trading on 37 times cash flow. ALE which is the old Coles Myer liquor firms trading on 29 times operating cash flow, a REIT, which I’m not that familiar with called Charter Hall, Long Wale REIT 17 times cash flow. So basically, you invert that.  So if it’s trading on 37 times cash flow, they’re getting a two and a half to 3% yield as income from the people who rent the tenants to the properties.

So that’s why those numbers are as they are. In the real estate area of things that we tend to get developers coming up on our on our buy lists from time to time, which trade on lumpier cash flows, which is why we don’t get them there all the time. But on much better numbers. For example, Sunland, AV Jennings, Acumen, I think ACU Acument on there at the moment. They’re property developers, and if they manage their cash flow properly, they get lots of cash in from sales, and they build the building. Or they’ve sold something and have that cash flow to reinvest, and if they manage it properly, they become quite profitable.

Cameron 1:06:41

Thank you, Mark, Mark, Mark, the second or the third asks, CAA posted results yesterday and went up. Roughly 10% QAV scores pretty good at point three, two, is it still a buyer at these levels? of around $1.65? After running well above its buy-line from 435. This is the question I was referring to before so yes. So yes, going up.

Tony 1:07:08

Correct. Yes. So I don’t have numbers for CAA yet from Stock Doctor. side. Like I certainly test it. It’s QAV score with the new numbers. But before the new numbers came in the QAV score was 0.34, so plenty of buffer there. My gut says it won’t drop off the buyer list. So what I guess what I’m saying is I become worried if something was going up dramatically, and it dropped back down to a point oh, five, all this. I certainly wouldn’t be buying it then, and that’s not necessarily selling it then. If it was still going up, but I consider selling it if it started to turn down at that kind of nosebleed valuation heights, and like I said before, I’ll do some more research on that. So I can get some rules around that one.

Cameron 1:07:57

I did sell it when it was about 735. Because I had to do rule one on CAA.  Yes

Tony 1:08:10

I thought its been going up quite solely. I’ve had it for a while now. You might probably…

Cameron 1:08:16

Yes, no, I did 11th of August I sold it bought it.

 

Tony 1:08:20

And thanks for taking one for the team, and that’s it, and it’s a good return on CAA. [laughing]

Cameron 1:08:32

Yeah, maybe you should. You’re welcome. everybody. Have a 10% Stop Loss rule number one for now. I do now. Yeah, yeah. Good.

Tony 1:08:44

Yes, maybe you should…

Cameron 1:08:45

You’re welcome. everybody.

Tony 1:08:47

Have a 10% Stop Loss rule number one for now.

Cameron 1:08:51

I do now.

Tony 1:08:52

Yes. Good.

Cameron 1:08:55

Last question from Mark the third. Hi, Cam sometime back TK said one of his tricks was to avoid buying a stock that was in the top scorers list that have been going up. Do you know what that threshold is? For instance, if a stock has doubled in value from crossing a three-point buy line is that an avoid see another question about this. Have you said that before?

Tony 1:09:17

I don’t recall saying that? I’m sorry. I’ve misled people if I’ve said that. I wonder if Mark’s getting confused with the fact I won’t buy it if it’s short term trend is down, and I wait for update and upturns for the month before I buy. Huh. Yes, but no, I certainly would buy something that was going up and I had a good score. Absolutely. Yes, Even if it was above its buy-line, and something like Fortescue metals group is the classic example. We were buying it well above its buy-line.

Cameron 1:09:48

Yes. So a lot of questions about stuff going up, and the conclusive answer is from the Charlie Watts of investing. No, you’re not worried. It’s all good.

Tony 1:10:02

Yes, I’m not worried you’ve got rule number one to protect you on a 10% sell side ratio but it’s going up for a reason people like it and the numbers are good why would you not consider buying it?

Cameron 1:10:15

Yes.

Tony 1:10:16

Yes.

Cameron 1:10:17

All right that’s a full lid this week, Tony we got in and under two hours for change, right?

Tony 1:10:24

We just had a two and a half hour meeting this morning to make up for [laughing].

Cameron 1:10:30

Well this gives us time for you to talk about TV and music. What are your TV book and music recommendations? And what are you cooking tonight? We all want to know that.

Cooking just a chicken and veggie pasta chicken and veggie bake…

Tony 1:10:45

We had some bad eating habits last week we had our first delivery in lockdown so nine weeks but I think I must have seen a pizza commercial at some stage when I was watching something and we celebrated with a cheese pizza.

Cameron 1:11:01

Oh from Pizza Hut?

Tony 1:11:02

Yes, it was how we celebrated, you lashed out. [laughing] So I’ll declare that it’s back to healthy eating this week. I’ll do a chicken and pasta bake, a chicken and sorry, veggie bake.

Cameron 1:11:17

Tray back.

 

Tony 1:11:19

Yes, just put it in the tray.

Cameron 1:11:20

Love it. One of our go to’s chicken and veggie tray back. Fantastic bit of olive oil. You know some rosemary whack it in FANTASTIC.

Tony 1:11:30

My secret is to get a tomato and cut it up and put it on top. Oh, juices.

Cameron 1:11:35

Yes.

Tony 1:11:36

Oh, and we also when I serve it I put some beetroot and avocado on top that’s just really sort of just add a bit of spice to the real flavor to it. Yeah, it can be a bit bland sometimes but anyway, the cheese on top when it melts through it’s good too.

Cameron 1:11:53

OK, making me hungry. Tony, what have you watched, anything good?

Tony 1:11:58

I’ve gone back to watching Shetland. You watch that? It’s a Scottish detective drama, really good.

Cameron 1:12:07

Chrissy watched it.

Tony 1:12:08

Yes, I watched it when it was on the ABC couple of years ago and it popped up on my Netflix list recently. Right? It’s really good. You got to watch it with the captions on though because they…

Cameron 1:12:19

Yes.

Tony 1:12:19

Sometimes lapse in the Gaelic and they talk about Scottish. Yes, but the landscapes brilliant. That’s probably the best thing about it.

Cameron 1:12:27

Yes.  Yes. No, I remember Chrissy watching it when I was working at nights couple years ago, and she’d have the captions on.

Tony 1:12:28

Yes.  Yes.  And it has good guests now. So one of the I’ve gone back to the start, because I have seen some of it before, and Brian Cox was in one of the early episodes and he did a great job.

Cameron 1:12:44

Have you watched Succession yet?

Tony 1:12:46

I’ve watched the first series. Yes, hadn’t haven’t gone past that.

Cameron 1:12:49

Yes, it was the second series. Yes.

Tony 1:12:52

Yes. Third series has just dropped off.

Cameron 1:12:54

It’s dropped?  Yes, Oh, God. We’ve been hanging out for that. We love that show, and it’s for me, it’s all about the McCulkin kid. whatever his name is Rory McCulken I think it’s the McCulken kid in it.

Tony 1:13:07

The Hone Alone guy.

Cameron 1:13:09

No, his younger brother his…

Tony 1:13:11

Oh yes. he’s in it. Yes.

Cameron 1:13:12

Yes. He’s the younger brother in it. Who’s a bit of a douchebag. But yes, he just he’s just so good plays so well. But Brian Cox. So good. The whole cast is great. It’s just a great, great show. Supposedly overtaken them? Yes. I haven’t. Yeah, I watched the first episode of that. I couldn’t get into it. It is going to give it another shot, though. I love Giamatti.

Tony 1:13:13

Yes. So that drops? I think they had to stop halfway through a season because of COVID. I think the second half play next week.

Cameron 1:13:38

Yes, good stuff.

Tony 1:13:47

How about You?

Cameron 1:13:50

I haven’t watched anything in the last week. Nothing. Too busy.

Tony 1:13:52

I have been reading that book that Steve Mabb put us on To Richer, Happier, Richer, Happier, Wiser.

Cameron 1:13:59

Yes, very good. Yes. Which one of those are you aiming for?

Tony 1:14:07

Richer, Happier, Wiser, hopefully lighter as well? No, it’s good. Its this guy’s investable, the top financial gurus in the last 20 years, and it’s chapters on different person. It’s actually really good. Yes, I started reading, like… I should just put out quotes fresh, because I’m really going. Yes, that’s what I said. That’s what I said. [laughing]

Cameron 1:14:27

[laughing] Well, I’ll get that QAV book finished one of these days, and we’ll have our own account there.

Tony 1:14:36

Yes.

Cameron 1:14:40

All right. Well, thank you very much, Tony. Thank you to everybody for the questions, and for all of the great contributions to the Facebook group in the last week. Keep it up.

 

Tony 1:14:51

Yes.

Cameron 1:14:51

And we’ll be back next week with the fully licensed version of QAV.

Tony 1:14:57

Correct, and the buy list. Yes.

Cameron 1:15:04

Exciting stuff.

Tony 1:15:05

I just have to teach Alex how to do QAV so she can.

Cameron 1:15:10

Well, that’s the other news, and your new intern, your daughter, Alex.

Tony 1:15:13

Yes, that’s right. Yes. I talked to her a couple of weeks ago about needing someone to put out regular buy-list for me, because I think I’d get distracted and wouldn’t have the time to do it. She said, I’ll do that. Because I was thinking about using her boyfriend, Shawn.  And I was about to call Shawn when she called me and intercepted the call. No, no. I’ll do it. I’ll do it. So yes, I will oversee it and make sure it’s OK, and I’ll teach you how to do it. But yes, she’ll do it eventually.

Cameron 1:15:41

Right.

Tony 1:15:43

You know, it’s the old story of least cost job gets done by the least cost operator. I don’t want to be spending my life on buy lists. Yeah, I’d rather be researching whether we sell things at QAV 0.05. Thanks, mate. Have a good week. Bye.  All right. You too.