Transcript #415

QAV 415 Club

 

Dura­tion: 58:09

Cameron Reil­ly: [00:04] Wel­come back to QAV Episode 415, TK. We’re both back in our homes.

Tony Kynas­ton: [00:13] Yeah, we are. It’s good, good to be back. How was Bund­aberg?

Cameron Reil­ly: [00:17] Bund­aberg was alright. Like it was a bit hot yes­ter­day but today like it was 26, blue skies, just beau­ti­ful. We’ve decid­ed we’re nev­er going back to Bundy in sum­mer ever again. It’s just March and April, Sep­tem­ber. Per­fect, beau­ti­ful beach­es, beau­ti­ful weath­er, every­thing. Hey, did you get my gift? Where is it? You’re not wear­ing it.

Tony Kynas­ton: [00:41] Oh, shit I was going to wear it, I know. I’ll go and get it.

Cameron Reil­ly: [00:48] Get in close. Give us a close-up. Give us a close-up, Berk­shire Hath­away on May 1, 1999. War­ren The Whip Buf­fett, there you go I expect you to wear that when you play golf from now. That’s your new golf hat.

Tony Kynas­ton: [01:05] Thank you. It’s love­ly.

Cameron Reil­ly: [01:06] It’s the only thing I could find that was from Oma­ha, Nebras­ka.

Tony Kynas­ton: [01:14] It’s an old one, was it on some kind of antique site or eBay or what?

Cameron Reil­ly: [01:19] eBay, fierce bid­ding auc­tion. I had to get in there. Not real­ly.

Tony Kynas­ton: [01:28] So it’s good. No, it’s good. Thank you. And also, the whiskey that the Mel­bourne guy sent me was Bak­ery Hill

Cameron Reil­ly: [01:35] Righ,t love­ly, Bak­ery Hill Pock­et Guide. Hey, I went to a dis­tillery in Bund­aberg yes­ter­day, I went to Kal­ki moon as you know I picked up a cou­ple of bot­tles, and then yes­ter­day I went to Water­view it’s a lit­tle dis­tillery just near the Bundy Rum dis­tillery. And a lit­tle bit of wide range of rum and gin and vod­ka, whiskey. Rum and gin and vod­ka they pro­duce. So, I picked up a thing called BOB Hon­ey. Which is like hon­ey made with macadamia flower hon­ey rum. The hon­ey is from a macadamia flower bee or some­thing. Real­ly nice. Yeah. Nice. Lit­tle tip­ple kind of thing. Yeah, yeah, any­way, so every­one there likes their rums so check out the water view dis­tillery in Bund­aberg. You can order online I believe they’ll send it to you. I bought three bot­tles of booze when I was in Bund­aberg, which is more bot­tles of booze than I’ve bought in the last three years. But I fig­ured got to sup­port the lit­tle small busi­ness­es in my home­town.

Tony Kynas­ton: [02:43] Yeah, good for you. So, the trip was good. Oth­er­wise, yeah. Apart from the booz­ing and like eat­ing and all that?

Cameron Reil­ly: [02:51] Yeah but was good. Went to see a band The oth­er night. Some of my old school­mates had their band, hap­pened to be doing only their sec­ond gig this year. So that was good. They did a lot of the old 80s, 70s and 80s clas­sics. Yeah.

Tony Kynas­ton: [03:09] Excel­lent. Excel­lent. Excel­lent. Well, this week­end was the mas­ters, so I was up at five o’clock this morn­ing watch­ing a Japan­ese golfer win his first major.

Cameron Reil­ly: [03:19] Peo­ple who are not watch­ing the video stream Tony, held up a mas­ters Cof­fee mug there, tea mug.

Tony Kynas­ton: [03:26] Cor­rect? Yeah.

Cameron Reil­ly: [03:26] What was his name? The guy who won.

Tony Kynas­ton: [03:27] Hide­ki Mat­suya­ma.

Cameron Reil­ly: [03:29] He’s Japan­ese?

Tony Kynas­ton: [03:29] He’s Japan­ese.

Cameron Reil­ly: [03:31] Is he the first Japan­ese man to win a Mas­ter’s?

Tony Kynas­ton: [03:33] He’s the first Japan­ese play­er to win any major.

Cameron Reil­ly: [03:39] Wow. Whoa, yeah. Domo ari­ga­to, Mr. Mat­suya­ma.

Tony Kynas­ton: [03:45] Mat­suya­ma, yeah. The sound like, occa­sion­al­ly would cut to the Tokyo TV com­men­tary just for a bit. It’s like those old come­dies, YouTube videos, where they have the Span­ish soc­cer.

Cameron Reil­ly: [04:06] Oh, yeah. Did you ever watch the orig­i­nal Iron Chef on SBS 30 years ago? All right. Well, let’s get into stocks. I want to pro­mote your ASA webi­nar or our ASA webi­nar. Appar­ent­ly, I’m on the thing. I don’t know what I’m doing. I’m not doing any­thing but…

Tony Kynas­ton: [04:26] you’re meant to deliv­er half the pre­sen­ta­tion.

Cameron Reil­ly: [04:28] Am I? But you wrote the deck. You rewrote, I wrote the first one then you rewrote the deck. And you said we’re going to do it by your­self.

Tony Kynas­ton: [04:37] No, I did­n’t. I said you had a writ­ten as if you were doing it by your­self.

Cameron Reil­ly: [04:41] I was going to do it. And then I was going to intro­duce you. Orig­i­nal­ly, I went, and now ladies and gen­tle­men. So that’s April 15th. I think at 1 pm.

Tony Kynas­ton: [04:59] It’s 12 pm.

Cameron Reil­ly: [05:02] Yes, scratch that. 12 pm. Thurs­day, the 15th. That’s this Thurs­day. And you can find out more on our Face­book page. You get the link or the ASA web­site. And yeah, but it’s not going to be any­thing new for our sub­scribers. Real­ly. We’re just going to be telling your sto­ry and talk­ing about QAV, right?

Tony Kynas­ton: [05:19] Yeah, exact­ly.

Cameron Reil­ly: [05:21] It’ll be fun. Yep, yeah. Our port­fo­lio I just pulled up Share­site has­n’t changed much since last week by the looks of it. For this finan­cial year our port­fo­lio’s up 31% ver­sus the SPDR ASX 200 Fund, which is up 21.8%. So, 22. So we’re about 9, 10 points, ahead of the ASX. So that’s good. It’s not dou­ble, but it’s good. And you know, comes and goes, goes up, goes down, but we’re still out­per­form­ing it nice­ly.

Tony Kynas­ton: [06:02] Yeah, cor­rect. I’ve got a cou­ple of things to go through. If you’ve got time. Yeah. Yeah. So got the first bit of work back from Dylan the intern, which was real­ly good.

Cameron Reil­ly: [06:11] What is that first bit of work?

Tony Kynas­ton: [06:16] Yeah, so we’ve been, we’ve been try­ing to set up regres­sion test­ing, as you know, we don’t have a data source now. And Dylan’s writ­ten the code for it. But we spent a lot of time try­ing to get the three-point trend­line algo­rithm to be auto­mat­ed. So, it’s kind of there. It’s work­ing in most cas­es, but not all cas­es. So now we decid­ed to pock­et it for a while and just look at some of the ques­tions we could answer, per­haps with­out the three-point trend line being all around. And the first ques­tion was, which was the heavy lifter of our KPIs? So, Dylan went back 10 years, and pulled out, like ran and rerun and rerun the mod­els, tak­ing sam­ples of hun­dreds of stocks and cre­at­ing buy lists, what he decid­ed to do was to rebal­ance. So, he would sell and buy accord­ing to when stocks, he would try and hold the top 10 stocks in the buy­er list every half. So, he was sell­ing and buy­ing to do that, as opposed to three-point trend line buy­ing and sell­ing, which is a bit dif­fer­ent from what we do.

But in terms of the process of what we’re try­ing to do, which is to just look at the rel­a­tive per­for­mance of each item on the check­list. It will work fine. So, the aver­age of all his runs, he did 50 tests. And he aver­aged 19%, over 10 years per annum, which is pret­ty close to what I was get­ting any­way. And that was just with a sim­ple rebal­anc­ing method. So, I’m hop­ing it’ll be dif­fer­ent, we actu­al­ly get the three-point trend line up and run­ning.

Cameron Reil­ly: [07:50] Dif­fer­ent in terms of bet­ter.

Tony Kynas­ton: [07:50] Yeah, I would think so.

Cameron Reil­ly: [07:51] Sor­ry. Can you explain what the rebal­ance, how the rebal­anc­ing works?

Tony Kynas­ton: [07:55] Yeah. So, he would gen­er­ate a buy list when there were new fig­ures every half and then rebal­ance the port­fo­lio. So, if some­thing was­n’t in the top 10, I think he used 10 stocks. I don’t have the details, that kind of detail in front of me, I think he used 10 stocks, in each port­fo­lios, so he bought the top 10 on the QAV list every half and sold out and re-bought to achieve that.

Cameron Reil­ly: [08:21] Right. So, he would rebuild the buy list for every new results sea­son. Take out any­thing that was­n’t in the top 10. He would remove it and replace it, like an ETF basi­cal­ly.

Tony Kynas­ton: [08:35] Yeah, right. Yeah.

Cameron Reil­ly: [08:35] And it achieved 19%. Wow.

Tony Kynas­ton: [08:38] Cor­rect. Yeah. So, the big, heavy hit­ters in that list, I guess, maybe no sur­prise, but the two biggest ones were the price to oper­at­ing cash flow and the increas­ing equi­ty. Right? Yeah. And then after that was the using our IV2 fig­ure, so in oth­er words, if we did­n’t use the IV2 score on the check­list, the per­for­mance dropped off to 14.9%. If we did­n’t use price to book being greater than 30%, or 30% or less above the book price, we drop back to 14 and a half per­cent. If we did­n’t use oper­at­ing cash flow per share though, we dropped back to 9.6%. Which is pret­ty much mar­ket, I would think, over that time. And if we did­n’t use increas­ing equi­ty, we dropped back to 13.8%. And all of the vari­ables that Dylan pulled out or had some con­tri­bu­tion to play.

So, some of them are only mak­ing like a 1% dif­fer­ence, but some of them, as I said, were only  mak­ing sort of a 7% dif­fer­ence, which is a lot. Yeah, so that’s the start. That’s the first run through, so he did a lot of test­ing on that. But I’m going to go back now and look at what a port­fo­lio will look like if we just use the big heavy hit­ters, just oper­at­ing cash flow, price to oper­at­ing cash flow, and then increas­ing equi­ty, and I want to test what the cor­rect weight­ings are, should we be sort of giv­ing like pric to oper­at­ing cash flow a score of one if it’s less than six? Or six or less? Should we be giv­ing it like a score of five, if it’s that impor­tant now. So yeah, that’s the kind of work we plan to do in the future based on that, but inter­est­ing first cut, and he’s got the mod­el set up now. Which is good.

Cameron Reil­ly: [10:23] This is real­ly excit­ing. Hooray for Dylan the intern. When do we lose Dylan? Isn’t he back at UNI now?

Tony Kynas­ton: [10:29] Yeah, he’s back at UNI. So, he slowed down a bit. But he’s I think he’s real­ly enjoy­ing this. So, he’s giv­ing it a fair bit of time, which is great.

Cameron Reil­ly: [10:37] Oh, that’s great. Yeah, good stuff.

Tony Kynas­ton: [10:39] Well, yeah. So hope­ful­ly we’ll add some of the oth­er ques­tions that we’ve been ask­ing about, like increas­ing gross prof­it, which I think was one that Steve Mabb sug­gest­ed. We’ll put that one in and see what makes a dif­fer­ence. And, yeah, so he worked our way through our back­log of items to check to regres­sion test. Yeah, so that’s good. The oth­er inter­est­ing thing I read on the week­end was a paper that Jamie sent through to us. I don’t know, if you had a chance to read it, I’ll just get the title up, so I don’t mess it up, because it’s quite techie. The paper was called “A Quan­ti­ta­tive Approach To Tac­ti­cal Asset Allo­ca­tion” from the Jour­nal of Wealth Man­age­ment. And it was, I think, orig­i­nal­ly pub­lished in 2007. But it’s been updat­ed recent­ly. So well, long sto­ry short, it was buy­ing an index fund, and then swap­ping out between an index fund of shares and an index funds of bonds, when a mov­ing aver­age line, that was a 10-month aver­age, was crossed by the share price. So, it’s kind of like an alter­na­tive to our three-point trend­line.

I know we’ve looked at it in the past, where we looked at a long-term mov­ing aver­age being crossed by a short-term mov­ing aver­age. But this was even sim­pler it was just over­lay­ing a 10-month mov­ing aver­age over the share price. And when the share price went below the aver­age, the per­son run­ning the regres­sion test would sell out of the index fund and buy into bonds. And then would reverse it when the mov­ing aver­age was a buy sig­nal when the share price went above the mov­ing aver­age, 10 months mov­ing aver­age. And in Stock Doc­tor, If you go into the advanced graph­ing guide, graph­ing sec­tion, yeah, chart­ing and then going to stud­ies, there’s a sim­ple mov­ing aver­age line now, which you can over­lay to have a look at it.

I did some quick checks. And in some cas­es, it lines up with three-point trend lines, but in oth­er cas­es, it’s a bit chop­pi­er, so more volatile. But any­way, the point that this guy makes is that, by get­ting out of the mar­ket, when the down­trend has com­menced, is he got out­sized per­for­mance, which is the kind of sort of result that we’re get­ting as well. So, if peo­ple are inter­est­ed, they can go and have a look at the paper. And it goes, it lists var­i­ous dif­fer­ent tests, all kinds of tests, and the ben­e­fit of using this kind of approach, but it was real­ly worth­while. And the rea­son for it being worth­while is that you’re just out of the mar­ket when the mar­kets going through its cor­rec­tions. So, you’re in there for the good times, and you’re get­ting out when times turn bad

Cameron Reil­ly: [13:22] For peo­ple who want to look it up them­selves. It’s called “A Quan­ti­ta­tive Approach To Tac­ti­cal Asset Allo­ca­tion.”

Tony Kynas­ton: [13:29] It’s a bit tech­ni­cal, so I guess skim through it until it gets to the meat of the arti­cle, which is basi­cal­ly look­ing at the effect of hav­ing a 10-month mov­ing aver­age on your per­for­mance. Yeah.

Cameron Reil­ly: [13:42] By the way, I keep los­ing con­cen­tra­tion because I’m look­ing at your back­ground or you know, your back­ground your room. It just looks like a da Vin­ci paint­ing. I’m look­ing at the per­spec­tive of those squares on your ceil­ing. Your room is so long and deep. It looks fake. It looks like you’ve got a green screen back­ground with a da Vin­ci

Paint­ing.

Cameron Reil­ly: [14:04] Well, I know it’s not fake. I’ve been there two weeks ago. Yeah, but yeah, it’s just it looks stun­ning from this per­spec­tive. So many like per­spec­tive angles com­ing in. Dra­mat­ic. Yeah, good. Well, thanks, Jamie. What else you got, boss?

Tony Kynas­ton: [14:24] I did­n’t haven’t done a down­load, but I thought we’d just talk quick­ly about the stock of the week, which is the num­ber one thing on the last down­load I did on the buy list, which was Max­i­trans-=, MXI. Man­u­fac­tur­er of trail­ers, like truck trail­ers.

Cameron Reil­ly: [14:44] Right. And why are they your stock of the week?

Tony Kynas­ton: Because they are num­ber on on the buy list and I thought we should, I haven’t done a down­load for a while. So, I thought we should look at num­ber one on the buy list. Yeah. So only small. It’s only a small cap though. And its aver­age dai­ly trad­ing is about $30,000 from mem­o­ry. So, it won’t suit every­one. It’s $29,165. With a $64 mil­lion mar­ket cap.

Cameron Reil­ly: [15:08] That’s not MFD?

Tony Kynas­ton: [15:11] No its MXI.

Cameron Reil­ly: [15:16] Just bring up the chart.

Tony Kynas­ton: [15:19] Last time  I did a down­load which was about a week ago they were scor­ing 0.67/

Cameron Reil­ly: [15:31] So why are they scor­ing so well and why are they, you know what’s going on with them?

Tony Kynas­ton: [15:36] Yeah, so I’m just going to look at their oper­at­ing cash flow. It’s prob­a­bly the high­est it’s been in the last five years, maybe even for­ev­er. And I just had a, since about, no it’s actu­al­ly I can’t see a high­er cash flow year than what they’re doing at the moment. And I don’t nor­mal­ly do this but in try­ing to work out why that was the case. I went to their  announce­ments and in the AGM, they spoke about the fact that they were so uncer­tain dur­ing COVID that they were going to sur­vive, but they did every­thing they could to max­i­mize cash flow, oper­at­ing cash flow, so they paid down debt, they took costs out of the man­u­fac­tur­ing process. Blah, blah, blah, they did what­ev­er they could to focus on cash flow. It’s just, it’s at a record high now. So, I think that’s why it’s scor­ing so well for us.

Cameron Reil­ly: [16:32] Right, well, good for them. I’m just look­ing at a chart though. Okay, yeah, they’re above the sell line. If I do the sec­ond peak from sort of Jan­u­ary 21. The sec­ond trough I mean, as the sec­ond low point, I was using the sec­ond one like the, well it’s a bit late for COVID real­ly. Like their low point was June 2020, for some rea­son. I was using the July one, and that would have put the sell line right about where they are now. But if I use that sec­ond trough, late Jan­u­ary, ear­ly Feb­ru­ary, when­ev­er that one is there, Jan­u­ary, it gets above that nice­ly by 10%. High­er than that. A bit less actu­al­ly. But it’s sort of got a nice upward trend since June. It does, yes. And wood across the buy line. Only like a month ago, real­ly? Feb­ru­ary, March maybe? Feb­ru­ary.

Tony Kynas­ton: [17:41] Yeah. If you use that sec­ond point. Sec­ond, the sec­ond peak. Sor­ry. Back in Novem­ber last year. Yeah. Yeah, I think you might be inclined to use one ear­li­er. First point, Decem­ber, sec­ond point Feb­ru­ary 18. Which would bring you back into a buy around about Octo­ber 2020.

Cameron Oh, okay. Yeah, right.

Tony: May have had a sell though, after that. Because as you say that two low points would have been a sell.. Maybe just after that. So, you’re prob­a­bly right to use the peak you sug­gest­ed in Novem­ber 2020.

Cameron Reil­ly: [18:21] Good. Max­i­trans? That’s a pret­ty good score.

Tony Kynas­ton: [18:26] It’s a very good score, isn’t it?

Cameron: Yeah.

Tony: And shows you the pow­er of focus­ing on oper­at­ing cash flow?

Cameron: Yeah.

Tony: I mean, I guess they were tak­ing lots of short-term deci­sions because they were wor­ried about what the effect of COVID would be on the busi­ness. But you know, sort of read­ing between the lines, I think they’re sell­ing okay at the moment.

Cameron Reil­ly: [18:46] Right.

Tony: Yeah.

Cameron: Any­thing else in the news?

Tony Kynas­ton: [18:50] No, I don’t think so. I think that’s enough.

Cameron Reil­ly: [18:53] Okay. Well, we’ve got a few ques­tions. Thanks to every­body. We only had one ques­tion as of yes­ter­day, and I jumped onto the club page and said any ques­tions and a bunch of them poured in via email and Face­book. So, thank you to every­one for giv­ing some­thing giv­ing us some­thing to talk about. This first one is from Paul. Hi, Cam, I’d be inter­est­ed to hear Tony’s thoughts on the per­for­mance of the NASDAQ 100 over the past 10 years, a 23 and a half per­cent per annum aver­age return. Hey, I’m going to pause for a sec­ond that reminds me. Sor­ry, get­ting back to Dylan’s regres­sion test­ing that 19% — does that include after you’ve net­ted out bro­ker­age, cap­i­tal gains tax, and all that kind of stuff?

Tony Kynas­ton: [19:40] No that will be gross.

Cameron Reil­ly: [19:42] That would be gross right. So, you’re 19 and a half per­cent is net. His 19% is gross. And prob­a­bly doing a lit­tle bit more trad­ing as well.

Tony Kynas­ton: [19:53] Well, I don’t know but pos­si­bly ‚like he’s prob­a­bly trad­ing every six months, at least.

Cameron Reil­ly: [19:59] Yeah. And I know you do too you said you dump a cou­ple on aver­age.

Tony Kynas­ton: [20:01] But I just haven’t gone through the detail with Dylan yet about it. So, I don’t know.

Cameron Reil­ly: [20:07] And so that’s gross. So, if we had to net out CGT, and bro­ker­age and the oth­er fees, etc. asso­ci­at­ed with it, what do you think that would drop the 19 down by, any rough guess? Half a point?

Tony Kynas­ton: [20:24] Hard to say, I don’t. Okay. So, I don’t think bro­ker­age would have a big impact on things. Maybe half a point at the most. Tax might, just depends on whether there were loss­es to go against the cap­i­tal gains, and I don’t know. Sor­ry.

Cameron Reil­ly: [20:43] Yeah, that’s a fig­ure we’d need to try and get at some point. That’s the real fig­ure, right?

Tony: Yeah.

Cameron: Okay. Sor­ry, back to Paul’s ques­tion  — This is the NASDAQ 100 over the last 10 years — a 23 and a half per­cent per annum aver­age return for a decade would appear to be a very con­sis­tent stel­lar return for very lit­tle effort. Would Tony argue that the decade was a one-off past per­for­mance, and not an indi­ca­tor of future returns, etc. Or might there be val­ue in hav­ing tech ETF expo­sure in a port­fo­lio giv­en the nature of the fastest-grow­ing busi­ness­es and the times in which we live? I appre­ci­ate that they are dif­fi­cult to val­ue. But it is hard to argue with num­bers like these and it would appear that a bas­ket of the lead­ing 100 stocks more than aver­ages out the win­ners and losers. Kind regards Paul. Fair ques­tion, I thought.

Tony Kynas­ton: [21:33] Yeah, and you know, if Paul wants to go ahead and do it and feel free or do a cham­pi­on chal­lenger port­fo­lio with it? I would­n’t, myself per­son­al­ly, this is not by any means finan­cial advice. As you know, as Buf­fett would say it’s out­side his cir­cle of com­pe­tence to invest in tech stocks, and it’s out­side of mine. I’m com­pe­tent to know these busi­ness­es are some­times good busi­ness­es, but I don’t think that they’re always good invest­ments. And you know, Paul says in his ques­tion, he appre­ci­ates they are dif­fi­cult to val­ue. But it’s hard to argue with num­bers like these. So, it’s basi­cal­ly a momen­tum trade I would think, to do this.

Cameron Reil­ly: [22:17] But isn’t the same as any ETF buy, you’re just look­ing at the ETF returns.

Tony Kynas­ton: [22:27] Yeah, so I think just a cou­ple of things about the num­bers. I think they require a bit more inves­ti­ga­tion because I pulled up… so this is a new ETF from what I can see or it’s at least  a recent­ly list­ed ETF

Cameron Reil­ly: [22:37] There is a betashares one on the ASX — NDQ.

Tony Kynas­ton: [22:43] Cor­rect. And I could­n’t find my own num­bers to do a cal­cu­la­tion on the NASDAQ 100. There’s the NASDAQ Com­pos­ite Index, which is every­thing in the NASDAQ. And it cer­tain­ly has­n’t been get­ting 23 and a half per­cent. Over the last 10 years. I pulled the num­bers off Google Finance myself Recent­ly, today,  and I make it that the NASDAQ com­pos­ite had 17.5% over the last 10 years. And if you go back 20 years, it’s 9.9% and 11.6% for 30 years. So, you could argue that NASDAQ 30 years ago looked dif­fer­ent to NASDAQ today, so hap­py to take the 17.5%. But that’s half of what this ETF provider is … it’s less than what the ETF provider is claim­ing, they’re claim­ing 23.5, and I’m get­ting 17.5 for the whole NASDAQ.

When I went to find a US ETF for the NASDAQ 100, the one I pulled up, again, was not per­form­ing at that kind of rate. So obvi­ous­ly, betashares would have had the num­bers to back up what they’re say­ing. But I’d be inter­est­ed, if maybe Paul wants to do his own inves­ti­ga­tions, and con­vince him­self or sat­is­fy him­self that that’s actu­al­ly what the returns are. But tak­ing that aside, my prob­lem with the NASDAQ isn’t so much that it’s an index of stocks I can’t val­ue, which is part of the prob­lem. It’s more than his­to­ry has shown us that the things that go up high come down with a thud and hav­ing been through the Dot Com boom and bub­ble, and burst. And the NASDAQ drop 75% it’s and it’s look­ing at dur­ing oth­er down­turns, they tend to mag­ni­fy the upside and the down­side.

And in a ris­ing inter­est rate envi­ron­ment, which we’re going into, might not be next year, but it’s or even this year, but cer­tain­ly in the future. I think there’ll be you know, some down­ward pres­sure on the high-fly­ing growth stocks. So, if Paul want­ed to buy into this ETF, I’d def­i­nite­ly do it only if I had a three-point trend line strat­e­gy or a 10-month mov­ing aver­age strat­e­gy so I could get out at the first sign of trou­ble because yeah, what goes up quick­ly comes down even quick­er. So that’s, that’s my con­cern. It’s not a sleep-at-night port­fo­lio for me. Because I know that at some stage, I’m going to wake up and wish I’d sold out the day before because overnight in the US some­thing ter­ri­ble has hap­pened and the stocks have all dropped 30% in one night, so that hap­pens on the NASDAQ.

Cameron Reil­ly: [25:28] Right. So, you know, it would­n’t be the sit­u­a­tion like any oth­er stock in our port­fo­lio where you’re just look­ing at a three-point trend line sell line, because you think it could col­lapse more quick­ly.

Tony Kynas­ton: [25:46] No, I’m say­ing at least use a three-point trend­line. But yeah, it could actu­al­ly drop through the three-point trend­line at a very fast rate, which they’ve done before. Yeah. But you know, the oth­er gen­er­al point to make is that, from time to time, peo­ple can always cher­ry-pick a good 10-year peri­od of invest­ing. And the point, again, that Paul makes, is that future, past results don’t always pre­dict future returns, is valid. The NASDAQ 100 could con­tin­ue to do 23.5% per annum, I would­n’t know. But, you know, oth­er peo­ple, like the best invest­ment in vehi­cles got to be a TARDIS, so you can fly back in time and buy bit­coin and buy Ama­zon at the IPO and buy Apple when Steve Jobs was run­ning it, all those kinds of things, they’re always going to be an exam­ple out there over the last 10 years, which beats your return, you just got to be com­fort­able that your return is good for all sea­sons, good for all weath­er and that you’re com­fort­able, you can sleep at night, you have a process for deal­ing with the ups and the downs.

And you under­stand what you’re invest­ing in, your bas­ing it on the fig­ures. And I think with a lot of these things that are say­ing look how good it’s been for the last 10 years, they’re bas­ing it on the past fig­ures and not nec­es­sar­i­ly the future fig­ures.

Cameron: Right.

Tony: Same with Bit­coin. Why does­n’t Paul go and buy bit­coin? It’s out­per­formed in the last year. The same thing, we can’t val­ue it. If we don’t know, we don’t have a check­list for buy­ing it. All we can do is put a three-point trend­line over it in terms of trad­ing. And that’s a valid strat­e­gy. As long as you’re dili­gent and you don’t get, you know, you don’t get stuck with some­thing which falls so quick­ly, you can’t get out.

Cameron Reil­ly: [27:28] Well, how do you, remind me again, how you val­ue LICs like Wil­son  asset man­age­ment?

Tony Kynas­ton: [27:36] Well, that’s dif­fer­ent, I mean, the ETF could be very the same way I sup­pose. Wil­son asset man­age­ment, for exam­ple, or any of the LIC’s will have to have to pub­lish their net tan­gi­ble asset back­ing, which is the mark to mar­ket val­ue of all the stocks they hold, it’s usu­al­ly done on a month­ly basis, as of month-end. And then you can com­pare that to the share price of the week, which holds all those assets. And so some­times you can buy $1 for 80 cents, which is a great time to buy a LIC. You prob­a­bly could do this, if they pub­lished what the under­ly­ing… no you can’t it’s an ETF. ETFs don’t trade it at dis­counts or buy over­ages to their net tan­gi­ble assets because there’s a com­pa­ny or a per­son in the back­ground called the mar­ket mak­er who’s always trad­ing the oth­er way. So, the ETF is meant to equal the index all the time.

Cameron: Right.

Tony: Yeah.

Cameron Reil­ly: [28:32] Right. But you have said in our invest­ing lad­der, an ETF is a good start­ing point for peo­ple on their invest­ing jour­ney.

Tony Kynas­ton: [28:44] Well, I prob­a­bly said LIC’s — ETFs Yes, but LIC I pre­fer.

Cameron: right

Tony: You could use it, yes, you can use an ETF if you’re buy­ing the index. I pre­fer to use a LIC, so I can trade that over or under­age,  com­pared to the index.

Cameron Reil­ly: [29:00] Right. But that, again, that takes work then, though.

Tony: It does. Yeah.

Cameron: I mean, in our invest­ment lad­der, if we’re talk­ing about the good start­ing point for peo­ple on their invest­ing jour­ney, who don’t have the time or the incli­na­tion to do a QAV type analy­sis on any­thing, they just want a good return with low fees, I think we have said ETF and a LIC is a good place to go.

Tony Kynas­ton: [29:25] We have, index funds gen­er­al­ly. Absolute­ly. I’m not sure I’d be, I would­n’t advise any­one to go and buy a NASDAQ index fund with all their mon­ey. Sure, as I said, do it as a test or do it with some of the mon­ey. And, you know, ide­al­ly, do it through a down­ward cycle so you can see what the down­side is going to be and how you cope with it.

Cameron Reil­ly: [29:50] Come back in 30 years and tell us how it went.

Tony Kynas­ton: [29:54] Well, yeah, it’s been hard, isn’t it? Well go back and have a look. I mean, you can pull up at least a 30-year graph of the NASDAQ. And you can see that, you know,

Cameron Reil­ly: [30:03] Or you can regres­sion test. Right? You could regres­sion test what the top 100 stocks in the NASDAQ were over 20 years and you know how it would have per­formed. Sure­ly some­body has done that.

Tony Kynas­ton: [30:17] Well, I did some research today, but I could­n’t come across that, I just came across the NASDAQ com­pos­ite.

Cameron Reil­ly: [30:21] Well thanks Paul, good one. Next ques­tion. Arash. Hi, Cameron. I know you’ve spo­ken about AGD, but would be inter­est­ed to know if Tony thinks we should keep our AGD shares and stick to the sell line or cut our loss­es in light of the announce­ment dis­cussed in last week’s pod­cast

Tony Kynas­ton: [30:41] I’m assum­ing that what Arash is talk­ing about there are my mus­ings on whether I would take a short­er peri­od for gold stocks based on the com­mod­i­ty price and when it start­ed to kick up, but I’m not sure exact­ly what he’s refer­ring to there.

Cameron Reil­ly: [30:56] Me either. I thought I hoped you’d know.

Tony Kynas­ton: [30:58] Yeah, I think that’s what he’s talk­ing about. Because I had men­tioned that a cou­ple of times over the last few weeks. Com­modi­ties. And AGD these are gold min­ers. I guess that’s what he’s talk­ing about. Yeah. Sor­ry, Arash I’ve been away play­ing golf. So, I haven’t, haven’t land­ed on an answer yet. Or a solu­tion to my com­mod­i­ty trend­line trad­ing strat­e­gy. So, we’ll get back to you on that one.

Cameron Reil­ly: [31:26] But if I look at AGD, they sort of the price peaked in August last year at 28.67. Cur­rent­ly down at 17 and a half. So, seems to be slid­ing. The three-point sell line for though is pret­ty low. It’s like you know, 10 cents.

Tony Kynas­ton: [31:44] Yeah. And so, what Arash is ask­ing the real­ly rel­e­vant ques­tion is, has the gold price peaked? And as I’ve said before, it’s only come off from 20 or from $2,000 US to 1700 US, which is not a whole lot. The gold trend line is still in an upswing. So, I’m not real­ly under­stand­ing why the gold min­ers are sell­ing off so dra­mat­i­cal­ly. But at the moment, they’re still about their three-point sell line. So, and in fact, this one’s kind of almost get­ting back to a buy again, AGD. If that the last sort of month which is going side­ways, if that keeps up, I think that will almost breach the buy line, would­n’t it?

Cameron Reil­ly: [32:35] Just run­ning a dig­i­tal ruler over it.

Tony Kynas­ton: [32:40] So I’ve got a high point in August 2020. Feb­ru­ary 21 is my sec­ond point.

Cameron Reil­ly: [32:49] Yeah, well, it’s kind of crossed that. It’s above that.

Tony Kynas­ton: [33:00] It’s just kind of touch­ing it now. I think. So, it’d be up to where it goes to the next month or so as to whether it’s a buy again, but well it’s still a buy but it might be a more recent buy, it might be an uptick. Yeah, so Arash sor­ry I don’t have a defin­i­tive answer about com­mod­i­ty stocks yet I’m still doing some test­ing on that and some think­ing about it.

Cameron Reil­ly: [33:21] Just try­ing to get to stock doc­tors’ com­mod­i­ty page so I can have a look at what’s been hap­pen­ing with the gold price recent­ly. CMD — com­modi­ties — la de dah — gold… Well, it’s spik­ing up today.

Tony Kynas­ton: [33:47] You kind of expect it, because you know, vac­cines aren’t work­ing and you know, are being slow­er to roll out than they should be and all that kind of stuff. So, the world’s not through this COVID sit­u­a­tion. I expect gold to not drop too much fur­ther from where it is, giv­en the kind of back­ground.

Cameron Reil­ly: [34:04] Yeah. So, it’s sort of a wait-and-see with gold.

Tony Kynas­ton: [34:09] Yeah, it is. Yeah.

Cameron Reil­ly: [34:09] All right. Hope that helps Arash. Mur­ray. Why did Tony skip past MYR on the buy list for his recent buys, would have bought it would have the liq­uid­i­ty and size for him.

Tony Kynas­ton: [34:26] Nope. No, too small. Sor­ry, Mur­ray. Myer — in my most recent down­load, has an aver­age dai­ly trad­ing amount of $879,000.

Cameron Reil­ly: [34:38] That’s basi­cal­ly your lunch bud­get. It’s your booze bud­get for the month.

Tony Kynas­ton: [34:46] Yeah, my rule of thumb is to try and buy things that are three times high­er than my hold­ing in them, which does­n’t apply in this case.

Cameron Reil­ly: [34:54] Three times high­er.

Tony Kynas­ton: [34:54] Yeah, so a third, so the aver­age dai­ly trade, so my port­fo­lio hold­ing is a third of the aver­age dai­ly trade. And some­times I fudge that and go up to 50%. But I try and keep it below 50%.

Cameron Reil­ly: [35:07] Right. So, in this case, the dai­ly trade would need to be like 100 mil­lion.

Tony Kynas­ton: [35:11] I’m not going to tell you. But Myer is too small. So now I have a whole bar­rage of ques­tion, so what about the one that trades with $100 mil­lion. Okay.

Cameron Reil­ly: [35:26] We just keep edg­ing our way up. Phil Mus­catel­lo sent us an email dur­ing the week that one of the top search­es that bring peo­ple to his web­site is what is Tony Kynas­ton’s net worth? And I said, Yeah, that was all me. I was hop­ing he’d told you when you had a few drinks. Because he hasn’t told me. Not that I’ve ever asked but I’m assum­ing if I asked you would nev­er tell me.

Tony Kynas­ton: [35:45] That’s like a joke I had recent­ly. Lar­ry Emdur passed away. Like, you know how old he was?

Cameron Reil­ly: [35:53] No. How old?

Tony Kynas­ton: [35:53] How old do you think?

Cameron Reil­ly: [35:57] Lar­ry Emdur? 50?

Tony Kynas­ton: [36:00] High­er.

Cameron Reil­ly: [36:00] 60.

Tony Kynas­ton: [36:03] High­er.

Cameron Reil­ly: [36:05] I don’t even know who Lar­ry Emdur is. He did a game show, right? I don’t watch TV, what Game Show did he do?

Tony Kynas­ton: [36:12] The Price Is Right.

Cameron Reil­ly: [36:17] Okay. Yeah, well, did he real­ly pass away?

Tony: No.

Cameron: Good joke though, nice one. Nice try Mur­ray. Keep it up. You know, I’ve been telling every­one to keep ask­ing these ques­tions. So, we can fig­ure out how much Tony’s port­fo­lio is worth, peo­ple keep ask­ing me and I go, I have no idea. I don’t know. I don’t ask.

Tony Kynas­ton: [36:41] You do ask. I just don’t tell.

Cameron Reil­ly: [36:41] I don’t ask. When have I ever asked you?

Tony Kynas­ton: [36:45] You asked your boys to ask me.

Cameron Reil­ly: [36:48] Did not ask No, I did­n’t. I did­n’t ask. I did­n’t ask my boys to ask you. They said to me, what do you think Tony’s worth? And I’m like, I got no idea. But what­ev­er it is, it’s prob­a­bly three times more than it was… It’s prob­a­bly twice as much as it was three years ago.

Tony: Yeah. That’s prob­a­bly right.

Cameron: That’s the rule of 70. Right. So, if you’re get­ting 20% a year it dou­bles every rough­ly three years.

Tony Kynas­ton: [37:14] Yeah. A bit more than that.

Cameron: Three and a half.. Some­thing like that.

Tony: Yeah.

Cameron Reil­ly: [37:21] Where­as I’m worth less than I was three years ago. I’ve done some­thing wrong. Justin asks, I have a com­pa­ny that has recent­ly com­plet­ed a cap­i­tal raise only for insti­tu­tion­al investors. They did­n’t noti­fy the retail investors until the cap­i­tal raise was com­plet­ed and shares were issued. Is this process nor­mal? Or would this come under the umbrel­la of the reduced dis­clo­sure rules?

Tony Kynas­ton: [37:46] Yes, that’s an inter­est­ing one. I’m not I’m not across the rules. I thought that they had to make an equal offer or at least give the retail investors a chance via a share pur­chase plan. So, I sort of was try­ing to go through my mem­o­ry banks and think of a case where this has hap­pened to me, but I could­n’t. So, I went to the ASX web­site and.. I kind of homed in on the answer. So, it’s this is in a sec­tion called under­stand­ing cap­i­tal rais­ings on the ASX web­site and it was from last year when they relaxed the laws on cap­i­tal rais­ings. It talks about the fact that if a com­pa­ny has to do a place­ment, it used to be that they could­n’t do more than 15% of the cap, the mar­ket cap, as an offer, and it got raised to 25% dur­ing COVID which was an emer­gency mea­sure. And it goes on to say that’s cur­rent­ly con­di­tion­al on ASX list­ed enti­ties either doing a fol­low on accel­er­at­ed pro-rata enti­tle­ment offer or a place­ment fol­lowed by share pur­chase plan at the same or a low­er price than the place­ment.

This is so retail share­hold­ers get to par­tic­i­pate in the over­all cap­i­tal rais­ing at a price at least as favor­able as the place­ment. So, cer­tain­ly, if you’re, if a com­pa­ny is doing an emer­gency cap­i­tal rais­ing up to 25% of their mar­ket cap, they have to issue a share pur­chase plan for retail investors, but it gen­er­al­ly is the prac­tice, so, unfor­tu­nate­ly Justin has­n’t told me who the com­pa­ny is. If he wants to con­tact us pri­vate­ly, I can look at an indi­vid­ual case, but I think that they’re meant to, I think, the rules are that the com­pa­ny should also be hav­ing a share pur­chase plan for retail investors fol­low­ing the insto place­ment.

Cameron Reil­ly: [39:53] Right, right. Sor­ry, we can’t help more on that Justin but yeah, shoot us an email and let us know who it was if you want. Glen. Hi, Cam I’ve noticed a cou­ple of com­pa­nies hav­ing their AGMs in the com­ing months. How do AGMs fit into Tony’s invest­ment strat­e­gy and his thoughts around what to be vig­i­lant about in these meet­ings, there is a ref­er­ence in the QAV Bible that Tony will gen­er­al­ly sell if a) a com­pa­ny issues new results which change its val­u­a­tion. I assume at the AGM com­pa­nies aren’t issu­ing new results but may change guid­ance. So, post AGM this could affect the stock­’s sen­ti­ment or fore­cast future earn­ings. If the AGM does point to new guid­ance how soon would the future earn­ings per share be changed in stock doc­tor post the AGM.

Tony Kynas­ton: [40:39] Yes, so Glen is spot on there, the AGM sea­son is real­ly all about guid­ance, because gen­er­al­ly the AGM is hap­pen­ing a cou­ple of months into the new cal­en­dar year or finan­cial year depend­ing on whether, well if it’s an AGM it should be half-year­ly so it should be com­ing into the new finan­cial year, but for the com­pa­nies who report cal­en­dar year, they’ll be doing their AGMs around now and they’ve already had, Jan­u­ary, Feb­ru­ary, March, fig­ures to know how this year’s going so far so that gen­er­al­ly gives them at least a bit of a bedrock to fore­cast what they’re going to look like for the half, and for the year. So, it’s all about guid­ance. Gen­er­al­ly, it does­n’t change much. I don’t. In my expe­ri­ence, we’re not going to trade very much dur­ing the guid­ance peri­od, or the AGM sea­son.

Occa­sion­al­ly, some­thing will come out, that will be an aber­ra­tion and then we might, it’s prob­a­bly going to be reflect­ed in the share price soon­er than it gets reflect­ed in the check­list because we’re only going to prob­a­bly change future EPS, and that should come through in stock doc­tor, I would think with­in about a week, so it should­n’t take too long to get into stock doc­tor and get into our check­list but like, I would think it’s more it’s more going to be about the three-point trend­line being breached because of poor guid­ance, and in a few exam­ples I can think of that’s what hap­pens, the share price drops quick­ly after the AGM.

Cameron Reil­ly: [42:06] And you have an alert set up in Stock Doc­tor for some­thing like that.

Tony Kynas­ton: [42:09] No, just have the nor­mal three-point trend line alerts.

Cameron Reil­ly: [42:13] What’s your three-point trend line alert though, isn’t it, you have an alert set up for when it gets close to its sell line.

Tony Kynas­ton: [42:18] Yeah, gen­er­al­ly I only do it for the stocks which are get­ting close any­way so if I do like a peri­od­ic review of the port­fo­lio, usu­al­ly most of the stocks are sell­ing way above their sell line but if we get one that gets close to the sell line, then I’ll raise an alert in  Stock Doc­tor before. Yeah, so it, I’d say in 90, plus per­cent of the cas­es, it does­n’t wor­ry me this peri­od. The oth­er inter­est­ing thing about AGMs is that if you’re unhap­py with a com­pa­ny well, you should sell the shares if you’re unhap­py with the com­pa­ny, but it is pos­si­ble these days to vote against the Rem report, and if they get above a cer­tain amount of, I think it’s 25% vot­ing against it, then if that hap­pens two AGMs in a row the board gets spilled so they gen­er­al­ly pay atten­tion to issues that share­hold­ers raise in that sit­u­a­tion after a first strike.

Cameron Reil­ly: [43:10] What’s a Rem report?

Tony Kynas­ton: [43:14] Remu­ner­a­tion report so usu­al­ly the AGM is only about things like, in gen­er­al, vot­ing direc­tors to the board and approv­ing the CEO’s pay and direc­tor salaries. And so, it’s now, I guess a weapon to use against the under­per­form­ing board to vote against the Rem report.

Cameron Reil­ly: [43:34] Right. How much atten­tion do you pay to AGMs?

Tony Kynas­ton: [43:36] Hard­ly any

Cameron Reil­ly: [43:39] Yeah, that’s what I fig­ured.

Tony Kynas­ton: [43:41] Yeah, yeah, it’s a, it’s a box-tick­ing exer­cise real­ly. If I don’t like the com­pa­ny I would sell it rather than go and com­plain to man­age­ment. It’d be dif­fer­ent if I, you know, want­ed to be an active investor and take a board seat or what­ev­er but yeah, I don’t want to do that.

Cameron Reil­ly: [43:54] You’re not you know the Stephen Mayne.

Tony Kynas­ton: [43:58] No, not even a War­ren Buf­fett, he would be hap­py tak­ing posi­tions and then try to turn the com­pa­ny around.

Cameron Reil­ly: [44:05] Yeah, be far more active. Yeah, for you that just cuts into golf. Thanks, Glen. Who is this one … Dan: hi Cam hope you’re well mate, I am. Thank you Dan. I’m very well, very relaxed. Despite the fact that I lit­er­al­ly got out of a car after a six-hour dri­ve and sat down at the mic but I’m good. I’ve noticed a cou­ple of ques­tions, a few ideas, ques­tions for one of the next shows if you think they make sense. Is there some sort of check­list we can use dur­ing report­ing sea­son that can help with the deci­sion if we will hold on to a share in your port­fo­lio or need to sell one of them. Is there a sys­tem­at­ic approach we can use to help with that deci­sion? For exam­ple, what if rev­enue is down 15% or debt lev­els have increased sig­nif­i­cant­ly? Well I would assume that just the usu­al three rules right? The usu­al, three-point trend­line, basi­cal­ly, or real­ly bad news.

Tony Kynas­ton: [45:08] Yeah, so there’s no check­list, oth­er than the QAV check­list so if the num­bers go through the check­list in those kinds of cir­cum­stances it’s quite pos­si­ble that com­pa­ny would fall off the check­list as a buy. But it may not nec­es­sar­i­ly be a sell because its three point   trend line has­n’t been breached yet. So that’s, that’s how I do it. There’s a lot of things I’m look­ing for that make a big dif­fer­ence. Asset write downs, so you know, think of the Fos­lock exam­ple that we talked about a week or two ago that there was fraud in the account­ing in Chi­na, and it was only dis­closed at results times when the audi­tors, or the audi­tor first of all signed off on the accounts and then went back and had to recant. So, it’s that kind of thing, there’s been oth­er cas­es where, for exam­ple, an acqui­si­tion, a big acqui­si­tion has­n’t worked out and they may not dis­close it until the annu­al num­bers are released, for exam­ple. So yeah, it’s got to be a real­ly big thing to make me want to sell just based on one event. And that’s usu­al­ly a bit of pre­dic­tion on my part that the share price will drop through the 3‑point sell line pret­ty quick­ly.

Cameron Reil­ly: [46:23] Yeah. The sec­ond part of Dan’s ques­tion is, can you draw any use­ful con­clu­sions by look­ing at the depth of a share chart , and in brack­ets, the amount of buy­ers or sell­ers at a giv­en price. Does it tell us some­thing about sen­ti­ment or less risk, as you know a lot of buy­ers are lined up at a cer­tain price.

Tony Kynas­ton: [46:42] Nev­er done any analy­sis on it. Sor­ry Dan. It’s not some­thing that has inter­est­ed me. If it’s good to have depth, I love depth in the share price buy­ing and sell­ing because that gives us the chance to get in and out with­out dra­mat­i­cal­ly affect­ing the share price but yeah, I don’t look at it myself so I can’t answer that one sor­ry.

Cameron Reil­ly: [47:03] Aren’t the three-point trend­lines sort of a reflec­tion of that, any­way? They kind of tell us where the sup­port lines are and the, you know, maybe not the lines where peo­ple are get­ting out but the buy and sell lines tell us some­thing about the amount of buy­ers and sell­ers at a giv­en price.

Tony Kynas­ton: [47:19] Not so much that it’s more about the was part­ly about the aver­age dai­ly trade so that’s a mea­sure of mar­ket depth but I think what Dan’s get­ting to was say for exam­ple if BHP was trad­ing at $40, and there was, you know $10,000 worth of buy and sell orders at $40 but there was $10 mil­lion worth at 41, or 39, that might give an indi­ca­tion as to where the price would go to. And Dan’s cor­rect, but I don’t know how we would feed that into our deci­sions to buy or sell a stock. So, throw that one out to the lis­ten­ers, and let’s see if some­one uses it, we can come back and talk to us about it.

Cameron Reil­ly: [48:08] Yeah. And the last part of Dan’s ques­tion — can it be smart to post­pone a deci­sion to buy a share by a day or two based on the AFR head­lines about the expec­ta­tions. If the ASX is bound to rise or drop the next trad­ing day. For exam­ple, when you read on a Sun­day night that the ASX is expect­ed to drop because of some­thing that hap­pened in the States.

Tony Kynas­ton: [48:32] I kind of do that so rather than look­ing at what the fore­cast is I pre­fer to buy on up days rather than down days, only because if you have a down day and you have anoth­er down day and you bought the first one you’ve lost mon­ey, but if you buy on the up day … you could still have those two down days fol­low­ing it, I guess. But, so, there’s prob­a­bly not much sci­ence on that but I like to buy on an up day. I wait for the mar­ket to open.

Cameron Reil­ly: [49:03] And how long do you wait before you deter­mine whether or not it’s an up day or a down day?

Tony Kynas­ton: [49:06] Yeah, a cou­ple of hours.

Cameron Reil­ly: [49:08] And if things are going up, then that’s an up day.

Tony Kynas­ton: [49:08] I’m hap­py to buy, yeah. Yeah, it’s not like sci­ence and this, that’s, that’s just some­thing, just a bit of expe­ri­ence over the years and if it’s going down, I wait for it to go up again before I buy it. And, you know, I know the ques­tion will be how do you know it won’t go down fol­low­ing that and you don’t.

Cameron Reil­ly: [49:30] Thanks, Dan. Last ques­tion from Brent com­ing to us from Black­wa­ter. Black­wa­ter, weren’t they the mer­ce­nary, Amer­i­can mer­ce­nar­ies in Iraq,. Wow, be care­ful there Brent.

Tony Kynas­ton: [49:46] Also a coal min­ing dis­trict four hours inland from Mack­ay.

Cameron Reil­ly: [49:48] I think Black­wa­ter’s had to change their name about three times because they keep end­ing up in hot water, hot Black­wa­ter over civil­ians they assas­si­nat­ed, and then they have to change the name.

Tony Kynas­ton: [50:03] Have you seen Buy Shit, the movie.

Cameron Reil­ly: [50:05] No, no, that’s the Dick Cheney one?

Tony Kynas­ton: [50:10] Yeah. Yeah, he’s, he was CEO of an incar­na­tion of Black­wa­ter. I don’t think it’s called Black­wa­ter when he was run­ning it, but yeah, right. Then he became the vice pres­i­dent after W ced­ed all mil­i­tary over­sight to him.

Cameron Reil­ly: [50:29] Yeah, Brent says hi Cameron and Ice­man, this ques­tion was asked on a zoom call some quar­ters ago but thought it might be time­ly to ask again fol­low­ing the earn­ing sea­son. I was won­der­ing how the cur­rent buy list com­pares to oth­er peri­ods say two to five years ago. Was there as many com­pa­nies on the list, were the QAV scores as high, were there as many high mar­ket cap busi­ness­es on the buy list. And then he fin­ish­es with the thought What I enjoy most about QAV club is the coach­ing and link­ing with oth­er sim­i­lar-mind­ed investors to get more from the net­work, I was think­ing we could start a QAV book club. Maybe we could have a book of the month, cre­ate a feed on the web­site where we could share our insights, what do you think? I think that’s a great idea, Brent.

I think the first book should be The Psy­chopath Epi­dem­ic. Every­one buy a copy of The Psy­chopath Epi­dem­ic and read it and tell your friends to buy a copy or go to my mom’s house, and she strate­gi­cal­ly placed Psy­chopath Epi­dem­ic on the book­shelf in her liv­ing room and I said oh you read my book, have you? Actu­al­ly, not yet. You know I’m still try­ing to fin­ish this oth­er one that my friend wrote, and I said you told me that a year ago that you were going to read my book when you fin­ish yeah well, she goes. There are too many good shows on Net­flix, I haven’t, I said great, I said look I just want one per­son in my fam­i­ly to have read my book. Is that too much to ask, one per­son. Well, I tell you what though, but sor­ry Brent I’ll get to your ques­tion in a sec­ond, ran into this old mate of mine he was play­ing in the band that I went to see on Sat­ur­day night turns out he’s now work­ing as like the tech guy at one of the old the­aters in the main street aban­don the Mon­crieff the­ater.

I said that they still this is where I saw Star Wars in 1978 and 77 and all these things. I said that they still show movies, because I know it’s most­ly like live enter­tain­ment shows dude stuff, they like the­ater. He said yeah of spe­cial occa­sions they do I said we should get a screen­ing of my film. In my home­town then he goes, I know just the guy to talk to, I’ll set it up so that would be cool, you’ll have to come to Bundy, if we do a screen­ing in Bundy, you’ll have to come up with our golf club and that’s where the band was play­ing actu­al­ly the Bundy golf club, and unless you play some golf, you can, you know, I’ll let you beat me. A game of golf and be good. Any­way, good, that sounds great idea about the book club Brent, but I’m dead­ly seri­ous. Let’s talk about the epi­dem­ic What do you think about these ques­tions? How does the list com­pare to the list a few years ago?

Tony Kynas­ton: [53:27] I think there were few­er items on the list a few years ago, But I’m just going back on mem­o­ry here I think that may have been because on the cur­rent buy­er list I include every stock regard­less of whether it’s a micro-cap or not. And I think I might have a fil­ter in the past just for stocks that inter­est­ed me. Yeah, but that aside, I think, in the last 12 months in par­tic­u­lar we’ve seen an uptick in the buy list because of COVID. And com­pa­nies are doing well. They’ve seemed to have come through COVID, almost unscathed and per­haps even in bet­ter shape than they were pri­or to COVID. And cer­tain­ly, peo­ple aren’t trav­el­ing over­seas, there is a lot of mon­ey in their pock­et. So, there is a bit of mon­ey in the econ­o­my that was­n’t there a year or two ago. Yeah, I think the list is big­ger at the moment, for var­i­ous rea­sons,

Cameron Reil­ly: [54:14] Yeah. I mean, sor­ry, sor­ry, I remem­ber when we start­ed as the first six or 12 months of doing the show. I know we weren’t real­ly doing a buy list. Back then we were doing stocks one at a time, but we were on the show we were real­ly strug­gling for a while it was just why Apol­lo tourism kept com­ing up. We were real­ly strug­gling for a while to find stuff and it took us like we start­ed the show I think in Feb­ru­ary or March of 2019, and we did­n’t find 20 stocks to add to the buy list until Sep­tem­ber, took us that long to find 20 stocks, and we were doing them slow­ly one at a time. But if we did that today I think we would find them pret­ty quick­ly.

Tony Kynas­ton: [55:00] Yeah, I agree. And that’s, that’s an inter­est­ing point you make by two because that was poten­tial­ly men­tioned the light means the mar­ket was at a high back then was at the end.

Cameron Reil­ly: [55:05] Well it was the end of the five-year bull mar­ket. Right, yeah, yeah.

Tony Kynas­ton: [55:11] So, it’s from, maybe that means we’re head­ing into the start of a five-year bull mar­ket run which would be love­ly.

Cameron Reil­ly: [55:15] Yeah, well, that’s the way that you nor­mal­ly goes. Does­n’t it? Yeah, crash as you go into sev­en years.

Tony Kynas­ton: [55:25] Yeah. So yes, def­i­nite­ly more or less now with the QAV scores high­er in the past now I think prob­a­bly about the same. Again, just going on mem­o­ry, were there any high mar­ket cap busi­ness­es on the buy list yes def­i­nite­ly we’ve always had high cap, high mar­ket cap busi­ness­es. I mean we’ve got Fortes­cue in the banks at the moment, to name a few. Plus, some of the retail­ers in the past, we’ve had the likes of Qan­tas on the buy list Fortes­cue Met­als have been on that for a while. Some of the big gold mines from the buy list just a few years ago so yeah there are always big caps to buy on the buy­er list.

Cameron Reil­ly: [55:59] All right, well, that’s a wrap. How did a princess raf­fle go I for­got to check?

Tony Kynas­ton: [56:05] Ran fourth but ran real­ly well, rental home from last night only miss win­ning by half a length so that was a real­ly good run and fill in the con­tain­er­ship race on Sat­ur­day in Mel­bourne, so be pre­pared for that.

Tony Kynas­ton: [56:23] Are you going down for it?

Tony Kynas­ton: [56:26] No I’ll be stay­ing up here but the friends who aren’t she’s ide­al rac­ing in the Syd­ney cup right in on Sat­ur­day, which is a big event up here, so I’ll be going there.

Cameron Reil­ly: [56:34] Any oth­er rec­om­men­da­tions for us this week Tony good movies, books, TV shows.

Tony Kynas­ton: [56:40] No. I haven’t real­ly been keep­ing up I’ve been away, and I am play­ing golf, can rec­om­mend the Whiskey Bar or the hotel and bar­rel that’s lots of fun. There are AWS, friends will love it. Yeah, okay. Yeah, great, it was real­ly good.

Cameron Reil­ly: [56:57] All righty then. Well, thanks again to every­one for the ques­tions. Thank you for the answers Tony hope every­one has a great week. Don’t for­get to check out the ASA webi­nar if you want to see us do a dog and pony show. And we’ll be back next time. Thank you, every­one.

Tony Kynas­ton: [57:14] Thanks, Cam.