QAV #449 Transcription

Cameron  00:07

Welcome to QAV 449. This is an episode that Tony and I actually recorded towards the end of last week, because we knew he was going to be away for most of this week playing a bit of golf. And I didn’t want to try and jam something in at the end of the week. So, for that reason, there’s a couple of events that have happened this week that he won’t be talking about, for example, copper became a sell. And so, we sold well, those of us that owned probably sold, SFR and C6C and AIS. And, we sold MML out of the Navexa portfolio, the QAV portfolio in Navexa this week, as well. So, there’s, there’s a couple of questions we answer at the end that we got last week, but mostly this is just a recap show. Tony and I are talking about some of the highlights and lowlights of 2021 in QAV and investing. So that’s what it is. And we’ll be back next week with a regular show, so send us your questions if you’re a QAV club member. Let’s get on with it. Oh, welcome back. Here we are. Yet again.

Tony  01:16

Yet again. Two days later

Cameron  01:18

Yeah, well, people don’t know that, we’ll put it out next week. QAV 449. We’re gonna call this one something clever, no doubt, as I always do, but it’s, it’s sort of, I don’t know, lessons of 2021 show. Do something a little bit different to wrap up the year even though it’s early December. We got a few more shows left in us before the end of the year, but you did one of these for Phil recently and it seemed to go well, so we thought we’d do one for us too.

Tony  01:45

Yeah. 2021 the dumpster fire. Just like 2020, but more COVID.

Cameron  01:54

Yeah, the economy… I saw our federal Treasurer’s report card’s not looking great. Out of all of the OECD countries, I heard on the ABC this morning, our economy has done the worst this year. Mm-hmm.

Tony  02:09

Urgh, really?  Yeah. I haven’t heard that and it’s probably true, because we’ve been locked down like none of the other countries have. But I, you know, I’d be surprised if what’s, what’s not happening in the economy is accumulating in people’s savings accounts, so I think it’ll be good in the end.

 

 

 

Cameron  02:28

I thought people were spending money like nobody’s business over the last year with all of the job keeper and whatever stuff they were getting. Property prices, it’s all going into property, property prices are booming, etc.

Tony  02:40

Yep.

Cameron  02:41

Share market went up had a, had a crazy run there for a while.

Tony  02:45

Yeah, yeah, no, that’s all true. But people haven’t been able to spend on travel, in particular. What else haven’t they been spending on? Car prices have gone up, I guess. But yeah, I did see something in the last 24 hours saying that savings are at an all-time high.

Cameron  03:00

Right. Well, that’s good.

Tony  03:03

Anyway. Like, look, you know, I think it doesn’t amount to a hill of beans, all these kinds of assessments on the economy at the moment. It’s, it’s, it’s all propped up with paper money, and it’s, or with funny money. And it’s, you know, an artificial time. So, it’s not a good time to judge.

Cameron  03:22

Fills up columns and meeting minutes, though, Tony. You gotta talk about this, though. Well, they have to talk about this.

Tony  03:28

The noise.

Cameron  03:29

We ignore the noise, and how’s that doing, how’s that been for you this year? Do you, what do you want to talk about this year? What do you want to talk about, the current market?

Tony  03:40

Yeah, so I know this isn’t going out until next week, but just a couple of things that people might want to watch. The oil price was getting close to a sell. I think it’s only about two bucks above the sell, and that’s the Brent crude price – I checked it before we came on. I know this is going out a week later, so it may have already crossed and so but people might want to check. And we can always put something out in the Facebook group if it crosses. That’s in response to Omicron, and if the borders do shut, which they have in some cases around the world, and there’s less travel, there’ll be less demand for oil because of aircrafts being grounded. So, just be aware of that. I’ve got Santos in my portfolio, so it’ll be a sell if the oil price crosses. And then the other one on the flip side, there’s a company called Nufarm, NUF is the code, which is getting close to a buy. I got an alert a couple of days ago to say that it crossed the buy line, but it’s retreated again in the latest downturn. So, if people need a large ADT stock, or are looking for one, they might want to check that one out.

Cameron  04:45

And they’re in the oil game?

Tony  04:47

No, Nufarm are in the crop protection game, so pesticides, agribusiness, they also I think now have a division which sells seeds. So, they’re, I guess they’re becoming more and more a supplier to the whole of farm need. So, they sell canola seeds and things like that as well as, as well as the weed killers. And actually, that’s a question for the listeners, I was trying to find the underlying chemical to see if there was a commodity chart for it, but I haven’t been able to yet. I think the underlying chemical might be something like glyphosate, some kind of phosphate, I think is the basis of the, of the weed killers. But like, a, I couldn’t, I couldn’t tell from looking at the Nufarm website what their inputs were, and I couldn’t also get a five-year monthly chart or anything like that. But someone might be able to find it or they might know, especially our rural people, they might know exactly what’s in the can of a bottle of Nufarm chemicals.

Cameron  05:42

And so, you would use – try and track that, like we track other commodities?

Tony  05:47

Oh, yeah, definitely. Yeah. It’ll be interesting. It could, it could be, you know, there’s kind of a two-edged sword here, like if it is, say something like glyphosate, and it’s going up, which it probably is, then, if Nufarm are able to pass on the price increases to customers then their sales by definition are going to go up. So, that might be a heck of a tailwind for them. However, if they’re in a very competitive environment and they can’t pass on those price rises it’ll be a difficult time for them. So, it would be interesting to know what the inputs are and what the trend line is for that commodity.

Cameron  06:22

That if their costs are going up and their prices go up, doesn’t really matter from a cash perspective does it?

Tony  06:28

Yeah, well, it will, because it’s the old margin conundrum. Like if I’m selling something for $1, and it cost me 50 cents, I’m making a 50% margin. If the input cost goes up by 10%, and I pass it on as a 10% price range, I’m getting $1.10 but it’s costing me 55 cents so I’m actually making a bigger margin. So, sometimes that comes into play.

Cameron  06:48

Instead of making 50 cents you’re making 55 cents.

 

Tony  06:52

Correct, yeah.

Cameron  06:52

Right. Okay. There you go.

Tony  06:56

So that’s the two current things. But as for 2021… actually, probably the last thing I want to talk about in the current situation, my portfolio has been very choppy, probably going down over the last week or two with all the ups and downs and rule 1 sells and three point sells and all the rest of it that’s been going on. And I seem to buy something and it goes down the next day, which is not real great, but anyway, that’s happening. And it makes me reflect on the fact that, well two things. I think, first of all, I don’t think we lose money in these situations, we lose time. And what I mean by that is that, you know, mentally I have this clock in my mind, and maybe it’s a planning idea, but I’m expecting to double every sort of four to five years, probably four years or so based on our compound growth rate. And when we have these periods of downturns in the market, it just kind of elongates that a little bit. So, instead of maybe having another, I don’t know how many, twenty doublings left in my life, I might only have nineteen now. So, I kind of, kind of look at these as losing time rather than losing money. The portfolio is not going to go back to zero, the share market’s not going to shut tomorrow, so we’ll always be able to regather it if we follow the process. But we just lose that time of compounding that it makes the time to double a bit, a bit longer.

Cameron  08:06

I thought with the rule of seventy-two at 19.5% it was more like three and a quarter years.

Tony  08:12

Yeah, yeah it is. So, three and a half to four years is probably about right. That makes sense.

Cameron  08:17

But just because you’ve had a, like, an average year, or a bad year, doesn’t necessarily mean you can’t have a boom of a year… … Next year and recover all of that, right?

Tony  08:25

Correct. Yeah, no, exactly. And it’s also I think interesting that we’re having this kind of choppy period now after a boom year last year, that sometimes happens as well. The markets raced ahead, maybe raced ahead of itself, given the circumstances economically…

Cameron  08:41

Yeah.

Tony  08:41

… Around the world. So, it could be just retreating a little bit to catch its, catch its breath and pause, and then we’ll go off again. Who knows?

Cameron  08:46

I think, I mean, that’s a good point. I mean, the thing we have to remember is whilst downturns, recessions, downturns, depressions are common, they’re part of the, part of just what happens in markets. And they’re not unexpected. They seem to be unexpected when they hit but you know, we have one, whatever, ten years or so?

Tony  09:07

Well, not at all. Let me just, let me just fill you in… yeah go on, sorry.

Cameron  09:12

Well before you do, I was gonna say that this is a global, a global pandemic that we haven’t had to deal with for a hundred years. Globally, there weren’t many countries that did a good job of it. Nearly every country butchered the whole thing. And it’s going on a lot longer than any of us could have imagined. The implications of it are far deeper than any of us could have imagined. This is a, it’s a crazy time, and a crazy time to be an investor as a result. I think we – everyone needs to keep that in mind, that we’re trading through one of the craziest things that’s happened to civilization since, I don’t know, the last World War maybe.

Tony  09:54

Yeah, true, but it seems like every couple years we trade through crazy times, like it’s, that’s been my experience. So, I just, I made a list of all the things that have happened in a macro sense that people have called a crisis while I’ve been investing, and you know, to go through it, there was the “recession we had to have”, the Paul Keating recession “we had to have”, when interest rates were really high and the share market didn’t do well during that. So, that would be in the early 90s. There was a Gulf War I around that time as well, when, when George Herbert Bush went to, went to war. There was the Asian Financial Crisis, there was the long-term capital management crisis, there was the dot com collapse, there was the World Trade Centre collapse. There was Gulf War II after that, when the Bush family tagged each other and took up the, took up the baton for, for America. There was the GFC after that. There was a COVID cough. There’s Omicron. And I probably missed three or four. But that’s, what’s that, ten, there’s ten – been ten crises in the last thirty years. So, that’s one every three years. And that sounds about right to me. So, you know, it’s like, get used to it. This happens. And, and you know, yes, they are crisis to a certain extent; I mean, the Asian Financial Crisis had bugger all effect on me personally, but it did have an effect on the share market, it made everyone jittery. And that’s the thing, the share market likes certainty. People want to know, if I’m going to put my money into the share market, there’s going to be more when I go to take it out. They don’t like the fact that, “oh, what’s happening in Asia? And what does that mean for bonds? And what does that mean for banks? And what does that mean for governments, and the currency?” and all this kind of stuff. It gets too hard to put all the moving pieces into a spreadsheet or a model, and they take their money out. So, all these things are called crises and collapses and all the rest of it, but sometimes it’s just, it’s just the noise in the market, you just have to keep ploughing ahead and ignore it.

Cameron  11:53

And it’s business as usual. I mean, you said on our last show, the, “the obstacle is the way”. I mean, this is the market. Markets aren’t always going up in a straight line, they’re,

Tony  12:04

Correct.

Cameron  12:05

They’re turbulent, they go up, they go down, they go back up again, there’s no avoiding it. That is, that is the market. That’s what we’re investing in.

Tony  12:15

And we sit here ready, if the market goes down further, to sell out and cash out and wait. Then we sit here ready if the market goes up tomorrow to invest and reap the rewards. We don’t take a position on what the markets gonna do we just have a process that accepts whatever comes next.

Cameron  12:31

Yeah, and I think, partly, because we take a long-term view of investing, as opposed to say, many of the professional investment firms out there that are incentivized on more short-term rewards – they need to report numbers, people get paid bonuses on numbers, you know, they’re looking for short term numbers – we’re not really I mean, we’re in it for the long term. So, we just keep doing what we’re doing and know that over five years or ten years it’s going to work.

Tony  13:08

Yeah, that’s right. Yeah, no, exactly. We want to, and, you know, hopefully, we’ll have had, our portfolios will be worth, you know, eight times more than what they are now in ten years’ time and that’s the sort of thing which we’re striving for.

Cameron  13:21

Yeah.

Tony  13:21

And it could all, that eight times could all happen in two six-month periods, really. Yeah.

Cameron  13:26

And from what you told me, I remember, some time ago, I can’t remember when it was but in the last year, you took us through your annual figures over twenty-five or thirty years, whatever it was. And from memory there was a lot of average years, a few bad years and a half a dozen fantastic years. Right. Yeah. So, I guess the point for those of us that are new investors is to always remember that. It’s the long-term plan that we’re working towards here. So, just by the very nature of the market, there are gonna be bad years, most years will be average years.

Tony  13:49

Yeah. I mean, yeah, it’s right. And the GFC is a good point of that, like I, I lost, well over the, it sort of went for about eighteen months, but over those two years, I lost 20% on 20%, which is basically half the portfolio went missing in the GFC. But then the next year, I tripled the money. So, like it’s just, that’s just how it works. 20% down, 20% down, then 300% up. That’s the stock market.  Mm-hmm.

Cameron  14:36

But we want to make sure that when the really good years come, we’re in, we’re in it.

Tony  14:41

Yeah.

Cameron  14:42

We’re there, and we ride it up.

Tony  14:43

Yeah, and there’s been plenty of studies done by people saying, “oh, if you weren’t in the market for these eight days over the last ten years, you would have made a lot more money than if you’d be in the average, if you’d been fully invested.” Yeah, great. But you know, who picks those eight days?

Cameron  14:58

Yeah.

Tony  14:58

You know, it’s, it’s, it’s nice to know that because that’s how the market works, but you’ve got to… It’s like playing poker, right? You can’t say, “oh, deal me out for the next three hands. I think everyone’s looking a bit dusty around the table. It’s not looking good.” And then the three hands time, “oh, deal me back in, I feel really hot now.” It’s like, it just doesn’t work that way. You gotta keep, keep at the tables. Sit at the table and take every, every card that’s dealt to you and have a process to deal with that.

Cameron  15:26

You may not be aware of this, but the World Chess Championship is going on at the moment.

Tony  15:31

How come you’re not there?

Cameron  15:32

In Dubai? You know, I just, I’m busy. So, it’s been played between Magnus Carlsen, who’s been the world champ since I think 2013 and a Russian, Ian Nepomniachtchi. AKA, it’s just Nepo is what he’s known as. They played their fifth game last night, and it’s been five drawers so far. They’re just it’s a draw, draw, draw. They’re just playing drawers. And it’s been called the most accurate World Championship ever played, according to the computers that are analysing the game, like, just no one’s making mistakes. Every move that they make is the perfect move to be made according to the computer. And it results in really, really boring chess.

Tony  16:20

Right.

Cameron  16:20

Because it’s the safest chess you’ve ever seen. There’s nothing flamboyant, there’s nothing flashy. It’s not like the good old days in the 80s with Garry Kasparov, where he was just sacrificing pieces and blowing up people’s ends just because he knew he’d pull something out of his ass in the last second to come in, which was really Napoleonic chess. This is really, really, really boring.

Tony  16:44

Right.

Cameron  16:46

Sturdy, steady chess. But you know, they know they’re playing because they both know that World Championships these days are won in that one game, when your opponent gets tired.

Tony  16:58

Right.

Cameron  16:58

Or he misses something and you get that point, you know, it might just be one out of ten games that you actually win. And that’s it, you get a million bucks, right? Hey, folks Cameron in the editing room. So, as I mentioned earlier, we recorded this, I dunno, late last week. Of course, since we recorded this, I said they’d just played game five, game six, Magnus crushed Nepo. It was amazing. It’s been called one of the greatest chess games ever played in history. Those of us that are chess nerds have been very giddy about it ever since. Game seven was a very quick draw game, Nepo blundered again and Magnus got another win. So, I know you probably don’t care. You care as much about this as I care about Tony droning on about horses and golf. But yeah, it’s currently, Magnus is two points up, there’s six games left, Nepo would need to win four out of the next six to win, it’s just not going to happen. So, it’s been very exciting since I recorded this. I just thought I should point out, in case any of you are chess fans that yes, I know that it all went as I predicted; somebody would make a blunder and then Magnus went in for the kill proving that he is truly the greatest of all time.

Tony  18:15

It sounds like that book we talked about last year, the, what was it? Winning is Not Losing, something like that?

Cameron  18:20

I don’t remember that. What was that one…

Tony  18:22

Oh, yeah, you put me onto it. It was about, I think it had examples of tennis players. You just keep the ball in play.

Cameron  18:30

Oh, yeah.

 

Tony  18:32

I think chess was part of it. But it was basically saying that… It was called something like Winning is a Game of Not Losing. Yeah. And that’s what it was saying. It was saying, you know, don’t take outlandish risk at whatever you do, just, just stick to the process, keep the ball in play, and eventually your opponent will get tired or make a mistake.

Cameron  18:50

Yeah. And in our case, our opponent is the rest of the market.

Tony  18:54

Yeah, that’s right. And if they’re not, if they don’t have a process, and they’re listening to noise, and they’re just as emotional as the market, they’re gonna make a mistake.

Cameron  19:03

I just think, we talk about aiming for a 19.5% average annual return. And it’s, I think it’s easy for those of us that are new to think, well, we need to earn that every year. That it’s going to be 19.5% this year, 19.5% next year. And, the sad reality is, it would be lovely if it worked out that way, but the sad reality is that’s just not how it works, right?

Tony  19:25

No, and I remember talking with Alex Hay, going back a long time ago. We were in a box at the races as guests of someone and he said – and this was about, oh would’ve been early spring carnival, so probably August/September – he said, “you know, someone rang me up yesterday, one of the fund managers I know and he said, I’m up 20% This year, what do I do Alex? It’s, do I sell everything and just claim a 20% return for the year or do I keep going and run the risk of losing it?” And, that’s always stuck with me because who knows? You know, the number of times I’ve been halfway through the year and I’ve already made my 20%, of course, it’s a… like it’s a, you know, maybe sixty/forty split for the second half of the year as to whether I lose money or make money, right. So, you’ve gotta keep going. I’ve got no idea what to do.

Cameron  20:08

Yeah, right. Yeah.

Tony  20:11

Because if I don’t, right, say I sit on the 20% return halfway through the year, the share market might double in the second half of the year. You missed out on it.

Cameron  20:18

Yeah.

Tony  20:18

It might go down 10%, and you’ve, you know, you’ve, you’re losing, well, you’re losing, you’re back to 10% for the year rather than 20%. So you just gotta, you can’t predict. You’ve gotta stay in it.

Cameron  20:29

Gotta stay in, gotta just play the cards every day. The cards the market deals you.

Tony  20:33

Yeah. Yeah, no, exactly.

Cameron  20:36

And just have that long-term view. It just reminds me of Buffett’s Mr. Market story, which I think is Benjamin Graham’s Mr. Market story, but, and he probably got it from someone before him. But this, like Mr. Market is bipolar. One day, he’s, we’ve seen this, like, in the last week, I’ve been laughing about it on our Facebook group, you know, one day, all the market news is up, COVID, Omicron, this is not going to be bad. No one worry about it. It’s the, the symptoms coming out of South Africa suggest that it’s not very, not as, not as, I dunno, dangerous as some of the other variants. That’s all great. Market jumps by 60-70 points for the day. The next day, they come in and go, actually, it could wreak havoc with the global economy, markets down 60 points…

Tony  21:24

Exactly.

Cameron  21:24

… The next day, it’s all over the place.

Tony  21:27

It’s like watching a tennis match. Like, yesterday, I get up and the head of Pfizer or Moderna says, “well, we don’t think our vaccines gonna cope with Omicron.” Market goes down. Get up today, the head of AstraZeneca comes on and says “yeah, well, yeah, probably will, we think it will.” Market goes up. It’s like…

Cameron  21:45

Yeah. Won’t even give you blood clots this time, it’s gonna be good, trust me. Yeah, I know. It’s, it’s all over the place. But yeah, the good thing for us is just to remember that we can ignore the noise and just, just keep following the pattern.

Tony  22:00

As Buffett says, we’re buying, we’re buying pieces of companies. And if the price changes, we still own that piece of a company. So, that’s the important thing to remember, I think. It’s the price that’s the, it’s the price that’s rotating up and down or gyrating up and down. It’s not the company. I mean, yeah, look if we own shares in Qantas at the moment, or if we own shares in airports, you know, Auckland Airport, or whatever, yeah, they’d be going down because of Omicron. But most of the shares we own, like Santos might, we might have, I might have to sell it because it’s an oil company and if the world market does shut down, there’ll be less oil if you can’t travel. Okay, but most of our stocks are not going to have much, not going to be impacted much by Omicron or vaccines or whatever. So, we are owning pieces of companies.

Cameron  22:45

But the flip side to that is we’re not going to sit and hold those shares if the price goes down, we are going to rule 1 them out. People can sit and hold on them and do a classic value investor play if they want, hold on to them for five years. Wait for them to come back. Buy more. Yeah, yeah, yeah.

Tony  23:01

Double down, and when it keeps dropping, double down again. When it keeps dropping and your broke, what do you do then?

Cameron  23:10

Borrow money from the mafia, to buy more.

Tony  23:13

You go on to TikTok and you say, “oh, this shouldn’t be happening. I know what the value of this company’s worth!”

Cameron  23:22

But, your strategy is, well, no, don’t do that. Sell. Stop loss, get out and try and put your money into something that’s not falling.

Tony  23:33

Or even in the same company, if it comes back up next week. If that’s the next thing, next thing on the list to buy, for sure.

Cameron  23:38

Yeah.

Tony  23:39

I don’t have a problem with that. Like, it might seem silly, but you’re having transaction costs and triggering CGT, and that’s not great, but there have been cases where I’ve sold one thing and then a month later bought it back again. That’s just the way the process works. You can’t…

Cameron  23:54

But if it’s a rule 1 sell, if it’s a rule 1 sell it’s a capital gains loss for us. So, you’re just stacking up future capital gains losses that you can offset against your gains down the track.

Tony  24:07

Yeah, and look, if you have, if you have twenty stocks in your portfolio, and you have a few rule 1 sells, so you’ve lost 10% on I don’t know even, even if you’ve lost 10% on three or four, it’s not, it’s not a big hit to your portfolio overall.

Cameron  24:23

Yeah. Each stock, if you’ve got twenty stocks, each stock’s 5% of your portfolio. If it drops by 10%, that’s 0.5% of your portfolio.

Tony  24:33

Yeah, so if that happens to you five times, you’re down 2.5% assuming nothing else goes up or down. Yeah.

Cameron  24:40

Yeah, yep. Alright, what else do you want to talk about? What else have you learned this year, Tony?

Tony  24:48

This year? Well, I think that the two things that have really impressed me this year, one of the tools that our group have contributed, the Flitman model, and, and the Brettelator. So big shout out to those guys, it’s… When I think back to before I started QAV, it was a much more manual process that I was going through. And if people go back and listen to some of the earlier podcasts, they’ll hear that I talk about, I get an update from Stock Doctor of all the companies that just reported, like, I sort of go through those by hand and look at, look at their numbers. Run a kind of manual screen on price to cash flow. And when I found something, have to dump it into a spreadsheet manually and then do the calculations on the checklist. All those things, it was just such a long, laborious process. I had a few shortcuts, I used to run a kind of prototype QAV checklist filter and Stock Doctor was based on the acquirers multiple, which was a kind of a proxy for our, for our checklist. But even then, we’d spit out a list of you know, a hundred stocks, and I’d have to go through each one by hand and, and look at it. Didn’t have the Flitman Model back then, didn’t even have the model I developed for QAV in Excel back then. But things just evolved, and they’re getting more automated, and those two tools in particular really made my life a lot easier, a lot quicker. And more golf time to go out and play golf. Yes, so real hats off to those two contributors. And I think the second point is that the group is just such a great group. I mean, I love the Facebook group. It’s just, it’s people helping people and supporting people. It’s, it almost should be taken out of Facebook and put somewhere else because it’s so unlike the rest of Facebook or Twitter or any of those things, no one’s, no one’s there going “sucked in, you rule 1 sold that, why’d you ever buy that for, I didn’t buy it.” It’s, it’s no, it’s the reverse. It’s just, you know, bad luck. Stick to the process. And that’s probably the third thing is that, you know, thanks to the people who listen to the podcast who put their, their results out there for public display. That’s just fantastic to hear people say I got 70% last year or, you know, 60%. Those are some really fantastic numbers that people told us they were getting over the last twelve months. And thank you for sharing, but that’s great.

Cameron  27:11

Yeah. No, it is. It’s a, it’s a group of really smart and nice people. So, it’s a pleasure. It’s really nice to see.

Tony  27:22

Yeah, and the dinners are great. We’ll have to catch up with them again. Hopefully over December, January when I’m in Melbourne, but in the other places too. It’d be great to get over to Perth one day.

Cameron  27:31

Yeah.

Tony  27:32

Adelaide.

Cameron  27:32

Well I’ve promised everyone in WA that we will be over there as soon as we’re allowed to. We’ll be over there to do an event.

Tony  27:39

Yea, no, good. I want to shout out your work. You’ve done a lot of great work this year and it doesn’t get recognised.

Cameron  27:48

Oh, thank you, Tony.

Tony  27:48

It’s yeah, I mean, we, in the last week or so – people don’t know, but we catch up usually on a Monday and talk about the prior work prior week and what we’ve been doing and what needs to be done and all the rest of it – and you’ve just been working your ass off on QAV, getting things organised behind the scenes, helping people, answering questions, monitoring the Facebook group. It’s really good. I just want to say thanks for that.

Cameron  28:16

Thanks. Screwing stuff up, but hopefully not. Getting it right more times when I screw stuff up. That’s my model; 60%. That’s my goal. Get things right 60% of the time.

Tony  28:27

But that’s another learning, I think since you know… when I started off on QAV, I was very tentative. It’s like, “ah, shit, I don’t want to make a mistake in front of people. That’d be really terrible.” But I realised, of course, that mistakes are just part of the process, and everyone makes mistakes, and you learn from them. But you move on, recover and move on.

Cameron  28:46

Yeah, despite rumours to the contrary, you and I are both human.

Tony  28:51

Correct. Yes.

Cameron  28:54

Well, I’ll add a couple of stuff in. Like my big lessons for the year, I mean, I’ve talked about this before, a few months ago, I think maybe, but there was that switch that went off in my head at some point where I started to think about QAV as a game.

Tony  29:06

Yeah.

Cameron  29:07

It’s like a game of chess, for me. It’s like, okay, I have all of this data in front of me, I’m trying to, you know, find the stocks that are going to outperform the other stocks that the market hasn’t picked up on yet. And we’re going to, I’m going to buy those for my portfolios, and I’m not going to get it right every time but I’m going to weed out the ones that don’t work and replace them with other ones and some of those won’t work, but some will and weed those out. And it’s like, okay, you’ve put ten in, you put twenty in, take out, you know, five, put another five in, take out a couple of those, put it in, take out a couple of those where you just keep, and then some of those will fail and you replace them with this thing, but it’s like it’s kind of this beautiful sort of shell game almost where you’re just moving things around.

Tony  29:55

Right.

Cameron  29:56

And you don’t know which one the shell’s under until it goes up. But yeah, it’s this, it’s this discipline of being unemotional, treating it like a game. It’s a problem to be solved. You know, it’s like chess is, it’s, it’s a problem. Okay, I have a set of data here, in chess it’s the pieces, and it’s your opponent and what you think they’re going to do, the opponents like the market. Well, what do I think they’re going to do? What, you know, I’m gonna try and counter what they’re doing and do my own thing. And you know, just try to be unemotional about it which is very hard at chess. But…

Tony  30:33

Really?

Cameron  30:33

… I find – oh, yeah, for me, you get very, very emotional in a game of chess.

Tony  30:37

Really?

Cameron  30:38

Normally – oh, yeah. And normally, it’s yourself.

Tony  30:41

Right.

Cameron  30:42

Like you beat up yourself. If you make a mistake, you’re like, “Ah, why did I…?” You know, and I still do that with this. You know, the big challenge in chess for, chess players will know this, like, is when you make a move too quickly, and you know you should have thought it through but you just get emotional and you make a move. And then you kick yourself a second later when you realise – and I do that with QAV. I’ll see something’s gone below 10% and, in Stock Doctor, and I’ll get an alert and I’ll quickly go and sell it. And the minute after I hit the sell button, I’ll go “oh shit, I didn’t check the dividends.” Or, I did this the other day, I had to replace something, rule 1 something, and I had to replace it, and I bought it. And, you know, I’m doing fifty other things, right? At the same time, and I bought it and then I was like, “oh, shit, I didn’t check it for a Josephine.” It was, was PRU, Perseus. I was like, “oh my God, I didn’t check it for a Josephine. I’m such an idiot.” I checked it, luckily it wasn’t a Josephine. But, you know, it’s like,

Tony  31:27

Yeah. Yeah.

Cameron  31:41

It’s still those sorts of things where I jumped too quickly, and I’m not… I need the checklist before I buy, before I sell.

Tony  31:49

No that’s right. Yes.

Cameron  31:51

You know?

Tony  31:52

And I think, I mean, that’s hopefully where we’ll end up over time, is, is getting the process automated. So,

Cameron  32:00

Yeah.

Tony  32:00

You know, it’s just okay, here’s your alert, sell it. It’s already calculated the dividend component of it. Is, here’s something to buy next, it’s the highest on the list, but it’s not a Josephine and the underlying commodity’s all fine, and all the rest of it. Yeah.

Cameron  32:12

Even better, if we don’t need to do anything. The software just does it.

Tony  32:16

That’s what I mean.

Cameron  32:17

It does the trading for us.

Tony  32:18

Oh, right. Yeah.

Cameron  32:18

Oh yeah, no, it just does the trading.

Tony  32:20

Yeah, right.

Cameron  32:22

We just lie on the beach, play golf, and it just runs it in the background for us.

Tony  32:27

Right. And the CCP hacks their away into the code and drains all the money out of our account.

Cameron  32:32

Hey, don’t speak evil of Credit Corp. They’ve been my best investment over the last year, they’re up like 75%.

Tony  32:38

Yeah, they are good, aren’t they? I agree. Yeah, I was going to, one of the things I wanted to go over today was my best, my best stocks I’ve ever purchased and ones that I would hold forever. And I think Credit Corp would be in that list. It’s certainly one I would hold forever. I kind of qualify that, because I really like the current management, I think the CEO of Credit Corp would be right up there in my top, you know, top list of best CEOs in Australia, if not at the top. You know, I’ve met him, I’ve listened to him talk. He’s running, he’s working in a, you know, an industry that has had a bad reputation but he takes it very seriously in terms of the process that they go under, to the point where – I mean, it’s a debt collection business, right? So, to the point where they, they become a business that not only collects debts, but it actually lends credit to those people now, because they’ve been so successful at working out repayment plans for people in collecting their money. They have a really good profile of those customers, and they can actually lend the money and now they’ll get it back. So, you know, that’s how successful they’ve been. So, I just I just think Thomas Beregi at credit Corp is right up there and Credit Corp would be a stock I probably hold forever. Admittedly, it will go, it will go up and down at times. The GFC, it dropped like a stone because there was no debt collections going on. The bank’s stopped selling their debt ledgers and so Credit Corp had to bide its time for a while. But, and that will happen from time to time, happen in the COVID Cough it went down but it always recovers. It always does well. I saw there was an announcement a couple of days ago, the stock went up 8%. They bought the part of the radio rentals business, the old, you know, appliance hire business. And they’ll be, they’ll be doing that now as well. So yeah, I mean, they’re expanding into niche areas, but they do it really well. And the other thing about Credit Corp is they always under, under promise and over deliver. So, I think the reason why the shares went up 8% wasn’t so much that they bought the radio rentals business but the fact that they did that and then they upgraded their guidance for the year and the stock went up. And that’s, it’s almost a patent to Credit Corp. They’ll come out with their results and go “Yeah, we think the next year’ll be okay, here are all the problems that we’re facing.” And then towards the end of the year, they’ll just upgrade their guidance. So “oh, actually, things turned out better than we thought,” and the share price goes up, and they just do that year after year.

Cameron  35:04

It’s an old Microsoft and Berkshire Hathaway play too, I think. Microsoft used to do that every year in Bill Gates’ day, Ballmer’s day, to be like, “Yeah, like, we had a great year, but next year…”

Tony  35:13

Yeah.

Cameron  35:13

… “next year can’t be as good as this year. So, everyone just cool your jets, it’s not gonna be as good,” and of course, next year would be better. And they’d go “okay, well that was a good year, but.”

Tony  35:20

Yeah, right. Yeah.

Cameron  35:23

Sand bagging, we used to call it.

Tony  35:25

Yeah, right. And, and Credit Corp are very good at that. The other, the other, my best stock buy, I think ever, if I can reflect on this a bit. This is prior to QAV, but the QAV process was in its prototype stages, was a company called Monadelphous, MND. And it may come back onto the buy list at some stage in the future. But it happened back in about mid 90s, I think. And it was trading at 20 cents a share, and it went all the way up to $24 a share over the following, sort of, maybe three or four years. No, that’s wrong, probably over the case of about eight to ten years. And the GFC killed it, and I sold out at about $22 or something. But it got to the stage where I was receiving my original purchase amount in dividends every year from it. Yeah. So, that was a, that was a good buy. There’s a couple of… Macquarie Group, I think also would be a stock I hold forever, and I currently own it. And again, it does, it does trade up and down with the economy, it’s leveraged to that, but it just, the management has just always been A1 with Macquarie Group. They always have their model of, of finding entrepreneurs and, and just incentivising the hell out of them to make money. And then if it makes money, just grow it as fast as they can with the capital they’ve got at their disposal. Macquarie, the Macquarie Group is, that exists now is so different from the one that I first encountered when I started investing, which was Macquarie Bank. And it was basically, you know, it was, it was a stockbroker back then, as well as a small retail bank. And now it’s probably one of the biggest infrastructure owners in the world, at least as a listed company, and owns lots of tollways and bridges and things like that around the world. So again, I just, no one ever sat down at Macquarie Group and, sat down with a whiteboard and said, “right, what’s our strengths, weaknesses, opportunities and threats, let’s build a business plan around roadways.” They just found someone who was an entrepreneur in the area, bought them a, bought them a proposal and said, “look, if I had a billion bucks, guys, I can make a lot of money if we went and bought these roadways,” and they went, “yes, go for it, we’ll give you whatever it is, 10% of the profits.” And it’s just grown from there. So, it’s just a great business model of sharing incentives with people who are developing the business.

Cameron  37:43

And they’re up three bucks today.

Tony  37:45

Good, happy days. I’ll have a Negroni tonight to celebrate.

Cameron  37:54

They’re trading at 198, so 10%’s $20. That’s what 3%, roughly, up 3% today.

Tony  38:01

Good.

Cameron  38:01

It’s not bad in this market, though.

Tony  38:02

In this market, I agree.

Cameron  38:04

I don’t know what it is about their business that made them go up 3% when everything else is pretty much in the red today.

Tony  38:11

They must be getting close. They had a share placement issue, so maybe that’s getting close to…

Cameron  38:16

Oh, right.

Tony  38:17

… Finishing. Yeah. That might affect the share price, I’m not sure I haven’t looked. So, the other one that I’ve never been able to buy since, but I owned it years ago, was a company called ARB. It does four-wheel drive accessories. And it started off as just manufacturing bull bars for Utes. And it’s just grown and grown and grown. It’s been really well managed. And I remember talking during the year about trying to find the, the customer-centric company that was leveraging its growth. And there was a section in the book I read out which talked about companies Munger like, that were like that. So, Walmart was one, Amazon was one, where they take their profits, they always, they cap their profits so they don’t try and make more than about 10% margin per year, and they put it back into lowering prices. And there’s this leveraging flywheel effect of, of keeping prices low, attracting more customers, capping the margins, putting it back into the business and I think ARB, just on reflection, might be a version of that kind of business in Australia. But consequently, it’s trading at a like a really high PE. I haven’t been able to buy it after my first encounter with it, when it was starting out. It was cheap. And it did really well for me, but then it became expensive and I sold it.

Cameron  39:32

Why did you sell? We don’t sell things because they become expensive. Why did you sell? Was it a GFC thing or something?

Tony  39:37

It was pre GFC. This is going way back into the probably 90s I guess. So, yeah, I didn’t have the three-point sell lines then. It could have been that it had a downturn and I sold, I can’t recall the exact examples. But there was also a time when, when I did play that game, when I said “okay, well it’s trading on a PE of five or whatever it was at the time, I’ll buy it.” And it’s, it went all the way up to whatever, you know, PE it did thirty times and I thought it’s getting rich and I’ll sell it. Of course, biggest mistake in my life, it’s probably worth about 100 times more than it was back then. But yeah, so that, that would be another company, if I had a chance to buy it again, I would and hold it for the rest of my life, because I think it’s again, it’s really well run. And it seems to have that kind of customer-centric, cap the profit and put it back into the business type approach that Munger talked about.

Cameron  40:28

Mm-hmm.

Tony  40:29

Of course, the problem with those companies is everyone knows that and they push the price up, and it becomes hard to buy them. Yeah, yeah. So, what else this year, so in our dummy portfolio, best and worst stocks that Navexa was telling me this morning; the best stock for this calendar year for 2021 was Grange Resources, GRR, up 154% for the year, so that was pretty good. And the worst stock was Hawthorn Resources, which was down 48% for us, so that was really bad. Oh, and by the way, Hawthorn’s been on the rise, and it was getting close to its buy line on the weekend when I was doing our buy list actually. So that’s another one that people might want to keep an eye on.

Cameron  41:10

So hold on, how could, how could Hawthorne been down 48%? We wouldn’t have let it drop that far before we sold it. That doesn’t make much sense.

Tony  41:18

Yeah, it can happen if, because we’re talking about the calendar year, so I’m not sure when we bought it. So potentially, we bought it at a low price, it went up and then came back into its sell line.

Cameron  41:28

Oh, I see what you mean. Right. Yeah.

Tony  41:31

I’m just looking at the calendar year 2021.

Cameron  41:33

Right.

Tony  41:34

Yeah.

Cameron  41:34

I’m gonna look it up now, because I want to know what the story there is.

Tony  41:38

It could have dropped quickly too, because it was, it’s a very liquid stock. It’s a small-cap, so it may, it may have just powered through the, through the sell line. If I, if I remember wasn’t it, was that the one that Chris Corrigan was a share, owned 30% of the shares and he sold it?

Cameron  41:53

I think so. Yeah. And it plummeted fairly quickly, I think.

Tony  41:56

Yeah. So, we may not have been able to get out in time for, to rule 1 at a 10%.

Cameron  42:00

Just hold on a sec, let me look up the trade details. Hawthorn we bought back in April 2020 at 14 cents. We sold it in February at 7 cents. But, there was a return of capital along the way, too in November 2020.

Tony  42:23

Right, so that’s not counting into Navexa’s calculations for this year, then.

Cameron  42:27

No.

Tony  42:28

We’ve probably added the return of capital back into our thoughts on when to sell, I would think. For me, I looked at, looked at mine; my best stock this year, calendar year, is South 32. Which I haven’t held for the whole year. But that’s up 37%. And my worst stock was SSR which is down minus 28%. SSR, I think was the one the American Goldminer that merged with Alkane Resources which I held, and then the share price went up but in that retreated quite dramatically after that.

Cameron  42:59

Yeah, I think we had that in the QAV portfolio as well.

Tony  43:03

Yeah, quite possibly.

Cameron  43:04

Well, I’m going to look at my best stocks for the year now that you’ve done that. I’m interested, I want to know. Well, it’s a toss-up between Credit Corp, which is up 67% for the year, and MaxiParts, which is up 70%.

Tony  43:19

Okay.

Cameron  43:20

Now, I don’t think I’ve held them for a year, you know, I only bought, I don’t know, I’ve held Credit Corp for a while but I only bought maxi pads probably six months ago. But it’s up 70% in that amount of time. So, that’s alright.

Tony  43:31

It’s interesting. I’m not sure why Credit Corp wasn’t at the top of my list when I had a look, because I’ve held it for years.

Cameron  43:38

It’s had a corker year. And the third best for me is Myer, up 50% still. Myer’s had a cracker run.

Tony  43:48

Yeah, very good.

Cameron  43:50

I told Tony before we went to air I’ve put everything into a spreadsheet. Before the show today I was trying to work out my CAGR for it, because I’ve got three portfolios and they’ve all got different transaction periods and blahdy blahdy blah, and I was trying to… Last time I was having, we had a QAV dinner here, I was talking to Steven Mabb and we were just talking about our performances. And I said, “well, you know, according to Stock Doctor and the time weighted return, mine is…, blah, blah, blah,” and Steve was like, “yeah, but that’s bullshit. You can’t, you can’t, it’s not, you know, it’s nothing.” He said, “yeah, the only real way to do it is to do a CAGR thing,” so, and you and I’ve talked about the same thing before, so I tried to do it in Excel today and my brain melted. So, I spent like an hour on it and my brain was melting. I’m gonna have to go back and have another crack on it. And according to that it said my performance since inception was negative 1,347%, so I don’t think I did it right.

Tony  44:43

No, probably wrong.

Cameron  44:44

I know I’m not the world’s greatest investor, but I don’t think I’m down negative 1,347%.

Tony  44:51

What else have I got to talk about? A couple of things. I’m going to drop the rebalancing study that I’ve been doing-test.

Cameron  44:58

Oh, yeah?

Tony  44:59

You know I said last week I’m going to keep going for another six months. Like, it’s, it’s the second of December now so I updated it yesterday. And, like, it’s rebalancing is down 25-30% compared to not rebalancing.

Cameron  45:12

Wow!

Tony  45:13

Yeah.

Cameron  45:14

What did you say last week? Didn’t you say it was kind of even?

Tony  45:17

It was 1%, yeah, but that… so last, so yesterday, or last month I sold out of NIC Nickel Mines, and that’s gone up like 40% or something this month. I bought challenger CGF with the results, and that’s gone down. And then this, this month, I was due to sell South32, which on the day was still rising, and I’m like, this is nuts. I’m not gonna…

Cameron  45:43

And this was because it’s QAV score was 0.05?

Tony  45:47

Yes. So…

Cameron  45:47

That’s why you didn’t get rid of it?

Tony  45:48

No. So, I think I got that wrong. I’ve just been buying the bottom of my list of QAV scores in the portfolio. So, some of them weren’t, I think, I think South32 is about 0.8 or something like that at the moment. So, it wasn’t just those, it was just taking the bottom stock out of the portfolio, replacing it with the next one on, the top one on the buy list.

Cameron  46:06

The bottom stock based on what metric?

Tony  46:09

In my, on the QAV score. So, the lowest QAV score in my portfolio and… Right. … I’d say probably every month that was much lower than 0.1.

Cameron  46:19

So, walk me through this again. So, every, you’re doing this monthly?

Tony  46:23

Yes.

Cameron  46:23

Every month, you would take the stocks in the portfolio.

Tony  46:27

Correct.

Cameron  46:27

Look at the QAV, current QAV scores for those stocks.

Tony  46:31

Correct.

Cameron  46:31

Remove the one with the lowest QAV score and replace it with…

Tony  46:36

The highest QAV score on the buy list that I could buy.

Cameron  46:40

That you could buy that you didn’t already own?

Tony  46:42

Yeah.

Cameron  46:42

Or add more of it if you did own it.

Tony  46:44

Correct, add more if it. Yeah. So,

Cameron  46:45

Right.

 

Tony  46:46

CGF has been that stock for a while, Eclipx was there for a while. They’ve all been going backwards. Whereas if I hadn’t have sold something and bought them, I wouldn’t have the same exposure to CGF or Eclipx and have it go backwards. So yes, it’s this, doing it yesterday, I just went “this is nuts”. And it’s probably, it’s probably cost me two or 3% on my performance for the half because…

Cameron  47:13

And you were doing this with real money?

Tony  47:14

Yeah. 10%. I put 10% of the portfolio into it. So, yeah.

Cameron  47:19

Wow, that’s like $100 million people, that’s like that’s, that’s nearly real money.

Tony  47:23

Anyway, I’m stopping it. I know that I started doing it because last half or last year I noticed that it might be a good thing to do. And it worked the other way. But, nah it’s just I think…

Cameron  47:32

Shouldn’t you have run it on paper for a year…

Tony  47:34

I did.

Cameron  47:34

… Before you, oh, you ran it on paper?

Tony  47:36

So, I noticed it, I ran it on paper and then I was doing it live as a 10% challenger portfolio.

Cameron  47:40

So how long did you run it on paper for?

Tony  47:42

I’d say six months. I think what’s happened is, coming out of the COVID cough which would have been eighteen months ago now or there abouts, it worked then, as things went up in value and their QAV score dropped, cycling out of them. But I think in more, I call it normal, it’s not really normal, but, but since then, it hasn’t worked.

Cameron  48:00

There you go, experimenting with real money people.

Tony  48:03

And Dylan, I remember also what gave me the courage to do it was Dylan did a study over the last ten years of doing that every month; swapping the lowest. And he, and we haven’t cracked a way of putting the three-point trend line, trend lines into our model because it’s just, it’s just too hard to do the calculations every month for ten years on two thousand stocks. So, it’s without three-point trendline buys or sells just taking the highest QAV score and the lowest QAV score and rebalancing, selling the lowest, buying the highest, and he was getting 18% over ten years just doing that. So, that kind of gave me courage that it was going to work but I’m just, I can’t stand a hit to my portfolio at the moment to keep going so I’m gonna dump it.

Cameron  48:47

You don’t trust Dylan, in other words, you don’t trust the model?

Tony  48:50

No, I do trust Dylan, I do trust the model, but we’re getting more than 18% now with what we’re doing. So, the test was always, see, we don’t know how much the three-point trend lines adds to his 18%. Whether it was adding 1%, in which case what we’re doing now is as good, or whether it’s adding 5%, in which case we’re better off going with Dylan. But I just, I haven’t seen enough success to drop what we’re doing now and replace it with a rebalancing strategy. And it’s always been my baseline theory that rebalancing isn’t a good idea.

Cameron  49:21

Yeah.

Tony  49:22

Yep. And I think that’s, the last sort of month has proven that to me.

Cameron  49:26

Well, maybe you’re just doing it the wrong way, though.

Tony  49:29

Yeah, and it could be a bad month. I know. But I’m not prepared to persist with it.

Cameron  49:36

Fair enough. Real money. I get it.

Tony  49:38

What else? Oh, we didn’t mention the interview subjects. So, the highlights for me I think have been some of the interviews we’ve done this year. Early on, I went back through and had a look, early on we had David Waldron on to speak about his book Building Wealth Through Shares. That was, that was great to interview him. I really enjoyed that.

Cameron  49:54

Yeah.

Tony  49:54

I really enjoyed Louise Bedford’s interview on getting female, more females into investing and their experiences, that was really good.

Cameron  50:02

Yeah.

Tony  50:02

A lot of positive feedback after that one, too. And I mean, that’s just two, there’s been plenty of other ones. I really enjoyed Michael Goldberg’s, but I think he might have been 2020 rather than 2021.

Cameron  50:12

Right. I can’t remember.

Tony  50:14

Yeah. But he’s always stuck in my mind. He’s, he’s, what he said was, “if you’ve got a list of good ideas, why go past your first one? Why investigate the twenty?” That’s always stuck with me. Yeah.

Cameron  50:26

Yeah.

Tony  50:27

Yeah. But yeah, the interviews have been a highlight, I think, as well.

Cameron  50:31

Yeah.

Tony  50:32

Lowlights, I mean lockdowns, COVID, all that kind of stuff. The border closures have been a lowlight. We’ve just been stuck in, stuck at home, stuck in Sydney for too long. I mean, I know there are reasons for it.

Cameron  50:44

But you’re still alive.

Tony  50:46

I know I’m still alive. I know there are reasons for it, so I’m not begrudging it, but it’s been a low, it’s been a lowlight. Hasn’t been a highlight.

Cameron  50:51

You’re not gonna get out there and march in the streets?

Tony  50:52

No. You know, I saw that it was like, I’m going down to Victoria on the weekend, I saw there was still another 1300 COVID cases there yesterday.

Cameron  51:02

Really? Wow, still that high.

Tony  51:03

And like ten deaths. And you gotta think that people who are dying from COVID now have to be unvaccinated, right? So, these people who are marching in the streets are just signing their own death warrants in Victoria at the moment.

Cameron  51:16

I think the stats, I’m not sure about Australian stats, but I think the stats coming out of the US anyway, are that 95% of hospitalisations and 95% of deaths are unvaccinated people. Right?  Yeah.

Tony  51:31

And Victoria, I think is over 90% double vaxxed now, so the people-if there were ten deaths yesterday from COVID, they’ve got to be unvaxxed people.

Cameron  51:39

Well, 90/95% of them, let’s say that.

Tony  51:41

Yeah.

Cameron  51:41

So, nine out of the ten were probably unvaxxed. Yeah.

Tony  51:46

So that’s another lowlight, that people can be so – look, I’m sceptical, I think you’re sceptical but people can be so misdirected by social media now in particular, to do the, to do things which are advancing someone’s political cause and not helping, not helping their own cause. Now, I think it’s a real, it’s a real I don’t know. I don’t know. It’s, it’s something that I don’t like. And it’s a real problem.

Cameron  52:07

Yeah. Look, my theory is there’s always been stupid people in the population. They just, now they just have social media. I mean, you know, fifty years ago, stupid people were you know, were just at home ranting to their family and neighbours, colleagues at work. Now they’re on social media. A couple of quick questions. Easy ones, I think, Gary: “hi Cam, just going through the latest checklist sheets to see how they compare. I noticed with Tony’s sheet it has a column of calculated sentiment that can be filtered for uptrend and downtrend. This doesn’t seem to be in the AF version. I feel like I heard you guys talking about this filter on a recent episode.” And I said, “yeah, Gary, I think that’s just the SDMAX thing that he was looking at for a while when we were trying to calculate Josephine’s for the buy list,” but I don’t think you pay much attention to it, really.

Tony  52:55

So, it was actually before that it was used, I think it was Steve Mads idea to use it as a proxy three-point trend line calculator.

Cameron  53:04

That’s right. Yes.

Tony  53:05

It’s if the five-year share price is up, if the six months share price is up, and it’s SDMAX bullish I think it is in Stock Doctor, then it correlates reasonably well with our three-point trendline sentiments. It’s not a complete correlation, so I didn’t take it any further. It is, it is in the checklist. I find it useful If I, if I have a, when I do a download I check that column where it says “uptrend or downtrend” against what I’ve got for sentiment and it makes it much easier to process my, my lookups on the graphs. If they’re both in sync, if it’s a downtrend according to that calculation from Stock Doctor and I say it’s a downtrend move on, if they’re both up trends, move on, but if they’re different, I’ll go and investigate why.

Cameron  53:50

Right. Well, Gary said he’s been filtering based on that. Is that a good idea or a bad idea?

Tony  53:57

It’s not a bad idea, but it won’t be 100% accurate in terms of three-point trend line sentiments. There are differences. Yeah.

Cameron  54:06

So maybe don’t do that, Gary.

Tony  54:08

No. Do what I do. Like, like I said, look for the differences and focus on those.

Cameron  54:12

Yeah, right. So, when you, so your own sentiment sell is from the last time you check the sentiment, which might be last week.

Tony  54:20

Yep. Or it could be when the results came out or whatever, yeah.

Cameron  54:24

Yeah. But these days, you know, it’s probably in the last week or so because we’re doing it every week.

Tony  54:28

But we’re unusual in that respect, I think, yeah.

Cameron  54:30

Dave: “Hi, Cam. Thanks for your review of my question last week. I really enjoyed the discussion.” Well you’re welcome, Dave, I can’t remember what that was. But good on you.

Tony  54:39

I think Dave was talking about us, about QAV potentially crowding the trades. And lots of people pushing the price up or down as we bought and sold.

Cameron  54:46

Yeah, that’s my dream: that we become that big and powerful. We can go to companies and say, you know, “alright, what’s it worth for us to talk about you this week? Come on.”

Tony  54:57

“Accidents happen. Oh, sorry about that.”

Cameron  55:05

He says Gary’s question in the latest edition, which isn’t the Gary question we just asked about, but the last one “was really interesting, but I thought it warranted further discussion. Tony said he stays fully invested because he doesn’t have a crystal ball that tells him when the market is going to turn up. As you added” being me, “you could miss that first 10% and that’s everything. That seems to be contrary to the concept of sentiment, which is fundamental to QAV. Tony likes to wait until he sees a consistent upturn in a stock and even an underlying commodity and is happy to forego that 10% to provide the confidence it is on the right track. Why wouldn’t that apply to the market as a whole, which is arguably more sentiment driven than a single stock, and definitely more than a commodity? I asked for similar reasons as Gary, I started a QAV mini portfolio, seven stocks about 20% of my investments less than a month ago. Since then I’ve sold and rebought four times plus two more I’m about to sell. My positive strike rate is one out of eleven with an overall return of negative 10% versus the market negative 2% in just a month. I know it’s only one month, but gee, it’s proving challenging to stay the course.” Bit like Tony’s rebalancing portfolio, “I’d be really interested to hear Tony’s views on this. Thanks again for the show. Dave.”

Tony  56:17

Dave, sorry, you’re having a tough time in the market. It is a choppy market to be starting out in particular. Yes, we do wait for sentiment to be improving. So, I’ve said before, and I’ll say it again, that we’re not out to try and get that first 10% or so upturn when the share price turns. That’s very hard to get. But we do wait for the sentiment to be confirmed. But I think what we were talking about last week was more along the lines of should someone in your situation sell up and wait for the market to turn? And that’s when we, when we said “well, you’re gonna miss out on sudden up-turns and potentially, up-turns in general,” like how do you define when it’s time to come back into the market? To take your point about applying the sentiment checker to the whole market, I’d be careful of doing that, because there are stocks in our portfolio which run counter cyclical to the market. So, they can be going up or down when the market itself is going in the opposite direction. And so, that’s you know, that’s why I’d normally find myself being fully invested 100% of the time because I can find stocks that are going up, that’re worth investing in, even though the markets going down.

Cameron  57:32

Right. You know, we do apply the three-point trendline to the commodities.

Tony  57:39

Yes.

Cameron  57:39

But there’s a direct relationship between the commodity price and that company.

Tony  57:44

Yeah, yeah, particularly with miners, although we use a lot of other commodities as well. Yeah, I mean, a rising commodity price just increases their gross margin because their costs haven’t changed. And when they, when the commodity price decreases, it affects their gross margins, which generally flows on to a worse position. And in fact, that’s something I didn’t mention before sorry, I skipped that in my notes. I think one of the highlights, for me, was the great rotation out of commodity stocks, when we realise that iron ore was a middle year fudge sell. And I know I got out of Fortescue Metals at $20.50 a share and it’s getting back up there now, I think it’s about $17 today, but it got all the way down to $14. So, I, that missed a big hit to my portfolio because I think something like about a third of my portfolio was Fortescue Metals and other iron ore, other iron ore miners, like Champion Iron comes to mind. Yeah. And so, I avoided a big loss. So that was a highlight during the year for me.

Cameron  58:45

And that was a, that was a new thing for QAV too, looking at the commodity three-point trend line. There was an amendment or a…

Tony  58:53

Yeah. An evolution.

Cameron  58:55

Before there was, there was the fourth amendment to QAV. By the Founding Father.

Tony  59:00

The other highlight I’ve neglected to talk about was getting the AFSL licence for us, as well.

Cameron  59:04

Oh yeah. Yeah.

Tony  59:05

Which is a highlight during the year, and I think secured our, our ability to keep putting this out without having to necessarily fear being pulled off the air unexpectedly.

Cameron  59:16

Not a highlight for my bank account getting the AFSL.

Tony  59:18

Yeah I know, I understand, I think it’s worth it though.

Cameron  59:21

It’s costing us.

Tony  59:23

It is costing us. Yeah.

Cameron  59:24

Yeah. But it’s security.

Tony  59:27

Yeah.

Cameron  59:28

As you say, it’s, it’s the security that they won’t come knocking on our door. I don’t think they’ve knocked on anybody’s door and taken them off the air yet, but, but at least we feel confident that if ASIC do come knocking on our door, we can say “hey,” you know, “we’re doing we’re doing the right thing.”

Tony  59:42

Yeah, that’s right. I think we feel confident. And I’ve always wanted to put out with our emails each week recommendations, and we needed the AFSL licence to do that.

Cameron  59:52

Well, you know, helps you sleep at night. That’s good.

Tony  59:54

Yes.

Cameron  59:54

I’m happy with that.

Tony  59:56

Thank you.

Cameron  59:59

All right. Well, I think that’s the show.

Tony  1:00:01

Okay. Well, thanks for that. We’ll be back as business as usual next week.

Cameron  1:00:05

Yeah, and thank you, Tony. For all the time and effort and patience you’ve put into us this year. You are a bit of a Buddha sitting there. We keep asking you the same questions over and over again and you just smile.

Tony  1:00:18

Give different answers.

Cameron  1:00:20

It’s all, it’s all one. Yeah, occasionally a different answer. Then you say “no, I never said that.” I told you were all one with the universe? What are you talking about? That’s nonsense. I know, I don’t care what the transcript says, I never said that. But you got it recorded? Uh, recordings can be faked. Yeah, no, but seriously you’re making all of our lives better and we, we appreciate everything that you do.

Tony  1:00:45

Well, thanks mate.

Cameron  1:00:47

And I appreciate you wearing the Berkshire Hathaway hat that I bought you for your birthday. Yeah.

Tony  1:00:54

Thank you for that.

Cameron  1:00:55

Alright, safe travels, Tony.

Tony  1:00:56

Thank you.

Cameron  1:01:01

The QAV podcast is a production of Spacecraft Publishing Proprietary Limited authorized representative of FSL 52044, 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.