QAV 501 Club

Cameron  00:07

Welcome back to QAV. This is episode 501, season 501 being recorded on the 12th of January – Wednesday, the 12th of January 2022. Apart from very windy golf, how are things down in Cape Schanck,  Tony?

Tony  00:26

Good. Isolated, which is what I’m liking at the moment; no Omicron.

Cameron  00:30


Tony  00:31

Yeah, it’s, it’s hot and windy. Well, there’s Omicron around, I mean every now, now and then I’ll get an email saying someone’s had it on the golf course, but I go out and do a shop once a week and that’s my only exposure to civilization.

Cameron  00:42

And you got boosted last week. How did that go?

Tony  00:46

Good. Yeah, I had… Jen was sick the first days, for about 24 hours, and I was fine. But then the second and third days, I was just pretty washed out. So, something was going on. But I was fine. Nothing sick. Had a sore arm for a while.

Cameron  01:00

I believe you’ve now been cleared to play in the Australian Open this week.

Tony  01:04

Yes, that’s right. I’ve been vaxxed.

Cameron  01:06

Yeah. You’re good to go.

Tony  01:08

But I’m not going to rely on the warranties of the federal government. You know, it’s great we can’t go overseas at the moment because the French hate us, the Chinese hate us, and now the Serbians hate us.

Cameron  01:23

And some Americans too. I was watching an interview that Glenn Greenwald did with another top ranked US tennis player who has chosen not to come to Australia to play in the Australian Open because he’s not vaccinated, and we have a terrorist regime down here that he’s not very comfortable associating with, so.

Tony  01:44

Terrorist regime?

Cameron  01:47

Something like that – tyrannical regime maybe.

Tony  01:50

Who’s that guy? George Christiansen? He was out today saying that if “well, if, if an unvaccinated player can come into the country, then we should just open the borders to all unvaccinated people.”

Cameron  02:00

Because opening our state borders has been such, it was such a great idea. Everything’s going so well. New South Wales’ economy is doing so well right now, I believe.

Tony  02:10

To be in WA at the moment, hey?

Cameron  02:12


Tony  02:13

That’s the really stupid thing about it is because it’s not, there’s no lockdowns, well, no government mandated lockdowns, there’s no support.

Cameron  02:20


Tony  02:20

So, you know, the local businesses which can’t get staff because they’re quarantining are just going broke. And no one wants to go out anywhere because of Omicron,

Cameron  02:30

Yeah, self imposed lockdown, as they say. Anyway, we don’t need to tell everyone what’s going on. Everyone knows what’s going on.

Tony  02:36


Cameron  02:37

Let’s talk about more positive things, like the shock decision by the Indonesian government to suspend some thermal coal exports to guarantee domestic supply, which, according to the ABC a couple of days ago could have a flow on effect for Australian miners locked out of the Chinese market. I read this and thought should we be paying extra attention to our coal stocks, Tony?

Tony  03:01

Well, have you read today’s financial review, Cam?

Cameron  03:05

I did read it, very early this morning, yeah. What did it have to say?

Tony  03:09

The Indonesian government’s backflipped and they’re now allowing exports again.

Cameron  03:12

Oh, Indonesia.

Tony  03:16

Yeah, funnily enough, the local mining industry and some of their neighbours who need the coal put some pressure on in the Indonesian government and they, they folded like a cheap suit.

Cameron  03:28

Right. Oh, well, so much for that plan, then?

Tony  03:34

Well, the coal price – I did check the coal price based on that, and it has, has ticked up again, so it is slowly improving. It fell off a cliff a few months ago, but it’s still a buy signal, so I’m not gonna take anything off the buy list. But no, I don’t think Indonesia is having a dramatic effect on the coal price at the moment.

Cameron  03:55

Well, I’ll tell you what is being dramatic at the moment, is our stock tip from last week. No, no. When was it? Oh, a few weeks ago? 13th of December, GWR. Iron ore and gold miner, I think, is that right? Iron ore and gold, does that sound right?

Tony  04:13

I think so. Definitely iron ore, yeah.

Cameron  04:15

“Iron ore producer with an eye on strategic minerals and advanced gold production,” according to their website. Very flashy website. We recommended – was one of our stock tips on the 13th of December. Oh, only 67%. It was up 83% when I looked earlier, it must have come back. It’s up what?

Tony  04:34

Right. And it was up a lot today too, up 20% today.

Cameron  04:38

Oh, only 5% according to Google Finance.

Tony  04:40

Okay, it was up…

Cameron  04:41

Yeah. I think it was up and then it came back, yeah.

Tony  04:43

Again, had a cursory look at it. I think what’s happening is, I saw an announcement to say they’ve turned, well, they started mining again at C4, which is one of their mines. And it looks to me like they must be just a marginal producer because when the iron ore price came down they stopped mining and now it’s, sort of, going back up again slightly anyway. They’ve, they’ve recommenced mining at the mine. So, this happens in the commodity cycle; you get marginal producers who will only really make money when the price is you know, above average. So, this looks like one of those stocks and as soon as the spear gets turned on the share price goes up.

Cameron  05:21

Did you buy it when we recommended it?

Tony  05:23

No, it’s too small.

Cameron  05:24

Yeah, not too small for me, but my portfolio was…

Tony  05:26

Oh, you bought it?

Cameron  05:27

No no, my portfolio’s full. I couldn’t buy it for my Super fund, anyway. But yeah no, it’s a damn shame. It’s up 70% in a couple of weeks, that would have been nice. But it’s been good for our Navexa portfolio, because we did add it to our dummy portfolio, and we obviously put it out as a stock tip so it’s helped our stock tip track record look extra good. And gave our dummy portfolio a real kick in the pants in a good way, a good kick in the pants if there is such a thing.

Tony  06:01

I’m not going to say much about Navexa today, I just need to get my head around their reporting at the moment.

Cameron  06:06

Have we given up on that? I think we’ve kind of given up trying to understand it. Isn’t it? It’s like…

Tony  06:11

I think so.

Cameron  06:12

Tony sent me an email just earlier saying if you look at Navexa’s reporting for, well, any period really since inception or the financial year, it tells us our, the value of our portfolio is one figure. But if you look at the report for the last seven days, it gives us a completely different and much lesser value of the portfolio, not growth or anything, but total value of the portfolio drops by 10% if you look at the seven-day report. We can’t figure that out for the life of us.

Tony  06:41

It could be dividends, like one might just be showing us the capital growth or the invested amount in the portfolio and the other one’s showing that plus dividends, but I’m not sure. I haven’t been able to reconcile it. But it’s, yeah, it’s not making much sense. But having said that, what did they send out? The top three movers for the week in our portfolio. So, GWR was the top mover at 35.7%. KIL, our good old Kangaroo Island timber, which is now called Kiland or something like that is 6.23%. And – but we did suffer a loss with PRU, which is down 4.6%. They’re the movers and shakers from the Navexa portfolio.

Cameron  07:18

And I sold CGF out of our Navexa portfolio last night because it had breached its sell line. But I haven’t replaced it with anything yet.

Tony  07:28

Oh, I sent you an email saying FEX.

Cameron  07:31

Oh, okay, good. Thanks.

Tony  07:33

Yeah, so I went down the list and I think Thorn Group was the top, the top of our buy list, but it’s a Josephine at the moment. So was the next stock, which from memory was MML. And then we had the next one, I think, and then we got to FEX after that. But if you haven’t sold Challenger, I think it’s actually back above its buy line today, or it was at lunchtime when I had a look.

Cameron  07:53

I did in fact sell it yesterday.

Tony  07:55


Cameron  07:56

Sorry about that.

Tony  07:57

That’s okay. Add FEX in.

Cameron  08:00

FEX. Alright, well, I will do that now.

Tony  08:02

Yeah, I think it’s Fenix from memory, Fenix iron, another iron ore company.

Cameron  08:07

And our stocks of the week this week were ANZ and COG.

Tony  08:12

Yes. Well, we’ve talked about COG before, but probably had ANZ – we’ve definitely had ANZ on the buy list but I don’t think we’ve talked about it, so I’ll do a pulled pork on ANZ in a little bit. The other interesting thing, like, it’s kind of the reverse of CGF because it was on our buy list when I did the buy list on the weekend, but now it’s back off again today. It’s about a cent below its buy price, I think.

Cameron  08:34

Right. I think I did say in my report on it on Monday that it was pretty close, so people should keep an eye on it.

Tony  08:41

Yeah, right. Okay.

Cameron  08:43

Do you want to talk about ANZ, now?

Tony  08:45

Oh, I was just, yeah, I’ve got a few other things to talk about first. So, I’m gonna talk about the buy list. So, just in case – I mean, people should check the buy list themselves or do a download when they’re ready, but a few of the notable moves; CLX and TBR, MTO, just came off the buy list this week. CLX and TBR came off, MTO just came off, and CTP and Aurizon, AZJ, came on to the buy list, so a couple of big stocks there that people, if people need that, but certainly ones that we’ve mentioned before, CLX, TBR coming off, MTO motorcycle – MTO is motorcycle traders, I think – CTP, Central Petroleum, and Aurizon going on, so few moves there if people are interested. The other thing is, to talk about is, we are coming into confession season because reporting season will start officially first of Feb, but in earnest probably a week or two after that. So, we’re probably three weeks away from reporting season, so it’s a good time to stay close to reading the AFR, stay on top of your alerts, because this is the kind of time when if a company comes out with a news announcement it could change the stock price dramatically either way, really. So, it’s something to watch out for. Alright, stock of the week. ANZ.

Cameron  09:59

Never heard of them. Who are they, Tony? What, what is this thing you call ANZ?

Tony  10:04

Australia New Zealand Banking Group, and everyone will know who ANZ is if you’re an Australian listener, or a New Zealand listener, one of the big four. Couple of things that people may have, may have missed if they weren’t reading the Fin Review over Christmas. There is some speculation around that the, I guess well respected CEO, Mr. Elliott, may retire in 2022. He will have been there I think for six or seven years by then. He was brought in, I think he may have been the CFO, Shane Elliott – uh, Shayne Elliott? I think it’s Shayne Elliott – before taking on the CEO role, then spent most of his early tenure unravelling the prior CEO’s expansion into Asia, which had some mixed success. So, he brought all of that capital back where it was earning a better return in the Australian franchises. And then during the Hayne Commission, I think probably out of the CEOs of the banks, probably did okay, or the best in terms of you know, he always was very, quite, humble, and was listening to what the, what Mr Hayne was saying, rather than – which was not always the case with some of the bank CEOs who, and some chair people who sometimes got a bit bolshy with the Hayne Royal Commission, much to their detriment. I guess that’s by the by, a CEO change can cause volatility in a company’s share price, and this could all be nine months down the track, but I do raise it as probably one of the impending issues for ANZ. it can cause the share price to be volatile for a couple of reasons; if they promote from within, then chances are the people who were on the list and thought they may have got the gig may get upset and leave, which could cause some reorganisations in the management, if not the business units, but if they employ someone from outside that could have a surprise effect, good or bad on the stock price. Most times good, but can go either way. But either way, whether they employee from within or from without, oftentimes a new CEO will spend the first sort of three months working out how to best position the company for themselves – and I’m being a bit cynical here – but I’ve often seen a new CEO come in and take lots of write-downs, blame it on the last guy, and really clean up the balance sheet so that they can put a floor under their options going forward and make sure they make the most money out of all their incentives. That’s probably their only opportunity to clean decks, if you like, and shake out the skeletons, and take all the provisioning that the last guy may not have wanted to because it would have affected the share price. So, the share prices can often go down soon after a CEO is replaced, but not always. So, just an observation and something to be aware of if you’re thinking of investing in ANZ. The business itself, I mean, it’s one of the big four banks; every one of the big four banks really has a specialty, like a strength compared to the others, and in ANZ’s case there’s a couple. They are the biggest New Zealand Bank, which is a big money spinner for them. They are big in credit cards, and always have been, mainly because of the Qantas Frequent Flyer programme which they’ve been linked to for a long time. So, there are a couple of strengths and their strength is still in the Asia-Pacific region, particularly the Pacific region. So, they still have probably a bigger market share in certain jurisdictions overseas than their competitors. So, they’re the strengths of ANZ. I think it’s coming onto our buy list now probably because it’s the cheapest of the, of the big four banks. Certainly, on a PE ratio basis, it’s the lowest of the big four and I’ll get into the numbers in a minute. But, I raise this because there’s been like a, I guess, a shorthand way of investing in banks on the ASX for a long time, and that’s basically just to invest in the, in the bank with the lowest PE ratio. And that way, you’re always kind of buying the bank with the biggest value and as it sort of cycles up in share price and the PE raises, you sell it and you buy something else with the lowest PE, because big four banks are not a whole lot of differentiation between them. So, in some respects it doesn’t matter which one you buy, but relatively it does and and buying the cheapest PE’s always been a good sort of way to invest in the banks and really the ASX in general going forward. There are these sort of shorthand ways that the experienced operators get to know over time doing things like what they call pairs trade. So, if you industry like banking, if you like the, if you want to buy the bank with the lowest PE, then you might want to short the bank with the highest PE and so you benefit from that cyclical sort of rerating of stocks. And the highest PE bank is CommBank at the moment, and there’s a question coming up later on about CommBank went down in the last quarter – and I think probably one of the reasons for that is because it’s the highest PE of the banks and so people do kind of trade out of the high PE bank into the low PE bank. Yeah, so that’s by the by, but again, like buying listed investment companies when there’s a gap to their NTA, like buying the top 20 stock which has the biggest gap between its current share price and it’s IV 2, they’re all kind of shorthand ways of investing, especially if you don’t have much time to look at it, and buying the bank with the lowest PE’s another one of those. Anyway, that’s, I guess, background information for the numbers and I’m doing my analysis based on the download I did on Sunday, when the price was $28.40. The buy price at that time was $28.10, but as I said, last time I had a look, it was about a cent or two below that. So, if it doesn’t turn up again this might be a moot exercise, but still worth doing I think just to run through the numbers on ANZ. It’ll probably come back on the buy list I would think. The other thing to mention about the big four banks is their yield, and ANZ’s no exception. So, it’s currently yielding 5.06%, and it’s fully franked, and if you gross that up it’s 7.23%. So, if you’re a retiree with a million dollars and want to live off the income, putting it into ANZ means you’ll, you’ll pick up $72,000 a year after tax, especially if you’re in a, like a self-managed Superfund where you’re getting a full rebate for the franking credit. So, the big four banks traditionally have been well supported by retirees, and that’s probably still going on today I would think based on those numbers. To go through the numbers, ANZ is a large average daily transaction stock, as you’d expect; $134 million is traded on average every day in it, so very, very big. It’s QAV score is 0.36, so that’s also quite high, especially for large cap stock. And it will be getting pretty close to the top of our buy list with that kind of score. And a quality score of only 64%, though, and that’s probably the, the area to focus in on. To go through the numbers, it’s slightly under the consensus target, so that gets a one for us. It’s a borderline Star Growth stock in Stock Doctor and it’s a Star Income stock, so both of those score 0.5 in our checklist. So, it gets a score of 1 for those two combined. It does have strong financial health, as you’d expect, and it’s been steady for a while, so that’s, they’re both good things for our checklist. As I said before, it’s the lowest of the PEs for the big bank, it’s PE is 12 or 12.5. I think Westpac is just slightly higher than that at around 13, but then CommBank is up around 20. So, it’s, they’re good – both ANZ and Westpac are a long way behind CommBank. And I think NAB has the highest at the moment, but that’s probably a bit anomalous; its PE is well over 100, so it’s probably just been going through some write-downs which are affecting its earnings, but I haven’t looked at NAB for a while, so I can’t really say. The reason why it’s coming up well for us at the moment, though, is its prop cap is 1.81. So, it’s, it’s priced operating cash flow is 1.81, which is very cheap. So, even though it’s quality score’s only 64%, it scores well for us because of its value dimension. The current share price, however, is greater than our IV1 but it’s less than our IV2, so it does score a point for that. It’s trading around book value, which is very interesting for a big company like this. So, net equity per share is $22.81, and book plus 30 is $29.66, and with the share price in the sort of low 28s, we can buy this for less than 30% plus books. So, this would be something on the Warren Buffett radar screen if he was investing in Australia I would think. On the negative side of things, though, the analysts are predicting a decrease in earnings per share of 5% next year, so that scores a -1 for us. And again, that’s a prediction so who knows how that will play out. But that’s what they’re predicting. The yield as I said before is good, certainly above the bank rate. It’s the old adage of investing in Australia is “don’t put your money in the bank, buy their stock instead”, because the yield is much higher than the, the term deposit rate from the bank itself. So, yield scores well for us. And it did, as I said, it did cross over on the weekend and gets a point for a new upturn. That’ll have to lose, we’ll lose that point though, if it does continue to stay below its buy line, obviously. Equity in the bank is not consistently growing, though, so it doesn’t score for that, and it’s not the lowest PE in the last three years so it doesn’t score for that either. And obviously, it doesn’t have an owner-founder – the bank was founded over 100 years ago – so no score for that. So, quality score is only 9/14, which is not the highest but certainly gets onto our buy list because of the price to operating cash flow. So, that’s the numbers for ANZ. A couple of other thoughts about the business itself, and again, this is getting into the story and the issues rather than the numbers, but just for some thought starters for people who are thinking of investing, if you look at the share price graph for ANZ it’s pretty much completed its recovery from the COVID cough and that’s where all the big gains were made in the Australian banks, and it’s back to sort of that same trendline that was before the original COVID downturn in March a couple of years ago. And it’s on a sort of gently sloping decline, so it’ll be interesting to see what the share price does from here, whether it sticks to that trend or whether it does continue with its up, up turn. And Omicron obviously may still cause it problems. I suspect with large increases in property prices, especially home property prices in the last 12 months or so, they should be reducing stress on the loan book for ANZ. And you would think, you know, again, who knows with COVID what comes around the corner, but you think that reducing stress on the loan book is always a good thing for a bank and they’ll probably take lower provisions for bad and doubtful debts, and potentially even start to write some of those back from their current balance sheet. So, we may see some improvement from here just based on that alone. So that’s, that’s ANZ bank, Cam.

Cameron  20:52

Alrighty. Yeah, well, I just checked the blog post I did for it on Monday, I did say that it could drop back below its sell line, not the buy line. But yeah, it’s dropped, I don’t know how far it is from its sell line today, but it was just above that, too. So…

Tony  21:08

Oh, okay, yeah, they’re pretty close. They’re both very similar at the moment, in terms of price, yeah.

Cameron  21:12

Just also I made a note just to make sure that people payed attention. I also made a note in the blog post; COG, our small-cap stock of the week is actually a Josephine – just barely – I think the previous month close was $1.50, and it was trading at $1.46. I did say that, technically, we probably wouldn’t buy it until it showed us an uptick, but you know, people can make their own decisions about Josephine’s, etc. Just trying to bring up the Brettelator and see where it is today, but the Brettelator’s wigging out on me, Google Finance, etc., etc. Okay, a couple of other things I just thought I’d mentioned to people if you’ve signed up to Stock Doctor in the last three or four weeks, because we announced around about the middle of last month that Stock Doctor was building a QAV filter, and coming out with it. Apparently, few of our, few of our new subscribers, club members, have contacted me in saying well, they went ahead and signed up to Stock Doctor and then found out the filter hadn’t, the QAV filter hadn’t been launched. Stock Doctor told me it was, it would be ready on a certain day and then apparently it wasn’t, and then Stock Doctor sent people the list of the filters, but they were wrong. Stock Doctor got it wrong. I’d sent them the list and apparently, they, I don’t know, human error. So, I apologise for anyone that happened to, and for anyone who hasn’t noticed, just, if you did sign up to Stock Doctor and they had the pre-built QAV filter in there, just go in and check it against the Bible’s filter list. Check that the GICS classification is correct, and I think it was EPS forecast was missing from the list that they were sending to a couple of people. So, just go and check that. I mean, if you’ve tried to use it, it wouldn’t work anyway, because it wouldn’t be able to cut and paste into the checklist. So, you’ll quickly find out that something is rotten in Denmark. Also, Ali asked on Facebook the other day, Tony, how often we should be updating our sell alerts in Stock Doctor, and I told her that I tend to do it at the beginning of every month. Just the habit I’ve been into since the last time you reminded me that we should do that. Oh, COG is $1.45 today, so it’s still a Josephine. Well, I thought I just check with you. How often do you do your sell alerts?

Tony  23:39

Yeah, I’m pretty ad hoc about it, Cam, I don’t do it in a disciplined way. First of all, I only raise them if I’ve done a buy list for the stocks I’m interested in – which is probably only about twenty or so on the buy list – and then they have to be within, say, 20% of their sell line, and then I’ll raise a sell alert for them, or a buy alert if they’re getting close to their buys. And I’ll, I’ll update those, yeah, just in an ad hoc basis, really, I don’t do it in any sort of methodical way. Generally, I find over the course of a month or a little bit longer than that maybe that I’ve checked those twenty stocks for some other reason anyway, and I can update them then. And that’s because I’ve read something about them in an article in the paper or they’ve come up on one of the lists, like the top movers of a day or something like that listed in the AFR, and then I’ll go and have a look at them.

Cameron  24:29

You’re talking about buy alerts or sell alerts, though?

Tony  24:32


Cameron  24:33

So, for the stocks in your portfolio. Again, I assume you only really bother setting an alert if they look like they might be heading in the wrong direction.

Tony  24:43


Cameron  24:44

I do the same thing. I mean, I’ll take a quick look if they’re, if they’re way, way, way above their sell price I won’t worry about it, but for the ones that are you know, I’ll do it sort of monthly. Okay, cool. You got anything else you want to talk about before we get into Q&A?

Tony  24:59

That’s probably good advice too, Cam, to do it monthly, because as the month rolls over in the graph it can change the sell price as well.

Cameron  25:06

Yeah, I’m always sort of surprised when I’m going through it how not all of them have changed by a great deal but probably a third to a half the sell prices are a lot higher than they were the previous month. Particularly if they’ve been in a steep incline since the COVID cough or in the last six months.

Tony  25:26

Actually, one that surprised me recently, I was going through looking at gold when I did the buy list on the weekend, and I remember sometime last year I highlighted the fact that gold was getting close to a sell. And I think the sell price back then was about $1750, $1760 US dollars an ounce. And the gold price is back up around a sort of high $17s-$18,000s. But the sell price has dropped as well, because the graphs are just, even though the moving sideways have moved on a number of months since then. So, I think the sell price is now about $1600 US an ounce.

Cameron  25:59

Good. Anything else before we get into some questions?

Tony  26:02

No, let’s hit the questions.

Cameron  26:04

We only have a couple of questions this week, so it’s going to be a short show. Short show is a good show.

Tony  26:09

We can, we can talk about after hours for another hour afterwards. If you like, or…

Cameron  26:17

First question is from Michael: “interested in Tony’s thoughts on NTD’s SPP” at the national tire and dishwater… national tyre distributors, I think it is? I can’t remember, what is it, NTD? National Tyre, Tyre and Wheel Limited? I don’t know why there’s a D in their code. And on SPPs in general, ie whether to participate in them. I did send Michael, he asked this on Facebook, I did send him a link to something you’d said before – another show – where we’ve talked about SPPs, because it comes up as a share purchase plan for folks that are new to investing basically, as I understand it, when if you own shares in a company and the company says “hey, we want to raise some capital, we’re going to do you a special deal because you’re in, you’re an insider, you already own stock, and we’re gonna offer you shares at, at a discounted price.” Is that basically what an SPP is?

Tony  27:15

Yeah, very much so. Oftentimes the retail SPP will happen after the instos have been asked to buy new shares, so that is the case with NTD. So, they used those, I think bought about $9 million at a discounted price, and now the board is making that same offer to the retail shareholders, although they expect to raise less. They’ll raise about 3 million, I think they’re asking for, from retail shareholders.

Cameron  27:40

Right. And a retail shareholder is just somebody who’s not part of a fund manager or a bank or something?

Tony  27:47

Yeah, or a large shareholder. And that’s probably a question we should highlight to individuals, is you can get in on institutional offers if you are classed as a professional investor, and that your accountant will need to sign off on that and give it to your stockbroker. And the rules currently are, from memory, you’ve got to have an income of 250,000 or more, or have I think it’s $2 million in assets outside your family home. So, that obviously won’t suit all our listeners, but there might be some out there who aren’t aware of that. And for the simple cost of getting your accountant to right a letter and say “yep, that’s, you know, I fall into that category” and you give it to your stockbroker, you will get it onto those, those deals when the instos are offered. First dibs are new share SPPs.

Cameron  28:35

Does that income have to come from investing or just income more broadly?

Tony  28:39

Just income, so you could be like a wage earner earning that kind of money.

Cameron  28:43

And to get your accountant to write that letter, is it like getting our lawyers to write a letter when we started the show? It’s gonna cost about $10,000. Does that…

Tony  28:52

Seemed to be the case with Price Waterhouse Coopers when I did it with them recently, although we moved away from using them as our accountants. But no, it should just be like a couple hundred bucks, they will have done it many times before. And if they’re doing your tax returns they’ll know exactly what your financial profile is, so just, you know, pull out the template and sign it.

Cameron  29:11

And so the advantage then is you can get in before retail investors on these, and it maybe at a better, better deal, sometimes?

Tony  29:19

It’s oftentimes the same deal, but you’ll get in when, like, there are companies out there who don’t make the same offer to retail shareholders for whatever reason. And like during things like the COVID cough and the GFC, boards are under pressure to act quickly, and so they might just literally put out a notice on Friday saying we want people to take up new shares so we need to raise, raise capital to repair our balance sheet. And by Monday, it’s closed. So, you get in on those kinds of deals, and you also – capital raising is probably the main one but sometimes… yeah, no capital is another form of, I was gonna say another thing about capital raising, but yeah. So, basically, if you need to raise capital from a retail shareholder, you have to go out with a prospectus. And we talked about cleansing notices last week, which is a short form prospectus, which could be the case, in some instances. I haven’t looked into the MTD share purchase plan in detail, but it probably does have some form of prospectus behind it. And that’s one of the reasons why companies can shy away from doing it, because it’s, it’s a cost, it’s a legal cost to put a prospectus together, to raise less money from the retail shareholders then they could be raising from the Insto and sophisticated investors, shareholders. So, there’s that. There’s oftentimes, if you get onto that kind of list, you might just get a phone call from the share broker saying, you know, “so and so’s selling a block of trade, are you interested in buying some and putting together, you know, a list of people who want to bid for it?” So, yeah, you’re starting to play more in the fund manager world than you are in the retail world.

Cameron  30:55

Right. And so, do you have any particular thoughts on the NTD SPP?

Tony  31:01

Well, bloody good, bloody good buy. So, Michael, if you own NTD, congratulations. I’m looking at the share price graph now. I’m not sure what the price was when it was on our buy list and we were recommending it, but from the COVID Cough it was like, I think it closed at 25 cents at its low point and it’s $1.60 today, so great rise. And since they’ve announced the share purchase plan, which is, is raising money for a lot of different things, but primarily to buy another business called Carters – just a funny name for another company in the tyre and wheel area. But anyway, they’re buying Carters, so obviously people think that’s a great idea. Yeah, so it’s a no brainer. In this particular case, you’re, you’re being offered shares at $1.35 and they’re currently $1.60. So, you’re making easy money straightaway. Not always the case with share purchase plans, and we’ve spoken about this before. So, that’s kind of rule, the first rule of share purchase plans; if I buy the shares, am I in the money? And you’ve got to take into account dilution, because once the share purchase plan is done and dusted, there’ll be more shares, and the share price may come back because of that, to reflect dilution. And in this case, though, I think they’re, they’re raising, as I said before, 9 million, or they’ve already raised 9 million from instos, they’re raising 3 million from retail. So, 12 million in total, the market cap is around 185 million, so there’s only a dilution of about 6.5%, which is not, not too bad, it may not even affect the share price given that it’s going up so strongly now. But anyway, what I’d normally say is that based on the current share price, and based on the offer price, you’re going to make 18.5% and therefore you can easily afford to suffer the 6.5% dilution should it occur. So, this is money for jam, basically. A couple of things to be wary of, and I said before rule one was to see if you’re in the money: don’t go in from day one for a share purchase plan, they often take a month or so to run and they often have clauses in them like you can buy shares, in this case at $1.35, but sometimes they also have another clause which says, or a discount of 5% to the weighted average cost of the shares or weighted average price of the shares in the last five days before the share purchase plan closes. So, often pays to hold off until the last week and just see whether the deal improves, you know, if the share price for NTD was $1.30, then it’s an even better deal, right? Although you probably wouldn’t buy because you’re not going to make money just based on the offer price. But in some cases, the waiting till the end is a good idea. A, you see where the share price finishes up and B, you can see what the offer is; is it going to be better to buy the – are you going to take the offer that they’ve given you in terms of $1.35 share price, or the average discount for the last week of trading? So, that’s another thing to look out for. In general, something else to bear in mind is that oftentimes share purchase plans get scaled back. So, because this is such an attractive deal that’s being offered by NTD to its retail shareholders, you might find that they want to raise $3 million, but they might get $6 million in applications. And then they don’t, the board will either say “well, we’ll take the extra 3 million, and there’s even more dilution to the share price.” Or, they’ll say “no, we’ll scale everyone back and give them half what they applied for.” Which means that if you’ve sent them $30,000 today, you might get $15,000 back in a month’s time when everything’s done and dusted, and they’ve had your money for a while, but you haven’t had the use of that money. So, just bear that in mind too. And I’ve certainly been in share purchase plans and applied for the max and then gotten, you know, 10% of what I asked for and so my money’s been tied up for a month or so doing nothing really. So, that’s something else to be aware of. What else? And the last, last point I’ll probably make in general is that again, this is an example of weighing up your options for allocation of capital, are you better off putting 30,000 into the share purchase plan or are you better off buying something higher up on the buy list? So, you’ve got to way those two things up. But given this seems like such a compelling deal, and it’s like an 18.5% return in a month, it’s probably going to be better than whatever else is on the buy list, so I’d be taking up the share purchase plan offer now.

Cameron  35:23

Please don’t take this as financial advice, go see a registered financial planner before you make any investing decisions. But that’s what Tony would do.

Tony  35:34

Yeah, you’re right sorry. I shouldn’t, it’s not a recommendation for Michael. I don’t know his circumstances. But I do think this is a compelling offer for people and, and well done to Michael for holding NTD when it’s improved so much.

Cameron  35:45

The last time it was your stock of the week was in mid-January 2021, about a year ago when it was just north of $1.

Tony  35:56

So, 60% in 12 months.

Cameron  35:58

It dropped, promptly dropped, of course, because it was just stock of the week, down to 82 cents by the end of March.

Tony  36:06

100% in a Year.

Cameron  36:08

Then it went up. Then it doubles, yeah, yeah. Of course, people would have rule 1’d it on the way down.

Tony  36:15

Shook out all the rule 1s.

Cameron  36:17

Yeah, it was the right call just a couple of weeks early. You could’ve left it a couple of weeks. Alright, good. So, that’s SPPs. Duncan asks, “why has CBA crept back to near its peak given that there’s been no price sensitive announcement since its fall from grace a few weeks ago? I see it is on the buy list this week,” this is probably last week – oh no, might have been this week, “but is it worth a punt again? Would TK buy it again?”

Tony  36:47

Yeah well, Duncan, I would. It’s back on the buy list. It’s a quality company. It’s a large-cap company. So, lots to, to recommend it to people to invest in. Again, it’s not going to be as high up on the buy list as ANZ because the PE’s 20 odd, it’s the highest PE of the retail banks, or the big four retail banks in Australia. So, that’s going to be an issue for it. Probably the reason – the thing to focus on is not so much why it’s getting back up to where it was, but why did it drop. And all I can think of is that it did put out a quarter three update, which I can see in Stock Doctor – if people are interested, they can go on to Stock Doctor, look up the company announcements and look at the price sensitive company announcements and see how much the share price moves on the day of that announcement. And when they put out their quarter three earnings statement or a quarter three update, the share price dropped 8% that day, and it kept going for a bit more than that. I think that’s why it dropped in November, I think it was from memory, and it came off our buy list because of that. But I guess my point is that when you’re trading on the highest PE of any of the big banks, and your competitors are trading at not quite half of what your valuation is, you’re always going to be the most volatile of the banks and so it only takes some, not even bad news, but potentially just mediocre news or news that doesn’t contain some kind of fabulous earnings upgrade, something like that, that the analysts expect from a well-run company to send the stock price going lower. If the PE is high and evaluation is high. It’s kind of a mini version of what we’ve been saying about all the high PE stocks, the Afterpays, and anything trading at a hundred times. It doesn’t take much to make them drop. So, I think that’s what’s happened with CommBank. But I think, you know, the, the larger, longer term story is still very much intact with CommBank. It has the largest retail franchise, and by that, I mean the biggest share of customers. It’s well run, it’s probably leading the way in terms of digitization amongst all the big banks and the big – for people who don’t know the banking industry that well, and I’m not saying I’m any sort of expert, but I’ve sort of been around the edges of it for a while – the big banks, their biggest problem has been historically that they have such large legacy computer systems that it’s a huge cost and a huge risk and a huge disruption to business to migrate to new platforms. And so, they’re, or the business IT platforms are very, very old, even though they’re, I’m not saying they’re not good, they’re certainly very robust, which is probably the most important thing for bank but certainly not up to the likes of your start up fintech companies. But CommBank has done the most to address that position, and that’s one of the reasons why it trades on a higher valuation, is that people expect it to lead the way I guess in terms of competing with the new fintechs.

Cameron  39:29

Are they bolshy bankers too, Tony?

Tony  39:32

I think they all are, Cam.

Cameron  39:34

I gotta laugh at that. I’m trying to imagine Lenin and Trotsky sitting down with these bankers and finding some common ground in 1917.

Tony  39:46

You talking about the comment about the Hayne Commission?

Cameron  39:49

Yeah, I just I made a note trying to think of a title for the episode. You were like “bolshie bankers” and I’m like, really? Bolshie bankers? I’ve never thought about bankers being too bolshie before.

Tony  40:01

The person I was thinking about the most was the, the ex-chairperson of NAB, Mr. Henry, who – Ken Henry I think his name is – who went in on the front foot to Hayne. Whereas, Shayne Elliott from ANZ was very humble and said, “yes, we’ve made mistakes, and we’ll fix them,” which is the way to play that Royal Commission, and then there were varying degrees of that.

Cameron  40:20

Didn’t the NAB CEO and Chairman have to fall on their sword a little bit after that?

Tony  40:23

They did, yeah.

Cameron  40:25

Bolshy. Oh dear. Okay. So, that’s CBA. Duncan had another question, and I’ll allow it, Duncan, seeing as we don’t have many questions this week: “lots of iron stocks seem to have breached their earlier peak, but the commodity price is nowhere near its peak before its plunge. I think it was mentioned a few weeks ago, but I wonder if Tony has any new insights on iron ore and iron stocks?”

Tony  40:52

I don’t, Duncan, it’s, I’m still scratching my head at FMG. I kind of agree with I guess what you’re thinking, I’m assuming what you’re thinking, but from my point of view, the companies have recovered in their share prices to a large extent, but the iron ore price hasn’t. So, the iron ore price was up at $224 a tonne at one stage. And admittedly, FMG was a little bit higher than what it is now, maybe 10-15% higher than what it is now. But the iron ore price is nowhere near that high. It’s almost half of that. And yet the, the miners have returned back to those highs. So, I suspect there’s a bit of a, as often is the case with the market, a bit of a pendulum going on here, they may have swung, the share prices for those companies may have swung too far south when people sold out as the iron ore price was dropping, and now they’re probably swinging a bit too far north as people are buying back in because the iron ore price is steady. It doesn’t mean that FMG’s necessarily overvalued, it’s still on the buy list, and if I need to I’ll buy it, but it might go sideways for a while, it might come might retrace after a while, might go up. We never know. But, but yeah, I had the same sort of feeling about it all as you do. I think there’s a bit of FOMO going on here. Once the iron ore miners as a class started to rise again, I think people thought “well, we better, better jump back in again.” Especially if you’re someone like FMG, which is part of the indexes, if you’re an index manager who was smart enough to sell out when the price was going down, you’ve got to buy back in now to at least maintain the index. Or if rather than being an index fund, if you’re someone who measures yourself against the index, you need to buy back in now to just not be left flat footed. But that’s what I think’s going on, I’m not really sure other than that, and I have no more thoughts other than that. There have been some articles written about new, I think it’s called FFI, the future industries part of FMG, where they’re starting to get into all sorts of hydrogen, green hydrogen and metals that might be used by electric vehicles and things like that. That’s the blue-sky part of FMG. They haven’t done a whole lot in reality, and nor would I think it would be profitable at the moment. So, that’s a wait and see. But that could be increasing the share price of FMG in particular, but it doesn’t explain the other ones like we spoke of earlier today; FEX is on the rise, GWR is on the rise, CIA is on the rise. They’re all on the rise, and it’s, I think it’s just a bit of a sigh of relief from the market that the iron ore price has stabilised and they want to get back into the sector. But oftentimes, the market works like a pendulum, as I say, and we might be swinging a little bit too far to one side at the moment.

Tony  41:34

Swinging too far. You know what else all those stocks have in common though, Tony, our stock tips of the week. They’ve all been a stock tip the week in the last month, so I think it’s the QAV effect there, Tony. Normally, stock tips of the week go down immediately, but those have all gone up. FMG is up about 13% since I added it to my portfolio again after you said that iron ore was a buy again, so that was only, what, 14th of December, I bought it. It’s up 13% since then, so I’m a happy camper.

Tony  44:07

Yeah, good. I haven’t bought back into them because I’ve been waiting for something to sell. But you know, I mean, to Duncan’s point, I wouldn’t have any trouble buying them back again if I need to.

Cameron  44:16

I was gonna suggest it was just you pushing the price up but apparently not. Swooping in.

Tony  44:23


Cameron  44:24

Taylor sent me a clip of the equity mates podcast on TikTok, there’s something they put up on TikTok this week where they were plugging FMG as well. And I saw, I saw one big brokerage firm call it a sell yesterday, I saw in my news releases. So, anyway, guess there’s, that’s the market for you. Okay, so you can’t really explain it. It’s just, it’s weird.

Tony  44:47

It’s the market doing what the market does.

Cameron  44:49

Yeah. But the markets perfect Tony, isn’t it? Like, all the literature says perfect information. Everything is … efficient. Yes.

Tony  44:59

Efficient market theory, what a joke that was. The only people who made money out of efficient market theory were the professors pushing the theory at the schools of economics.

Cameron  45:09

The consultants that came in afterwards. Well, I think that’s all we have for the show this week. I think that’s where we’ve run out of questions. We’ve run out of stuff except for after hours. That’s about it.

Tony  45:25

Yeah. Okay. Well, we could certainly do after hours. Is there anything else you wanted to do that we, might be interesting for people? Or are you happy that we’ve spent enough time on stocks?

Cameron  45:34

Yeah, that’s 50 minutes. That’s longer than I expected we’d get today. I didn’t think we’d make half an hour today with only two questions but there you go.

Tony  45:44

Send your questions in next week.

Cameron  45:46

Yeah, send in questions. So, tell me what else you’ve been up to? What have you been doing for fun apart from golf down at Cape Schanck, TK?

Tony  45:53

Well Jenny’s been here, which is great. We’ve had Alex down for a week, which was lovely as well, we were all gonna go back to Sydney for the fireworks on New Year’s Eve and have a party at our place, but we put the kibosh on that when people started pulling out and the caterer was asking us whether it was wise to do it during Omicron. So, we finished up hunkering down here. Alex hadn’t seen Ted Lasso or the Get Back Beatles series, so we watched those again from end to end, which were great. But yeah, just sort of summer beach house stuff, lots of walks. Golf, jigsaws, Alex started the jigsaw which I’m just finishing now. I read, got given Barry Humphrey’s book, My life as Me, one of his autobiographies for Christmas as a Kris Kringle. I think it’s actually an old one. But I think Barry also puts out a new autobiography every five years and just adds to the last one. And they’re always great reads, I really enjoy them and would recommend it. It’s called My Life as Me, was the one I read, but there’s probably three other different versions of it as well. But I would warn people to have a dictionary handy because he does like to use big words. That’s one of the benefits of reading the book is it’s a great launching pad for art and for history and for literature and improving your vocabulary just to follow his tastes in different things. So, so great read. I watched Don’t Look Up on Netflix. Have you seen that?

Cameron  47:13

Not yet, it’s in our queue.

Tony  47:15

I really enjoyed it. It’s pretty patchy, but very, very satirical. Very, very black, and I quite enjoy it. It’s always tough watching an American satire, because it’s like, they don’t do it that well. And kind of like sometimes I think the whole country’s a satire already, so, trying to out-satirise themselves is really hard. But worth the watch. I thought it was great.

Cameron  47:36

Well, they did VEEP, which was really good, but it was made by a British production company and whatever his name is.

Tony  47:45


Cameron  47:45

Iannucci, yeah.

Tony  47:47

Italian, in fact, isn’t he? Rather than – well he comes from Britain, I suppose.

Cameron  47:49

Armando Iannucci? Yeah, I don’t know.

Tony  47:51

But yeah, so I reckon it’s worth a look. It’s just funny. I mean, just the premise of it. I won’t, I won’t spoil it, but the comets heading to Earth and they managed to divide it along political lines and one half of the population keeps going “a comet’s coming to Earth!” and the other half goes, “it’s all fake news. Don’t look up. It’s rubbish.” And then the last thing I want to talk about just what I’m doing, its Magic Million’s sales week on the Gold Coast, so we have a cult being sold on Friday night in the sale. So, if you don’t see me on Monday, it sold well. We’ll be celebrating. But if you see me back at work on Monday, it didn’t sell well. So, busy time for the racing industry. I keep getting lots of phone calls from trainers wanting me to buy a horse with them they’ve bought at the sales.

Cameron  48:36

So if it does sell well, why won’t we see you? Where or what will you be doing?

Tony  48:42

Silly celebrating, I think probably.

Cameron  48:44

That’s good.

Tony  48:46

If anyone’s interested, if someone’s interested, it’s by Harry’s Angel, which is a first year sire out of Kaisura or Caesura. Actually, how do you pronounce that, Cam? You’re the Caesar expert? CAESURA, the mare. “Caesura?”

Cameron  49:03


Tony  49:06


Cameron  49:07

Well, if you were pronouncing it the way the, they would have pronounced it in ancient Rome it would be “Kai-zura” but we Englishise-Anglicised it to be “sizura”. I don’t know what name that is, though. I don’t know anyone who was called Caesura.

Tony  49:23

I think it’s just the female version of Caesar, probably, the person who named the, the broodmare was a Caesar fan perhaps? Yeah.

Cameron  49:30

Good stuff. Gotta love of Caesar fan.

Tony  49:34

Yeah, actually, there’s lots of ancient Roman names in racehorses every now and then. Which is interesting.

Cameron  49:39

Well, I wish you’d get back to Sydney because I want to know what you think of my Christmas gift. It’s been sitting there waiting for you for a couple of weeks.

Cameron  49:46

So anyway, you’ll get it when you get it, I guess. Well, I’ve been, I’ve been watching Cobra Kai. I finally got Hunter and Tayler into Cobra Kai. They’re loving it. Chrissy and I’ve been watching The Great when we’re watching stuff, enjoying the latest season of that. New season of The Righteous Gemstones just kicked off as well. So, we’ve started that last night, watched an episode of that. Just fantastic show. You seen any of that yet?

Tony  49:46

Oh, well thank you!

Tony  50:01

No, I haven’t.

Cameron  50:15

It’s great. Danny McBride and John Goodman running a big happy clapper evangelical church down in the South, and they’re just the most… It’s basically Succession, but set around a Catholic church, not a Catholic Church, an Evangelical Church – Baptist Church. Yeah, really funny.

Tony  50:36

Scomo’s not in the background somewhere?

Cameron  50:38

Yeah, he probably is. Yeah, he’s probably there.

Tony  50:42

I love John Goodman, so I’ll check it out.

Cameron  50:44

Oh, and Danny McBride. Have you seen any of Danny McBride’s stuff?

Tony  50:48

No, it doesn’t ring a bell. Is he the guy from Schitt’s Creek?

Tony  50:51

Isn’t that a line from Smokey and the Bandit? East-bound and down?

Cameron  50:51

No, no, that’s Dan Levy. Dan Levy. No. Danny McBride did, he’s done a number of great series. His first one was called Eastbound and Down, which was about ten or twelve years ago, where he was a hot shot baseball pitcher who was a massive alcoholic and drug addict and asshole psychopath who basically got fired and had to go back to his hometown and get a job as a gym teacher. But walks around like he’s a superstar and just treats everybody like shit. Fantastic.

Cameron  51:26

Yeah, it’s from the theme song. It’s the theme song, “Eastbound and Down loaded up iand trucking…” That’s basically it, yeah. Like the first episode of the show starts off with, you hear this motivational voiceover about how this guy rose to become one of the top pitchers in you know, Major League Baseball, and then he pulls up and he’s a guy driving in a truck, a big ute, and he pulls up. And it’s Danny McBride listening to his own motivational tape as he gets out of his car back in his hometown. He does, he’s really good at doing really dumb, arrogant guys from the South who think they’re hot shit, but they’re really dumb. So that was a great series. Then he did a second series called Vice Principals about a Vice Principal of a high school, he was the Vice Principal, which also starred Walton Goggins as his arch nemesis Vice Principal, which was just fantastic. Again, just two guys…

Tony  52:23

I love Walton Goggins.

Cameron  52:25

Me too. Well, Righteous Gemstone, Walton Goggins was in the first season of that as well, as another Baptist preacher with, they’ve all got, you know, crazy hair and crazy clothes and living in mansions and drive, you know, flying in private jets and just but just the most horrible human beings outside of Succession, you know, just horrible, horrible people. It’s very funny. Yeah, Danny McBride is one of my heroes. He’s very much like Ricky Gervais, and he just does these series that are all kind of similar. He writes them and stars in them usually and he’s an American version of Ricky Gervais. Been getting into, I think I don’t if we talked about this last week, but I’m doing a retrospective on Guy Ritchie. Went back and rewatched Lock, Smoke and Stock and been watching his new one Wrath of Man with Jason Statham. Not great, but just giving it a, giving it a shot. Have you seen that yet?

Tony  53:18

No, I haven’t. I looked at it last night, but I think I still have to pay for it on Amazon Prime, and I thought stuff that. So, as soon as it becomes free.

Cameron  53:26

I think it’s on Netflix, actually.

Tony  53:27

Is it? Okay, I’ll have a look then.

Cameron  53:29

Or one of those, Binge maybe. I don’t know.

Tony  53:31

No, I haven’t seen it. Have you watched the Rock and Roller yet?

Cameron  53:34

You know what, I went to rewatch it after you reminded me of it last week and then realised I have actually seen it. I did, I did watch it a while back.

Tony  53:41

That’s great.

Cameron  53:43

It’s pretty good. But Lock Stock I think is just, it and Snatch are his masterpieces.

Tony  53:48

Oh yeah, and Snatch.

Cameron  53:50

Been still listening to Billy Connolly’s audio autobiography, loving that. And Fox has been watching Doctor Who with me every night. He’s finally… you remember when he was born and Alex gave him all that Doctor Who stuff? A book.

Tony  54:03


Cameron  54:04

He’s got his head buried in that book every day for hours now and he’s constantly talking about it. We sent Alex a little video last week of him saying “thank you for the book, Alex”, seven and a half years after she gave it to him. Yeah, he’s like a complete Doctor nerd now like everything’s just all about the Doctor. I think we’re up to season three of David Tennant so far, and he’s finally, finally into Doctor Who, which is a lot of fun for me.

Tony  54:33

Oh, that’s great. Yeah, I used to love it when I was a – I still do love it – but I used to love it when I was a kid too.

Cameron  54:38

Yeah, it’s kind of a right of passage for Aussie kids, getting into Doctor Who. So, that’s that. Alright. Well, thank you, Tony. So where will you be this time next week? Still down there?

Tony  54:50

I’ll still be here, yeah.

Cameron  54:51

Or on a yacht, if you sell your horse.

Tony  54:55

Yes, that’s right. If a horse sells well, yeah. Depending on horse sales, yeah. Well, I’ll be here probably for the next couple of weeks at least. Just waiting to see what happens with Omicron and we’ve got some work lined up for Sydney so it’d be nice to be out of the apartment when that’s happening, so we’ll see.

Cameron  55:17

The QAV Podcast is a production of spacecraft publishing Proprietary Limited, authorised representative of AFS sell 520442 AFS representative number 001292718. Please don’t make any investment decisions based solely on listening to this podcast 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.