Transcript QAV 437

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

OK.

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

Yes.

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

Yes.

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

Val­ue.

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

OK.

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

Years.

Cameron  11:29

We don’t know.

Tony  11:29

Exact­ly.

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

Yes.

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

Yes.

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

Yes.

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

Yes.

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

Yes.

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

Right.

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

Yes.

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

Yes.

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

Hen­ry.

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

Yes.

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

Right.

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

Yes.

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

Cor­rect.

Cameron  43:09

OK.

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

Yes.

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

Right.

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

Now­cast­ing.

Tony  1:11:58

Yes. Now­cast­ing. Yes.

Cameron  1:12:00

QAV.

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

Jeal­ous.

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.