Transcript QAV #446

Tran­script QAV #446  Club Edi­tion

 

 

Tony [00:00:35.8] You know peo­ple come to me for tech­ni­cal advice, right?

 

Cameron [00:00:38] That’s very sad.

 

Tony [00:00:41] Once. They don’t come twice.

 

Cameron [00:00:45] Wel­come back to QAV, this is episode 446 and we’re record­ing this on Mon­day 15h Novem­ber 2021. How are you TK?

 

 

Tony [00:00:58] Yeah good. Real­ly good, thank you. How are you?

 

Cameron [00:01:01] That’s good.

 

Tony [00:01:02] Come stai?

 

Cameron [00:01:03] Molto bene, molto bene gra­zie, gra­zie. Molto bene. Actu­al­ly, I promised our tran­scriber that we wouldn’t speak in Ital­ian any­more. It’s hard enough. She said Ger­man and French would be fine, Ital­ian is too much work.

 

Tony [00:01:15] Okay.

 

Cameron [00:01:16]: Let’s ah, let’s get into what’s going on. I want­ed to start with say­ing that we sold SUN — I sold SUN — last week. Prob­a­bly a cou­ple of weeks lat­er than I should’ve sold SUN. Sun­corp breached its three point trend line sell line in late Octo­ber and, total­ly missed it.

 

Tony [00:01:40] Yeah, no, I got it. I sold it. Yeah. Just set alerts in Stock Doc­tor for the sell price and that helps a lot.

 

Cameron [00:01:48] Yeah, yeah it would if I didn’t get four thou­sand emails a day and most of them were junk. Yes, no, I do set those but I missed that one and you didn’t tell me so it just…

 

Tony [00:02:01] Yeah I did, hang on.

 

Cameron [00:02:03] Did you?

 

Tony [00:02:03] Yeah, I always send you an email when I trade.

 

Cameron [00:02:06] Uh. You didn’t tell me I should trade it as well.

 

Tony [00:02:09] I didn’t know you had it.

 

Cameron [00:02:12] It’s not your fault. Yes no I just want­ed…

 

Tony [00:02:15] ESP. Faulty ESP again.

 

Cameron [00:02:18] Oh, do I have to sell ESP as well?

 

Tony [00:02:20] No.

 

Cameron [00:02:21] I just want­ed to put that out so that peo­ple remem­ber to set alerts. Yes, got­ta set alerts.

 

Tony [00:02:26] Yes.

 

Cameron [00:02:26] And, not just set alerts but I just want­ed to remind peo­ple because I need­ed to remind myself that I have to go in and check the three point sell line sell price in the alerts at least prob­a­bly once a month — like, the first of the month or some­thing like that.

 

Tony [00:02:41] Yeah, once a month is good, prob­a­bly not much more than that. Every month it could tick over to a new num­ber, so once a month is good.

 

Cameron [00:02:48] I think by the time I got it was down by like 16%. But any­way…

 

Tony [00:02:51] Okay.

 

Cameron [00:02:54] Also, just want to remind peo­ple, par­tic­u­lar­ly peo­ple lis­ten­ing to the free episodes, that pay­ing atten­tion to our stock of the week picks each week — most of which are doing quite well at the moment — there’s a cou­ple that went back­wards, south, but most of them are doing quite well. Um, but some will always go back­wards and of course, buy­ing them is only the first step in a suc­cess­ful strat­e­gy, you also need to know when to sell them, and we’re not going to be advis­ing you when to sell them, so um, you know we’re not going to be send­ing, we’re not going to be track­ing them, send­ing out alerts I don’t think it’s up to you as an investor to fig­ure that out or, to pay atten­tion to your three point trend lines and your rule 1 lines and that kind of stuff. So, but if you are look­ing at the stocks and buy­ing them make sure you’re pay­ing atten­tion to, uh, you know what hap­pens to them after­wards.

 

Tony [00:03:51] Yeah, we’ve talked about this for putting out our stock of the weeks now, um, in our emails, but I don’t real­ly want to cre­ate anoth­er dum­my port­fo­lio so we’re not going to cir­cle back and tell peo­ple when to sell them if they need to. But, you know, the basic rule of thumb is, with QAV is, that it’s a 60/40 game. Prob­a­bly 40% of the stocks that we talk about are going to go down at some stage, and you’ve got to be ready to sell them as they breach — either rule 1 or your three point trend line sell. So, you know, I didn’t real­ly want to set up a sec­ond dum­my port­fo­lio that tracks our rec­om­men­da­tions so they’re just real­ly rec­om­men­da­tions to look at and do your own research as a start­ing point, not any sort of port­fo­lio con­struc­tion rec­om­men­da­tion.

 

Cameron [00:04:31] Exact­ly.

 

Tony [00:04:32] I just want­ed to add, and fur­ther to that, in this, you know I don’t know whether it’s because the mar­ket is, uh, climb­ing high­er or what, but the last few months have been par­tic­u­lar­ly chop­py. And, you look at some of the stocks like you did then, Sun­corp just dropped 15% in maybe a month or you know 4 weeks maybe, maybe less. It doesn’t take much to see stocks drop quick­ly at the moment. Pos­si­bly because they’re all priced to per­fec­tion. One that I, you know, came across recent­ly was GAP — Gale Pacif­ic — which if you look at its share price graph it fell of a cliff last week when they came out and gave a guid­ance, I think prob­a­bly at their AGM, a guid­ance on full-year prof­it was going to be break-even at best. And so the share price react­ed quick­ly and swift­ly at that news and dropped. So you’ve got­ta be either set­ting alerts or be check­ing reg­u­lar­ly and then it’s much eas­i­er to set alerts than to check your port­fo­lio reg­u­lar­ly, for sure.

 

Cameron [00:05:28] Mm. Look­ing at the list of rec­om­men­da­tions that we’ve made since we start­ed again back in ear­ly Sep­tem­ber, 7th of Sep­tem­ber, I think about 60–70% of them are above water.

 

Tony [00:05:41] Mm-hmm, that sounds about right.

 

Cameron [00:05:42] Yeah, which is kind of our goal; 60–70%. But some of them are doing quite well. KRM, Kingrose Min­ing is up 60% since it was our stock of the week on the 20th of Sep­tem­ber, so that’s not even 2 months it’s up 60%. Michael Hill Jeweler’s up 34% since we rec­om­mend­ed it on the 28th of Sep­tem­ber. Clearview Wealth, CVW is up 17% since we rec­om­mend­ed it on the 4th of Octo­ber. The rest are up sort of sin­gle dig­its, a cou­ple have gone back­wards. ZGL, AIS, SUN, Myer, Newhope Coal, EHL and CLX. But, again, you know, as I said, our goal is always to get about 60% that go well and we’re sort of spot on with that.

 

Tony [00:06:27] Yeah, and to pull our weeds quick­ly on the oth­er ones.

 

Cameron [00:06:30] Yep. Uh, speak­ing of things to be updat­ed for the club mem­bers, the Bret­ta­la­tor was updat­ed last week to ver­sion 21.11.10. Thank you to Mr Bret­ta­la­tor him­self for all of the work he con­tin­ues to put into that for every­body. So, if you didn’t see that if you missed that on Face­book, make sure you fol­low the links on the QAV club mem­ber resources page on our web­site and got to the link of the lat­est Bret­ta­la­tor. And, as always, please make a copy of it before you try to use it. Don’t send Brett an email ask­ing for per­mis­sion to use the mas­ter ver­sion, that’s not going to work. Make your own copy; just go file-copy when you’re in Google Sheets and go from there.

 

Cameron [00:07:15] What do you want to talk about this week before we get into the ques­tions,

Tony?

 

Tony [00:07:19.1] Yeah, so a few things. I spoke a cou­ple years ago now about my three fin­ger check on the econ­o­my — which is for me, the econ­o­my moves around petrol prices, mort­gage prices, and the dol­lar — and petrol prices I just noticed last week when, because I’ve been locked down for so long I hadn’t filled up, but I went for a trip to Wag­ga and filled up on the way back, and it was like $1.65  or some­thing a litre for fuel. So petrol prices are on the rise as we know because we’ve talked about San­tos and oth­er oil com­pa­nies and gas com­pa­nies before on the show recent­ly. Oil prices edg­ing, it’s back up over $80 a bar­rel. If the trend con­tin­ued it could get back to over $100 a bar­rel which is where it’s been before, but who knows, no pre­dict­ing. But if it does, that is going to be sort of one leg of the tri­pod pulled out of peo­ples pock­ets and usu­al­ly, you know, two legs and an econ­o­my starts to col­lapse. So, we’re start­ing to see mort­gage rates rise as some­one point­ed out recent­ly on the show, that banks are now out of step with the RBA and they’ve start­ed to raise mort­gage rates because the bond yields are ris­ing high­er than the cash rate, which is gen­er­al­ly a sign that inter­est rates are going to increase. Again, don’t want to pre­dict by how much and when, and how long it will take, and for how high it has to go before peo­ple real­ly start to hurt, but peo­ple have become quite used to low-inter­est rates and if they do rise, that’ll be the sec­ond leg of the milk stool kicked out from under­neath the milk­ers. And when two legs go, the econ­o­my usu­al­ly turns down.

The Aus­tralian dol­lar has been slow­ly creep­ing high­er. It prob­a­bly should be high­er on the basis of the com­mod­i­ty exports we’ve been hav­ing, but the US dol­lar has been rea­son­ably, well it’s been singing, but it has been rea­son­ably flat of late. But, if the US dol­lar drops or if the Aus­tralian dol­lar ris­es, then yeah that’s three sort of cross­es against the econ­o­my. So I’m just call­ing that out now, only because I saw petrol prices rise, and that’s the first leg that real­ly starts to eat into people’s pay pack­ets, and some­times I think as investors and econ­o­mists, and we’re not econ­o­mists, but the RBA as econ­o­mist, they for­get that the vast major­i­ty of Aus­tralians out there are on a salary, and I guess by def­i­n­i­tion it’s around the aver­age. And once you sort of take out more for petrol and more for a mort­gage, and then if you start to pay more because the dollar’s ris­ing for imports, you know, we’re stuffed.

 

Cameron [00:09:53] I thought the three-fin­ger eco­nom­ics was when the econ­o­my crash­es you’re pour­ing three fin­gers of scotch in a glass.

 

Tony [00:10:00] Yeah.

 

Cameron [00:10:01] You go from no fin­ger to two fin­gers, to three fin­gers. And then you just start drink­ing from the bot­tle.

 

Tony [00:10:10] Yeah, lucky I stocked up over COVID and I couldn’t get out to bars, so that’s good.

 

Cameron [00:10:14] It’s like, I remem­ber hav­ing break­fast with the CEO of Rivers, the cloth­ing brand, I dun­no, ten or twelve years ago. Part of, you know, an indus­try break­fast thing. And he said — the econ­o­my was going through a tough peri­od at the time or some­thing — and he said, some­body, asked him the ques­tion “what do you do dif­fer­ent­ly when there’s an eco­nom­ic down­turn?” He said, instead of drink­ing one bot­tle of wine at night I drink four, or some­thing like that.

 

Tony [00:10:46] Yeah, and look, I just, I mean call­ing that out as a bit of an aside real­ly, it won’t change the way we approach invest­ing. It’s, things aren’t look­ing as rosy as they have been in the past.

 

Cameron [00:10:56] And if there’s a down­turn, you know, the mar­ket will become more volatile and we’ll sell more than we would nor­mal­ly do over a peri­od of time and maybe be sit­ting on some cash while we’re look­ing for things to buy back in. But we’re just you know, that’s just play­ing by the rules as we nor­mal­ly do.

 

Tony [00:11:10] Yeah, I mean that’s a good point, its busi­ness as usu­al as I said last year on Phil Muscatello’s show, the year before when the COVID cough first hap­pened. It’s what the mar­ket does. You just got to be pre­pared for it, it’s got to be part of your frame­work to han­dle it.

C [00:11:24] Yeah.

 

Tony [00:11:24] Not be sur­prised by it.

 

Cameron [00:11:25] Market’s go in cycles.

 

Tony [00:11:25] Yeah.

 

Cameron [00:11:27] Talk to me about MQG and the SPP.

 

Tony [00:11:30] Yeah, so last week I was talk­ing about the fact that Mac­quar­ie Group was hav­ing a share pur­chase plan which is open at the moment if you’re a share­hold­er. You have a chance to buy up to $30,000 worth. I made the com­ment that you might put in $30,000 and that will be kept by Mac­quar­ie Bank while the process plays out and then returned to you after the fact which could tie your mon­ey up from any­where up to a cou­ple of months real­ly, and fac­tor that into your equa­tions. Steven May point­ed out recent­ly in an arti­cle he wrote, Mac­quar­ie has a his­to­ry of not scal­ing back their share pur­chase plans, so you may well get all $30,000. So I was kind of mak­ing more of a gen­er­al com­ment. And I also noticed that West African Resources, anoth­er com­pa­ny that I hold in my port­fo­lio, has anoth­er share pur­chase plan going out at the moment as well so they may well scale back. So just the same com­ment, just some­thing to be aware of with SPPs, you may get scaled back, and you’ll get a refund cheque or a refund deposit into your account for that, but just be aware if you’re bank­ing on that mon­ey it may not come back to you quick­ly.

 

Cameron [00:12:34] Okay, good to know. Alright, top three dum­my port­fo­lio stocks for the week,

Tony.

 

Tony [00:12:40] Yeah, so the three in Navexa are Perseus, PRU, which is up 7.74%; KSC, which is K&S Trans­port, up 6.59%; and CLX, up 5.46%. So, they’re our top per­form­ers for the week.

 

Cameron [00:12:59] Wow, not bad. How’s our port­fo­lio doing for the finan­cial year this week? Ah, QAV port­fo­lio for the finan­cial year as of today, we’re up 7.14%, the SPDR200 is up 5.16% so we’re still about 40% above the 200 for the finan­cial year.

 

Tony [00:13:20] Right.

 

Cameron [00:13:21] There you go. We did sell some­thing last week too, I think I sold COG out of our dum­my port­fo­lio last week.

 

Tony [00:13:28] We did, didn’t we. Yeah

 

Cameron [00:13:30] And replaced it with MML, I think.

 

Tony [00:13:33] That’s right. Which has been in and out for a while, hasn’t it? Cou­pla times.

 

Cameron [00:13:36] It has. In and out like a priest and a nun, or some­thing. It’s up 4% since we added it last week, so that was a good deci­sion. NAB, you’ve tak­en NAB off your buy list?

 

Tony [00:13:49] Yeah, so NAB like three of the big four and Mac­quar­ie report­ed now for an end of Sep­tem­ber year-end. NAB is off the buy list because its oper­at­ing cash flow decreased dra­mat­i­cal­ly, and I know that banks have sort of fun­ny oper­at­ing cash flows com­pared to indus­tri­als but it was quite a big drop for NAB. I haven’t been able to under­stand exact­ly why, ‘cause you don’t get a whole heap of detailed infor­ma­tion in the notes, but it talks about bor­row­ings and loans being increased com­pared to the last half. Again, I haven’t done enough research to know what that is. I sus­pect it’s bor­row­ing and loans for NAB as a busi­ness rather than NAB you know, bor­row­ing mon­ey in the mar­ket and lend­ing it out to mort­gagees, but I’m not sure. But yeah, cer­tain­ly oper­at­ing cash flow has dropped. The fun­ny thing is, the ana­lysts all applaud­ed the result and the NAB share price has risen since the results were announced. So there you go.

 

Cameron [00:14:48] There you go. What’s going on with Kan­ga­roo Island port?

 

Tony [00:14:51] Yeah, so we spoke about what was called Kan­ga­roo Island Plan­ta­tion Tim­ber now called Kiland. It piv­ot­ed from being a saw miller to a gen­er­al farm­ing type agri­cul­tur­al com­pa­ny. One of the things that they did in their lat­est results, or that they announced at their AGM sor­ry, was that they had to write down the port that they were using to export the logs from, which I think from mem­o­ry may have burnt in the fires and they were still attribut­ing a val­ue to it and had plans to rebuild it. But then the South Aus­tralian Attor­ney-Gen­er­al knocked them back and they weren’t able to rebuild. That par­tic­u­lar deci­sion has become a focus for what­ev­er South Aus­tralia calls its ICAC, its gov­ern­ment watch­dog. Because the Attor­ney-Gen­er­al in South Aus­tralia just hap­pened to own a block of land across from the Kan­ga­roo Island Plan­ta­tion Timber’s plan­ta­tion, on Kan­ga­roo Island and has voiced opin­ions in the past that it was very noisy when the saw millers cut the trees down and the trucks rolled out to the jet­ty. So, appar­ent­ly, and I’ll be care­ful how I say this, but appar­ent­ly it’s not a good look that she turned down the rebuild­ing of the jet­ty and some peo­ple are say­ing that might be to suit her rather than what’s best for the island. But, ah, con­tentious issue, and in the news, and you don’t often talk about a small-cap stock like Kiland and on a show like this and then find that their issues are in the news next week. So, yeah, inter­est­ing times.

 

Cameron [00:16:21] Well you know that every­one lis­tens to this show now,

Tony. We’re shap­ing the nation­al con­ver­sa­tion. Ah, okay, talk to me about…

 

Tony [00:16:33] Two more in the news stocks for us, San­tos and Cred­it Corp, which I both own and have been a sta­ple of the port­fo­lio for a long time, they both fest up recent­ly to tak­ing too much Job­Keep­er and they’ve both returned a whole mess of Job­Keep­er back to the gov­ern­ment. Which is a good thing, but it real­ly only hap­pened because of the, I’m not sure what the law change was but I know the One Nation par­ty was behind it and the gov­ern­ment was deal­ing with them to have bet­ter trans­paren­cy of Job­Keep­er recip­i­ents and whether they actu­al­ly need the mon­ey or not. Won­der­ful­ly enough, ever since that was moot­ed and talked about and may even have passed par­lia­ment now, peo­ple have start­ed return­ing mon­ey to the gov­ern­ment. So, yeah. I guess kudos for CCP and San­tos for send­ing it back, and, maybe they just over­looked it for a while, while they were wait­ing to work out their num­bers or some­thing, but they may have been a bit slow at doing it.

 

Cameron [00:17:27] And you think One Nation’s dri­ving it?

 

Tony [00:17:30] Yeah, look I should have been bet­ter pre­pared before I start­ed talk­ing about it, but the gov­ern­ment was deal­ing with One Nation on a whole raft of issues and one of the things that One Nation asked for in the nego­ti­a­tion was a reg­is­ter of Job­Keep­er recip­i­ents to be set up, which the gov­ern­ment didn’t do, but they did say that there would be greater trans­paren­cy into who received what. And that’s caused, fun­ni­ly enough, a lot of income back to the tax office in the last few months.

 

Cameron [00:17:55] Wow. I mean, the whole fact that this isn’t trans­par­ent in the first place bog­gles the mind.

 

Tony [00:18:02] It does, doesn’t it? Espe­cial­ly with the dol­lars involved. I know we’ve just spo­ken about the sec­ondary effects of Job­Keep­er, so there is a valid argu­ment for some peo­ple that got Job­Keep­er and didn’t pass it all on to staff who were still down from COVID, and they used it to repay down debt, for exam­ple, and they could argue the com­pa­ny was in a much bet­ter posi­tion, there­fore, going for­ward, and they sta­bilise the com­pa­ny and that it maybe would not have gone for­ward with­out the Job­Keep­er mon­ey. But, it’s still no excuse for a non­trans­par­ent spend­ing of $60 bil­lion by the gov­ern­ment, I think any­way.

 

Cameron [00:18:32] Yeah, yeah I mean you would think that the pub­lic has a right to know who got the mon­ey. If the company’s want to argue that they deserve the mon­ey and they used it well, that is up to them to argue, but peo­ple should still know where that mon­ey went.

 

Tony [00:18:46] Yeah, and of course as peo­ple like Steven May point out, it wasn’t just to list­ed com­pa­nies, lots of pri­vate com­pa­nies got it, a lot of schools got it, a lot of high-end schools got it, a lot of golf cours­es got it. You know, a lot of organ­i­sa­tions you wouldn’t even think of as need­ing it got it. And pos­si­bly quite right­ly, but we’ll nev­er know.

 

Cameron [00:19:02] Mm. Well, I nev­er thought these words would come out of my mouth, but well done One Nation Par­ty.

 

Tony [00:19:12] Yeah, exact­ly.

 

Cameron [00:19:12] Next time I dri­ve up to Bund­aberg and I’m dri­ving past all of the Pauline Han­son bill­boards in coun­try Queens­land I will refrain from…

 

Tony [00:19:20] Give her a thumbs up.

 

Cameron [00:19:22] … refrain from throw­ing things at it and, ah, yeah. This one time, this one time I will not throw things at Pauline Hanson’s bill­boards. What’s hap­pen­ing with Beach Petroleum’s CEO?

 

Tony [0:19:36] Yeah so, no one real­ly knows but he resigned quick­ly recent­ly and is mov­ing on. Last time I had a look on the week­end, Beach was very close to its sell line, so I mean peo­ple may want to hold on and see what hap­pens if it cross­es its sell line or not, but cer­tain­ly the CEO resign­ing unex­pect­ed­ly is not a good look with Beach. I don’t own it, I don’t think it’s in our dum­my port­fo­lio, but I would be con­sid­er­ing poten­tial­ly to sell it based on that.

 

Cameron [0:19:59] So, uh, this is Mr Matt Kay, the CEO.

 

Tony [00:20:04] Yeah.

 

Cameron [00:20:05] And it was effec­tive imme­di­ate­ly. Chief Finan­cial Offi­cer Morne Engel­brecht will be assum­ing the role of act­ing CEO while a search is under­tak­en for a replace­ment. So, not a smooth tran­si­tion…

 

Tony [00:20:18] No.

 

Cameron [00:20:19]…. By the sounds of it.

 

Tony [00:20:20] No, and gen­er­al­ly, gen­er­al­ly — who knows what the rea­son is, they haven’t giv­en a rea­son, so, I don’t think they’ve even sight­ed fam­i­ly rea­sons as the rea­son they often do for an unex­pect­ed res­ig­na­tion or health rea­sons. Read­ing between the lines, and I’ll be care­ful what I say here, the largest share­hold­er in Beach Petro­le­um is the Stokes fam­i­ly, and there has been in some instances cas­es where CEOs have fall­en out of favour with them and they have a dis­agree­ment about the direc­tion of a com­pa­ny. You know, the rock meets the hard place and usu­al­ly it’s the hard place that leaves and the rock stays on in terms of being the major share­hold­er. Any­way, I don’t know what the rea­son is, we don’t know what the rea­son is, cer­tain­ly rais­es ques­tions about whether we should be hold­ing on to Beach ener­gy going for­ward.

 

Cameron [00:21:00] Mm, but at this point, you’re just going to keep an eye on it?

 

Tony [00:21:06] Yeah well it’s so close to the sell line it almost doesn’t need to sell right now, we might as well just wait and see if it cross­es. I haven’t checked it today, it may have even crossed it today.

 

Cameron [00:21:15] You hold it in your port­fo­lio?

 

Tony [00:21:17] I don’t, no.

 

Cameron [0:21:19] Alright, well for peo­ple who do hold it, have a think about it.

 

Tony [00:21:23] Yeah, it’s been on the buy list for a while. I’m just going to have a look at the graph for it now. Free­hand draw­ing of the sell line says $1.90, $1.10, and the price today is $1.24, so it’s get­ting down towards a sell. And it’s been a bit of a falling knife for a while, too, to be hon­est. Which is because of write-downs on reserves in the past, because again it’s a gas and oil com­pa­ny, so it should be on a tear­away a bit like San­tos, but it’s not.

 

Cameron [0:21:47] Well that might have some­thing to do with the CEO leav­ing.

 

Tony [00:21:49] Yeah, absolute­ly.

 

Cameron [00:21:51] FMG went up.

 

Tony [00:21:53] Yeah, so inter­est­ing­ly enough there was com­ments made at the AGM last week, you know, talked about the fact they were still export­ing, it was still prof­itable, but also talked up a lot about their Fortes­cue Future Indus­tries divi­sion which they’ve just set up, which will be fund­ed by 10% of the prof­its going for­ward. And, they’ve been mak­ing some inroads into hydro­gen but also into Lithi­um, and they were talk­ing up those at the AGM which seemed to be well received by the mar­ket and the share price went up. But it made me look at iron ore, which is still going down so it’s not iron ore which is dri­ving the Fortes­cue Met­als price up. I also looked at all the oth­er iron ore stocks, BHP and Rio didn’t seem to have the same sort of bounce at the same time. I did notice some of the small­er ones like Cham­pi­on Iron did do a slight rebound, but I think this is a bit of news. I’m still cau­tious about buy­ing back into iron ore stocks at the moment with the iron ore price still drop­ping, regard­less of what hap­pens with Fortes­cue and its lithi­um play, etc. etc. I’m not buy­ing back in just yet.

 

Cameron [00:22:55] Right, okay. Wait and see then.

 

Tony [00:22:58] Wait and see, yeah.

 

Cameron [00:22:59] Alrighty then, shall we get into ques­tions.

 

Tony [00:23:04] Yeah, or do you want to do stock of the week?

 

Cameron [00:23:05] Oh we haven’t done stock of the week. Yeah stock of the week, sor­ry.

 

Tony [00:23:07] It’s alright.

 

Cameron [00:23:08] What do you have for us this week,

Tony?

 

Tony [0:23:10] Yeah, small-cap is Atlas Pearls, ATP, which has been doing well late­ly. I’m not going to talk about the num­bers on that one, but peo­ple can have a look. Very small ADT of about $7,000 so will only suit peo­ple with a small port­fo­lio. And it’s basi­cal­ly a pearl fish­er­man, or pearl fish­ing busi­ness, based out of Indone­sia I think or Thai­land. Some­where in the South East of Asia. It came onto the buy list recent­ly and has been doing okay since then, so have a look at that if you’re after a small-cap to invest in.

The sec­ond stock, the large-cap is Super Group, SUL, and Super Group might sound like a bit self-aggran­dis­ing as a name, but it actu­al­ly has its ori­gins back in a com­pa­ny called Super Cheap Auto, which par­tic­u­lar­ly Queens­lan­ders will know about because it was a Queens­land com­pa­ny orig­i­nal­ly. Inter­est­ing his­to­ry, it start­ed off in the ear­ly 70s as a mail-order parts busi­ness from the kitchen of a home in the Gold Coast. A guy called Reg Rowe from mem­o­ry set it up in ‘72 in Queens­land. And then even­tu­al­ly that got big enough as a mail-order busi­ness that he set up some stores, they were called Super Cheap Auto. That kind of became the Office­works, maybe the Bun­nings, of car parts par­tic­u­lar­ly in Queens­land, and were very very suc­cess­ful at sell­ing bits and pieces for cars and parts for cars at good prices. They expand­ed well, and then even­tu­al­ly start­ed to diver­si­fy away from the auto­mo­tive indus­try and they bought out Rebel Sports a cou­ple of years ago and then got into camp­ing with ECF camp­ing and Mac­Pac. So because of those oth­er acqui­si­tions, they changed their name from Super Cheap Auto to Super Group, or Super Retail, Super Group. So, inter­est­ing com­pa­ny.

The num­bers, the QAV num­bers, it has a QAV score of 0.17, so it’s not at the top of our list, but a lot of these big com­pa­nies ‑large-cap com­pa­nies- are towards the bot­tom of our list. So the 0.17n is a rea­son­able score for it. It does have an aver­age dai­ly trans­ac­tion of $9.5 mil­lion so it can suit, you know, all of our lis­ten­ers this one. And I should say, it suits me because I own them. I bought them a cou­ple of weeks ago. They came onto our buy lists again recent­ly. They became a Star Stock in the last sort of five or six weeks as well, so ever since their last results came out they’ve been doing well. I’m going to base my num­bers on the share price yes­ter­day at 1$13.19, which is 14th Novem­ber. At that price, they were just under the con­sen­sus bro­ker price tar­get and also Stock Doc­tors IV, so the QAV check­list gives them scores for that. The oth­er thing that’s inter­est­ing about this com­pa­ny is that it has a high yield, so 6.7% yield, so we score it well for that. Also, inter­est­ing­ly enough, it has a return on equi­ty of 27%, which is not some­thing I nor­mal­ly pay atten­tion to, but it does kind of give us con­text for retail-type com­pa­nies. The net tan­gi­ble assets for this com­pa­ny is only $1.59 if you remem­ber the share price is $13 in change.

So one of the things that hap­pens with these kinds of com­pa­nies is they gen­er­al­ly don’t own their stores or the land that their stores are on, and so there­fore their assets are basi­cal­ly the fit-outs in the stores and what­ev­er stock is pass­ing through at the time. Which, because of that, means that the equi­ty is low­er than if they did own all their own land, and there­fore the return on equi­ty is high­er. So, that’s just a way that man­age­ment in the retail space has played with num­bers for a while because peo­ple chase high ROE com­pa­nies, they get out of prop­er­ty and that inflates the ROE. Not nec­es­sar­i­ly a bad thing, there’s cer­tain­ly an argu­ment to be made to say that retail­ers are in the busi­ness of sell­ing things and not invest­ing in land, but the con­trary argu­ment is that retail­ers know a lot about com­mer­cial prop­er­ty because they have to, because they’re nego­ti­at­ing leas­es and pur­chas­es all the time in the area. So, it’s a sort of swings and round-a-bouts sto­ry that one. But def­i­nite­ly, a good ROE doesn’t score for us on the price to book ratio though because of that. Good prop/caf, price to oper­at­ing cash flow of five times which is if you think about the sort of sta­bil­i­ty of this busi­ness that’s, and the cash flow­ing through it, that’s a real­ly good val­ue pur­chase for us. It’s slight­ly above our IV 1, slight­ly less than our IV 2 which is $15.38, but not half IV 2 so it only gets one point for that. Inter­est­ing­ly enough, the fore­cast EPS is down, so when I do the yield over the PE I get a neg­a­tive num­ber. But I think that the rea­son the fore­cast EPS is down is because of COVID, so the fore­cast EPS will refer to the end of the finan­cial year, which is the mid­dle of next year, or maybe one month lat­er, I’m not sure when Super Group reports but often retail­ers are a Jan­u­ary and July.

Any­way, that’s the time peri­od, and that means that a lot of the first half for New South Wales and Vic­to­ria any­way, the stores were closed, so the full year’s EPS will prob­a­bly be down. I think most peo­ple are look­ing through that and try­ing to get a feel for the com­pa­ny on a busi­ness as usu­al basis and so they’re for­giv­ing it for that drop in EPS. And cer­tain­ly, the share price has been ris­ing since COVID so it’s doing well for that.

The oth­er good thing that scores well for us is that the orig­i­nal founder is still hold­ing a large part of the com­pa­ny. So director’s hold 29% of this com­pa­ny, even though it’s got a $3 bil­lion mar­ket cap, Mr Rowe is still sit­ting on $750 mil­lion — $1 bil­lion worth of shares in the com­pa­ny, in the com­pa­nies, and he’s still on the board. He was the orig­i­nal man­ag­ing direc­tor and then became chair­man and is now a direc­tor on the board. So that’s a good sign I think.

In terms of the man­u­al­ly entered data, it is trad­ing on its low­est PE for the last three years, but its equi­ty hasn’t always been con­sis­tent­ly increas­ing so it’s 0 for that. All up, it gets a qual­i­ty score of 86% and as I said before a QAV of 0.17.

 

Cameron [00:29:00] Alright, thank you for that. Super Cheap Auto. I’ll go in on the week­end and buy some more new car mats, just to check the place out again, give it the sniff test. Alright, let’s get into ques­tions. First one this week comes from Reg, Reg says…

 

Tony [00:29:20] Oh, maybe it’s Reg Rowe, the founder of Super Cheap Auto.

 

Cameron [00:29:25] Oh, maybe it is, wel­come Reg. No, I think it’s ASA Reg. “As a rel­a­tive new­bie, I’ve still got all sorts of ques­tions whizzing around in my head, so I hope the ones I pose are not dumb or haven’t been asked before.” No such thing as dumb ques­tions, Reg.

 

Tony [00:29:41] Mm-hmm.

 

Cameron [0:29:43] They’re all good. Even if we’ve answered them before, it’s a good reminder. I need to get remind­ed of things reg­u­lar­ly, as my wife often tells me.

 

Tony [00:29:52] And I get to change my sto­ry, as well.

 

Cameron [00:29:57] Yeah. Go “What? The buy line fol­lows the sell line, no I nev­er said that. We’ll just cre­ate a new buy line.”

“Just won­dered if there was any evi­dence if you’re want­i­ng to buy that it might be more ben­e­fi­cial to buy from the list of new buys for that week as opposed to new stocks that have been on the buy list for a num­ber of weeks?” What are your thoughts,

Tony?

 

Tony [00:30:19] Yeah, I thought that was a real­ly good ques­tion, I don’t have the research to answer it, but I will add to my list and have a look. Gen­er­al­ly, buy­ing from the top down for me has worked best over the years, and I don’t pay atten­tion to whether something’s a long way above its sell line or its been on the list for a long time. What I do find is that com­pa­nies do stick on the buy list for a long time, and com­pa­nies like Super Group go on and off, but they’ve been a part of my port­fo­lio on-and-off now for a very long time. Sort of 15–20 years. So yeah, there are sort of, I won’t call them peren­ni­al val­ue com­pa­nies, but I guess com­pa­nies which are usu­al­ly under­val­ued by the mar­ket for what­ev­er rea­son, but they’ve been good invest­ments for me. So I’m not scared about buy­ing some­thing which has been on the list for a while, but I cer­tain­ly haven’t done that piece of research Reg and I think it’s a real­ly good idea and I’ll get back to you with the num­bers once I crunch some.

 

Cameron [00:31:08] The oth­er side of that sto­ry is I think when some of the stocks like the banks or Mac­quar­ie, I guess also a bank, some of those big com­pa­nies that end up on our buy list which aren’t nor­mal­ly on our buy list because they’re nor­mal­ly over­val­ued, they end up in our buy list. Nor­mal­ly that’s pret­ty excit­ing though, they come in, they come in low…

 

Tony [00:31:31] Yeah.

 

Cameron [00:31:31] …You say they won’t be around for long.

 

Tony [00:31:33] Yeah, gen­er­al­ly for at most six months. Like NAB, came on and went off with its next results, and there’s been oth­er com­pa­nies like JB HiFi comes to mind, which sort of just get onto the bot­tom and then they leave. So yeah, we do have to be aware of that, par­tic­u­lar­ly if you have a need for large ADTs like I do. But gen­er­al­ly, I’ll still buy from the top-down of the large ADT stocks I don’t own.

 

Cameron [00:31:56] Well speak­ing about Mac­quar­ie, I think this next ques­tion from Jere­my and Allie and a few oth­er peo­ple were ask­ing about this, and they’re all — you know, because Mac­quar­ie we talked about I think last week, I end­ed up adding Mac­quar­ie to my port­fo­lio last week, but if you look at the chart it’s going through the roof right now — and Jere­my asked, this is on Face­book: “Any­one else strug­gle to buy shares at all-time highs or year­ly high? It’s inter­est­ing psy­chol­o­gy for me. On the one hand, highs are good, the stock is head­ing in the right direc­tion, but I also fear peo­ple will take prof­its and the rug gets pulled.”

Allie in a sep­a­rate thread, but sim­i­lar intent I think, said “If I’m look­ing at C6C on the Bret­ta­la­tor, it’s num­ber 25 on this weeks buy list but it’s way above its buy line, which it crossed ages ago, is that graph about ready to have anoth­er buy line drawn, and what do I think about it in the mean­time? There are oth­ers in this weeks list that are sim­i­lar though not as pro­nounced. So, yes, if it’s got a good QAV score and it’s above the buy line, might

Tony buy any­way, even though it’s been above the buy line for a long time and it’s going up sharply on the right.” I have to admit, I looked at the MQG, I was look­ing for some­thing, I need­ed a high ADT stock to add to my Super port­fo­lio. MQG was the next in the list, there wasn’t a Josephine, and I looked at the chart and was like “oh, shit”, like, you know, there is this psy­chol­o­gy as Jere­my said where you know, part of me goes “well, it can’t keep going up” — remem­ber you told me once, “no tree grows to the sky” or some­thing…

 

Tony [00:33:29] Cor­rect, yeah.

 

Cameron [00:33:30] But it was the next one on the list, so I bought it any­way. But, do you have any thoughts on that sit­u­a­tion?

 

Tony [00:33:39] Well, me too, I own Mac­quar­ie Group since its last results came out. Yeah, whilst it’s true no tree grows to the sky, we don’t know when that will actu­al­ly stop grow­ing which is why we have our three point sell line, you know, for­mu­la. For com­pa­nies like Mac­quar­ie, etc. we don’t have the ben­e­fit of the under­ly­ing com­modi­ties which is dif­fer­ent to C6C, which was part of Alley’s com­ments. So, no, I just fol­low the rules. Let me pose some ques­tions: If you had bought Mac­quar­ie Group when it was much low­er, and were still a share­hold­er today, would you sell because it is going up? Or would you hold it?

 

Cameron [00:34:11] Well I would hold it, but that’s only because you tell me to water my flow­ers and pull my weeds, but…

 

Tony [00:34:19] Cor­rect.

 

Cameron [00:34:19]… but we’ve had plen­ty of oth­er guests, pro­fes­sion­al investors on the show that talk about rebal­anc­ing when things go up. They go “ah, it’s time to get out.”

 

Tony [00:34:28] Yeah, look, that’s, you know I don’t like rebal­anc­ing although I am run­ning a test at the moment on that. What I’m look­ing at for rebal­anc­ing is for when things drop below a score of 0.05 on our QAV score, and Mac­quar­ie Group is nowhere near that score although it has been in the past. So, I did sell out and buy back in. That aside, it’s, you know, the quote that comes to mind is the War­ren Buf­fet quote: “if you own Michael Jor­dan, would you bench him because he’s had a good year?” And the answer is no, of course. We have rules around when to sell these stocks, and we can’t pre­dict when they’ll turn, so we wait for them to actu­al­ly turn before we sell them. You know, as for things like C6C, the ben­e­fit, well I guess one of the added ben­e­fits of own­ing com­mod­i­ty stocks, is that you can look at the under­ly­ing com­mod­i­ty and we did sell C6C from our dum­my port­fo­lio because the cop­per com­mod­i­ty price turned, and so we have the ben­e­fit of being able t trade a stock like C6C based on cop­per. So that was just as, prob­a­bly more per­ti­nent, to C6C’s price graph than C6C itself. You could’ve still held onto C6C. You would’ve gone down a bit in the last six months, and now you’re going back up again. That’s the oth­er dimen­sion I guess, if some­thing has a very low sell line it’s prob­a­bly going to stay on or in our port­fo­lios for a long time so we may have to weath­er peri­ods of down­turn while we wait for a new sell line to be drawn. So there’s that angle of it. But I don’t dis­tin­guish between those which are way above their buy lines and those that are close. In fact, I think it’s riski­er if they’re clos­er to their buy line because, you know, sort of a mar­ket gyra­tion, a 10% drop in the share mar­ket might see us sell­ing out of it. Where­as, if it was like a Mac­quar­ie bank way above its sell line, we’d still be hold­ing onto it and rid­ing out that 10% cor­rec­tion. And like­wise, if a com­pa­ny just goes above its buy line, there have been plen­ty of cas­es where they peak above, I buy them, they drop back again, which is not good because they’re below their buy line. We have to decide whether to keep them or sell them. The last point I’d make to Allie is that C6C has just actu­al­ly redrawn its buy line, so it’s this con­cept of the sec­ond buy. The Bret­ta­la­tor has the buy price when the share price graph took off, which is what it should be doing, the buy line fol­low­ing the sell line, but you can use the old rules, or not the old rules, the basic rules of H1 and H2 being the high­est and sec­ond-high­est points on the graph and draw­ing that oth­er buy line for a com­pa­ny like C6C, which gives us what I’ll call the sec­ond buy line, and just through dis­cus­sions with Brett recent­ly and look­ing at some minor code changes to the Bret­te­la­tor I’ve kind of come to realise that that sec­ond buy line is telling us that stock is no longer a Josephine. So if you look at the C6C graph it got to its highs and then it dropped back again when the cop­per price became a sell, and so it was like in a falling knife sit­u­a­tion there for a while, and now it’s rebound­ing as copper’s become a buy again. And you can redraw a buy line even though there hasn’t been a sell for a long time, and that to me is say­ing it’s the end of a Josephine and it’s time to safe­ly buy back into that stock.

 

Cameron [00:37:17] Regard­less of the cop­per price?

 

Tony [00:37:20] Well no, we always use the cop­per price. The cop­per price is back to being a buy again. So that was the turn­ing point for C6C. But I’m just say­ing Allie raised a ques­tion that it was close to its, to being able to redraw a buy line. I think now you can redraw the buy line for C6C. When I’ve seen this hap­pen in oth­er com­pa­nies like Fortes­cue met­als comes to mind, that sort of redraw­ing of the buy line is the end of a slight down­turn on the way up, on the road up, and it’s the end of it being a Joe­sphine and you can sort of start to look at buy­ing again.

 

Cameron [00:37:51] Right. Okay. Thank you,

Tony, I’m just play­ing around with the C6C chart, hav­ing a look at where I would draw these things, yeah right. Okay. Good stuff. We did very well out of that, I seem to recall C6C was one of our bet­ter stocks.

 

Tony [00:38:07] Yeah, it’s a great stock, isn’t it?

 

Cameron [00:38:09] Alright, Samuel. This is the last ques­tion for this week. Only three ques­tions, have an ear­ly night. Pull out that three fin­gers.

 

Tony [00:38:17] Yeah.

 

Cameron [00:38:18] Samuel: “Bon­jour, Cam and TK, I have a ques­tion for next week if I may. I refer to the KRM share which was stock of the week in Sep­tem­ber, had a look at it and formed an opin­ion and after the last report, the mar­ket react­ed pos­i­tive­ly so I took a posi­tion. It’s been doing well, so once again, thank you for men­tion­ing it. My ques­tion is about the risk asso­ci­at­ed with their busi­ness. Fol­low­ing their announce­ment I had a clos­er look at them and notices the deal involves most­ly explo­ration, which I know lit­tle about, and sounds risky to me. They do pro­vide a huge amount of geo­log­i­cal assess­ment, which I don’t under­stand. Their future revenue’s not look­ing flash, with gold pro­duc­tion about to end, and they make no secret about that, so I feel like I’m not own­ing a gold or nick­el pro­duc­er but an explo­ration com­pa­ny where the investor is buy­ing the prob­a­bil­i­ty of future dis­cov­ery. In this case, I feel the report­ed fig­ures, annu­al and quar­ter­ly reports are only show­ing the past and not a reflec­tion of the future. Does TK have any par­tic­u­lar view on the con­sis­ten­cy and reli­a­bil­i­ty of explo­ration com­pa­nies and the unusu­al risk asso­ci­at­ed with them? Mean­while, since I feel I’m exposed to risk well above my com­fort lev­el, I will prob­a­bly sell while I’m ahead as the beast has been very volatile.”

 

Tony [0:39:29] Well I hope, I hope he hasn’t sold them today, because they’re up like 11% or 12%. Look, they’re all good points. Part of my answer harks back to last week, which is to say apply the sys­tem, don’t try to pre­dict. I’m not an expert on gold mines, I think most of our lis­ten­ers wouldn’t be. There’s prob­a­bly a cou­ple out there who would know much more about it than I do. But that’s pret­ty much what you could say about every stock I invest in. Apart from the fact that I’ve been, you know, an occa­sion­al cus­tomer of Rebel Sport or I have a mort­gage with a bank and things like that. We’re not real­ly, the game we’re play­ing is not to be a ver­ti­cal expert on one indus­try or one com­pa­ny, it’s to be a hor­i­zon­tal expert on how to use fig­ures to base our invest­ment deci­sions. So, I total­ly get the point though that was made about the fact that this com­pa­ny is tran­sit­ing from one stage of its life, and throw­ing off lots of cash because it’s a gold min­er, and it’s going into a new phase of its life when the gold life, or the mine life, is com­ing to an end and it’s turn­ing into an explor­er. But again, all I can say is that my expe­ri­ence is to still let sen­ti­ment be the guide on that one. This hap­pens quite reg­u­lar­ly with mines, and I’m think­ing that prob­a­bly the biggest and most recent exam­ple is Sand­fire which is the large-cap cop­per min­er who every­body knew was com­ing to the end of its DeGrus­samine life, which was its big cop­per mine in Aus­tralia, and it start­ed doing, did explo­ration around DeGrus­sa, but also decid­ed to do acqui­si­tions and buy big mines over­seas and raise new cap­i­tal. So that could also be in the future of Kingrose, KRN. And I think that’s what’s dri­ving the share price rise today, some M&A activ­i­ty that’s going on. The share price from now on will be large­ly news-dri­ven. I’m trust­ing in the fact that the com­pa­ny has a ton load of cash sit­ting on its bal­ance sheet and moti­vat­ed man­age­ment to keep the oper­a­tion going for as long as pos­si­ble so they don’t lose their jobs and keep their bonus­es, etc. So yes, while it might feel uncom­fort­able because you are tran­si­tion­ing from one type of com­pa­ny to anoth­er, it’s my expe­ri­ence that these things gen­er­al­ly work out. I wouldn’t say nec­es­sar­i­ly always pos­i­tive­ly, because if you look at Sand­fire it went down before it come up, and there’s a cap­i­tal rais­ing so you have to decide whether you want to par­tic­i­pate in that, but gen­er­al­ly, the fact that we’re in a min­er that has lots of cash on its bal­ance sheet is a good thing. And the fact that we have moti­vat­ed man­age­ment to deploy that cash to keep their jobs is a good thing, and so that’s what I’m trust­ing in real­ly.

 

Cameron [00:41:51] It’s fun­ny, I think I said to Sam on Face­book I think

Tony will say trust the man­age­ment, see what they do.

 

Tony [0:42:02] Yeah and if we get it wrong, I mean, we’re going to be the last to know. The share price will drop through its sell line. So set your alerts and pay atten­tion to that, but we’re large­ly going to be sen­ti­ment dri­ven until the com­pa­ny enters into anoth­er stage of its life. Which, you know, based on some of the news com­ing out today might be to acquire anoth­er mine.

 

Cameron [00:42:19] And I’ll just add, like, with all due respect to Sam, you know, obvi­ous­ly very smart, he’s get­ting down into the weeds and look­ing at the details. But hav­ing done this show for near­ly three years with you, peo­ple ask these ques­tions from time to time, “well what about this aspect of their busi­ness? And what about that aspect of their busi­ness?” And your answer every time has been pret­ty much the same thing. It’s just basi­cal­ly a vari­a­tion of, you know, you’re think­ing too hard.

 

Tony [00:42:43] Yeah.

 

Cameron [00:42:43] Look at the num­bers, stay out of the weeds, you know just fol­low the process. Stop think­ing too hard. There’s no part of the QAV process that says get down into the nit­ty-grit­ty micro-details of what’s going on with this busi­ness. If

Tony want­ed you to do that, it would be in the check­list and in the Bible.

 

Tony [00:43:06] Cor­rect.

 

Cameron [00:43:06] If It’s not in the check­list or the Bible, it gets back to what I said last week; it’s great that you’re doing that think­ing and if you’ve got noth­ing bet­ter to do with your time, but that’s not part of QAV’s process.

 

Tony [00:43:20] No.

 

Cameron [00:43:20] We just look at the num­bers.

 

Tony [00:43:21] Yeah, and look, I don’t blame Samuel for sell­ing some­thing he’s not com­fort­able with. I ful­ly get that, that’s fine. But if he has sold, it didn’t say he had, but if he has sold, please sell some more, because the stock price is going up. So, for every­body who is still in it, they’d love you to sell some more Samuel.

 

Cameron [00:43:38] Maybe Samuel’s the new

Cameron.

 

Tony [00:43:40] Yeah, right. And you know what? That’s part of the psy­cho­log­i­cal game we’re play­ing. You’ll always have these ques­tions thrown at you by the com­pa­nies we invest in and by the mar­ket, you can’t pos­si­bly know all the answers, so you don’t try to answer them, you just keep apply­ing the sys­tem. We know that the sys­tem works.

 

Cameron [00:43:59] I got an email from a new sub­scriber the oth­er day, who asked about debt to equi­ty, “why isn’t debt to equi­ty list­ed in the check­list?” And I said, well, it’s kind of fac­tored into the Stock Doc­tor finan­cial health rat­ing, so we just let them do the work for us. But the same is true for all of the oth­er num­bers like the con­sen­sus val­u­a­tions, those sorts of things. There are indus­try experts out there, well ana­lysts, who are paid to go deep, do deep dives into the sec­tor, into the indus­try…

 

Tony [00:44:32] Yeah.

 

Cameron [00:44:34] … into what the com­pa­nies going, and they come up with their con­sen­sus val­u­a­tions for all these things, and then we just look at the con­sen­sus val­u­a­tion and give it scores based on the con­sen­sus val­u­a­tion.

 

Tony [00:44:44] Yes.

 

Cameron [00:44:44] So we don’t need to do all of that, oth­er peo­ple are doing that and we look at their work, and you’re just tak­ing a macro view of the expert’s views on all these sorts of indus­try-relat­ed or busi­ness-relat­ed per­for­mance issues so you don’t have to, right.

 

Tony [0:45:05] Yeah, and that’s why sen­ti­ment is so impor­tant because a lot of that sen­ti­ment is dri­ven by the ver­ti­cals; the peo­ple who, day-in day-out, will analyse one par­tic­u­lar sec­tor. Bank­ing, gold mines, what­ev­er it is, they’ll do the deep dive. They’ll do the man­age­ment inter­views. They’ll form opin­ions, and then they’ll move large amounts of mon­ey around with their super funds or indus­try funds or large man­aged funds, list­ed invest­ment com­pa­nies or what­ev­er, and that will change sen­ti­ment. So, a tra­di­tion­al val­ue investor in the War­ren Buf­fet mould will say don’t buy it if you don’t under­stand it and buy every­thing that’s going down, but I just found that was too hard for me, you know, as some­one who was work­ing at the time and set­ting all this stuff up to be able to then also go and meet with man­age­ment and ask them ques­tions and meet with the com­peti­tors and ask them ques­tions and key cus­tomers, and all the rest of it. Couldn’t do it. But what I could do is, we’re lucky, I’ve rid­den the tsuna­mi almost of data that’s become avail­able to retail end users because of the inter­net. You know, back in, when I start­ed off doing my own invest­ing, I used to have to buy an annu­al book from Huntley’s Mon­ey Week­ly of one page per com­pa­ny of all their num­bers for their results. Their annu­al results were sum­marised down into, like, the front page of Stock Doc­tor type thing. And do all the analy­sis by hand. And so, we’ve moved from that, from like tele­phone books of annu­al reports sum­maries through to being able to find out almost any­thing, any­where at any time. And, it’s through that kind of evo­lu­tion process that I‘ve been able to put togeth­er the check­list and do it at that kind of macro-lev­el, not the micro-lev­el.

 

Cameron [00:46:34] Yeah, and it plays to some­thing I talk about on a lot of my oth­er shows. This issue of epis­te­mol­o­gy and heuris­tics, you know, which I think are very impor­tant in try­ing to nav­i­gate your way through dif­fi­cult top­ics where you can’t be an expert. I can’t be an expert. I can’t be an expert on epi­demi­ol­o­gy and what’s going on. Hav­ing debates with peo­ple about Iver­mectin and whether Iver­mectin is a good COVID cure, and go well “lis­ten, I’m not an epi­demi­ol­o­gist, I can’t be an expert, to what’s my heuris­tic? How do I know what’s like­ly to be true? What’s my heuris­tic, and where am I going to turn to to get that infor­ma­tion?” I need to let the experts do the work for me, and then I look at what the experts are say­ing and say “okay, well that doesn’t nec­es­sar­i­ly mean that the experts are right, doesn’t nec­es­sar­i­ly mean that Stock Doctor’s ana­lysts are right, or the fund man­ag­er ana­lysts are right, but they’re the peo­ple that are ded­i­cat­ing their lives to work­ing this stuff out, so I’m just going to use that as my heuris­tic.

 

Tony [00:47:41] Yeah, Cor­rect. And they’re more right than wrong, oth­er­wise, they’d lose their jobs. We can put some ele­ment of trust in them. But I think the oth­er dimen­sion to the stock mar­ket, which is even dif­fer­ent to trust­ing med­ical research, or what­ev­er, is the mar­ket just moves so quick­ly on infor­ma­tion. So once the idea is out there that this is hap­pen­ing to this com­pa­ny, the share price will react like that *snaps fin­gers* and in fact, it’s also a bit of a fore­cast­ing engine and peo­ple like Roger Mont­gomery and Jeff Wil­son will say that the mar­ket casts a shad­ow, and its usu­al­ly about nine months into the future. So the market’s try­ing to posi­tion itself to what’s going to hap­pen down the track. It’s a bit of a for­tune-telling machine I guess, which is one of the rea­sons why it does get things wrong because you can’t do that real­ly. But, you know, if peo­ple haven’t read the book “Wis­dom of Crowds”, it’s fan­tas­tic. One of the key exam­ples of that was when the space shut­tle Chal­lenger blew up with­in eight min­utes, I think it was. The man­u­fac­tur­er of the o‑ring that froze and didn’t expand when it should’ve and caused the petrol to mix to ignite when it shouldn’t have, was basi­cal­ly bank­rupt. The shares dropped on the mar­ket dra­mat­i­cal­ly. Eight min­utes it took to work out what was wrong with the Chal­lenger before NASA did. And NASA was still going on TV days lat­er say­ing we don’t know what hap­pened. The share mar­ket did. So, yeah, when you get a lot of smart peo­ple who are paid to under­stand things, they’ll move quick­ly and they’ll get their mon­ey out or they’ll get their mon­ey in as quick as they can. And so the share mar­ket is actu­al­ly a real­ly good infor­ma­tion trans­fer vehi­cle. So, when we talk about sen­ti­ment, it’s a pret­ty trust­wor­thy com­po­nent to our invest­ing.

 

Cameron [00:49:23] Alright. That’s Q&A for this week. After hours, we fin­ished White Lotus last night. The series, I think it’s on Net­flix, maybe Binge, a real­ly good lit­tle series if you’re look­ing for a good short series.

 

Tony [00:49:41] Yeah, thanks.

 

Cameron [00:49:42] About a bunch of rich white peo­ple who go to Hawaii, stay at a hotel and all of the machi­na­tions and ins and outs between them and the hotel staff. Just rich white peo­ple prob­lems. And, uh, I watched a film the oth­er day, we watched a film on the week­end. I was forced into it by Hunter, called Whiplash, with JK Sim­mons.

 

Tony [00:50:05] The drum­ming one?

 

Cameron [00:50:08] Yeah, you seen that?

 

Tony [00:50:09] A long time ago, yeah.

 

Cameron [00:50:10] Yeah, it’s four or five years old. Good, but yeah fun­ny like our dif­fer­ent per­spec­tives on it. Hunter thinks it’s the great­est film of all time and that JK Sim­mons char­ac­ter in it, the teacher, Fletch­er, basi­cal­ly was a good guy. Yeah sure, he was mean, cru­el…

 

Tony [00:50:31] A drill sergeant, yeah.

 

Cameron [00:50:33] Yeah, well it was basi­cal­ly like Full Met­al Jack­et but you know in a music school, right? Where­as my view was no, there’s no excuse for psy­chopa­thy. The guy was a com­plete psy­chopath. He forced one of his stu­dents to sui­cide, he was destroy­ing stu­dents left, right and cen­tre. The fact that he might pro­duce a good musi­cian some­where along the line out of those sorts of tac­tics, in my book, is straight out of the Psy­chopath Epi­dem­ic, right?

 

Tony [00:50:58] Yeah.

 

Cameron [00:50:58] Psy­chopaths may deliv­er pos­i­tive out­comes from time to time, but the net is they tend to do far more dam­age to peo­ple and soci­ety I think than they do good. Hunter and I end­ed up hav­ing this mas­sive debate over break­fast on Sun­day morn­ing. He’s like, “nah you’re total­ly wrong, this guy was the great­est.” I was like, “dude, you just haven’t worked for enough psy­chopaths yet.”

 

Tony [00:51:26] Yeah.

 

Cameron [00:51:27] Go out there and work for psy­chopaths for 30 years then tell me that their tac­tics are jus­ti­fied.

 

Tony [0:51:32] Yeah, and be yelled and screamed at for weeks on end while you’re try­ing to do your job, and learn. See how you like it.

 

Cameron [00:51:37] And not just you, every­body. Like I saw this at Microsoft. I saw lots of real­ly good, smart peo­ple leave because they end­ed up work­ing for a psy­chopath and they were like, life’s too short, I’m just going to get out of here.

 

Tony [00:51:51] Yeah.

 

Cameron [00:51:51] I don’t think that’s, I don’t think it’s a good man­age­ment approach.

 

Tony [00:51:56] No, and it’s often the approach of some­one who feels threat­ened by smart peo­ple under­neath them to belit­tle them and make life hell for them, yeah.

 

Cameron [00:52:06] Yes, I agree, I said to Hunter like okay, so JK Sim­mons char­ac­ter, what if he’d tak­en the young drum­mer guy ear­li­er on and said lis­ten, you’ve obvi­ous­ly got a lot of tal­ent. You’ve obvi­ous­ly worked very hard to get to this point. You’re obvi­ous­ly very pas­sion­ate. You’re not quite good enough to be in my band right now. Tell you what, go train for ten hours a day for the next thir­ty days, come back and have anoth­er crack at it. If you have any ques­tions, any­thing I can do to help, this is my email address, this is my phone num­ber, give me a call. I’m here to help. But you know, right now you’re not going to cut it. But go away and train. Would that not have the same effect as swear­ing at the kid, and mak­ing fun of his moth­er leav­ing him when he was a child, and you know, scream­ing and yelling and vio­lence, and throw­ing things. Smash­ing chairs against the wall.

 

Tony [00:52:59] Yeah, it’s not on, is it? I remem­ber I had a clas­sic case of that when I was about 15. I was in the Air Train­ing Corps, the air cadets. We’d get tak­en up to Amber­ley

every year to fly around in heli­copters and planes and things. Any­way, but most of it was just being marched around the drill square learn­ing how to parade and all that crap. And after three or four days of this, there was an old guy who came in and took us for a ses­sion, and just sat us all on the ground and told us a sto­ry. He said “you guys know how to march, I’m not going to drill you. You are going to prove that to me at the end, we’ll get up and do it once.” And we all just went, “oh this guy is the best, he’s so good.” We’d do any­thing for him.

 

Cameron [00:53:] Right, yeah.

 

Tony [00:53:38] And after he’d fin­ished his sto­ry, he said “okay, show me how you do it”, every­one did it per­fect­ly, he said “right, dis­missed.” And like, that’s the one per­son I remem­ber from my whole time being trained in the Air Cadets.

 

Cameron [00:53:50] Yeah, look I can under­stand though from a mil­i­tary per­spec­tive, you know a large part of the mil­i­tary cul­ture is to break down people’s per­son­al­i­ties and turn them into war machines who don’t ques­tion. But that’s not how you, that may work in the mil­i­tary, but it’s not how you cre­ate great artists or great employ­ees and work­ers I don’t think.

 

Tony [00:54:13] And look, I’ve had boss­es who in my cor­po­rate days were ex-mil­i­tary and I always tried to avoid them because they were always, even if they came across nice­ly, under pres­sure they’d revert to type and start yelling and scream­ing and shout­ing, expect­ing every­one to sit up straight and march to orders. They were just the worst.

 

Cameron [00:54:29] Com­mand and con­trol. Yeah, the guy that prompt­ed me to leave Microsoft was an ex-mil­i­tary guy, It was the exact same sort of thing, you know, just try­ing to crush any oppo­si­tion in his path.

 

Tony [00:54:39] Yeah, which is why I’m a share investor and not still work­ing in cor­po­rate, because who needs that kind of grief, right?

 

Cameron [00:54:45] Yeah, yeah exact­ly.

 

Tony [00:54:47] Tell me about The Many Saints of Newark. You went to see that.

 

Cameron [00:54:49] Did go see that, didn’t have high expec­ta­tions for it. For peo­ple who don’t know, this is the pre­quel film to The Sopra­nos. Chris­sy and I both actu­al­ly enjoyed it, not that it’s per­fect, it has some flaws, but for a two-hour film. You know, if you think of it as a stand­alone film, I think, and you don’t think of it as a Sopra­nos pre­quel, it holds up pret­ty well. And there’s cameos of the younger ver­sions of char­ac­ters that you know from The Sopra­nos. The guy who does Sil­vio does a spot-on imper­son­ation of a young Sil­vio, it’s just glo­ri­ous. The young Pauly Wal­nuts didn’t have as much to do as I would have liked. Vera Famil­iar who’s doing young Livia Sopra­no gets in a cou­ple of good scenes, but again, not as much as I would have liked. Michael Gan­dolfi­ni does a great job as a young Tony Sopra­no, but again he’s not in it a lot. It’s real­ly a film about Dicky Molti­san­ti, Christopher’s father, which is kind of irrel­e­vant real­ly to The Sopra­nos except that he’s sort of an old­er men­tor to Tony which then Tony obvi­ous­ly becomes for Christo­pher after his father dies. Ray Liot­ta does a great job in it, I mean the cast were great. It was a rea­son­ably good film. I would have liked to have seen more of what hap­pens next.

 

Tony [00:56:17] Right.

 

Cameron [00:56:17] Like I think, from where that film ends to where The Sopra­nos starts. Like how did Tony, because at the end of the film is when Tony decides he’s going to become a gang­ster. But I want to see young Paulie, young Sil­vio, young Tony, you now all these guys, make their bones and come up through the ranks.

 

Tony [00:56:38] Yeah. Yeah, right.

 

Cameron [00:56:40] You know, there’s not a lot of Johny Sopra­no, Tony’s dad played by John Bern­thal. He’s in it, but he’s in prison for a lot of it so you don’t real­ly see him. That’s the rea­son

Tony’s close to Dicky Molti­san­ti because, oh the guy who plays Uncle June…

 

Tony [00:56:55] Yeah, I was going to ask you about him.

 

Cameron [00:56:57] Oh, he does a great job. He’s quite a big role in it. He does Uncle June to per­fec­tion, includ­ing Uncle June’s favourite swear­ing, which I prob­a­bly can’t say on this pod­cast, but he gets that in four or five times in the course of the film. It’s real­ly good. So yeah, we enjoyed it, yeah. It’s not going to be a clas­sic. I think a big prob­lem for a lot of crit­ics is prob­a­bly it isn’t, you know, it doesn’t reach the bench­mark of The Sopra­nos. Like prob­a­bly one of the, if not the great­est tv shows of all time.

 

Tony [00:57:38] Yeah.

 

Cameron [00:57:39] It’s not the great­est film of all time, it’s not even in you know the upper ech­e­lons. But it’s a good film, it was enjoy­able and worth a watch for a Sopra­nos fan def­i­nite­ly, I think.

 

Tony [00:57:49] Yeah, good. Okay. Well, we watched a lot of dreck in the last cou­ple of weeks. Prob­a­bly the dreck­i­est was one called The Come­back Trail with, speak­ing of gang­sters, Robert Deniro play­ing a com­e­dy role. And he does ter­ri­ble slap­stick com­e­dy. He’s tried it before, and Rock and Bull­win­kle springs to mind, and oth­er ones that just have bombed. But it’s so bad it’s almost good. It’s worth check­ing out just because it’s just… The sto­ry is, Deniro plays one of those ‘70s Hol­ly­wood film pro­duc­ers who are just scam­ming all the time. A very old Tom­my Lee Jones plays an actor, he’s the come­back trail, he’s an old-time cow­boy actor who’s brought back to star in a movie, but Deniro’s scam is that he’s hired this guy because he does his own stunts and Deniro’s going to kill him on the movie set and claim the insur­ance, and that’s going to get him out of debt with var­i­ous Shilocks around town. And Deniro’s just not a com­e­dy actor, he over­acts the whole way some­thing shock­ing. But yeah, it’s so bad it’s good.

 

Cameron [00:58:49] And yet, those ones he did with Bil­ly Crys­tal were a big hit, where he played basi­cal­ly a gang­ster…

 

Tony [00:58:56] But he plays the gang­ster part, where­as here he’s try­ing to play the com­e­dy type actor. Just doesn’t work.

 

Cameron [00:59:03] And the King of Com­e­dy was a great film, but again, he was play­ing a sort of a psy­cho in it. I love that film.

 

Tony [00:59:13] Yeah. me too.

 

Cameron [00:59:14] High­ly under­rat­ed film, that.

 

Tony [00:59:15] Oh, I agree. Yeah, so, read anoth­er Steven King book, I’ve been on a bit of a Steven King binge, called the Insti­tute. So that came out last year I think. After read­ing Bil­ly Sum­mers which I read recent­ly which I real­ly liked, I went back and read that one. It’s again, very good. He just writes so well, you just get dragged into these sto­ries by the char­ac­ters. His writ­ing is just top grade. You know, I remem­ber, it’s like a well-built house. It’s like the sto­ry, the sto­ries are very flim­sy, the plot, and quite incred­i­ble real­ly, but he just sucks you into the world so well you just want to keep read­ing and find out what hap­pens to the char­ac­ters. I remem­ber doing writ­ing cours­es where they’d teach you, you know, every scene starts with the five sens­es; what’s the char­ac­ter see­ing, what are they hear­ing, what are they smelling, touch­ing, and then how are they react­ing? What’re their feel­ings, how are they react­ing to all of those things. And every scene in the King book opens up with that, you get put right into the scene straight away. Yeah, it’s just real­ly real­ly good writ­ing. Any­way, I get sucked into it all the time. But yep, so it’s called The Insti­tute if you like that kind of thing. Yeah, not much, I mean we’ve been going back to the faith­fuls. Total Control’s back on the ABC which we love on Sun­day nights, so that’s Deb­o­rah Mail­man and Rachel Grif­fiths, that’s real­ly good. Uh, and that’s about it. Shet­land, I’m still going through that. Suc­ces­sion every Mon­day night. Suc­ces­sion night tonight. That’s real­ly good.

 

Cameron [01:00:32] I know, yeah, oh god, last week’s episode was so good.

 

Tony [01:00:36] It was, wasn’t it.

 

Cameron [01:00:40] Did you know that Kara Swish­er does the offi­cial HBO Suc­ces­sion pod­cast?

 

Tony [01:00:46] No, I don’t know who Kara Swish­er is either.

 

Cameron [01:00:49] Oh, okay so she’s one of the top busi­ness jour­nal­ists in the US.

 

Tony [01:00:56] Okay.

 

Cameron [01:00:56] She used to host the tech con­fer­ences with Walt Moss­berg and she’d have, you know they’d have Gates and Job’s on when he was still alive. She knows all of the top play­ers inti­mate­ly in the US. Like she’s inter­viewed every­one. I don’t know who she nor­mal­ly has on, I just dis­cov­ered it, but last week she had Mark Cuban come on and talk about some of the things that hap­pened in last weeks episode, where the op investor calls them out to his island house and drills them over their plans. She’s like, “would that real­ly hap­pen, you know? You own bunch­es of com­pa­nies and you’ve been major investors, what’s the rela­tion­ship like between CEOs and investors?” And he was talk­ing about, “well, you know,” what’s his name, the main guy, Roy?

 

Tony [01:01:45] Logan Roy.

 

Cameron [01:01:47] Yeah, he goes “Logan’s obvi­ous­ly sold down a lot of his stock over the years, and he didn’t cre­ate class A and class B shares, so obvi­ous­ly con­trol of the com­pa­ny resides with his abil­i­ty to keep all of the major investors hap­py and vot­ing his way.” He’s talk­ing about all this stuff and it was, it’s an inter­est­ing approach, to have a top busi­ness jour­nal­ist host­ing a tele­vi­sion review pod­cast but can get into the nit­ty-grit­ties about the busi­ness machi­na­tions of what’s going on, so yeah.

 

Tony [01:02:17] Yeah, good I’ll look out for that. Mark Cuban’s a good inter­view sub­ject too, I hear him on the Jol­ly Swag­man, talk­ing about NFTs and Ethereum and stuff. It was a real­ly good inter­view. And his whole his­to­ry as well.

 

Cameron [01:02:29] Well, but you know he sort of lost me ten or fif­teen years ago, when he said “there’s no way the inter­net, there’s no way we’ll ever be able to stream TV over the inter­net. There’s not enough band­width and it’ll nev­er hap­pen.” Not it won’t hap­pen today he said, it’ll nev­er hap­pen he said, “there’ll nev­er be enough band­width to stream TV over the inter­net”. Even back then, I was like hmm, you sure about that? But any­way, I guess every­one gets it wrong from time to time, even Mark Cuban.

 

Tony [01:02:57] Yeah. And talk­ing of Net­flix pro­duc­tions in the busi­ness press, I think the Fin Review car­ried an arti­cle about The Crown, the lat­est series of The Crown, which I don’t watch, but it was under pro­duc­tion. But the inter­est­ing thing is that they had hired Natascha McEl­hone, the Irish actress,

 

Cameron [01:03:14] I love her!

 

Tony [01:03:15] Yeah, to play I think it was, Lord — it wasn’t Mountbatten’s wife — but some­thing in one of those periph­er­al fam­i­lies. It caused a sen­sa­tion because McElhone’s father was in the pro­vi­sion­al IRA…

 

Cameron [01:03:31] Oh, wow.

 

Tony [01:03:33] …and uh, she’s sup­posed to be play­ing a part in the Mount Bat­ton fam­i­ly, and of course, Lord Louis went for a trip over Big Ben cour­tesy of the IRA, so yeah there was a lot of con­tro­ver­sy. I don’t know if she’s going to hold onto the role.

 

Cameron [01:03:46] A trip over the Big Ben?

 

Tony [01:03:48] Well, he’s blown up by the IRA.

 

Cameron [01:03:50] Yes, he was on a boat with his kids, as I recall. They went on a fish­ing boat and it got blown up. Yeah. I talked about him on one of my shows a while back. Yeah, she was in that David Duchovny show where he was the writer. She was his ex-wife.

 

Tony [01:04:08] Cal­i­for­ni­ca­tion.

 

Cameron [01:04:09] That’s it. She’s a very pret­ty lady. Very pret­ty. Alright, well, I don’t watch that show either because I can’t stand the Roy­als…

 

Tony [01:04:20] No, I’m in the same boat.

 

Cameron [01:04:24] But I might watch it just for her.

 

Tony [01:04:25] It’s like watch­ing Suc­ces­sion, except they didn’t make up their own for­tunes, they just camped from Ger­many to Britain and changed their names. Yeah.

 

Cameron [01:04:37] Good to be the King.

 

Tony [01:04:37] Yeah.

 

Cameron [01:04:38] Alright, thanks, mate.

 

Tony [01:04:39] Okay, thank you. Bye.

 

Cameron [01:04:46] The QAV pod­cast is a pro­duc­tion of Space­craft Pub­lish­ing Pro­pri­etary Lim­it­ed autho­rized rep­re­sen­ta­tive of FSL 520442 AFC Rep­re­sen­ta­tive No. 0012927718. 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.