QAV 437 Club

Cameron  00:15

Welcome back seafood. This is episode 437 of QAV. We’re recording Monday, the 13th of September, 2021, 3:12 PM in the afternoon.

What’s new in your world, seafood?

Tony  00:32

Same old. You can go for a picnic now though with five people. Otherwise it’s locked down as always here. Oh God. Unless you want to go to Bondi Beach for a swim. Don’t worry about it.

Cameron  00:43

I see Gladys turned up to the press conference today.

Tony  00:46

Yes, I think she’s had a bit of blowback about that. Yes.

Cameron  00:52

Fun. Well, we’ve got an action-packed show today, Tony. Lot’s happening. Want to talk about bloody Thursday first of all. Last Thursday I heard some people in the media were calling it bloody Thursday, blood on the tracks. to quote Bob Dylan. The market took a hit. You’re frowning at me like you don’t know what’s going on.

Tony  01:11

I didn’t even hear about that. Didn’t see it, didn’t register.

Cameron  01:16

Don’t care, doesn’t matter.

Tony  01:19

Correct. Yes.

Cameron  01:19

Well, it mattered to the QAV portfolio. We’re back down today neck and neck with All Ords or the ASX 200 anyway for this financial year. Over the long haul, we’re not but– And this is again according to the Navexa way of measuring it which you have some issues with but we’ll talk about that later on but—

Tony  01:39


Cameron  01:40

  1. Bloody Thursday gets no nothing from you. No.

Tony  01:43

I’ve never even heard of it.

Cameron  01:46

Don’t care. OK. Moving right along.

Tony  01:48

Never heard it.

Cameron  01:49

Want to give a shout out to James on Facebook. He said I’ve uploaded all my new and old trades in the share side to compare my investment returns from before joining QAV against those made after joining QAV and while it’s been only seven months that I’ve made several mistakes, E.g. not selling when the 3PTL said to sell. A good old rookie mistake.

The difference is remarkable. Pre QAV, 31 losers, 17 winners, 3.1% average annual return over five years. Post QAV, three losers, 11 winners, 16.8% return over seven months. Not only has QAV improved my bank balance but it has introduced me to investors who’ve helped me grow as an investor. All in all, QAV has been brewing for me and I’m happy to tell anyone foolish enough to stop long enough to listen.

Cameron  02:38

Congratulations James.

Tony  02:40

Yes. Thanks James and keep going, keep telling people.

Cameron  02:43

Yes, and keep telling us how it’s going.

Tony  02:44


Cameron  02:45

Because we love to get those stories because otherwise it’s just us talking into thin air. I mean, it– At the end of the day, the only way that we know we’re doing a good job is if people tell us what kind of returns they’re getting by following the recipe. How’s your chocolate cake turning out if you follow the recipe? Is it good? Is it tasty? Is it moist? It’s one of my favorite words, moist. Is it moist? Is your QAV moist? That’s what we want to know.

Tony  02:46

Yes, OK.

Cameron  03:02

I just got to write that down as a title. Is your QAV moist?

Tony  03:23

Sounds like a fruitcake at the moment.

Cameron  03:26

Well, one of us is a fruitcake. I don’t think people need to guess too hard, which one of it is?

Cameron  03:32

OK, we were talking last week about the Navexa’s–

Tony  03:35


Cameron  03:35

Way of reporting our results and Navarre Trousselot, he generously responded with a big long email, and then send us to a blog post on their website that explains it and they use something called a y e. Average years invested is the way I understood it but it sort of sounded like what you’ve been telling me to do to calculate the return on my portfolio, which is have a look at how much you invest in per stock, how long it was invested for, what when you sold or what have you how much you’ve returned? And then doodle dadly, sprinkle some pixie dust on it and you get a real, right?

Tony  04:14

Right. Yes, correct and look and to be very fair to Navexa and Navarre, it’s the same thing that share side does as well when I do reports and share side about performance and it’s, apparently– I didn’t know this until they came back to us but apparently it’s what fund managers use when they’re reporting their returns and it’s exactly what you said, it’s trying to take out of the equation particularly for a fund manager money coming in or money going out.

If you’re a big fund manager and there’s a run in Wall Street and people start selling your stock or redeeming their units from your fund, your fund gets smaller and if you manage your performance just simply on starting position of the fund for the year and how much it’s grown or shrunk by the end of the year, then all of that movement can come for money flows, money going in and money going out just from people buying or selling units in the fund or redeeming their shares in the fund. That’s what they’re trying to do is take that out of the equation side, they want to just look at, you bought this stock on this day, you held it for this many days, if you had this return, if I prorated it up to a year and add all those up, this is what your return is on an annual basis. It’s how well do you invest and I get that, that makes a lot of sense. The downside to that process is if you turn over the portfolio a number of times in a year, it’s still measuring how well you invested with all that churn but it may make you look better or even potentially worse than what you would be if you just took the closing value of the fund away from the starting value of the fund because you may have had in terms of how much was invested and if it’s churning, you may have had three years worth of investment in one year, if that makes sense because your holds– You urn the portfolio over three times, even though it’s still giving you the average, which is– Should look right.

When you look at our performance and using the Navexa methodology, it’s saying we were 37 or 38% up which when you looked at the starting portfolio price and the ending or the current portfolio price to use on—

Cameron  06:11


Tony  06:12

The other value, sorry. It didn’t truly reflect either the compound growth rate or the just simple growth rate. What– The portfolio’s up 50% in two years, which is about a 21, 22% compound growth rate? Yes, but Navexa saying we’re up 38% and Navexa is saying that because it’s taken all those individual holding time periods and added them all up and given us the how well that we invest number, I guess is the best way to put it.

If we were comparing ourselves to say, a big fund, that might be a legitimate comparison to make if that’s the way the big fund calculates their performance but we’re comparing ourselves to the ASX, which hardly ever churns, you will get four or five stocks coming in and out of the ASX 200 on a quarterly basis. It’s not going to churn that much and so it’s much I think; the better comparison is just simply our current portfolio value is X. Our starting port value was Y and then we can use the CAGR formula, which takes into account how long according to the number of years. It’s– From memory, it’s ending value over starting value raised to the power of the number of years we’ve held at minus one.

Cameron  07:19

When you– Yes, we’ve always quoted 19 and a half percent for you. Your portfolio over 25, 30 years, you’re calculating just using that CAGR formula that you use then.

Tony  07:31

Yes, that’s right and I did originally do it Navarre was doing it because as you know my portfolio is also our living– Is also covering living expenses. It’s covering tax payments, it’s covering mortgage repayments, and all that stuff. It’s a net number and originally started to try and back all those things out and just look at like it was held for 10 months and produce this return and then prorated that to get to 12 months and then add them all up and a) That was just too hard to do manually but b) Ater a while as the portfolio grew that the ins and outs for other things weren’t as– Were small compared to the compounding of the investments. I stopped doing it and started using that CAGR formula I just outlined and it’s also I think if you measure yourself against the ASX, it’s a better way of doing it. That’s how I’ve measured the ASX performance as well.

Cameron  08:21

Do you know how Stock Doctor’s dollar weighted and time weighted returns compared to this?

Tony  08:27

I don’t. It’s an interesting can of worms, isn’t it?

Cameron  08:30

Well, I put our portfolio– The QAV portfolio back into Stock Doctor last week to try and get some comparison and it says dollar weighted return per annum, 23.57%, time weighted return per annum, 7.02%.

Tony  08:56

Well, I think that’s a question for your Stock Doctor account manager because yes.

Cameron  08:59

And it says, current value 29,861.05 whereas Navexa says, 30,669.29 today. There may be some dividends that I haven’t processed. I had to process a bunch of dividends in Navexa today which I haven’t done in Stock Doctor so it might just be that but 7% per annum. What?

How does that make any sense? It says like we started at 20,000. It says total return 10,341. Anyway, you slice it, it’s– We have 50% more value in the portfolio now than we had two years ago yet it says a 7% time weighted return. That makes no sense.

Tony  09:42

Doesn’t make any sense to me either, unfortunately.

Cameron  09:45

So confusing all this shit. Really. It’s just like, oh my god. It’s like yes, I agree talking about COVID vaccination.

Tony  09:56

Well, that’s what I think you should just take the super formula as n from start and then use the CAGR formula to get the compound.

Cameron  10:03

Well, I did that in my emails with Navarre and those guys, and can you remember what I said it was?

Tony  10:12

Not as tough in my head but if we’re up 50% in two years, I would think it’s going to be around 21%. 20, 21, 22.

Cameron  10:18

Let me see. I calculate the CAGR is 23.39%, which is basically the dollar weighted return figure that I’m getting for our Stock Doctor.

Tony  10:28


Cameron  10:29

Give or take.

Yes, about 23 point something percent. That makes sense as a CAGR number. It seems to map up to the CAGR number anyway.

Tony  10:38

Right. Now, I I’m not an expert on all this and I gave up on trying to do it any intricate way a long time ago and just used the simple CAGR formula.

Cameron  10:46

Yes. Well, that’s that go back a step Warren Buffett’s global market indicator hits record signaling crash. According to the Financial Review last week, Warren Buffett’s favorite market indicator has surged to a record high of 142% signaling US and international shares are heavily overpriced and could plummet in the months ahead. We’ve talked about this on and off.

Tony  11:12

Yes, you could have run that headline for about the last two or three years probably, every day.

Cameron  11:16

Yes, probably. Right but it’s getting high. It’s still going, which is the point you always make like yes, OK, it’s headed for a crash but that could be tomorrow, six months from now, five years from now.

Tony  11:28


Cameron  11:29

We don’t know.

Tony  11:29


Cameron  11:29

What do you do? You just keep doing it?

Tony  11:32

Yes, we don’t try and forecast we now cast.

Cameron  11:36

Now cast.

Tony  11:36

As the governor of the RBA said, we don’t try and forecast when something happens that now then we act.

Look, just there’s some interesting, I did read something. I think it was in Livewire a couple of weeks ago about this that when Buffett and he took this from memory from Philips or– Was it Philips or cape Schiller? Schiller, the ratio of the stock market valuation versus GDP. When Buffett first started talking about this, interest rates were much higher and that’ll have an effect on valuations and also to corporate tax rates were much higher as well and they’d be lowered aggressively under Donald Trump in the US. This guy who wrote the article I read in Livewire, made a case, which said that the markets fairly valued when you take into account those two things and I was at Berkshire Hathaway AGM. I think that was five years ago now and Buffett was asked this very same question. He said, Yes, the market looks expensive, until you take into account interest rates.

Cameron  12:30

Right. This time, it’s different.

Tony  12:32

Yes, possibly but if you also look at the Buffett indicator, it hasn’t been that great at predicting crashes.

Cameron  12:39


Tony  12:39

It’s a 10 year rolling average for a start. It might lag by a year or two and getting it right.

Cameron  12:44


Tony  12:44

Yes, and as you say, it might be right for a couple of years, even longer before the market crashes.

Cameron  12:51

I say that.

Tony  12:51

Yes. Well, you just said it before. Yes, let’s go set as you say, Yes, I can take credit for that, as I’ve always said.

Cameron  13:01

Is that the rule?

Tony  13:01

Yes, since you heard it from Tony.

Cameron  13:02

The rule of quoting, remember that it’s like the first time you quote something you say, as Tony Coniston says. The second time you say as someone says. The third time it is as I’ve always said. That’s the three rules I’m quoting.

Tony  13:17

But yes, look, it’s a valid thing to always think about and have in the back of your mind, it’s going to come and I think, when we did shows around the COVID cough and I said the people good time to gear up, I think it’s now a good time to reduce that and don’t– I’m not selling anything, I’m still fully invested but don’t do things which might be detrimental in a decline and that’s the other thing too with all these things but the Buffett indicator could write itself by the stock market going sideways for five years, or by the American economy increasing but not the stock market. It’s not the only a crash isn’t beyond the outcome of the back ratio forecast,

Cameron  13:53

My son Taylor was telling me the other day that somebody he knew was telling him that it’s a good time right now to go out and invest heavily in property.

Tony  14:03

Well, after it’s risen by about 30 or 40%.

Cameron  14:05

Yes, it’s booming. It’s great time together, invest in property, like really, wow.

Tony  14:09

It’s always a great time to invest in property.

Cameron  14:12

All the indicators I see is that things are peaky. No. That is a good time but what do I know? Tell you who’s not now casting New South Wales government?

Tony  14:19

Yes, I don’t know. Things are picky either.

Cameron  14:21

What I was going to say, who’s not now casting is a New South Wales government because I saw this story today that’s just come out where they knew about the super spreader event in June and then they didn’t do anything about it for they didn’t put Sydney in lockdown for a few days.

Tony  14:35

Yes, I mean, they’re not now casting. They’re feeding the chooks. That’s all they’re doing but I’ve stopped that. That wasn’t feeding the chooks anymore last day.

Cameron  14:47


Tony  14:48

I referenced Joh Bjelke-Petersen, the younger people who haven’t heard that expression here.

Cameron  14:51

Yes, they need to explain who Joh Bjelke-Petersen is to them. It’s a minefield.

OK, moving right along. Let’s see what’s next on my list. CVW hired investment bankers to test appetite for a sale of the business now that it is predominantly a life insurance business

Tony  15:08

Yes, CVW was a pull pork– Pulled pork recently and yes,  I thought I just mentioned that I read an article in the field last week that crescent capital own a large part of Clearview wealth and the share price has been going up dramatically in the last week or so mainly because they Clearview wealth have sold off their financial advice business and this is part of a restructure that Clearview Crescent capital is leading for Clearview wealth and they Crescent capital and Clearview wealth have just lined up some investment bankers to look at whether there is any interest in buying Clearview wealth from the large life insurance businesses around the world.

Listeners may be aware that all of the major banks in Australia I think all have divested their life insurance businesses, or AMP, which sold off this recently our last year, and they’re all getting out of the life insurance business has– It’s a scale thing. Now you’ve got to have large worldwide economies of scale to make it work. Although I guess Clearview wealth is disproving that because it’s a profitable business for them but the conventional thinking is it’s it needs scale and basically the large insurance businesses around the world– Life insurance businesses have been buying out the Australian life insurance companies and that could also be the reason why Clearview well share prices going up so this could be a takeover target coming up.

Cameron  16:29

That’s good. What is the share price at today? Let me have a look. CVW, 68 and a half cents. Down a little bit extra that from last week but yes.

Tony  16:43

Yes. Look at the share price graph for its jump from 55 to 68 and a half in the last week.

Cameron  16:49

Yes. Two weeks.

Tony  16:50


Cameron  16:50

Yes. Wow.

Tony  16:51

Two weeks. Yes.

Cameron  16:51

Very good.

Tony  16:54

Anyway, not financial advice. Just general advice. Do your own research.

Cameron  16:57

Speaking of do your own research. Last week in our buy list, we had CCV quiet up near the top and by the time one of our intrepid listeners, Rob did his own analysis on the Monday I think it dropped from nice QAV score to QAV score of zero. He sent me an email said, what am I doing wrong? And I said, I don’t know. Let me have a look at it and I did a download and I also got zero.  I emailed you and you said, oh, I’ve also got zero because their results came out on Monday.

Tony  17:24

They did. Yes, and their operating cash flow was just dramatically fallen in the interim. The price to operating cash flow has then gone up dramatically and I’ve fallen off our borrowers with QAV score of zero. Yes.

Cameron  17:37

Which just goes to demonstrate why we tell people. Yes, do your own—

Tony  17:42

Especially in company reporting season where things can change daily.

Cameron  17:46

Yes, absolutely. That literally went from one day it was at the top of our list to the next day it was off our list.

Tony  17:53

Yes, and it doesn’t necessarily mean you should sell CCV. Again, It’s up to you but if I have a look at it, I think from memory, the price is still holding up. We have it in our extra portfolio I think don’t wait.

Cameron  18:04

We do. No, we don’t. We did once all the time but we just solid.

Tony  18:08

Yes. OK. If I was holding CCV, I would still three-point trade it from here.

Cameron  18:15


Tony  18:15

Yes. Even though it’s dropped off our buy list.

Cameron  18:16

Yes, we do have it in our buy list.

Tony  18:20

I thought we reported recently.

Cameron  18:22

Yes, sorry. It’s saying 0%. There must just be the growth today. Yes, now we do.

Yes. It’s– Let’s have a look at its share price history. It trading at 26 and a half cents today. It’s still a lot lower than it was a couple years ago but yes, it’s as high as it’s been for the last couple of years right now, way above its sell line by the looks of it.

Tony  18:48

Yes, isn’t it.

Cameron  18:48

But still above its buy line as well but—

Tony  18:50

Yes, definitely.

Cameron  18:52

We wouldn’t buy it today because it’s QAV score dropped down to zero.

Tony  18:57

And this is one of those interesting ones that I spoke about, I think last week where when I back tested a little bit for this, if a stock does do this, like sometimes they go down and sometimes like they continue to go well, and I haven’t worked out what the differences between those two groups. Sometimes holding on to a stock that goes below 0.05 like this one has can be a good thing and Macquarie Group is an example of that and sometimes it’s a bad thing where if it doesn’t have much operating cash, there’s a reason and may not be good for the future of the company. We’ll have to watch this.

Cameron  19:30

I was wondering if you left those stocks today in even though there were Josephine’s because of a dividend issue but it was just an oversight.

Tony  19:39

Oh, I think one was AXI and I think I don’t think it pays a dividend but the reason AXI was left in and again this is me making up the rules as I go is that it was only down by half a cent this month. It was eight cents a share at the end of last month. It’s now 7.5 cents a share this month and I had just put a rule of thumb in which said it was still within half a cent of its closing price. I wasn’t going to make it a Josephine because that can fluctuate around quite a lot based on half a day’s trade or an hour’s trade.

Cameron  20:11


Tony  20:12

That’s why I did that and there’s a couple of other cases in there too but difference I think with this stock with AXI is that it’s such a low price that half a cent is actually a meaningful number for it.

Cameron  20:23


Tony  20:23

Yes. Whereas some of the other ones I forget what they were but they’ll probably $1.50 a share and so half a cent wasn’t a big fluctuation for it.

Cameron  20:30

Well, the only ones that people asked about today. Doug asked about MYR arguments from people who have the Josephine’s I’ll give them the second I think MYR is a Josephine. I think AXI is too and the other one that Andrew Flippman picked up was sun. I think you had that as a Josephine. I don’t know why I think there must have just been a blip.

Tony  20:49

It was an error.

Cameron  20:49

Yes, because it looks good, right? It’s going up.

Tony  20:51

Yes. Look, it could possibly be just an error and I made the comment back to you that we need some quality control in the buy list before too much longer which we’ll do.

Cameron  21:01

We have a plan.

Tony  21:01

And we have planned to do. Yes. That was just a mistake, I think and without wanting to, it was my mistake. No excuses but what was happening was I was downloading, re-downloading and I think some of the Josephine’s got out of sync with the road they were originally entered in and I didn’t find that one and correct it.

Cameron  21:19

And you’ve been in lockdown for 12 weeks and you’re off the booze. These things compound. It’s like, OK, yes, we understand compound interest. This is compound.

Tony  21:30

Compound COVID.

Cameron  21:32

Compound side effects of COVID. Yes.

Tony  21:36


Cameron  21:36

The Josephine’s thing, look, I might be wrong here. You and I had this discussion on the show and I’ve been having it with people on Facebook, I’m quite happy to say I could be wrong but people say, well, they want to leave the Josephine’s in all, they want to point them out in the spreadsheet as if you’ve done in your latest sheet which I have to make publicly available but I still don’t understand I because when I’m doing a sheet, I check the sentiment on all the stocks that are in the top 30 or whatever, right? It doesn’t matter.

For me, I don’t see the value in highlighting them as a Josephine because I’m going to check everything anyway because I know the sentiment can change overnight, sentiment can go up and it can be negative. You can be below the sell line and then above the buy line a day later, I mean, so I have to check everything. I still don’t understand why people think Josephine’s need to be called out separately.

Tony  22:31

I’m 50-50 on this one, I think we should call it out separately and then people can make their own decisions. There are people as we know, from feedback, who will buy a stock if it’s above the buy line regardless of its most recent trend. They just think it’s cheaper buying; which I get I haven’t been doing that. The other thing that is, I guess some background to Josephine’s which I think is important. The first piece is that I’ve never put a joke I never put things in the checklist to check for Josephine. It’s just part of my buying process. If I find a stock I’m likely to buy, it meets my criteria of ADT, it’s a buy on the buy list.

Before I actually pull the trigger, I’ll look at its most recent trend in the current month and if it’s if that’s trending down, I’ll hold off. That’s just how I do it. The process that I use comes after the checklist. I’m also concerned that that process came about because if you look at some stocks, like Adairs, for example, it’s big enough for me to buy. It’s on the buy list but it’s most recent performance is horrendous, it’s come off a peak, it’s still trending down. Unless you’re one of those sort of average dollar cost value investors who will keep buying on the way down and then average out their costs as it rises again. I’m not going to buy it I’m going to wait for it to have some uptrend or turn around before I can see that it’s really Josephine it’s worth buying again where it becomes tricky is like the ones we just talked about, like looking at suncorp today. It was price has gone down today it’s just in an uptrend and if you look at more than one we just talked about the AXI it’s like half a cent in a downtrend. Are they still worth not buying? I probably wouldn’t buy both of those. If they’re on my list of things to buy even though they’re slightly down because they’re not they’re much. They’re not like an Adairs or they’re not like– I struggled with for a while with JB Hi-Fi, which I own. I’m declare that.

Yes, that was the reason for starting Josephine’s. If we start getting finicky do, we take into account its dividends. Like suncorp is ex dividend. Do we add that back before working out Josephine? Do we take into account which week of the month we’re in because in the first week of the month, it’s going to be– It could be a large swing but it’s based on again, a couple of cents in the price movement?

Yes, I’m not sure we’re going to be able to land on some real definitive rules here but I think it’s worthwhile doing so people can make their own minds up and think it’s worthwhile flagging but I can see what we’re doing, but I’d leave it there.

Cameron  25:00

Fair enough. What’s Next? Oh, you want to introduce spacecraft publishing?

Tony  25:03

Yes, I just wanted to mention that it’s now people who have read our disclaimers and maybe you and I are the only ones but–

Cameron  25:12


Tony  25:12

And Henry yes, from our license or by license or. Yes, I’ll say that the AFSL. We have an author– A corporate authorized representative license with the AFSL holder, which is another company and that CAR, the corporate authorized rep license is held by a company called spacecraft publishing, which I own and that’s why people will see it in our disclaimers and if anyone’s wondering what it is, it’s just simply a holding company for QAV or at least as far as the licensing goes.

Cameron  25:40

Yes. Good. Audit reports. Talk to me about audit reports, Tony.

Tony  25:44

Oh my God, the audit reports. Again, another 50-50, Apollo tourism and leisure results came out and they scored well. I think they’re about a 0.4 on the QAV wisdom and I thought, OK, is it time?

Cameron  25:57

They don’t score. Well, yes, to apply the Apollo tourism discount on that. I’ve tossed it, it’s a 100% discount. Voluntarism at least. All the time.

Tony  26:11

Anyway, when I did my download and saw ATL, I went straight to the audit report to see if it was improved because the history of this one is that two halves ago, it was a qualified audit. One half ago, as I changed the auditors and it wasn’t a qualified audit anymore, it was just the key audit matter and that that looked a little bit suspicious to me and now it’s the same orders, two halves in a row and it’s still a key audit matter and when I say it, it’s the question mark about whether ATL will continue to be able to trade and the original orders is called it out, there’s an emphasis of matter, which is what we look for in qualified audit and the emphasis of matter in that case, was the ability to continue as a going concern.

To be fair to Apollo tourism and leisure and I really spent a lot of time drawing into their numbers. On the plus side, they’ve done a lot of cost reduction. They’ve sold a lot of their inventory which they rent out, which was the hardest part of the– Which was the part of the business that was hardest hit by COVID and they also have probably half the business also, is manufacturing and selling RV’s, that’s been doing well, just like any other car sales have been doing well, during COVID. Half the business does well, half the business was doing poorly, like downsize the half it’s doing poorly, which is good. They’ve received a truckload of government support which has helped because they’ve been able to pay down debt.

The question mark in my mind is, if COVID lingers around, which it might do in the Northern Hemisphere, winter, which they’re going into, and ATL operate in Canada and the UK, and New Zealand and elsewhere in the US, certainly will be exposed to another COVID extended lockdown in the Northern Hemisphere winter and the question mark in my mind is would they continue to get government support and will affect their business. On the plus side, they said that they have lots of real estate which they own for their travel agent chaos, which they could sell. Potentially, again, like they could survive another year of COVID without much government support and also to they call out that, again, this issue of the leases on their vehicles are treated as short term liabilities, whereas the assets are long term assets and they don’t match up and it’s an accounting trickery there, which makes them look like they’ll struggle to pay their debt. I accept that and the other thing that I’ll say is that the cash on hand looks like it would allow them to trade for another couple of years, maybe three years, as well. Yes, I think they probably could survive.

This is a classic contrarian trade where you’re taking on some amount of risk but if it comes off, you’ll get paid really well because when Apollo tourism leisure come out the other side, the share price will go gangbusters. I call it out. I’ve lifted off the ball. It’s I’ve called it a qualified order. Again, it’s not a qualified order but it’s a red flag for me and the fact that it has all these issues around how much government support will they receive? How much do they have to sell or downsize the business to continue trading versus getting all the upside when it comes out on the other side? Originally, I actually went on well onto the manually entered data, Google Sheet and took it off as a qualified audit and then a day later, I put it back on as I went deeper into their numbers. I think it’s worthwhile calling it out to people. If you’re aggressive and aren’t allocating too much capital to it, then it’s probably a good bit but safety first. I think in this case, I don’t feel– I don’t really take the responsibility of QAV seriously and I think safety first. I wouldn’t recommend it on the buy list for people but that may suit some risk profile for people out there.

Cameron  29:32

Well, I think I banned you from ever adding it to the list ever again. I seem to recall and secondly, I think technically they received not a truckload of support from the government. It was more like a camper van load of support they got from government. Couldn’t take a swing of that one. All right. Yes, I know people.

Tony  29:52

I do enjoy trying to slip it back into the buy list every six months.

Cameron  29:53

Yes, you enjoy and try not get me drunk and slip it in when I’m not paying it.

Tony  30:00

Again, if you make the case for ATL, you’re really forecasting that we’re going to come through COVID. In the next six months at the northern hemisphere wind have another down. Another savage winter for a new version of COVID. It’s all forecasting. I almost wait to give up the first initial boom in the stock price and check the figures again in six months’ time and see if you know the better and we have more solid footing.

Cameron  30:25

Seriousness, I make fun of Apollo because of our history with them but I look at stocks like this and I’m like, look, if there was nothing else to buy, it’s like–

Tony  30:35

Yes, I agree.

Cameron  30:35

If there was no other girls to date, OK, but plenty of– There’s plenty of much more attractive, emotionally stable girls out there that I could. I don’t need to date Apollo tourism when she’s already let me down I think three times in the course of doing this show where we’re taking her out. We’ve invited her out to dinner and she just was a no show. Just didn’t turn up

Tony  31:01

He’s not committed. You’re not committed.

Cameron  31:01

No, I’m not. I don’t want to consent so badly.

Tony  31:07

It’s good point and it’s a reminds me of Munger saying that you don’t have to dance with every girl at the dance.

Cameron  31:13

Exactly. That’s my point.

Tony  31:14

Yes. Good point.

Cameron  31:16

Let’s move right along.

Tony  31:18

Yes, appendix 4e. In doing the downloads over the last couple of weeks, I’ve read a lot of audit reports and annual reports and things and appendix 4e is actually really useful. Most companies or other companies will say something like in their appendix 4e, it’s about the 10th or 11th item on the required list. They’ll say wording like the figures are being audited and they are unqualified or words to that effect and that’s really easy to find and search for and get a definitive answer to end. I recommend to people to have a look at appendix 4e but a lot of companies are still saying things like just bland stuff like the financials have been audited and we refer you to the audit report in the attached document which means, going to the bottom, working back out, reading the audit report, looking for emphasis of matter and all that, which is not that hard to do but it’s much easier just to go to the bottom of appendix 4e, which is a one-page document and have a look there.

I’m just wondering whether it’s worthwhile, should we start a writing campaign to ASIC saying, Hey, come on, let’s make appendix 4e, a useful document for us and have a standard set of wording for the audit qualification.

Cameron  32:28

Sounds like a job for the Australian shareholders Association doesn’t it?

Tony  32:31

It does.

Cameron  32:32

Because finally, we knew somebody with some pull at ASA.

Tony  32:36

It would certainly help us a lot if we could have some standard wording for 4e which was just really easy to look up and use.

Cameron  32:43

4e or not 4e? That is the question.

Tony  32:46

Yes. All right. I’ll reach out to ASA. Well, there’s even our State President– Your State President and see if he can help?

Cameron  32:51

I don’t think he’s State President. Is he? He’s just an expert. Just a director. [Inaudible 00:32:57]. Sorry, Steve. I haven’t kept up to date with your CV.

4e or not 4e? That is the question whether it is nobler in the mind to suffer The slings and arrows of outrageous audit reports or to take arms against a sea of troubles and by opposing end them.

Tony  33:17

Or by Apollo tourism and leisure.

Cameron  33:18

Yes. Moving right along.

Tony  33:22

We spoke about Navexa? I want to jump to a lesson that I read in a book from manga on the weekend and so getting talking about Steve, he recommended Richard Wider Happier in the Facebook group by Matthew William green, sorry, and it’s excellent. I really enjoy that. Reminds me of– It’s a book of where each chapter is an interview with a famous investor and that might sound pretty dry and a couple of them are just straight out. This is what I did. This is how I made money but I’d say the majority of the book is more than that. It’s not just about making money. It’s about the extra dimension. It’s about helping people. It’s about giving back all those things. It’s actually a really good read but I came across a quote from manga which I love. I just wanted to read it because it’s so pertinent to what we do.

This is from page 202 if anyone wants to look it up and it says manag’s approach to solve of solving problems backwards was influenced by Carl Gustav Jack– Jacoby or Jacobite. J-A-C-O-B-I. A 19th century algebraist who famously said invert, always invert, but manga tells me that he also had this mental habit of inversion, with help from his friend Garrett Harden, an ecologist who shared his fascination with the dire repercussions of shoddy thinking. Manga says, Harden’s basic idea was if somebody asks you how they help India, just say, what could I do to really ruin India, and you think through all the things you could do to ruin India and then you reverse it and say, now I won’t do those. It’s counterintuitive but it really helps you to reverse these issues. It’s a more complete way of thinking your problem through. In 1986 monger delivered a commencement speech at an LA prep school attended by several of his eight children and stepchildren. Instead of trotting out the usual bland platitudes about the secret success and happiness, he provided an inspired illustration of how to apply the principles of inversion. He gave the students a series of prescriptions for guaranteed misery in life, recommending that they should be unreliable, avoid compromise, have resentments, seek revenge, indulge and envy, ingest chemicals, become addicted to alcohol, neglect to learn vicariously from the good and bad experience of others, cling defiantly to their existing beliefs and stay down when struck by the first second or third severe reversed in the Battle of life and now, just a few sentences now.

Skip to the end. Charlie says, you have to do both, of course in life, but this inversion of looking for the trouble and trying to avoid it keeps you out of a lot of messes. It’s a precaution. It’s like a checklist before you take off in an airplane.

Cameron  36:11

How does that apply to QAV exactly?

Tony  36:14

Well, it’s a checklist but it– I think it’s really useful. I mean, that’s how the Stock Doctor research came up with their financial health, Merv Lincoln took all of the– All the relevant ratios for companies that failed and then inverted them. It’s also I guess; I didn’t formally think of things that way for the checklist but they’re there. We don’t want companies with high debt so we’ll score them with low debt. We don’t want companies with without a founder involved or partial ownership of the board of directors that’s in there. Yes, I think it’s really useful but I’ll throw out to people, what we ask people to come back with what they can, if I can give an example of an inversion of something that they think we should look out for. I find it particularly useful when I start to get tempted by the buy, after pay or to buy the current boom stock is let’s.

Number on rule, I think of what not to do in the share market is to follow the hot thing, the hot hand and that leads you back to value investing really. If you’re not following a hot hand, you’re looking for things which are hot, which are cool, which are cold, which is contrary and its value.

Cameron  37:26

You’re the father.

Tony  37:26

I’d like people to come in and let’s add to a list of things not to do.

Cameron  37:31

Not to do. Yes, like I think it is a fascinating way to think, what are all the ways that I could screw this up. Now, let’s not do those.

Tony  37:41

Correct. Yes. I think that’s a really powerful way to look at this and it actually reminded me of– The first thing I thought of was the dot-com boom, there’s a guy called Henry Blodgett, I think was his name and there was a female as well.

Cameron  37:55

Yes. Remember, Henry? Yes.

Tony  37:57

I’ve forgotten the female’s name but they were just internet boosters. Yes, and then, and they just would boost any dot-com stock as it got close to the end of the 1990s and then Henry was actually caught out in a tape recording or a quote or something saying that, yes, like the bank I worked for asked me to pump all this shit which I do but they’re really crap stocks and he was he was sacked and became toast.

Cameron  38:22


Tony  38:23

I think he’s actually resurrected his career. I think he saw he had a media company around, like a business magazine or a business podcast and he sold it recently for the money. Good luck to him. but yes, that was, yes, if you– What not to do, it’s to pump– To follow people who pump stocks, especially in a hot market.

Cameron  38:41

There’s Business Insider magazine that he then started. He got banned from the securities industry and then when started business magazine.


Tony  38:49


Cameron  38:49

Well, I tell you, the thing that reminds me of is I remember reading many years ago, back in my corporate career, these studies or surveys they do where they talk about the things that people– The most common regrets that people had on their deathbeds which is, I wish I hadn’t spent so much time at the office. I wish I could spend more time with my kids and my wife, my spouse, I wish I traveled more. I wish I’d done this and I was like, OK, well, here’s the list of things to design my life around, right? I’m not going to be one of those people that says, I wish I had x, because at the age of 30, I decided to engineer my life differently.

Tony  39:36

But yes, like, if I apply to my life, the inversion for me is I’m not going to be like the people who say, I just don’t know about finance. I’m not going to worry about investing.

Cameron  39:344

Yes, right.

Tony  39:44

Just keep working. I’m not going to be that and I hung out with other people at university who would say, Oh, it’s all for capitalists and I want to be a capitalist but, yes, I mean, you reach a stage where you go, I don’t want to keep working for someone for the rest of my life. I don’t want to have that control given to somebody else. I’d say you invert it. How do I get to release that yoke? And that seems through investing.

Cameron  40:08

Very good bit of wisdom. All right. Are we ready to get into–?

Tony  40:11

Super good book people. Richard was a happier. Thanks to Steve for that one. Good one, Steve.

Cameron  40:15

Ready to get the questions?

Tony  40:18

You want to do a pulled pork?

Cameron  40:20

The pulled pork? Yes. It’s not in my notes. Sorry, pulled pork.

Tony  40:24

That’s OK. Coincidentally, it’s actually one of the questions. We talked about during the pulled pork on aries resources before I looked at the questions. Anyway, we can still answer the question.

Cameron  40:33


Tony  40:33

As we’re talking about AIS, we’re talking about and the reason we’re talking about it, it’s a reasonably large cap stock, it’s about 400 million market cap, it’s 1.4 million ADT, which is a good size for almost anyone. It’s also scoring really well at the moment. I’m just looking at its QAV score now. It’s 0.26 and these numbers are based on a download I did yesterday, which is Sunday, 12th of September, at a price of 18 and a half cents per share.

Some background on Aeris Resources, it’s a mining company. It’s code is AIS and it’s a gold copper miner and this is probably the most contentious thing for us in the whole analysis but roughly about 60% of its income comes from gold mining and 40% from copper. There’s a bit more in there for silver but it has two mines and one’s a gold mine, one’s a copper mine, as copper is– Has broken its sell line in terms of the physical copper graph, I actually wanted to raise that to the copper futures graph is now back into being a buy. That’s interesting. May it may foreshadow what the physical does but we’ll use the physical at the moment.

Cameron  41:47

Hold up. Can we talk about that for a second? Because I looked at that.

Tony  41:52

Yes, sure.

Cameron  41:52

I looked at that this morning, when I was doing an AIS blog post and I didn’t notice that.

Tony  41:57

Copper physical, I’ve got the sell price. It’s about 9,400 and the current price is 9,356 and then copper futures, it’s way above its sell line. I’ve got the sell price for copper futures at about 3,888 and the price is 4,400. It’s been a buy for a while but it actually is a buy again, in that it’s high price, the second highest peak make it a buy again.

Cameron  42:27

You’re looking at the futures but not the physical?

Tony  42:30

No, I’m looking at both sides, my point is copper futures is good to go. Copper physical is a sell.

Cameron  42:37

Right. Yes. Copper physical, it’s still below it sells line. Copper futures, it’s above its sell line. Which one of those should I apply when I’m looking at AIS, for example?

Tony  42:50

Yes, well, this is unknown territory for me. I’m using the copper physical because futures are forecasting.

Cameron  42:58

Yes, right.

Tony  43:01

Possibly– It’s possibly where the copper price will go. It may not. Yes, but there might be an indicator.

Cameron  43:05

Copper is still in the sell that if we’re looking at the physical chart?

Tony  43:09


Cameron  43:09


Tony  43:10

Yes, and then the question for us is a 40% of the company is mining and selling copper. Is it something we stay away from? And short answer is I don’t really know. It’s 60% gold, 40% copper. It’s slightly more gold than copper and gold is still in its hasn’t reached that sell line yet. I’m leaning towards saying it’s good to go but again, if you’re conservative and don’t want to be holding an exposure to copper at the moment, then I wouldn’t hold the stock but yes, my thoughts are that it’s 60% Gold so it’s OK.

Cameron  43:43

Yes, Steve sent me an email as soon as he read the buy list this morning was like I thought this was a commodity sell. He’s quick off the market.

Tony  43:53

And look, to be completely honest with you, I haven’t had experience with this or any situation where there’s a multi commodity stock in my portfolio and what to do. Yes, a lot of it’s going to be led by the three-point trend line sentiment, I think too on this one.

Yes. OK, so let’s discussion about that. At this stage moving on, as a buy, the share price has still been going up, even though there has gotten exposure to copper. That aside, the other thing to note about this company is there’s lots of exploration going on and it’s an explorer and it has a history of horse trading, tenements, horse trading mines, buying and selling companies and mines and tenements and that’s means the share price is largely going to be event driven, I would think so you wouldn’t be surprised if you know they strike out a good drilling prospect somewhere in New South Wales where these mines are based and that boosts the share price or it goes the other way that they’ve been drilling for a long time finding nothing and the share price goes down so just wanted to call that out too.

We are buying is making a lot of cash flow now and a lot of cash from his current mines but it is also exploring a lot too and the third point I wanted to make generally about the company, which people should be aware of is being an explorer, it has raised capital– A lot of capital over the years, it may raise less going forward now that it has the cash flow from its copper and gold mines but whenever I see a company which is larger than this one has a market cap of $400 million plus but the share price is in the sort of pennies and this one’s at 18 and a half cents. It leads me to believe that they’ve done a lot of capital raisings over the life of the company and the share price is still a very low nominal amount which doesn’t mean a whole lot but it means that people should be aware before they go in that they may have to stump up for capital raising going forward.

Now, they did a capital raising halfway through the year, in fact, to buy out another thing, they bought out a shareholder, one of the mines they own, and also for exploration purposes. There could be more, that’s the last point I want to make about that. Oh, also to maybe that at some stage, they consolidate so that the share price goes up a bit like MaxiTrans where it was trading in the pennies, that 50 or 60 cents and now it’s trading at $3.50. This may happen for this company going forward too. Not that it’ll mean much to us because it’s the same company, just a different cut of the cake.

QAV of 0.26 quality score of 64%, no founder owner in this one, but directors are holding 9%. It’s just below a 10% threshold for direct designing shares in the company which is still pretty good but I scored a zero and that one, the forecast IV is good for this company, it’s greater than twice the share price. The company is expected to grow its EPS by 22% according to the brokers that track it and that means that if we use the IV2 metric, I get a number of 69 cents per share using IV2, which means that we could see some up quite a bit of upside in the share price. It’s trading around its IV1 number now, which I get is 18 cents. It’s probably fairly valued, even though it’s coming up as a value play for us and certainly being driven by its operating cash flow.

Price operating cash flow of 2.43 times which is quite cheap. PE of five. In this case, interesting ROE 50% which is very high. I think that will attract investors to the share as well traditional ROE style investors start off with financial health is strong and steady. Doesn’t pay a dividend, so 0% yield. Yes, it’s on the buy list, Aeris Resources.

Cameron  47:28

Everyone should do their own research because anything could happen.

Tony  47:31

Absolutely. Not financial advice and as I said, it does have an exposure to copper if copper keeps going down.

Cameron  47:37

Yes. Thanks, TK. Now, questions.

Tony  47:41

Questions. Yes.

Cameron  47:41

Very good. First question is from James. Uranium, well, it’s rocketed up. Coal, also on the move other resources tanking any more thoughts on getting onto these cyclical resource plays early to ride more of the wave and whether the QAV process should be adapted or our stock selection within the process to reflect the cyclicals versus turnarounds versus slow growers, etc. channeling piddle Lynch here. Thanks, James.

Tony  48:07

Yes, what he’s referring to? I’ll go from the end, backwards. The Peter Lynch thing is that Peter would classify stocks in different categories and would still own stocks in different categories but just construct a portfolio that way.

Cameron  48:19


Tony  48:19

Interesting to note is that copper and iron ore are commodities which are in sell phases at the moment but most of the other ones are good. Nickel, as James has mentioned, coal, uranium, I can’t think of other ones but there are other ones which are doing well. It’s not just that uranium and coal doing fine.

Look, it’s a really good question from James and we talked about coal a few months ago when the coal price started to turn up and I think the coal price we actually may have talked about it when coal broke its three-point trend line to become a buy but I couldn’t find a coal company to invest in that was on the QAV buy list. There were some that were slightly below and I call those out at the time and then they are well blokes because their prices have been going up and the four big ones that we look at Whitehaven coal, you heard call Yancoal and then perhaps Coronado which is a coking coal company.

I haven’t checked the coking coal price graph lately but it’s probably going to ride the thermal coal price up as well. Those four stocks, they’re all QAV scores which are very low. I did look them up, Yancoal 0.04, Whitehaven 0.02, new hope corporation 0.05, Coronado 0.01 and I have quality scores of less than 50%. If people did decide to buy them below that the buy list, great because they are all doing well.

My comments at the time were I wouldn’t be buying them because thought processes always mean that we’ll always have commodity ups and downs and we’ll always have stocks that trend based on that basis but we came together like an extra boost out of the ones which we can buy on the QAV buy list because they have a good quality score and they have a good price. They are coming out of the starting blocks a lot better than the ones which don’t have those qualities and certainly if you look at the uranium companies and there’s explorers in the Australian market or stocks listed that mine uranium and Australian market, they’re all in their infancy in terms of how there’s no operating cash flow. None of them appear on our downloads because they don’t have any operating cash flow.

The exception is Rio Tinto, and  it bought out a company called ERA which was the biggest listed uranium miner and coincidentally bought them out this year. They obviously they would have had a positive idea of where the uranium price was going but Rio Tinto, the uranium part of Rio Tinto is absolutely swamped by iron ore, which is a sell for us. I wouldn’t buy right Rio Tinto just for uranium.

The other ones– I think the biggest might be Paladin and this is not an area that I know much about but I’ve done a little bit of research. Deep Yellow is there, Boss Energy, Peninsular Energy, Vimy Resources, Berkeley Energia, Marenica Energy, Lotus Resources, Alligator Energy, Toro Energy are the ones that bring the mind. All of them don’t have positive operating cash flow, all of them written, your explanation may but all of them have very sharp price rises in the stock prices.

There’s certainly a lot of, I think, a lot of good in what James is calling out here but the question is, do we take advantage of it or not? And simply put my experience in buying commodity stocks has only been when they’re on the buy list. Occasionally, I may have dropped down to a 0.09 or something like that to buy stock but yes, I don’t have experience of buying these ones which don’t score well from a quality point of view or a value. Happy to run a test and see how they go, because they’re certainly all going up and they should all get an uplift from the commodity price increase but I really had no experience about how far and how shaky the ride will be.

Cameron  51:5

How is that any different from buying tech stocks though? It’s—You’re really just speculating that these things are going to do well, but it’s not really value investing the wizards.

Tony  52:05

it’s not value investing by any stretch. Although it could have been value investing if we got an early enough upside couple of months ago when the coal price first became a three-point buy. Some of these were, I think, like the QAV scores, and now you know what I say, 0.04, 0.05, 0.02 but they were up around 0.07, 0.08, 0.09. That would be the time to buy them but it may still be early days in both of those trends and they could still be upside down.

Cameron  52:32

I’m talking about these uranium stocks that you’re talking about particularly. I mean, yes, they’re going up, but you’re back into that tech stock. Yes, right. You’re back trying to play that game, trying to guess basically what’s going to do well, we’re not in the guessing business. We’re in this– We’re in the science business.

Tony  52:51

Well, except that the three point trendline for the commodity has been a good steer for us, for the iron ore stocks. We’ve made a lot of money out of them. I’m calling out as James could be right. I’m tempted to put a little bit of my portfolio and do one or two of these and see how they go because it may be that James is right in the future we decide that we’re value investors and commodity traders. I’m not I’m prepared to ride with two labels or I’d wear a suit with two labels or wear two suits wherever the metaphor is. If it makes money.

Cameron  53:21

You’ll end up looking like Ricky Bobby just with a suit with badges all over it. Oh, well, I don’t know man like it’s a slippery slope from there to Bitcoin then you got to buy bitcoin as well.


Tony  53:36

Well, you could three-point trend line trade Bitcoin I don’t know how that would go but yes, I mean my experience with tech stocks and I’ll use those because I don’t have experience with uranium or stocks that aren’t on the buy list with coal is that you make money until the last one wash you out because I just changed like quickly. Yes, just drop.

Cameron  53:53

Yes, I mean, that’s my comeback to people who tell me to buy bitcoin or afterpay in days gone by or whatever it is. It’s like, look, I understand that if you time it right, you can make money out of these things but that’s not the kind of investor Tony’s taught me to be. I’m not a timing it right kind of guy and yes, we’ve done well out of iron ore, looking at commodities but we were investing in businesses with a good track record, then we’re making money that was solid, well run. We knew that because we could look at the numbers and see that they were well established, well managed, profitable businesses. I would be very reluctant to start taking a punt on these other businesses that we don’t know about just because they seem to be on a surfing a wave at the moment and that seems like a different kind of risk profile.

Tony  54:44

It very much is I agree and that’s always been my experience, too. Yes, like the uranium stocks in particular. I mean, with that many explorers out there that you’d expect there to be some consolidation which will mean winners and losers in the market at some stage. It’s not my area of expertise to quote Munger and Buffett but hey, If James is interested, I’d love to know his experience and whether he wants to try it and see it but it definitely is a trading strategy rather than a value strategy.

Cameron  55:10

Yes. All right. Thanks for that, Steve. I don’t have a lot of spare time and I’m still trying to get my head around the spreadsheet, did a download last night, was working through the NAS today, one of the new companies on my sheet was WMC, which I thought was Western Mining Corporation. When did Western. When did WMC become Wiluna Mining Corporation?

Tony  55:34

I don’t know when it became wiluna but it came up on my download for the first time this reporting season. Maybe recently but yes, I mean, the first half a dozen times I look because I went Yes, Western mining its renewed.

Cameron  55:47

Yes, it’s back baby.

Tony  55:49

But it wasn’t. No.

Cameron  55:49

Different company that just managed to grab that checkout. Anyway. Steve continues, when I got to the qualified audit part, I found it confusing. Could you have a look and let me know what you think this was the one I used to be pointing to the appendix 4e and the annual financial statements and there was a statement in there that says we determined this area to be a key audit matter due to the significant account balances and the judgment involved in the preparation of the value in use model as discussed above. Well, key audit matter. There’s a flag. What did you think?

Tony  56:24

Not necessarily. No, I think it’s fine here. Yes, we’ll walk through it that I mean, James, our order for it must be you must tell us He is pregnant the moment. We’ve probably never heard people talk so much about all the things.

If we go the stock altogether, yes, it’s ASX or Stock Doctor and download the appendix 4e, which in this case is also combined with the annual financial statements in the same download. Sometimes they’re separate, but often are the same. If we just scroll down at the very start, you will see this is the regular appendix 4e time format, where it goes through the key metrics of the company revenue, net tangible assets, per share dividends, details of entities over which control has been gained or lost during the details that are associated in joint venture entities and it says or the qualification or review, so every appendix 4e will have this question the ASX or ASIC whoever is getting this report needs to answer and in this case, WMC say the financial statements have been audited, and an unqualified opinion has been issued.

That’s enough for me to say it’s not a red flag audit so I stopped there.

Cameron  57:32


Tony  57:33

But you can’t like if as Steve, did you miss that? Or like, as I said before, sometimes the appendix 4e for some companies just say something generic, like the figures have been audited and check the annual report. If we go down to the bottom of the annual report, which is also in that same ASX announcement. The way I read the audit report is to look for the start independent auditors report and the opinion that the first thing we check for is that they it gets a positive opinion and this is the side that the auditors believe that the financial report gives a true and fair view of the company’s financial position and that the figures comply with the Australian accounting standards in the corporation’s regulations.

First– The first thing that we have is the first thing I look for if we don’t see that it’s a red flag straightaway but chances are, you’ll already be called out as an emphasis of matter. If we keep scrolling down, we see basis of opinion which is just blurb saying that they’ve conducted an audit, and he lists key audit matters, which they have to do as well but a key audit matter just basically is telling people how they spent their time auditing the books.

If we come back to the key, all that matters but if we keep scrolling through, we then get down to other information which basically says that the directors are responsible for the other information and then it lists the directors’ responsibility. Nowhere in that audit report—Oh, sorry there’s a couple of paragraphs orders responsibilities for the audit of the financial report, which talks about their responsibilities, and if you want to know more, they provide a link on what the Australian standards are for auditors’ responsibilities and it goes on to talk about the remuneration report and they provide an opinion about that.

In nowhere in that audit report, is there anything saying that there’s an emphasis of matter and that’s what causes the red flag. An emphasis of matter as James or although the friend pointed out is where you’ll see wording along the lines of emphasis of matter, perhaps, for going concern, which means that the auditors are calling out the company may not be able to meet its obligations to pay bills during the next six months or 12 months and it can be some other emphasis of matters, I get called out for other particular things like there might be disagreements about intangibles or write downs or whatever but they get called out there, the red flags, the key audit matters, red flags, as we spoken before about Apollo tourism and leisure, there can be some things in there which are worth exploring, and if you’re super conservative, like it tend to be you can red flag them but generally, it’s just telling you how they spent their time.

Now the one the particular key or that matter that Steve called out, is the first one and it talks about ho-w– Let’s see, I can summarize it quickly. The group held carrying values for minds of $135 million and basically that an area of judgment around whether that carrying value should be maintained at 135 million, or written down because of various things is what the key all that matters talking about.

There was another key or that matter in there about a similar thing. Group performs what’s called impairment assessments when events or circumstances change in respect to the particular mind, the material, the whaler in a gold mine, and it’s called a cash generation unit, the CGU. It’s basically a part of the business generating cash and then again, the auditors have said that whether or not we should take a risk impairment on the carrying value of that mine which is currently $225 million, was explored in great detail, both by management and by the auditors.

It’s a key audit item. It’s not listed as an emphasis of matter and the assumptions have made by management have been challenged by the auditors. In my mind, it’s right for the auditors to focus on these things but if the auditors are satisfied that management have made reasonable assumptions and unhappy to not reflect this.

Cameron  1:01:30

They just– The key audit matter just means that they’re– It’s something that they focused on but they’re happy with it.

Tony  1:01:36

Correct. Yes.

Cameron  1:01:38

Good. Thanks. I hope that helps Steve.

Dave from Newy. Very interested in the recent discussion re using super to buy QAV shares, I’m wondering what implications this has, if any, for overall QAV portfolio management and potentially the returns. If I have a personal portfolio of approximately 20 QAV stocks and then I set up a super portfolio should that also be 20? If the funds available for personal and super significantly different, I could end up with 40 stocks total based on market cap, for example of super member direct being ASX 300 or ADT considerations, wondering what Tony does or has done between his personal portfolio and his super portfolio? Does he just total the dollars in both and divide by 20 for individual position size? Could someone that has a reasonable difference in available dollars between personal and super stretched the total holdings across both to say 30 stocks? And thanks to whoever put forward the member direct option, the benefits of the club.

I want to thank that person too because I think it was Gary from memory could have been someone else because I started doing that as well.

Good question. I thought I hadn’t really considered that before I was trading them my personal and my super portfolios as completely separate domains but what do you think, Tony?

Tony  1:02:55

No, I treat them all as one. We have shares in personal name, shares in our family trusts, and shares in our self-managed Superfund and I try and keep them between 15 and 20 overall and that does mean that sometimes a super fund can vastly outperform or vastly underperformed the other two portfolios. That’s just a fact of life but now I treat the portfolio and aggregate.

Yes, during today’s question, if he wanted to buy 30 stocks. Sure. I mean, I don’t have a problem with that. You start as the portfolio gets bigger, you’ll start to get more index like in your returns, it won’t be a huge burden, I don’t think they go to 30. A question I think that Dave’s alluding to is that, let’s take it to the extreme. If I had most of my money inside super and a small amount that I invest outside super, for example, then let’s say for if I divided the total combined by 20 and I could only hold one stock outside of super, I’d still probably do that but if you wanted to just preserve that cash because that one stock outside of super might half, before we sell it, and that could be a problem for you personally, if you’re looking to, for dividend investment flow or whatever from that one stock. I’d simply take the other stocks in the superannuation portfolio, maybe the top three or four, and hold them outside of Super. Those three or four add up to one position in the fund and you’re not introducing a new stock, but you are diversifying a little bit there to prevent any one stock from being a problem for you if you need that money. Does that makes sense?

Cameron  1:04:31

Now, I’m going to have to think about how that works. If you’ve got $500,000 in Super and $50,000 in your private investing, you’ve decided you got 550,000 all up that you’ve got, divide that by 20 so you’d be looking to put 27 and a half into 20 different stocks.

Tony  1:04:55

Yes, and like that 50,000 sitting outside, we’ll get two stock. Not quite two stocks, I’d still buy two stocks, maybe just give them $25,000 at trial and $27,000 each, and that should be fine. If you want to be really safe though, divide the 50 by say four and give yourself four stocks. Two in you and two are in the Superfund already.

You just say that, just in that if you only held two stocks and one went report, depending on your circumstances, that might be a problem for you if you suddenly have $30,000 outside of super and not $50,000. If, for example, you’re relying on dividends to pay for mortgages or living expenses, or whatever.

Cameron  1:05:35

Yes, right. If you already had a QAV portfolio in your own name of 20,000 or 20 stocks, and then you find out, you can start investing your super fund, you would have to sell down some of your existing portfolio and consolidate it?


Tony  1:05:54

No, well, the first thing I do is just—Now, if you had 20 stocks outside, you started investing in supers I just buy again those 20 stocks.

Cameron  1:06:01

But what you might have bought them, like a year ago, and they’re not– They don’t have a good QAV score again, now.

Tony  1:06:07

OK, if that’s the case, then you can’t do that but you got to try and balance the– Let’s take this to extreme. You’ve got personal stock portfolio, got a super portfolio, say you got married and your wife had a portfolio, your kids have a portfolio, you have a family trust with a portfolio, suddenly you’ve got 10 stocks of 20 portfolios, right? That’s an index fund. That’s why I’m saying. Yes, use common sense. If it’s not currently a buy, don’t buy it for your super fund but try and start with the ones you already own, which is still buys, put them in Super and then buy from the top of the list say, maybe you do as Dave said have 30 stocks but over time try and if you sell to buy one, so you get back to a 15 to 20 stock portfolio.

Cameron  1:06:54

Yes, over time, like you wouldn’t go out and just sell all those 20 today but when they breach a sell line, it would start consolidated down. Your entire portfolio, your entire holdings across all of your portfolios is that 15 to 20.

Tony  1:07:12

Yes, that’s what I do and I found out the best way to run things and just bear in mind that you’ll have years where your personal portfolio might be as high as 50% above or below what your Superfund portfolio is but overall, you’re getting 20%. Don’t be worried by the volatility.

Cameron  1:07:30

Yes. Unless  the money that you’re investing in your personal fund you need to live on so that’s correctly, careful, always have that. That’s the nature of investing.

Well, be careful about investing money that you may need an emergency to borrow because it may not be there.

Good. Well, thanks for asking that question. Dave. That’s gave me something else to do. I have to do all my stocks now. Good.

OK, last questions are from Edward. No. I’ve got Mark after that. OK. Edward asked a question about AIS but I think we’ve already dealt with that.

Tony  1:08:10

I think so. Yes.

Cameron  1:08:11

His second question was, I know TK has discussed the effect of inflation on the share market, there is discussion on whether it’s transitory or permanent but I believe we are in for a more permanent rise in prices which should ultimately lead to a rise in the interest rates which some are predicting may occur towards the end of 2022. As a theme, it seems to me, we need to look at the companies that can potentially pass on any input costs to their customers and avoid industrials or high growth companies e.g. tech stocks and maybe look to invest in the insurers, banks, etc. I’m also conscious that the market will generally price in this change at least six months to a year before the actual event. Is the five year monthly charts sensitive enough to try and capture the shift in the share market before the stocks in those companies become too expensive?

Tony  1:09:05

Yes, a lot of different things to unpack there. The first one is I agree with Edwards comments about inflation. I think it is coming if it’s not already here and I’m hearing lots of comments from various people. As we have a raffle business right where we source cars and we’ve been talking to other providers of other things to raffle off to raise money for charities and we’re hearing that people are finding it difficult to source vehicles coming into Australia as bottlenecks already and which will drive the price up of those commodities and we don’t have a manufacturing base here anymore.  If we do become heavily constrained with say cars just to pick that industry, and the price goes up, we can’t manufacture here we’ve got to pay that price.

I think supply side inflation is coming if it hasn’t already arrived. I heard this a year ago in the building industry when we went into the first COVID lock down. I couldn’t buy faster boards and things like that from overseas. There’ll be more and more examples of that. Yes, luckily, we have our own food production here. That may not be as much of an issue but potentially things like fertilizers and chemicals might be I’m not sure. Yes, I think inflation is coming, who knows what will happen when COVID subsides eventually whether it will go back to normal or not. That’s the $50,000 question that everyone’s asking from the Jerome Powell and the US to Wall Street to us as individual investors but from my point of view, I tune that out. If it comes, it comes in, we’ll deal with it when it comes. If it doesn’t, it doesn’t, we’ll deal with it.

What will be will be, and we’ll adjust ourselves and our actions based on that but that’s my answer to Edward but in terms of being able to forecast which companies will do well. Two things on that score, that the stock market is full of people who love to say, get out of the market, go to cash, buy health care because the population is aging, buy ESG stocks because we’re all decarbonizing, etc.

As soon as people start to think that way, those shares tend to get bought and the price goes up. It becomes a crowded trade straightaway and it doesn’t become a useful way to invest, not the least of which is because it’s based on forecasting which may not actually happen. You’re stuck holding a stock that you paid a lot for that turns out to be a dud and that drops again. That’s a real Muskie mistake, I think, in the share market. As well, as much as I agree with what Ed was saying it’s a forecast and my forecasting abilities as good as anybody else’s, which probably means it’s a coin toss and I’m not going to make investment decisions around that. Yes, I think you’re right Edward, but I’m not going to change what I do based on that.

Cameron  1:11:43

Whatever will be, will be que sera sera or as we will now call it from now on QAV sera sera.

Tony  1:11:52

We should. What will be, will be and we shall see when it is.

Cameron  1:11:57


Tony  1:11:58

Yes. Nowcasting. Yes.

Cameron  1:12:00


Tony  1:12:01

Thank you to the governor of the RBA for that.

Cameron  1:12:03

Mark. Last question. Mark says, TK watches for the big market cap companies come on to the buy list when their QAV score is lower than the scale so just above 0.1. Instead of buying from the top of the list with high QAV scores, he’ll consider buying one of these larger companies with a lower QAV score but still greater than 0.1 when they sneaked onto the bottom of the list. For instance, in his 13/8 journal TK was buying DOW ADT of 8.7 million to the QAV score was only just 0.1. I’m wondering how Tony chooses which big companies to buy that come onto the bottom of the top scorers list with a low QAV score but still greater than 0.1. Cheer, Mark.

Tony  1:12:49

Yes, two points. Generally, almost always all buy from the top of the list, I just have to put my own ADT constraints on the list. In terms of the DOW purchase, I turned over a good portion of my portfolio, this company reporting season a little bit beforehand, because of changes in commodities. I had my exposure to wine, or, for example, had grown dramatically over the last few years and I had to buy a number of stocks during the reporting season. I wasn’t just buying for top stock, which, as you go through normally, you might trade one stock off your portfolio and buy one stock or two stocks but I had to buy a lot and I was working my way down the list to the bottom and that’s why DOW going on in my portfolio, basically. That’s the reason for that but I have made the point from time to time but sometimes on the buy list, you get a big share, market cap company coming on, and it will only stay there for a while and JB Hi-Fi comes too. It’s a quality company, it’s been around for a long time and I am tempted from time to time to buy that company when it comes on to the buyer list, even though it might not be at the top and it might be at the bottom and as it turns out, JB Hi-Fi has dropped off our buy list again now. We may not see it for a while back onto the buy list.

They’re buying those big brand names is when they come on to the buy list even if they’re at the bottom is in the bad strategy as well, because it adds some quality to the portfolio, I think, going forward. There are two reasons but the main one is I had to turn over all the stocks in the last month or so and I had to buy down to the bottom of the list, which is why I bought DOW.

Cameron  1:14:24

Right. You’re not deliberately starting with stocks on the bottom of the list. You’re just going way down the middle of the list.

Tony  1:14:31

Yes, given my ADT limitations there were only I think, a dozen or 15 on the list that I can buy this time, right.

Cameron  1:14:38

That was ADT not ADD for anyone was wondering.

Tony  1:14:42

ADT. Yes.


Cameron  1:14:44

All right. Well, that’s full lid. Thank you to everybody who sent in questions. We’re now in after hours.

Tony  1:14:51

Yes. Thank you. I was going to say did you want to talk about after so sorry to interrupt you.

Cameron  1:14:54

All right. We’re in after hours where we talk about– What else are we doing outside of investing. For anyone who cares. If you don’t care, turn it off, but I care. I want to know what Tony’s into. He is always in the cool stuff. What are you listening to? You’ve told us what you’re reading. What else do you listen to, watching, doing, TK?

Tony  1:15:12

I’m trying to find my list and go from memory while I look for it. Watching some really good stuff. I mean, finish watching Mr. in between. That was a great third series. It’s not for everyone. It’s violent but the Tarantino is going away but yes, loved it. Really good and then I got recommended because of that, like Foxtel came out with a recommended– Recommendation to watch hap and Leonard. Have you seen that?

Cameron  1:15:34

I’ve watched the first episode of it when it first came out but my whatever reason I didn’t keep it up but it’s got Michael K. Williams right. Omar who recently died sadly.

Tony  1:15:49

Yes, I was going to say that. Yes, one of your guys from the wire but yes, I’m really enjoying it. Good first season.

Cameron  1:15:55

Yes, that’s good. That’s so sad. I was actually– What was I doing? I was on the phone to someone and Chrissy, like, literally kicked my door open. I heard her scream, ‘No.’ She kicked my door in. I thought, Fox had fallen out of a tree at school but she came in to tell me that Michael K. Williams had died. We loved him in everything that he was in such a great actor and interesting human being and but the character of Omar in the wire, he was even Obama’s Favorite TV character. Whatever that’s worth a great character and well written and well performed and as largely due to his performance, I think.




Tony  1:16:38

He does a great job in having learned to shoot plays a good place a gay cowboy. The sort of the it’s a like almost like a noir 70-80s thriller but it’s reminds me of Thunderbolt and Lightfoot. They’ve all critics with me here Jeff Bridges first.

Cameron  1:16:56

I just watched that like six months ago. Loved it.

Tony  1:16:59

  1. Yes, great. Yes, that’s really good and starting to place the billions episodes again, I have begun to highlight this because of COVID New York but it’s back to the first two episodes are out for the interrupted season which is good. Really good. Love billions.

Cameron  1:17:14

I haven’t watched much TV this week but I did start a show called Kevin Can F himself. Have you heard about this?

Tony  1:17:25

My brother in law’s name is Kevin.

Cameron  1:17:28

There you go. Did you ever watch shit’s Creek?

Tony  1:17:30

No, I didn’t like shit’s Creek.

Cameron  1:17:32

I’ve watched a bit of it. Chrissy watched it all. She loved it but the girl who plays the daughter in Shit’s Creek, Annie Murphy, I think is the actresses name is the star of the show and it’s really fascinating. We’ve only watched a couple of episodes but it’s set up as like a sitcom where she’s married to this guy called Kevin and it’s about the neighbors and his father and it’s a classic sort of 90s, 2000 sitcom where he’d like King of Queens. Basically, it’s like a King of Queens where he’s this fat, lazy, got beard guzzling man child, and she’s married to him and it’s all done sitcom style with a loopy soundtrack and she’s like, oh, Kevin, this kind of stuff. As soon as she walks out of the living room where his scenes usually set into the kitchen or outside, all of a sudden, it completely changes and becomes the lighting or changes to dingy and she’s murderous and suicidal. She wants to kill this guy. She hates alive, she’s depressed. It switches backwards and forwards between the sitcom and her real feelings when she gets out of the sitcom. Well about being by this really cleverly done and she’s great. Her performance in it is really stellar. I can recommend people have a look at that. I also rewatched one of my favorite films over the last week, Secretary, Maggie Gyllenhaal and James smiler.

Tony  1:19:00

Yes, the bondage.

Cameron  1:19:02

Well, it’s an s&m movie. She’s a masochist. He’s a sadist and they get together and it’s made in heaven but it’s, I remember, I haven’t seen it for 20 years but it’s always been one of my favorite films and held up really well her performance. His performance, really good, disturbing, and also funny the same time so the balance was really nice but the guy who directed Oh, well, well, what else did he did? He’s only made like two I think other films since then and both massive flops so fascinating. I don’t know how that works. You make like this cult classic film and then everything else you do is shit.

Tony  1:19:44

Yes, I can’t imagine Secretary had a good run at the cinemas though.

Cameron  1:19:49

No, but I think it came out in that era. In the early 2000s. It was still the year of post Miramax in the director where there was a there was a model at least on VHS in an arthouse cinema for like edgy gritty otter type stuff but.

Tony  1:20:10

From memory I think it was even marketed as like a in the vein of sex lies and videotapes the other, spider man.

Cameron  1:20:16

Yes, as a Soderbergh film. An early Soderbergh film I think was mean, but the first thing is that spider like spider does spider and he does a great job he’s just weird be if you hate spider than you. I like the film but because David Simon who made the wire the last series I think he did was the deuce, which I told you about was about porn industry, the development of the porn industry in New York in the 70s and 80s. She was one of the main stars of that as she was a prostitute who then becomes a porn director and her performance again was fantastic. It was good to go back and see her when she was like 22 making this film. She was really good. Anyway, that’s me. What else are you listening to?

Tony  1:20:59

A bit of soul Ruby Turner.

Cameron  1:21:00

I don’t know Ruby. I don’t know who’s Ruby Turner?

Tony  1:21:02

Yes, good. Is it good? Good album called Live at Ronnie Scott. Instead of Aretha Franklin black soul. Yes, really great voice. Oh, I see she’s stay with me baby is the standout track. That’s the one I was searching for. Sometimes you get like an earwig in your mind, like just had that riff going and I typed it in and this album came up and it’s really good.

Cameron  1:21:24

Good. I’ll check that out. Speaking of riffs Fox came up to my bedroom and like 09 o’clock last nights and he was like, Daddy, my favorite song is get past people can’t pass the hit man and it was he said he’s just been in his room just DJing Spotify for the last hour. It’s Joe’s brand get on the good foot. Fox is this really for a 7-year-old like a very eclectic taste in music. I pulled out a video a 15-minute performance by James Brown of get on the good foot from soul Train from like 73 or something 72, 73 and Fox as I sat there for 15 minutes, and watch this performance, just the best of jam with him in the flames and he’s dead. He’s doing the splits and like James in his prime. We’re at a blue one-piece body suit with heels. Just awesome and Fox loved it. He thought it was the greatest. Yes.

Tony  1:22:23

It is He is the great. I saw them. I saw James Brown and he’s backing band in Melbourne. Like in the late 80s.

Cameron  1:22:23


Tony  1:22:23

Yes, I was and they were getting old and but they were so good. Good and I had like the whole stick of the he’s made from his youth comes on first and walks on the stage and takes the cape off. Yes, bro. Yes, that’s his only job like them takes it off and the horn players all do the toil of the whole ones in time with each other and take the steps to the left hand steps to the right.

Cameron  1:23:00

Yes, the hardest working man in show business.

Tony  1:23:01

Yes. Oh, yes. I got I started off with the whole intro.

Cameron  1:23:02

Godfather of soul.

Yes, Brent, really would have been his living in America comeback days after he did the rocky was a two or three. I think rocky three

Tony  1:23:13

Oh, no much after that. This was about 88 I think Yes.

Cameron  1:23:18

Rocky three was like 85, 86. OK, when he did living in America, it sort of was a whole new phase of his career. I think he reached a whole new audience even came out with gotta cause a rap album. I remember in the late 80s, which was kind of funny. He tried to get on that bandwagon at one stage but yes, so Fox has been walking around the house for the last day. Just go get past people get past him a little redheaded, white boy, generally. James Brown. I tell you what I’ve been listening to and then we’ll wrap up in my working music for the last couple of weeks. Bebop, pomsky and the orchestral report Yes, Dov. Particularly their album blood veins of noir York, OK. It’s basically and I found out this is a whole genre through these guys. There’s a whole but these are Russian guys, but there’s a whole there’s a number of bands out there that all they do is produce Twin Peaks II music.

Tony  1:24:21

That’s sort of why I love it. Angela battlemented.

Cameron  1:24:23

Yes, but the stuff that he does particularly like Audrey’s sort of sultry music, Audrey and the rifle series didn’t change and that deep, sort of deep baritone sax that’s just coming in and the brushes on the snare and the hi hats is really moody on ambient sort of right? There’s this whole genre of bands that do this, they basically just ripping off Angel, a battle amentia and doing this. It’s great. It’s fantastic. That’s been my new thing. It’s like I get this Twin Peaks vibe, when I’m working all day. So check it out. They’re the bob Polsky and the orchestral report is love. B Bebop Charlie Parker B Bob off ski oh VSKY Bebop off ski OK, got a few albums out.

I actually reached out to them because I wanted to use it. I wanted to get permission to use the music is the new QAV intro.

Tony  1:25:19

I thought that would just a little bit of like, Twin Peaks II music would be perfect for us.

Cameron  1:25:25

I want to ask you why I’ve never used my music in the intro. Do you have to pay any royalties?

Tony  1:25:30

What music is that?

Cameron  1:25:32

For my 40th birthday? We got four hours in the recording session in a recording studio. Where’s that? Why don’t I have that used to be if you if you Google my name, it would be the only thing that would come up as the is my YouTube channel but yes, there’s a couple of tracks on my YouTube channel.

Tony  1:25:48

Jesus Christ Tony, Why is it taking you two and a half years of doing the show to tell me about that a little and I’ve known you for 40 years and you’ve never know I’ve told you before. I have told you before. All I can find now is QAV stuff from you.

Cameron  1:26:02

Yes, I know. It’ll be it’ll be I’ll send you through a link it’ll be I saturate a bunch UI based on my own your brains now.

Tony  1:26:08

Technically, you own it. I run it. Any kind of stun music someone by returning make Trent kinus did quality of values three point trail you need.

Cameron  1:26:25

Well, these are songs you wrote and recorded, or recovered mineral oils Hercules and then we wrote one I wrote one and we recorded that one for power in these hands. Wow. That sounds like Christian Oh, find a Christian rock? No, no, it was a Bruce Springsteen style song. Ah,

Tony  1:26:44

well, you need to write a song about value investing. Yes, no. power in your checklist or something like that? Yes, OK. Yes, we’ll send it to me man. That’s the new that’s it. it’s not the Brunswick Street Band. That’s not you are it? Nah,

Cameron  1:27:05

I cannot find we will call the fabulous flying shirts. Is that in the future? I think that’s something I don’t think it is. Well, because the good lead guitarist was walking down Smith Street and Collingwood and found these shirts with like flames on the side for like five bucks each. I bought it for awesome. Wish the weather when we play? Yes. OK. Yes, it’s pretty hard to find.

Tony  1:27:32

That is the best thing that’s happened to me all day. You’ve made my day. I can’t wait to hear that. All right. Yep. All right. Well, that’s it. Thanks, mate. Stay safe. Enjoy you your five man picnics. Five people picnic.

Cameron  1:27:48

Well, I went for a walk today and I thought I’d just check out Rushcutters Bay Park and see if it’s safe for a picnic. It’s just TV with people no mass. I think they must have also allowed personal trainers to have five people at the outside training. It’s just full of personal trainers. Running classes. Outdoor gyms are open so 20 guys doing chin ups all around the same area in the park. It’s just wild when it’s like it’s like the COVID picnic spot is that when I go there?

Tony  1:28:16

I was going to say five people you can pretty much have a QA dinner in Sydney because that’s about the all the people that have returned up to a QAV dinner when we do one in Sydney, Melbourne, packed down Brisbane packed out Sydney. Yes. All right. Take including Yes, Chloe.

Cameron  1:28:35

Take care Mate.

Tony  1:28:35

All right. Thanks, Cam. You too.