Transcript QAV 444

QAV 444 Club

Cameron [00:00:07] Wel­come back to QAV episode 444. Wel­come back to  Quo Vadis,  Tony. I decid­ed that’s prob­a­bly the Latin for the show —  Quo Vadis.

Tony [00:00:17]  With­er goest?

Cameron [00:00:18] Yeah. Where are you going?

Tony [00:00:20] Where do we go?

Cameron [00:00:21] That’s what we’re ask­ing!

Tony [00:00:22] Ah… I’m going down to  Wag­ga Wag­ga  Check out this Con­ser­va­to­ri­um of Music and the clay shoot­ing facil­i­ty.

Cameron [00:00:28] Yeah.

Tony [00:00:30] I fig­ure it’s like a Colos­se­um, right? You sit around in big stone arch­es and in the grand­stands of the back, they run a few pul­leys out there and then, you know, pull.

Cameron [00:00:43] You know, I’ve got a hole in my head from one of those places, right? You know the sto­ry about my frac­tured skull?

Tony [00:00:48] No!

Cameron [00:00:49] Long sto­ry. And I’ll tell you some oth­er time. Yeah. Well, if you need any­thing when you’re in  Wag­ga,  just call Gladys because she’ll just call  Dom  because your new pre­mier appar­ent­ly just does what­ev­er she tells him.

Tony [00:01:00] I heard that.

Cameron [00:01:01] So he’s got to be hap­py about that com­ing  out.

Tony [00:01:03] Yeah. And if she’s cor­rupt, then he’s cor­rupt because he just does what­ev­er she tells him.

Cameron [00:01:09] Yeah.

Tony [00:01:09] Just real­lo­cate the bud­get for me, for my cor­rup­tion. Look, you know, all jokes aside, I don’t think she’s cor­rupt.

Cameron [00:01:14] Real­ly?

Tony [00:01:15] I think this is just becom­ing pruri­ent now that they’re just lov­ing to dig through the sex lives of politi­cians.

Cameron [00:01:21] You don’t think she is cor­rupt, real­ly?

Tony [00:01:23] I think that’s how pol­i­tics works. It’s like the local mem­ber agi­tates as hard as they can to get fund­ing for their elec­torate. If they hap­pen to know or have an inside access to the cor­ri­dors of pow­er, they use it. And the pre­mier gets things done. I mean, I’d rather have a pre­mier who got things done, would­n’t you?

Cameron [00:01:38] Yeah. But if the Pre­mier is sleep­ing with an MP and not reveal­ing that to the con­stituents when she’s grant­i­ng him mon­ey on the phone call. You don’t think that’s a lit­tle bit cor­rupt?

Tony [00:01:50] If it is cor­rupt, it’s a lit­tle bit as you said. I don’t think you have to declare who you sleep with. Tell them to fuck off. It’s noth­ing to do with them. I hate this media intru­sion in the per­son­al lives of politi­cians. They’re peo­ple too.

Cameron [00:02:01] Sure.

Tony [00:02:02] How would you like it, Cameron — how would you like it if your phone was tapped when you’re call­ing  Chris­sy?

Cameron [00:02:06] Yeah, but if I was a politi­cian and rep­re­sent­ing the peo­ple, then that’s a dif­fer­ent ket­tle of fish. I’m not a pri­vate cit­i­zen any­more. I’m a politi­cian.

Tony [00:02:14] You put a chasti­ty belt on, do you, and lock it up?

Cameron [00:02:16] No! But you have a respon­si­bil­i­ty to be trans­par­ent with the peo­ple about any con­flicts of inter­est you might have.

Tony [00:02:22] Yeah. Well, OK, maybe. No, you do — you’re right! But was it a con­flict of inter­est?

Cameron [00:02:27] Yes.

[00:02:28] Why?

[00:02:29] She’s sleep­ing with a guy after he is declared to be cor­rupt by  ICAC  as well!

Tony [00:02:33] But that’s a dif­fer­ent issue. Well, that’s not the clay pigeon shoot­ing thing in the music con­ser­va­to­ry.

Cameron [00:02:38] No, it was before.

Tony [00:02:39] He is cor­rupt, he was tak­ing mon­ey from devel­op­ers and then push­ing their devel­op­ments. Yeah, that’s incred­i­bly cor­rupt and that’s appro­pri­ate.

Cameron [00:02:46] Right.

Tony [00:02:47] And it’s of poor judg­ment of Gladys hop­ping into bed with him, for sure.

Cameron [00:02:51] Yes.

Tony [00:02:52] Yeah. But it’s not ille­gal. It’s not cor­rupt. If she took mon­ey, that would be cor­rupt. How does she ben­e­fit from all this? In fact, she’s not ben­e­fit­ing at all.

Cameron [00:02:59] Unless she got to sleep with  Daryl Maguire.

Tony [00:03:01]  What was  sec­ond prize?

Cameron [00:03:05] Arthur Moses, appar­ent­ly. Any­way, peo­ple did­n’t come here to lis­ten.…

Tony [00:03:11] No.

Cameron [00:03:11] To us talk about Gladys’ per­son­al life or cor­rup­tion. I want to start off by con­grat­u­lat­ing a cou­ple of QAV Club mem­bers- Brett! Brett post­ed on Face­book yes­ter­day: “I’ve just com­plet­ed my first 12 full months of QAV.” This is the Brett of the Bret­ta­la­tor, of course. “I’m up 46%, com­pared to 29% for the  ALL ORDS  total return. Not dou­ble, but I’ll take it. I expect it should be even high­er as I only start­ed using rule one recent­ly and I held on to some iron stocks too long. Thank you, Tony and Cameron, for your gen­uine inter­est in help­ing teach finan­cial lit­er­a­cy in the QAV process to the QAV com­mu­ni­ty. After only one year, there is still so much to learn!” Well done, Brett.

Tony [00:03:50] Con­grat­u­la­tions, Brett! That’s great.

Cameron [00:03:51] That’s a great result! And we’ve got anoth­er one post­ed last night from Rowan on the Face­book group as well. Rowan said “Thought I might share my cur­rent year to date returns using QAV. I’ve been invest­ing since just after COVID, got lucky with the mar­ket tim­ing, and did alright. But the best thing I ever did was tran­si­tion to QAV in August last year and it’s been the funnest game I’ve ever played. Side note: I like the last episode where the guys talked about not feel­ing emo­tion­al about a small loss or — I think just as impor­tant­ly, the emo­tions of a big game get­ting attached and hold­ing on too long or build­ing an ego.” His  time weight­ed return per annum,  accord­ing to Stock Doc­tor, is 59.54%.

Tony [00:04:30] Wow.

Cameron [00:04:31] So ter­rif­ic results. It real­ly makes me hap­py when I see QAV mem­bers get­ting these sorts of results.

Tony [00:04:37] Me too!

Cameron [00:04:37] Just fol­low­ing the recipe that you wrote down for us.

Tony [00:04:40] Yeah, it’s very ful­fill­ing, very reward­ing to see you out there and being used and being used suc­cess­ful­ly. Good on those peo­ple! Thanks for shar­ing.

Cameron [00:04:47] Yeah, thanks for shar­ing! And you’re both in the run­ning for the inau­gur­al QAV tro­phy that I haven’t bought yet, but there’s a list some­where we have to record your results. Think on the club mem­ber resources page, you see a link to the tro­phy list. Go up and throw your results in that and you could get the tro­phy, which you’ll be able to dis­play promi­nent­ly in the tro­phy room of your house.

Tony [00:05:08] Yeah, that’s good. Sounds good. Don’t know what the tro­phy is yet. Our part­ner’s club has a tro­phy. It’s a horse cut in half and if you come first, you win the head. If you come last, you win the tail.

Cameron [00:05:18] Right? Well, I’ll have to come up with maybe a lit­tle stat­ue of you that’s cut in half.

Tony [00:05:25] The wis­dom of Solomon. A stat­ue of War­ren Buf­fett, I think, would be good.

Cameron [00:05:31] Right. Well, let me just com­mis­sion an artist to do this. I’ll get right on that.

Tony [00:05:36] There’ll be some­thing on the inter­net, for sure.

Cameron [00:05:38] We start­ed with the good news. Great results from these guys. Bad news is rough week on the mar­kets last week. ASX down 100 points just on Fri­day, I think, alone! Lots of sell­ing. I had to sell quite a few of my stocks that either breached 3PTL or most­ly rule one sells I think they were. Lots of blood in the streets, Tony, but it’s busi­ness as usu­al, I assume.

Tony [00:06:04] Absolute­ly. Yeah look I had to sell some too and I can talk about those now. I sold HZN at the start of the week and bought SFR and sold out of SUN and bought WGX dur­ing the week. And they’ve prompt­ly dropped so they could be becom­ing sells them­selves this week, but we’ll see. A real long way above their sell lines. Yeah, it’s been a fun­ny patch in the mar­ket around the end of year from, say, at the start of the finan­cial year through div­i­dend sea­son to now. Yeah, I haven’t seen a div­i­dend sea­son like this. I find it real­ly inter­est­ing. I sus­pect — this is only a the­o­ry — that a lot of peo­ple were hang­ing on to stocks wait­ing for a big div­i­dend to get paid and now those div­i­dends have come through, they’re sell­ing out and per­haps either tak­ing mon­ey off the table or look­ing for the next div­i­dend pay­out. We saw big drops in the iron ore stocks, first of all. And then, you know, the banks have been fun­ny. I’ve been in and out of some of the banks. They pay their div­i­dends, they drop. They should bounce back, they don’t. It’s been just a very unusu­al time in the mar­ket over the last few months. Psy­cho­log­i­cal­ly, I sus­pect peo­ple are start­ing to wor­ry about inter­est rates and infla­tion and poten­tial­ly what that might mean for the prop­er­ty mar­ket and what that might mean for their hip pock­ets going for­ward too. So a lit­tle bit of uncer­tain­ty out there, I think is also…

Cameron [00:07:22] To be fair, it’s a real­ly unusu­al time in the world right now. World econ­o­my’s strug­gling for a whole bunch of dif­fer­ent rea­sons. Com­ing out of COVID, just being one of them and infla­tion lev­els and all the mon­ey that was print­ed in the last cou­ple of years, et cetera, et cetera.

Tony [00:07:37] Yeah, that’s right. COVID — no one knows if there’s going to be an out­break in the north­ern win­ters, whether dou­ble vac­ci­na­tions will help with that. There’s strug­gles in the US for pres­i­dent to get his infra­struc­ture bill passed. So a lot of peo­ple were, you know, bas­ing invest­ment deci­sions on $3 tril­lion hit­ting some of the stocks that they might want to invest in in the US. That all flows through. When they start to lose a bit of con­fi­dence that can flow through to here as well.

Cameron [00:08:01] The Chi­na issues, sup­ply side issues… A lot of big issues right now. That’s obvi­ous­ly going to be reflect­ed in insta­bil­i­ty in the mar­kets, I guess. Our job is just to.

Tony [00:08:11] Ignore it!

Cameron [00:08:11] Stay the course, yeah.

Tony [00:08:12] Yeah, I mean. It’s right. I mean, you can prob­a­bly have this con­ver­sa­tion almost every week of the year, real­ly. There’s always some­thing going on.

Cameron [00:08:19] Right.

Tony [00:08:19] It’s nev­er clear sail­ing. So that’s why we have a process.

Cameron [00:08:22] Yeah, there’s going to be some tur­bu­lence. Peo­ple’s port­fo­lios, if they’re new, might go back­wards before they go for­wards right now. If you start invest­ing in a tur­bu­lent time, then you got­ta ride through that tur­bu­lence.

Tony [00:08:34] Yeah, and not just a tur­bu­lent time. Don’t for­get, you know, peo­ple who are get­ting good returns for the last 12 months who are invest­ing when the mar­ket was com­ing off all time lows. And now that mar­ket’s back up to above aver­age highs. So prob­a­bly also anoth­er big thing feed­ing into the chop­pi­ness of the mar­ket is, as you’ve said,  quo vadis  where does it go from here?

Cameron [00:08:53] Some of the things that hap­pened last week we announced KPT is our stock of the week, and then it imme­di­ate­ly changed its code to KIL. And when I was writ­ing my break­down of it, when we put it out as stock of the week last week, I was going “Well”. And I was read­ing up on, you know, the lat­est results and the man­age­ment state­ments and they were talk­ing about they did­n’t think that for­est that they had that burnt down and then bush­fires last year. They were like, “Well, we don’t think we’re ever going to be able to rebuild that. So we’re piv­ot­ing away from that.” They held off doing that until the day we announced the stock of the week and then came out and said changed our name to Key Land or Kiland I think. The new code is KIL. Yeah, no I don’t think the shares have suf­fered great­ly, through all that.

Tony [00:09:37] Look, apolo­gies for that! I knew about the fact that they weren’t going to replant their plan­ta­tion and there was anoth­er issue with a  pier  that they had up for rede­vel­op­ment and the state gov­ern­ment knocked back design­ing for that. So those have been flagged for a quite a while now, and they had said for the last month or lease that they were going to put the land to best use, which turns out to be agri­cul­ture. So they’re mov­ing away from the for­est. But what I did­n’t know was at the AGM, which hap­pened on, I think Tues­day they changed their name to reflect the fact they were no longer Kan­ga­roo Island plan­ta­tion tim­bers, an agri­cul­tur­al com­pa­ny.

Cameron [00:10:08] Share price look­ing at our stock tips, though, page is only down 1% since we put them out there last week. All things con­sid­ered, not too bad. Stock tips obvi­ous­ly aren’t doing too well at the moment up 0.7% over­all com­bined since we start­ed on the sev­enth Sep­tem­ber, so not quite two months ago. But again, that’s the mar­ket. It’s been a lot of blood issued. I think last week we were say­ing, “Yeah, it looks pret­ty good.” I think it was up like 4% col­lec­tive­ly last week.

Tony [00:10:37] Yeah, it was!

Cameron [00:10:38] All dis­ap­peared overnight. Some­thing else that hap­pened last week. ZGL, which was, I think, the first stock tip we did after we got our  AFSL  and start­ed repub­lish­ing stock tips — it col­lapsed overnight! Looks like some big parcels were sold off overnight last week. I think it’s got a fair­ly small, aver­age dai­ly trans­ac­tion vol­ume amount. I think it’s like 15,000, and there was some­thing like $130,000 worth of shares sold in one day last week. So for some rea­son, the price just col­lapsed as a result of that. I think some­body on Face­book said it was a fail to sell. I haven’t got the details on that.

Tony [00:11:20] Just did some quick research, I haven’t seen who the sell­er is. If it’s a fail to sell, that’s a wor­ry. But I’ll have to have a look at it, but could­n’t see any­thing from when I had a look at it on the week­end. It’s still gen­er­al­ly going up, even though it’s dropped a lit­tle bit.

Cameron [00:11:32] Yeah, but for those of us that bought it, it was a bit of a shock.

Tony [00:11:36] It does, yeah. It’s a rule one sell, I guess, if you bought it. Has it dropped that far?

Cameron [00:11:40] Yeah, it was a rule one sell for me.

Tony [00:11:44] Yes, I just want­ed to call that out. So just — basi­cal­ly to high­light the fact that in the next cou­ple of weeks or next month, we will see some com­pa­nies giv­ing us new num­bers, includ­ing ECX, which is on our cur­rent buy list. ANZ was. I ran their num­bers through the check­list and it isn’t a buy any­more. I think it failed on sen­ti­ment. So, but they have yeah — it does have neg­a­tive sen­ti­ment, but it does have a good QAV score. I think it was 0.14/0.15. Apart from that sen­ti­ment, but I just want­ed to high­light using ANZ as an exam­ple that there are stocks that report this month. Eclipx  is one. OFX is anoth­er one that has a Sep­tem­ber cut off. Pret­ty sure that two of the oth­er three major banks will have a new num­bers com­ing through stock doc­tor this month as well as will Mac­quar­ie Group, I think from mem­o­ry too.

Cameron [00:12:30] You fudg­ing iron ore, now?

Tony [00:12:31] No, I just want­ed to respond to a cou­ple of ques­tions that have been asked over the last month or so since the great rota­tion is — how do we draw the five year iron ore chart? And peo­ple were point­ing out, “Okay, it’s not a sell.” And it’s not, based on a five year chart, but I fudged it to reflect the lat­est upturn in the price of iron ore. So I went back to when that upturn start­ed, which I think from mem­o­ry was about 12 or prob­a­bly 18 months ago and drew my lines from there. And I did that sole­ly for iron ore from mem­o­ry. I think all of the oth­er com­mod­i­ty prices that I looked at.

Cameron [00:13:01] The sell line.

Tony [00:13:02] The five year trend held. But for iron ore, you could see it was oscil­lat­ing much quick­er than over a five year peri­od, and I did­n’t want to get caught hold­ing on to it for too long. So I just want­ed to explain that I did fudge iron ore to sell — that’s right, the sell line.

Cameron [00:13:17] You’re not fudg­ing the buy line..

Tony [00:13:18] Not fudg­ing it. It smells like it’s not too far away. And when I say that, it’s dropped off dra­mat­i­cal­ly and there has been a slight upturn. But I need to see anoth­er peak or trough in there before I can decide whether it’s a buy or not. But I sus­pect it’ll be a buy and it’s hold­ing up around $100 to $120 range. We’ll just take a bit of time and let that trend estab­lish itself first.

Cameron [00:13:38] Top three stocks last week. Were there any that did well last week?

Tony [00:13:43] There was actu­al­ly! Even though our Navexa Port­fo­lio, our dum­my port­fo­lio was flat for the week, there were still some big win­ners — CCV. It’s the place you go and take your gui­tar to go and sell it when you fin­ish play­ing with it. Let me look it up. Gosh, it’s too ear­ly on a Mon­day morn­ing, lis­ten­ers. I’m sor­ry. It’s CCV’s cash con­vert­ers. Yes. Thanks for that, Cam. I appre­ci­ate you get­ting up ear­ly because I’m head­ing off soon to  Wag­ga Wag­ga.  So Cash Con­vert­ers was up 13.7%. That was basi­cal­ly on the quar­ter­ly num­bers being very good and an AGM update. So well, this is the AGM sea­son, so you can see move­ments in stocks that hap­pen quite quick­ly if the chair­man or chair­woman gets up at the AGM and says “Hap­py days! The first quar­ter is gone real­ly well and we’re upgrad­ing our fore­cast for the year end num­bers.” That can hap­pen in this month or so. And it hap­pened with cash con­vert­ers. Two oth­er stocks that went up last week in our dum­my port­fo­lio — Eclipx went up near­ly 6% and they’ve report­ed some good num­bers, but they haven’t flowed through stock doc­tor yet, but I expect that they will soon. And IGL is up 4.69%. So those three stocks did well despite the port­fo­lio being flat for the week.

Cameron [00:14:53] Oh, I’m just look­ing at it now. As of today, for the finan­cial year, our port­fo­lio is up 8% ver­sus the All Ords 200 up 2.81.

Tony [00:15:04] That’s very good.

Cameron [00:15:05] Yeah. We still have been flat, in fact, I think we dipped a lit­tle bit, but still doing great.

Tony [00:15:11] Not stock picks. I’ve got some cup tips for this week, I think was next.

Cameron [00:15:15] OK, you’ve got some stock picks for this week, Tony.

Tony [00:15:19] OK, well, peo­ple will have to wait then. All right. Stock picks? Yes, I do. And they’re both ana­grams. So one’s AMI and the oth­er one’s IMA. Image resources was the high­est on the buy list that we had­n’t talked about. And Aure­lia Met­als (AMI) was the high­est larg­er cap that we haven’t spo­ken about. So I’ve pulled out — I’ve tak­en AMI to talk about as a pulled pork. I should declare upfront I’m a share­hold­er in AMI. It was the one of those life lessons that it was a buy for me a year or so ago, and then it prompt­ly went down and crash through my rule one price. And before I noticed and it dropped and I went “might as well hold on” because it was well above its sell line. But it still has­n’t gone back to what I paid for it. But it has had a good month. It’s up 25% for the cur­rent month, which is real­ly good because it had been a falling knife for a long time. So gold and what they call base met­als min­er 60% gold, 40% zinc, lead and cop­per, which they col­lec­tive­ly call base met­als. The three mines it has are in or near Cobar in New South Wales. So it’s an Aus­tralian min­er, and I think prob­a­bly the most inter­est­ing thing in terms of news, apart from the fact I had a good quar­ter­ly update, which I think put the rock­et under the share price. They have man­aged to secure a guy called Peter Bolton as their chair­man, so the exist­ing chair of the com­pa­ny retired for health rea­sons ear­li­er on in the year. Some­one stepped in. One of the direc­tors stepped in and act­ed as chair. And while I did the search and now Peter Bolton has stepped in, which is a very good sign because he was the out­go­ing CEO of Oil Search, a much big­ger com­pa­ny, not nec­es­sar­i­ly oil min­ing com­pa­ny so — in the ener­gy sec­tor, not nec­es­sar­i­ly gold min­ing com­pa­ny. He does­n’t have expe­ri­ence in the under­ground min­ing area but does have expe­ri­ence ener­gy over­all and in run­ning a big busi­ness. So I think it’s a pos­i­tive. I think it’s seen as being a good thing for the com­pa­ny. They’ve snagged some­one who has the cal­iber to chair it. So I think that also has helped push the share price up. That’s the back­ground to Aure­lia, onto the num­bers! QAV is 0.27. The score is 0.27. Good qual­i­ty score of 93%, which is quite high and also good ADT. So aver­age dai­ly trade is $1.5 mil­lion dol­lars and my num­bers are down in the share price of $0.38 and that’s the first of Novem­ber. And we’re doing this before the mar­ket opens. Fur­ther on, the stock prices above the stock doc­tor IV.. This is a star growth stock, so Lin­coln indi­ca­tors give it a stock doc­tor IV, but it’s near­ly half the price that the bro­kers have tar­get­ed for it. And it’s under our IV2. It’s less than half of our IV2, so it scores on that met­ric as well. Price to oper­at­ing cash flow is 3.4 times and has a PE of sev­en, so it’s def­i­nite­ly in the val­ue camp, even though it’s fore­cast to grow at near­ly 20% next year. So it’s a good com­bi­na­tion of a val­ue stock that’s grow­ing well, which I guess is the sweet spot for any sort of invest­ment, isn’t it, that we can find some­thing cheap to buy, that it’s grow­ing? It’s less than book, plus 30%. It’s just over, I think it’s — NEPS, it’s net equi­ty per share of $0.34 and it’s growth over PE is above to 2.6, in fact, and we like it when it’s above 1.5. So that’s good too. I guess prob­a­bly the only ques­tion about it is that there aren’t direc­tors that are hold­ing much stock. I could­n’t find what hap­pened to the out­go­ing chair­man. He may have had a large share par­cel, but dur­ing our research, I could­n’t see whether that hap­pened or not. But any­way, they don’t hold much stock at the moment. And in terms of man­u­al­ly entered data, it does have record low PEs for the last three years. So that’s the scor­ing for Aure­lia met­als.

Cameron [00:19:07] Very good. Aure­lia met­als. Yeah, I’ve got them in one of my port­fo­lios. In my super port­fo­lio, actu­al­ly, but they’re down 4% since I bought them. So hope­ful­ly they’re going to pick back up, keep going and not suf­fer the curse of the pulled pork this week, Tony.

Tony [00:19:26] Yeah. Yes, that’s right.

Cameron [00:19:28] No-one tell any­body. But we cov­ered that this week as our stock.

Tony [00:19:34] I must admit, when I go through and work out which one to talk about, I try make it a process. So it’s the next one on the list that we haven’t talked about. Then I start sec­ond guess­ing it and going “Well, it went up 25% this month. Should I go and get some­thing else?” And, you know, but you just can’t sec­ond guess things. Just stick with the process and we’ll talk about it. In time it’ll sort itself out.

Cameron [00:19:51] You’re start­ing to believe that you real­ly are a god and can influ­ence the fates of these stocks. Is that what you’re telling me? It’s start­ing to go to your head?

Tony [00:19:57] Or the reverse! Yeah, yeah. You lose con­fi­dence and try and improve.

Cameron [00:20:04] All right.

Tony [00:20:06] But you can’t do that! Stick to the process, every­one.

Cameron [00:20:08] All right. Ready for some ques­tions.

Tony [00:20:10] I am, yeah!

Cameron [00:20:10] Jol­ly good. First one is from Stu­art. Stu­art says “It was real­ly inter­est­ing on the pod­cast last week that Louise Bed­ford’s data analy­sis sug­gests that the most suc­cess­ful investors hold for a min­i­mum of 12 weeks through to 30 months. What are Tony’s thoughts on a min­i­mum 12 week hold to off­set those imme­di­ate ups and downs that incred­i­bly seem to hap­pen straight after a pur­chase or sell? I’ve also got NHC past the 10% loss, but pon­der­ing hold­ing for the 12 weeks.” What do you think about hold­ing for 12 weeks, Tony?

Tony [00:20:43] Well, a cou­ple of thoughts. When Louise spoke about that, she was­n’t say­ing peo­ple went into invest­ing with the rule of hold­ing for 12 weeks. She was mere­ly say­ing that when she looks at all the trades in aggre­gate, she was say­ing the good investors are hold­ing for a min­i­mum of 12 weeks. So the three to thir­ty months so — well, I need to go back and test that as a rule. I don’t think it will hold up. If you go in and say the stock drops, if you then hold it and you know, Aure­lia met­als is an exam­ple of that. We just spoke about — became a stock on the buy list. I bought it. It was a gold base met­als min­ers. All the com­modi­ties were look­ing good and it prompt­ly went down. And that hap­pens. And I missed the rule one sell. It went down fur­ther. And you know, then you’re in this quandry of what do you do? And in the past, I’ve done both things. I’ve still sold out if I’m 20 or 30% below, but the stock­’s still above its sell line. And in this case, I held on, it’s slow­ly work­ing its way back. So I don’t have enough data to work out what the answer is. If you find your­self in that sit­u­a­tion and it sounds like Stu­art does find him­self there for New Hope Coal. I don’t have a process for it. I do from now on, obey the rule one and sell out if it drops 10%. It’s a fact of life that that can hap­pen after you buy some­thing quick­ly. And often­times I bought some­thing and found out it drops at least 1 or 2% the next day, which is kind of nor­mal fluc­tu­a­tions in the mar­ket and poten­tial­ly I was push­ing the price up, buy­ing it any­way. So it’s kind of dropped back a bit, you know, because of the parcels I’m buy­ing. But yeah, if it does, the rule one’s there for a rea­son is to try and pro­tect as much cap­i­tal as we can. My advice to Stu­art would be, well, I don’t want to give — my gen­er­al advice if I’m caught in this sit­u­a­tion now would be to sell and then wait and buy back if you can when it gets cheap­er or you see that the upturn is estab­lished. And one of the things with Aure­lia met­als is that — I spoke about this before and again, it’s some­thing I haven’t got the data to back up, but it’s some­thing I’ve noticed is that Aure­lia became what I’ll call a sec­ond buy. So it’s been in a buy sit­u­a­tion for a long time, but it has been a Josephine for a long time as well. It’s been falling off its peaks. But with a 25% upturn in the last month, it’s now back to the stage where if you were just com­ing in and not look­ing at the buy line, fol­low­ing the sell line and just look­ing at the high­est point sec­ond high­est point draw­ing a new buy line. It’s now a buy on that basis as well. So, you know, it’s kind of like a con­fir­ma­tion, I guess, of the fact that it’s — the uptrend may be estab­lish­ing itself and the falling off might be over in Aure­lia Met­als’ case.

Cameron [00:23:22] You did­n’t tell the fire depart­ment that you’re record­ing ear­ly this morn­ing?

Tony [00:23:26] No, sor­ry.

Cameron [00:23:26] There you go, Stu­art. Hope that helps. By the way, I sold NHC as well. It was a rule one sell for me last week, dis­ap­point­ing­ly. Ally asks, “GCY. She had a check­list last week — we gave them a 2 for record low PE, even though their cur­rent PE is an N/A.”

Tony [00:23:46] Yeah, good pick up Ally! I made a mis­take there so sor­ry about that. I think what I was look­ing at is the June fore­cast for next year, where it’s got a PE fore­cast in there, which was low­er than any in the last three years. So my mis­take, and I think it’s some­thing that we’ve noticed in the past. You’ve got to be care­ful with stock doc­tor. You sort of think you should start from the right, but that’s where the fore­cast PEs are. You need to start from the cur­rent. Yeah, so that’s why. Apolo­gies for that. I did­n’t fix it up in the buy list, and it has­n’t changed the scor­ing or the rank­ing much for GCY. I think it’s tak­en one point or two off its QAV score. The oth­er thing about GCY, which is inter­est­ing, though — so very time­ly. There’s a lot going on. It’s  Gas­coyne Resources.  It’s — there are two cor­po­rate activ­i­ties in today’s like an impor­tant mile­stone for whether the com­pa­nies tak­en over or not. So quick his­to­ry,  Gas­coyne  pro­posed a merg­er with anoth­er small min­ing com­pa­ny called Fire­fly. They’re propos­ing it as a scheme of arrange­ment, which is where both com­pa­nies agree to join up. And that’s typ­i­cal­ly done through the courts so they sub­mit a joint agree­ment rat­i­fied by both sets of share­hold­ers and both boards. The court ticks it off and says, “Yep, that’s all tick­ety boo”, and off they go as a joint com­pa­ny. That goes through the courts today. In the mean­time, West Gold lobbed a bid for  Gas­coyne resources,  which was, I think, 30% above its share price and the share price ral­lied. But that bid was con­di­tion­al on the Fire­fly merg­er not tak­ing place. I think that’s dilu­tive and prob­lem is that  Gas­coyne  have struc­tured the merg­er, so they can’t get out of it. It’s up to Fire­fly to — they either both have to rescind although I think Fire­fly has the final say. Fire­fly aren’t say­ing they’re going to rescind it. So it’s going to the court today. So it will be inter­est­ing to see what it gets argued in court today with a  Gas­coyne  run dead or don’t try and stop the the merg­er with Fire­fly through the courts. And if it does, then the share price will drop. In fact, it dropped on Fri­day. The  Gas­coyne  direc­tors released a note explain­ing all this that they were still hav­ing to pro­ceed with the merg­er with Fire­fly, even though the bet­ter offer was con­di­tion­al on that not hap­pen­ing. So the share price dropped I think about 10% on Fri­day. We’ll see what hap­pens after it goes to court today.

Cameron [00:26:09] All right, well, there you go. Good pick up, Ally. Brett, Bret­ta­la­tor, the Bret­ta­la­tor asks, “Hi Cam! Ques­tion, please! QAV pro­vides a great bal­ance of effort ver­sus return. Has Tony — has Tony ever put thought into how he would approach it if he had the sud­den desire to put more time into QAV apart from start­ing a pod­cast? What might lev­el five on the QAV invest­ment lad­der look like?” I said to Brett, ” Dude, I’ll ask, but I think he’s still kind of pissed at me for get­ting him involved in this in the first place and ruin­ing the nice, easy life that he had two years ago.”

Tony [00:26:51] No, I’m not pissed at you at all. In fact, I enjoy it. It’s as you — as we said before, it’s very reward­ing, not pissed at all.

Cameron [00:26:57] For every­body else. What about for you? It’s very reward­ing for our lis­ten­ers.

Tony [00:27:05] Yeah. Well, it’s improved for me. I mean, we’ve got good, bet­ter tools than what I ever had? So that’s good. Yeah, I think that’s — it’s been real­ly good for me as well to tight­en up the process. In terms of lev­el five for QAV, it looks exact­ly like lev­el four from what I can tell. I mean, I would say, yes, def­i­nite­ly, my work­load is going up and this sort of area because of QAV, but I would say that, you know, nor­mal­ly — the pod­cast, yeah. Cor­rect because of the pod­cast — but nor­mal­ly, any­way, I’d say the major­i­ty of my time is read­ing and think­ing about how to improve QAV. And yeah, that’s evolved over — the check­list has evolved over the years to where it is now. And although there is often­times lots of sug­ges­tions on how to improve it, it real­ly sort of cuts the mus­tard and I find some­thing which can improve the process enough to incor­po­rate. So I don’t think there is a lev­el five for QAV. We might — who knows? We might come across some­thing that dra­mat­i­cal­ly improves our results. That’d be great. But — and that could be things like, I apol­o­gize that we still haven’t got analy­sis for it. Dylan’s been caught up with his uni assign­ments, and we’re try­ing to find anoth­er per­son to help us with stats. But it could be things like rewak­ing the check­list to reflect the fact that, you know, price to oper­at­ing cash flow has a dom­i­nant place to play in our scor­ing, as does the increas­ing equi­ty. And so maybe we have a dif­fer­ent weight­ing score­card going for­ward. That might give us an extra two or three per­cent­age points in per­for­mance. So. But no, I think QAV five looks like QAV four. It’s just let’s try — and I’m think­ing all the time about how do we improve it and then we need to test it and research it and then upgrade it and incor­po­rate it. But you know, I’ve thought about this a lot. It’s not that I invent­ed QAV so I can go and play golf. It’s just that after a while I said, “Well, what do I do. I’d like to play golf.” You know, espe­cial­ly after I’ve raised my daugh­ter and all that. So I had plen­ty of time on my hands, but I was always look­ing for ways to improve it. I thought, “Well, do I do QAV as a day trad­ing exer­cise?” I thought, “You know, do you do you do it as a more active­ly trad­ing exer­cise?” And I’m test­ing that, you know, the rebal­anc­ing tri­al is still on the way. Do we take the worst per­form­ing stock each month and replace it with the top per­form­ing stock. And Dylan did do some analy­sis on that. I for­get the num­bers, but with­out — he did that for 10 years worth of data, and the month­ly rebal­anc­ing was a pret­ty good num­ber. I for­get now what it was. It was like I think it was 18% per annum. And that’s bear­ing in mind that we haven’t cracked how to incor­po­rate the 3PTL cal­cu­la­tion in 10 years worth of data test­ing. It just — even using the Bret­ta­la­tor it just slows things down too much to check each month, each share price over ten years. So but we’ll crack that even­tu­al­ly. But yeah, so rebal­anc­ing might be the next thing. So you pay atten­tion each month, for exam­ple. But yeah, no, I can’t think of any­thing else to do that could improve QAV more than what we’re doing now.

Cameron [00:30:07] All of our lis­ten­ers pool their mon­ey and we take it to a Berk­shire Hath­away lev­el and start buy­ing board lev­el stakes in com­pa­nies.

Tony [00:30:19] Yeah, com­pa­nies. Yeah, that could poten­tial­ly be QAV five. It’s always been an inter­est of mine to do that, and I think it’s prob­a­bly about time I went and found a men­tor in the funds man­age­ment indus­try and talk to them about what’s involved. And the peo­ple I’ve spo­ken to gen­er­al­ly say things like, “Oh God, don’t do it.” It’s like it’s 80% com­pli­ance and mar­ket­ing and client rela­tion­ships. And, you know, at the most 20% being an invest­ment offi­cer, chief invest­ment offi­cer. And, you know, unless you’re that kind of per­son, you’ll be com­plete­ly, you know, depressed by the amount of work you have to do just to keep the fund tick­ing over from a com­pli­ance and a mar­ket­ing point of view. And it’s prob­a­bly why a lot of funds are start­ed by stock­bro­kers, right? Because they like that, that side of things — the sell­ing side of things and the admin­is­tra­tion side of things. And they also hap­pen to be good invest­ment peo­ple as well, I guess, through their expe­ri­ence. But yeah, it’d be great to have a fund. And I mean, you know, who knows what that could take? I mean, Berk­shire Hath­away start­ed off as a part­ner­ship. Where a group of peo­ple got togeth­er and said, “Hey, let’s just pool things.” And that might be an option, but it’s on my radar, but I haven’t had much time to to deal with it yet.

Cameron [00:31:34] What do you think it will be?

Tony [00:31:35] I don’t know, Cam. Poten­tial­ly the whole, even at my cur­rent lev­el, I’m sort of lim­it­ed in terms of what I can buy because there’s many large ADT stocks and there’s only a cer­tain num­ber of those on the check­list. So I’ve got to crack that nut, you know, which will hap­pen to me at some stage of my future and if we set up a fund it’ll cer­tain­ly hap­pen. And how do you solve that? Well, maybe you know, we buy stocks which are below 0.1 on the check­list or we go over­seas or we hold more than 15 to 20 stocks in the port­fo­lio. So there’s a fair bit of work that needs to be done on that. Buy­ing a fund, I think, would give us resources and poten­tial­ly access to buy unlist­ed assets if we hap­pen to come across busi­ness­es that we like that weren’t list­ed, but they score well from a QAV point of view. It might- it might facil­i­tate going over­seas, which will, I think, prob­a­bly solve the ADT prob­lem because, you know, if there’s a 15 stocks in Aus­tralia that fit that pro­file of QAV scores above 0.1 plus a high ADT, there’s got to be 100 in the US and, you know, many more in oth­er coun­tries as well. So hav­ing a fund might give me the resources to be able to do that. But yeah.…Yeah, it’s a — it’s a hard one. I mean, yeah, oth­er­wise I sit here and do it for myself as I’m doing. Which is good too.

Cameron [00:32:58] I was more won­der­ing if hav­ing the where­with­al to buy a big enough stake in these com­pa­nies where you can get, you know, some board rep­re­sen­ta­tion and some say over the busi­ness, can you then get involved and, you know, lend a bit of the Con­is­ton mag­ic to it to improve the returns of their share price in your port­fo­lio as Buf­fet does? Get in and go, “Cut this bull­shit out, cut that out. Do this.”.

Tony [00:33:26] Well, I think that’s the thing, Buf­fet does­n’t do that, right? He’s famous­ly hands off. “I’m buy­ing your com­pa­ny. I want you to run it for the rest of your life and don’t change any­thing.” So all he does is change cap­i­tal allo­ca­tion. So the cash flows into Berk­shire Hath­away and gets some of it gets redis­trib­uted back to the oper­at­ing com­pa­nies, but some gets used to buy new com­pa­nies as well — wher­ev­er the best return is, which is the sort of famous Berk­shire Hath­away mot­to. And it could be the way that, you know, we get a ben­e­fit from it. If we have stakes in enough com­pa­nies that we can — if we start tak­ing them over and redi­rect their cash flows, that can be of help to us. It could also — some­thing which would be inter­est­ing would be to have an influ­ence on a com­pa­ny that said to them, “Look, here’s how we invest. Here’s what we look for and like as investors. Please make this an empha­sis for your man­age­ment going for­ward. You know, we like to see founders who have or direc­tors who have skin in the game. We like to see, you know, this kind of growth on a low PE.” I mean, val­u­a­tion prob­a­bly won’t play as big a part in our direc­tions to man­age­ment after we’ve invest­ed. But things like, you know, div­i­dend yield, finan­cial health in par­tic­u­lar, you know, all the met­rics that stock doc­tor look at in terms of finan­cial health — that would be the first thing on my board agen­da if I was a direc­tor of a com­pa­ny. “Guys, why are we stray­ing from this tried and true method of, you know, run­ning a com­pa­ny and mak­ing sure it does­n’t start to have risks that can even­tu­al­ly erode its abil­i­ty to keep trad­ing? You know, let’s get the debt down, let’s get the cash up, all that kind of thing.” So I think that would be real­ly inter­est­ing to have that kind of influ­ence on a com­pa­ny.

Cameron [00:35:01] So you might be a lit­tle bit more hands on, than Buf­fet.

Tony [00:35:05] Yeah, but I haven’t real­ly thought about it much, Cam. I’ll be prob­a­bly one direc­tor’s voice push­ing the QAV  bar­row.  But it would be inter­est­ing to see what effect on the share price, what effect on the lon­gi­tu­di­nal, you know, suc­cess of the com­pa­ny if it actu­al­ly man­aged itself to score well on the check­list, espe­cial­ly from a qual­i­ty point of view?

Cameron [00:35:26] All right. Well, there you go, Bret. Well, I hope that gives you some­thing to think about. What would Tony do? WWTD. Dun­can asks, “I guess this is one of these gray areas. I’m not fast, as I don’t cur­rent­ly hold ECX and I’m not cur­rent­ly plan­ning to do so.” OK, this is part of a longer con­ver­sa­tion I had with Dun­can about ECX. He said, “I just want­ed to under­stand the flat bot­tom rule in this con­text and how Tony might have drawn the sell line.” Some­thing Dun­can post­ed on Face­book, right? What’s the sell line look like for ECX? I put up my graph. He said, “I see Tony likes your line, so I’ll go with that as a clar­i­fi­ca­tion. It would be good to know the rea­son­ing for it, though.” And then I asked him to drill down into his thoughts on it a lit­tle bit more. And this is what he said, “In March 2019, the low point was $0.64, plus 8% equals $0.6912. In March 2020, the low point was $0.68 cents, plus 8% equals $0.7344. This is less than the 8% increase over $0.64. So then I looked to the April 2020 low point and that is $0.725. This is less than 8% greater than the March low point of $0.68.” All right. So I think what was hap­pen­ing here is we were draw­ing, I was pick­ing my L1 using the fudge rule, but not going, not con­tin­u­ing to jump 8% from point to point to point

Tony [00:37:06] Cor­rect, which is not the fudge rule. The fudge rule as you take 8% from the first…

Cameron [00:37:09] Yes.

Tony [00:37:10] Low­est point.

Cameron [00:37:10] So even if you get to anoth­er low point, you don’t go and look at 8% from that and 8% from that and 8% from that.

Tony [00:37:17] Cor­rect. Yeah, because poten­tial­ly you could be going way up the graph from its low point. Yeah. So it’s the first two in this case any­way. So it’s March 19 at $0.64. And as Dun­can cor­rect­ly point­ed out, March 2020 was with­in that 8% at $0.68. But then April 2020 was 72.5, which was more than 8% above the March 19 num­ber of $0.64. So we don’t go past them, so L1 becomes March 2020.

Cameron [00:37:49] Yeah.

Tony [00:37:50] L2 then becomes April 2020, and the line is well below the cur­rent share price.

Cameron [00:37:55] So in terms of the ratio­nale, the rea­son­ing for that?

Tony [00:37:59] Yeah. So the rea­son­ing is if peo­ple want to have a look at a good exam­ple, ECX is a pret­ty good exam­ple of the ratio­nale for it. We’re using five year month­ly graphs. If we were using like a  dai­ly  graph, you prob­a­bly could find an L1. You picked the absolute bot­tom. But because we’re using month­ly to, the gran­u­lar­i­ty isn’t there. So if you look at the ECX graph, it’s almost like a riv­er val­ley, for exam­ple, that’s prob­a­bly got two rivers going through this val­ley. But if you go back to say, Decem­ber 2017, the share price starts to drop from there. It gets caught up in the COVID cough at March 2019, which is the low point. It does rise and then drop again, has that sec­ond low point in March 2020 and it starts to rise from there. So the over­all pat­tern for this graph, if you like, is a kind of flat­tened out U‑shape. And even though at the bot­tom, it’s more like a W. I guess it has a drop in March 2019. It ris­es and drops again in March 2020. If you take that out, it’s pret­ty much a U‑shaped bot­tom, and that’s the idea of the flat bot­tom. If — there’ll be some oth­er cas­es where the graph does­n’t go down, then up, then down, then up again, and they tend to have that kind of very shal­low bot­tom to them. So absolute L1 num­ber does occur some­where in the months between the ones we look at because the bot­tom­ing out of the sheer graph is tak­en two or three months to hap­pen. It’s a flat bot­tom, and that’s where the con­cept comes from. We can’t see the actu­al L1 because the graph isn’t gran­u­lar, so we look for the low­est point and then look for an 8% tol­er­ance from then.

Cameron [00:39:47] Riv­er deep moun­tain’s high is what this one is say­ing. Okay. Well, hope­ful­ly that helps. But yeah, that’s the way we draw — that’s the way we cal­cu­late the flat bot­tom. Just start from the low­est point and see if there’s any low­er points to the right that are with­in 8% of that. And if there are, we use that one as the L1, but we don’t go beyond that. Okay. Reg! My mate Reg respond­ing to, I think Bret­t’s post on Face­book about his results, said “I’m about six months in and not going too well, but I’m merg­ing in slow­ly and only replac­ing my exist­ing port­fo­lio stocks when they give me a stop loss trig­ger. May I ask, though, do you fol­low the process of sim­ply buy­ing the high­est scor­ing stock pro­vid­ed it pass­es sen­ti­ment audit and your ADT require­ment? I’ve been buy­ing more selec­tive­ly and maybe that’s not good process.” And I asked Reg to sort of expand a lit­tle bit for me on what “not going too well” meant. He said, “I guess in sum­ma­ry, I’m won­der­ing if the way I’m doing things kind of mas­sag­ing the QAV process, accord­ing to my own thoughts, is serv­ing me well. I’m cer­tain­ly not at odds with the QAV process itself, which is proven to achieve very good returns and I’m process dri­ven. So I’ve real­ly been look­ing for a sys­tem such as QAV, which is strong­ly process ori­ent­ed. What I’ve been doing is review­ing what comes up on the buy list, as I said, as I sell for my cur­rent port­fo­lio but not replac­ing with the top QAV scor­ers down. I’ve looked at all the stocks and bought selec­tive­ly — the larg­er mar­ket caps, avoid­ing stocks which would increase my expo­sure in indus­tries where I’m already well exposed, etc. I’ve also been going care­ful­ly in buy­ing in small­er lots, about 25,000 per stock, small­er than I would nor­mal­ly. I bought my first QAV hold­ing in July — MML, which I sold at a siz­able loss, but I don’t think I fol­lowed rule one. And I’ve also bailed out of HLS and  ASG  at loss­es. Now I’m hold­ing CJF, CVW, ECX, ING, NAB, SUL, and TRS. Of those, five are in prof­it and the oth­ers below what I paid.” One, two, three, four, five, six, sev­en. So five out of the sev­en are in prof­it. “Please under­stand. I real­ize, of course, that as you guys say, if I get six out of 10 right, I’m doing well and in no way am I being crit­i­cal of the QAV process. In addi­tion, I’d prob­a­bly say that July to now is not suf­fi­cient time on which to draw con­clu­sions, and I’m not doing that. I’m sim­ply won­der­ing if I could be doing things dif­fer­ent­ly and bet­ter. So accord­ing to stock doc­tor, my one year return on QAV­s­tocks, which is in effect only four months, is ‑27%, where­as the return on my whole port­fo­lio is greater than 20%. Cheers and thanks, Reg.” What are your thoughts, Tony?

Tony [00:42:35] Yeah. So do you know if that ‑27% is the four month return? Or is it annu­al­ized? In oth­er words, it’s three times the four month return.

Cameron [00:42:45] I’m assum­ing it’s annu­al­ized. He says, “It’s my one year return on my QAV stocks” which he’s only held for four months.

Tony [00:42:52] Okay.

Cameron [00:42:53] Yeah.

Tony [00:42:54] Because yeah, I can see why he’s right if it was 27% down in four months. But any­way, I think in terms of his process, the only thing I would add, I don’t know if we’re just doing this is — look for Josephines before you buy. Some of the stocks he named there, I know, have been falling knives for a while, so he might just be care­ful of that. In terms of buy­ing down the list — again, it’s some­thing I need to research, and it’s on the list of things to research. My expe­ri­ence is that the high­er up the list you go, the bet­ter your chance of get­ting a good return. But hav­ing said that, because of the ADT rule for me, I am buy­ing stocks towards the bot­tom of the list too, and some­times they do out­per­form. So I’m not that wor­ried if Reg is going down the list and find­ing stocks that he likes for what­ev­er rea­son, whether it’s an ESG over­lay, whether it’s — he said he was look­ing for stocks that weren’t in indus­tries he already has invest­ments in, but I would­n’t be doing that. I mean, it’s cer­tain­ly been a fea­ture of my invest­ment his­to­ry that you don’t go out to try and invest in a par­tic­u­lar indus­try. But when you’ve invest­ed and you turn around and look, you find you’ve got lots of stocks from one indus­try because of that par­tic­u­lar indus­try is, you know, going through a cycli­cal cor­rec­tion or what­ev­er. Like gold stocks like iron ore stocks. Pri­or to those, it was like air­line stocks. So I would­n’t be too wor­ried about not buy­ing into an indus­try that you already have, Reg. That’s not a com­ment I’d make, but cer­tain­ly be care­ful of Josephine. So stocks like MML, for exam­ple. I don’t know when you bought it, but it does have a quite an up and down pat­tern to it, so you may have bought it at the top of one of those pat­terns. I’m not sure if you’re buy­ing it on the way down. Just be care­ful not to do that because it’s been a Josephine. The Reject Shop was one of those too. For a long time it was a falling knife, and I think it actu­al­ly fell below its sell line ear­li­er this year when I sold out of it. But it has rebound­ed since then as things open up after COVID, so I think it’ll be fine going for­ward. I cer­tain­ly hold some of the stocks that Reg holds. Chal­lenger, Eclipx, Ing­hams, NAB, so I’ve got no prob­lems with those hold­ings. I think they they should do well going for­ward. Poten­tial­ly Reg’s prob­lem has just been the time peri­od he’s been invest­ing. As I said at the start of the record­ing, this last sort of few months has been par­tic­u­lar­ly chop­py, cer­tain­ly com­pared to last year when every­thing was just going up. Yeah, but we do have these kinds of times in the mar­ket when we’re in and out of stocks more than we’d like to be.

Cameron [00:45:23] Yeah. But gen­er­al­ly speak­ing, the process, once you’ve fil­tered for ADT based on your ADT lim­i­ta­tions, it’s to buy from the top of the list, right?

Tony [00:45:34] Cor­rect.

Cameron [00:45:35] And work your way down. Avoid buy­ing some­thing if it’s a Josephine, obvi­ous­ly sen­ti­ment, audit checks, make sure it’s in your ADT lev­el. But gen­er­al­ly you just start from the top and work your way down. In the­o­ry, the stocks with the high­est QAV score sta­tis­ti­cal­ly have the chance of per­form­ing best. Although, you know..

Tony [00:45:58] That’s my expe­ri­ence, but I haven’t, you know, haven’t test­ed that to give you the num­bers on that. But yeah, that’s my expe­ri­ence. And cer­tain­ly, if you look at even since we’ve been doing the pod­cast, stocks like Fortes­cue Met­als Group was very high on the buy list. Prob­a­bly the high­est stock on the buy list in terms of the ADTs I could get into. And that did incred­i­bly well. And before that, oth­er stocks like Qan­tas did that for me. Going back a long while, stocks like North­ern Star Resources did it for me. So yeah, my expe­ri­ence is the high­er up the list, the bet­ter. But hav­ing said that, I know the ones down the bot­tom still per­form as well.

Cameron [00:46:30] Yeah, right. But gen­er­al­ly, you would­n’t tell peo­ple that to cher­ry pick through the list. You would start at the top and just buy down.

Tony [00:46:40] Cor­rect. Yeah, I mean, unless you’ve got a process or a rea­son for screen­ing, yeah. You know, like ESG, you don’t want to buy a coal stock or what­ev­er. Then yeah, you should buy from the top down.

Cameron [00:46:49] I should I should lis­ten to that guy that said, don’t buy  coal  stocks

Tony [00:46:52] Yeah, he was actu­al­ly giv­ing us invest­ment advice rather than moral advice.

Cameron [00:47:01] Yeah, well, there you go, Reg. I hope that helps! You know, for the record, that’s, you know, I just buy from the top. And when I’m talk­ing to new folks, that’s what I say I do, too. I just start from the top and buy down. And when I sell some­thing, I see what’s at the top of the new list. And if I don’t own it or I don’t own enough of it, I buy it and just keep going. I’m, you know, no cher­ry pick­ing for me, just buy from the top. And so far that’s worked out okay for me. But, you know, I think with Reg, you know, we know that the process obvi­ous­ly works. You know, Brett and Ron’s results and every­one else’s results that have report­ed over the last year seem to indi­cate that’s just — stick with it. Should all come out of the wash.

Tony [00:47:44] And a dum­my port­fo­lio cer­tain­ly has those kinds of results as well.

Cameron [00:47:50] Yeah. And the oth­er thing I’d say, too, is — so he’s hold­ing one, two, three, four, five, six, sev­en stocks at the moment. Hmm. Might be a lit­tle bit of a nar­row field. You want to have sort of 15 to 20 in order to — because, you know, look­ing at my port­fo­lios and the QAV port­fo­lio over the last cou­ple of years, it always seems to be that there’s sort of what, 15 to 20% of the port­fo­lio that real­ly kicks ass that does the like 70%/80%/100% sort of returns. And then you have — we have anoth­er 20% that sort of don’t go any­where, you know, even after you’ve sold the rule one sells or what­ev­er, you’ve got anoth­er 20% that go up 2%, 3%, 5%, but don’t real­ly kick the stars out. And then the bal­ance do rea­son­able returns 20%-30% over the course of a year. That’s sort of been my take on it, but the ones you have to have a big enough field of hors­es in the race to get the ones that real­ly kick the lights out and pull the whole port­fo­lio up.

Tony [00:48:53] Yeah, I mean, that’s a good point, just sta­tis­ti­cal­ly, if we get 60% right and you have one stock in your port­fo­lio or it could be a los­ing stock a lot, you know, 40% of the time. If you have two stocks, well, one of them might be that 60%. But again, sta­tis­ti­cal­ly they might both go down. If you have three, one might. So in terms of that 60%, you want prob­a­bly at least 10, if not 15 or 20 before that. So the the stats sort of go your way rather than being just too con­strained by small port­fo­lio.

Cameron [00:49:22] Unless you’re Tay­lor, who bought five stocks, and I think three of them are up 80%, which is why he says he’s an invest­ing god, you know. All right. Thank you, Reg. I don’t think Reg is going to make it into the Bris­bane din­ner this week, but we’re hav­ing a Bris­bane din­ner Wednes­day this week. Look­ing for­ward to see­ing every­one who comes along to that. It’s always a good time to catch up with QAV club mem­bers over a meal. Glenn says, “Just check­ing the tab on my AF ver­sion spread­sheet for bank debt rate? Cur­rent­ly set at 2.69%, I haven’t changed it for a while. I was won­der­ing what rate peo­ple are using. Seems the SVR rates may be mov­ing up.” What’s SVR, Tony?

Tony [00:50:05] Don’t know.

Cameron [00:50:06] Okay. “EG NAB choice pack­age prin­ci­pal and inter­est equals 3.67%. CBA pack­age SVR equals 3.85%. ANZ dis­count­ed pack­age equals 3.59%. West­pack 3.84%.”

Tony [00:50:20] Stan­dard vari­able rate.

Cameron [00:50:21] Stan­dard vari­able. “There are so many vari­able pack­age options, but if I aver­age the four above, I was think­ing of adjust­ing my fig­ure to 3.73% or tak­ing the low­est of 3.59%. Any thoughts on this or recent changes to your bank debt rate being used in the spread­sheets?”

Tony [00:50:38] Yeah, good point, Glenn. I’m still using 2.69% and I was­n’t going to update it until the RBA raised rates. But as it’s been in the news a lot this week or so, the bond traders are doing the RBA’s rate rais­ing for them and the long term bomb rates have been ris­ing. So I looked up. I tend to use the ANZ stan­dard home loan com­par­i­son rate, and that’s sit­ting at 3.42%. So I will change the spread­sheet going for­ward to be 3.42, not 2.69 from now on.

Cameron [00:51:08] Right? Okay.

Tony [00:51:10] So  so well spot­ted  Glenn.

Cameron [00:51:11] Yeah, good think­ing, Glenn. Alright, last ques­tion! Short show this week so you can get on the road. Alice says, “I enjoyed the chat with Louise, espe­cial­ly on the behav­ioral aspects of invest­ing trad­ing. It would be great to hear both of your expe­ri­ences. Did you need to make any behav­ioral shifts to become a bet­ter investor?”

Tony [00:51:32] Very much so, yes!

Cameron [00:51:33] Real­ly?

Tony [00:51:34] Well, yeah. I’ve told the sto­ry before, but you know, my first year as an investor, which I call my Bach­e­lor of Invest­ing was just abysmal. I did every­thing wrong, took stock tips from bro­kers. Lis­tened to the explo­ration guys at Shell on what was a hot two cent oil explor­er tip. All that kind of stuff. Got some good invest­ment advice and pooh poohed it because it was so mun­dane. We were a bit like Tay­lor. “We don’t want just 20% per year. Come on, we want to dou­ble our mon­ey, triple our mon­ey.” You know, some of our mates were get­ting 10 times their mon­ey from inter­net stocks and all that kind of stuff. So yeah, I had to change my train­ing after I lost half my cap­i­tal in that first year. So that was a behav­ioral change. And it became, you know, it’s through the research. Let’s read every­thing I can. Let’s try and get a frame­work to a process to use going for­ward. So that was prob­a­bly the first thing that the GFC was my high degree in edu­ca­tion. So that’s when I start­ed to think, “Well, buy and hold for me was dead.” After the GFC, I did­n’t, you know, I did­n’t want to buy and hold, and peo­ple who did buy and hold it took them a long time. If you’re like an index investor, to get back to where the ASX index was any­way after the GFC, I think it was some­thing like eight or nine years. So you were a long time in the wilder­ness try­ing to make up ground doing that. And that’s when I start­ed the 3PTL, or incor­po­rat­ed the 3PTL into my check­list. So that was anoth­er behav­ioral change because before that, I was a clas­sic, you know, fol­low what Buf­fett does, which is to buy some­thing and hold it for­ev­er. And that two things hap­pened to sort of sway me from doing that. One was the GFC, but anoth­er one was, you know, some­one point­ed out to me and I for­get who it was that if you look at the ASX over a hun­dred years, I don’t think any of the com­pa­nies that were there in the past are still there now. Mm-Hmm. Over a short­er time­frame, like 50 years, or maybe BHP would be the only one that’s still there. And cer­tain­ly some com­pa­nies have evolved, like Myer was there and it became Coles Myer and things like that. But the point that they were mak­ing is that com­pa­nies have a life cycle and that this decade’s heroes aren’t going to be there next decade. So buy­ing and hold can have a lim­it­ed shelf life, and so that was a behav­ioral change for me, I guess, to be more invest­ing and then look­ing for sig­nals when to buy and sell. Mm-Hmm. And, you know, clas­si­cal­ly buy­ing and hold­ing is what behav­ioral econ­o­mists call anchor­ing. So, you know, if I had anchored my buy­ing of Fortes­cue Met­als, I would have watched the share price drop from $25 back to $14. And it may get back up to $25. But what you lose in doing that is the oppor­tu­ni­ty cost of tak­ing, of get­ting out and using that larg­er por­tion of cap­i­tal to invest in some­thing that’s going up and not wait­ing for it to come back. So that was a learn­ing for me is not to anchor, and it was actu­al­ly real­ly hard for me to sell my Fortes­cue stock when I decid­ed it was time to sell because it was a week or two before a very large div­i­dend was being paid. And, you know, it was prob­a­bly a bit of anchor­ing going on. This has been a great stock for me over the years. Am I going to ride it out or not? And luck­i­ly, I fol­lowed the process and got out. So that was anoth­er thing that in terms of behav­ioral changes, it was to fol­low the process, not try and sec­ond guess the process. So, yeah, real­ly good ques­tion. I think some oth­er things that I can think of, it’s I’ll call it. I don’t know if this is actu­al­ly a fea­ture of behav­ioral eco­nom­ics, but I’ll call it being com­fort­able with sur­pris­es. So it’s often a sur­prise to me that, you know, the next stock I’m going to buy is the high­est on the buy list. I’m like, I sort of some­times scratch my head and say, “You know, why are the banks scor­ing so well on our list? I mean, sure­ly every super fund in Aus­tralia owns Com­mon­wealth Bank and ANZ, et cetera, you know, how come they’re com­ing up as a good buy for a val­ue investor?” It’s being able to sort of go “huh” and step back and go, “Yeah, but it’s the next thing to buy so I’m going to buy it.” So, yeah, often­times I’m sur­prised by what spits out of the check­list. But you know, I still apply the check­list because that works over a long peri­od of time. If Stu­ar­t’s inter­est­ed, well, who was the ques­tion asked I’m sor­ry?

Cameron [00:55:42] Alice.

Tony [00:55:42] Sor­ry I’ve got the wrong page on my notes open. If Alice is inter­est­ed, a great book on behav­ioral eco­nom­ics, although it’s not about behav­ioral eco­nom­ics, is called Influ­ence by a guy called Robert Cial­di­ni, it’s actu­al­ly about mar­ket­ing. But what he goes through is five or six, I guess things that are hard­wired into your brain that mar­keters can use to fool you. And it’s things like con­fir­ma­tion bias not called con­fir­ma­tion bias and influ­ence. It’s called fol­low­ing the crowd, but it’s Cial­dini’s exam­ple is if you want to look at a quick look at con­fir­ma­tion bias, go and stand out in the busy side walk and look up and peo­ple will start to go by you and look up as well. And some of them will stop and try and they’ll ask you “What are you look­ing at?” So, you know, that’s hard­wired in us through evo­lu­tion — if you see some­one doing some­thing, at least inves­ti­gate it and you see it in the share mar­ket all the time! Why are peo­ple buy­ing After­pay? All because every­one stopped and looked at After­pay and they’re buy­ing it, so, you know, there are prob­a­bly half a dozen blind spots. They’re not blind spots, evo­lu­tion­ary. There’s good rea­sons why we do these things, but if you’re not aware of them, you can get mugged by them in the crowd. And so Influ­ence is a good book to start to read about that and to start devel­op­ing your think­ing around it.

Cameron [00:56:51] Oh, I’m real­ly shocked to hear that you strug­gled to sell FMG, Tony. You almost sound human there.

Cameron [00:56:58] Yeah, yeah. Well, I should­n’t say strug­gled. It’s again, it’s cop­ing with sur­prise, right? I actu­al­ly thought FMG might be a buy and hold stock for a long time, and I was sur­prised at how much the iron ore price dropped and how quick­ly and that it was a sell and that we had to sell it. So there was — I won’t call it emo­tion, but it’s cop­ing with that sur­prise. Oh yeah, the mar­ket’s always throw­ing up curve­balls at you, and you’ve got to have a process to deal with them.

Cameron [00:57:28] Right? Well, very good. Thanks for shar­ing that in terms of my behav­ioral shifts. I don’t know. Yeah, becom­ing an investor. That was my behav­ioral shift.

Tony [00:57:36] Yeah, right.

Cameron [00:57:37] Just to think of myself again as an investor. And you know, this was like as any­one who’s lis­tened to those first six months of pod­casts will know, a com­plete­ly dif­fer­ent way of think­ing for me. I had to pay atten­tion and get inter­est­ed in cor­po­rate mum­bo jum­bo.

Tony [00:58:00] And I was the same. I mean, even though I was work­ing work­ing for big com­pa­nies like Shell and Coles Myer, I, you know, I start­ed off my career with a healthy dose of skep­ti­cism on the cap­i­tal­ist way of doing things. Yeah.

Cameron [00:58:12] Where do you stand now with that?

Tony [00:58:14] Well, I think I think every­thing has its place. Cap­i­tal­ism, social­ism, all those things have good and bad.

Cameron [00:58:19] Yeah.

Tony [00:58:21] I’ve just been able to prof­it out of the cap­i­tal­ist side of things. So I’m not — I’m not gonna flag away for cap­i­tal­ism like Buf­fett does. Yeah, he thinks it’s the great­est thing in the his­to­ry of man. And per­haps he’s right. I mean, it’s, you know, it has pro­gressed evo­lu­tion, pro­gressed soci­ety and has evolved. But it does have lots of neg­a­tives that we’ve talked about and you’ve got to be aware of those. But yeah, I’ve been able to har­ness it to my advan­tage. So, you know, I guess I’m prag­mat­ic about cap­i­tal­ism.

Cameron [00:58:50] For me you know, I, as you know, I’ve spent the vast major­i­ty of the last 20 years read­ing his­to­ry books and talk­ing about his­to­ry and study­ing his­to­ry and pol­i­tics and behav­ior and that kind of stuff. So to ded­i­cate a large chunk of my time to read­ing finan­cial reports and look­ing at num­bers and read­ing the Finan­cial Review and doing this kind of stuff is com­plete­ly out of — not only out of my wheel­house, but out of my inter­est when we start­ed this show. I mean, I’m just not inter­est­ed in all of this kind of gumph. But you know, I’ve real­ized that if I’m going to be a suc­cess­ful investor, I have to be inter­est­ed. I have to take this stuff seri­ous­ly and devel­op a pas­sion for it. I have to rein­vent myself as some­body who cares about this kind of stuff. And yeah, I’m pret­ty good at rein­vent­ing myself. And I think I’m a pret­ty good stu­dent. Like when I real­ly want to learn some of that I find some­one like you who I believe you know what you’re talk­ing about and you’re mak­ing your­self avail­able as a men­tor, I’m will­ing to com­mit to the learn­ing process, you know. Okay, I’m just going to — I don’t have an opin­ion. If Tony says it’s this way, then it’s this way. I’m going to learn every­thing Tony knows. And then if I think Tony’s full of shit, I’ll be, you know, I’ll be able to say so, or if I think it can be improved or what­ev­er. But until that point in time, I’m just going to, you know, down­load Tony’s brain and find out every­thing that he knows about this. And, you know, do it. Fol­low the recipe. I’m good at fol­low­ing recipes I think. If I’m giv­en one by some­body I trust and believe what I spend most of my time pick­ing holes in what every­one else is doing, but only when I, par­tic­u­lar­ly if it’s some­thing I know a lot about, like if I read a book on ancient Rome or ancient Greece or the Cold War, and I’m going, “Yeah, this author’s got a bias and this is obvi­ous­ly bull­shit.” And I can tell very quick­ly if they’re favor­ing the Amer­i­can nar­ra­tive for some­thing that hap­pened in the Cold War ver­sus the North Kore­an nar­ra­tive or the Viet­namese nar­ra­tive, or giv­ing equal weight­ing to nar­ra­tives and that kind of stuff. But with some­thing like this, you know that part of my brain just switch­es off and I’m just like, Tony says, it’s this way. Then for right now, it’s this way. It’s like going to a kung fu school. I’m just — I’m here to learn. Teach me every­thing you know. I will do every­thing you tell me, exact­ly the way you tell me to do it to the best of my abil­i­ty, and I’m just not going to ques­tion it or chal­lenge it because you’ve been doing this for 20 years. I’m a begin­ner, an emp­ty mind, emp­ty cup. Fill me up. Let me go, you know, get me to at least black belt lev­el, and then I might start to have an opin­ion on this thing. But until I’m a black belt, you know, my opin­ion is worth­less.

Tony [01:01:52] Fill me up, but­ter­cup. Huh? No, it’s good. It’s a good way to be. It’s a great way to learn. And that might be QAV five as well. What you said about as peo­ple learn the process, they might actu­al­ly start, you know, amend­ing it. That’s what I’ve always hoped for was QAV hive mind is that some­one — and it is hap­pen­ing on the Bret­ta­la­tor came out of it and there’s oth­er things that come out which are real­ly good. You know, some­one might turn around and say, “Hey, I’ve mod­i­fied it to invest to hype stocks or dot.com stocks or, you know, high growth stocks.” And we could all ben­e­fit from that because cer­tain­ly, like, you know, stick­ing to my knit­ting, you devel­op bias­es, not because you’ve tak­en an opin­ion on things, but because your method works and it does screen out the After­pay’s of the world from your invest­ment hori­zon. But maybe some­one can fig­ure out a way of fix­ing that bias.

Cameron [01:02:50] I guess maybe Lev­el five is invest­ing in cryp­to. Yeah, I read the sto­ry in the media this morn­ing about some guy that invest­ed $10,000 in one minor cryp­to like two years ago I think. It was like it was­n’t Doge­coin, but it was a Shibu, anoth­er dog based joke bit­coin, and his $10,000 invest­ment is cur­rent­ly worth $7.5 bil­lion. But they’re say­ing the per­son who owns this wal­let has­n’t touched it for, like 18 months, 19 months. So they think maybe they’ve A) either for­got­ten about it or B) lost the pass­word and can’t get in. So they’ve got $7.5 bil­lion sit­ting in the Shibu coin that they can’t touch.

Tony [01:03:41] And if they go and try and cash out, that will dri­ve the price down as well, I guess. But look, that’s speak­ing of behav­ioral eco­nom­ics that arti­cle’s a sur­vival bias exam­ple right? After the Mel­bourne Cup runs tomor­row, there’ll be some­one who’s, you know, picked the first four win­ners in the water and gets paid tremen­dous odds for doing that 100 grand or what­ev­er. Yeah, and he’ll be — he or she’ll be inter­view­ing, you know, they’ll peo­ple will fol­low their tips going for­ward and they’ll nev­er win anoth­er thing again because it was just luck.

Cameron [01:04:09] Speak­ing of that, let’s get into after hours. Your Mel­bourne Cup tips, Tony. I think last year they sucked.

Tony [01:04:17] They did.

Cameron [01:04:17] Yeah. So just I want to put that out there for new lis­ten­ers to what­ev­er you do, don’t invest every­thing you have in Tony’s Mel­bourne Cup tips. But with that out of the way, what are your Mel­bourne Cup tips, Tony?

Tony [01:04:31] Yeah, it’s again, it’s a 60/40 thing. Like I’ve picked the win­ner about three out of the last five years. Last year I sucked. This year, I’m stick­ing to the for­mu­la, which is to look for a light­weight, a well, weight­ed horse in the race. And I’m going with the bot­tom weight Sir Lucan and I think it will just beat the favorite Incen­tivize. To pro­vide some sto­ry around that Incen­tivize won I think its last nine starts, won the Caulfield Cup, but that means it car­ries a weight penal­ty into the Mel­bourne Cup. And there’s, I think, only been about four or five hors­es in the his­to­ry of the Mel­bourne Cup over the last hun­dred and fifty odd years that have car­ried the weight Incen­tivize will car­ry to vic­to­ry. And so, you know, Incen­tivize is a very, very good horse. The last horse, I think, to do the Caulfield Cup, Mel­bourne Cup dou­ble was Might and Pow­er from mem­o­ry, and that was a very good horse. Incen­tivize might be in that league, but it’s going to be up there with the top five in his­to­ry to do it. And that’s a ques­tion mark for me and I’d cer­tain­ly want bet­ter odds than $2.70 or what­ev­er it is cur­rent­ly before I’d back Incen­tivize. But I think it will run the place. I think it will get beat­en by a horse like Sir Lucan, which is has got much — it’s got a bit of a weight drop. So I’m not look­ing at the Caulfield Cup form. I’m look­ing at the Bart Cum­mings form, which is anoth­er lead up race to the Mel­bourne Cup, and I think peo­ple have for­got­ten about that. The win­ner of that. I think the top three hors­es in that race are in the Mel­bourne Cup. The win­ner gets a weight penal­ty, which often hap­pens when you win the league that race. But the oth­er two drop­ping weights dra­mat­i­cal­ly. So I’m think­ing Mas­ter of Wine and Pondis will also do well. So there’s my first four. Sir Lucan, Incen­tivize, Mas­ter of Wine, and Pondis.

Cameron [01:06:15] Very good. Well, good luck.

Tony [01:06:19] I should put those in the Face­book group, too, because this may not go out in time for them to hear it.

Cameron [01:06:23] Any­thing else you have to rec­om­mend this week, TK?

Tony [01:06:26] No, I haven’t — I’ve been — my nose has been in the Form Guide, but — and in the share mar­ket with its chop­py nature this last week, so I haven’t had much time to read any­thing else beside the Fin and the Form Guide. That’s how it’s going to be this week as well going for­ward.

Cameron [01:06:42] Right.

Tony [01:06:42] With a bit, with a bit of golf and a bit of wine down in  Wag­ga Wag­ga.

Cameron [01:06:46] Love­ly. Well, safe trav­els. Enjoy your trip!

Tony [01:06:50] Thank you.

Cameron [01:06:51] Talk to you next week. Thanks, mate!

Tony [01:06:53] All right, mate. Have a good week!

Cameron [01:06:54] You too.

Cameron [01:07:00] The QAV pod­cast is a pro­duc­tion of Space Craft Pub­lish­ing Pro­pri­etary Lim­it­ed autho­rized rep­re­sen­ta­tive of AFSL 520442 AFC Rep­re­sen­ta­tive Num­ber 001292718. Please don’t make any invest­ment deci­sions based sole­ly on lis­ten­ing to this pod­cast. This is pre­sent­ed as gen­er­al advice only, not per­son­al finan­cial advice. We don’t know your per­son­al finan­cial cir­cum­stances. Please see a finan­cial plan­ner before mak­ing any invest­ing deci­sions.