Transcript #513

Cameron  00:14

Wel­come back to QAV. This is episode 513. We’re record­ing this on the fifth of April — Tues­day, the fifth of April 2022. It’s 3:25pm now in Bris­bane and also 3:25pm in Syd­ney, where the birth­day boy lives. Hap­py birth­day for yes­ter­day, TK.

Tony  00:34

Thanks Cam. I cel­e­brat­ed with Jen, we watched the sun­set, we had some antipas­to and drank my birth­day present, which was an old bot­tle of great red wine.

Cameron  00:44

And you were telling me before that you reck­on that a good bot­tle of wine like that, an old bot­tle of wine is at least twice as good as a reg­u­lar bot­tle of wine?

Tony  00:54

Oh, def­i­nite­ly, yeah. I decant­ed it for about six hours, so that real­ly helped. But yeah, no, very, very, very, very good.

Cameron  01:01

And is the dif­fer­ence in the com­plex­i­ty of the flavours or does it get you drunk quick­er?

Tony  01:09

Does­n’t get you drunk quick­er, no. It’s just well-round­ed flavours, nice soft flavours, even flavours, smooth. Yeah, it was love­ly.

Cameron  01:18

That’s good. Very nice. Well, on behalf of every­one at QAV who has­n’t already wished you a hap­py birth­day via the var­i­ous social media things, hap­py birth­day from all of us.

Tony  01:31

Yeah, thank you. And thanks for all the shout outs on Face­book, etc. That was much appre­ci­at­ed. Love­ly. Thank you.

Cameron  01:37

Alright, let’s get into invest­ing stuff, Tony. Let’s talk about finan­cial health rat­ing ver­sus finan­cial health trend in the check­list. One of our eagle-eyed watch­ers on Slack last week, I think it was, picked up the fact that you were scor­ing in the lat­est ver­sion of the check­list, you’re scor­ing for both finan­cial health rat­ing and finan­cial health trend and that this was­n’t men­tioned in the Bible that we’re record­ing, scor­ing for both. And I checked with you and you said, “yeah, I think I’ve always done that.” So, the new ver­sion of the TK mas­ter sheet now is record­ing for both. I don’t think we’ve, I haven’t told Andrew Flit­man yet, or asked Andrew Flit­man, told him that we’ve made this change. Is there any­thing you want to say about the rat­ing ver­sus trend sit­u­a­tion?

Tony  02:35

No, so it’s prob­a­bly my error, I thought the spread­sheet was check­ing for both. So, the health rat­ing should be strong or sat­is­fac­to­ry, that scores a one, every­thing else is zero. And then the trend scores a one if it’s steady and a two if it’s increas­ing, and a minus one if it’s decreas­ing.

Cameron  02:54

The fact that we haven’t been check­ing for both or scor­ing for both. The data has been in the check­list for­ev­er, but I don’t think we were tak­ing a score for both. Is it going to make a big dif­fer­ence in scor­ing, do you think? Final scores?

Tony  03:07

No, it won’t make a big dif­fer­ence. It might change the QAV score by one or two points. So, it might change the rank­ing slight­ly, but no, it won’t make a dif­fer­ence.

Cameron  03:15

If a com­pa­ny scores well for trend which is I think the one that we’ve been scor­ing on up until now, would it nor­mal­ly also score well on rat­ing do you think? Or are they sep­a­rate?

Tony  03:27

I would think usu­al­ly. I’m not quite sure, I haven’t looked into that. But poten­tial­ly you could have some­thing which is an ear­ly warn­ing for a num­ber of months, sor­ry, a num­ber of halves, and there­fore it’ll be a steady. So, it’s pos­si­bly dif­fer­ent.

Cameron  03:40

So, Tony, I saw some news in the finan­cial review this week about Per­pet­u­als $2.4 bil­lion bid for an out­fit called Pen­dal. I’d nev­er heard of it before, but I gath­er its some sort of funds man­age­ment merg­er sit­u­a­tion going on here. But the inter­est­ing part of the arti­cle that I want­ed to talk to you about, it says, “and it’s worth not­ing that Per­pet­u­al shares have held up quite well com­pared to oth­ers in the funds man­age­ment sec­tor. Where Pen­dal is down 46% over the past six months, Mag­el­lan is down 52% and Pin­na­cle invest­ment man­age­ment is down 30%, Per­pet­u­al shares have fall­en by just 8.5%.” So, that’s appar­ent­ly doing pret­ty well and the funds man­age­ment indus­try in Aus­tralia in the last six months is to only be down 8.5%.

Tony  04:37

Yeah, I can’t real­ly com­ment. It’s not real­ly a stock I fol­low. Per­pet­u­al is a val­ue man­ag­er, so it’s quite pos­si­ble they’ve been down for a long time and they’re just going back up or just… Yeah, I don’t know, sor­ry, I can’t com­ment. Well, actu­al­ly I’m look­ing at Per­pet­u­al now over the long term. So, it’s been on, it’s been a falling knife for over the last five years and prob­a­bly the last year as well. So, maybe that’s why it has­n’t dropped as dra­mat­i­cal­ly as the oth­er ones.

Cameron  05:03

Right? Well, you know, I was think­ing about it in terms of our QAV dum­my port­fo­lio, which when we rejigged it on Navexa last week, you know, it showed that we’re only, we’re neck and neck as of today with the ASX 200 for the finan­cial year. Since incep­tion were doing three times the ASX 200 bet­ter. I was com­par­ing it to this and going, well, at least we’re not down 52%. I mean, we’re doing pret­ty well if we’re neck and neck.

Tony  05:36

Per­pet­u­al is a val­ue man­ag­er. So, this is one of the clas­sic sto­ries you see. In fact, it’s almost like a sig­nal that you’re in a growth stock boom, is when a com­pa­ny like Per­pet­u­al goes down, because they just stick to their tra­di­tion­al val­ue type invest­ing and haven’t been pro­vid­ing the returns that the growth stocks have been pro­vid­ing, and they gen­er­al­ly turn around now that the growth stocks have come off.

Cameron  06:01

Yeah, we’re val­ue investors, too.

Tony  06:08

No, that’s right. So, it’s pret­ty hard to explain, isn’t it? And they’re get­ting paid to do it. Isn’t that nice as an investor?

Cameron  06:13

Yeah, it would be inter­est­ing to know, like, why they’re going down so much. Do they not use stop loss­es? You know, they just can’t get out? They’re entrenched? I don’t know what it is. I thought it was inter­est­ing though.

Tony  06:31

Yeah, I don’t know either. It is, yeah. I think the big­ger sort of sto­ry between Pen­dal and Per­pet­u­al is that there’s so much mon­ey going into pas­sive invest­ing — ETFS and index funds — that com­pa­nies like Per­pet­u­al and Pen­dal who are both active­ly man­ag­ing their funds are hav­ing to merge or take one anoth­er over to get economies of scale to keep the busi­ness going, real­ly.

Cameron  06:58

Anoth­er arti­cle that I thought was inter­est­ing, Tony. This is again from the Finan­cial Review in the last cou­ple of days: “Spoils of War: com­mod­i­ty earn­ings to rise above $400 bil­lion.” There was a sec­tion in that that said “Rus­si­a’s inva­sion of the Ukraine is expect­ed to send Aus­trali­a’s annu­al min­ing and ener­gy export earn­ings above $400 bil­lion for the first time, deliv­er­ing a $46 bil­lion increase and dri­ving prof­its even high­er in exporters, includ­ing BHP, Rio Tin­to, Wood­side and San­tos.” I think all of those have been on our buy list recent­ly. Rio, maybe Rio, I can’t remem­ber.

Tony  07:41

Rio’s on their now, I own Rio, and San­tos is on there now. I think BHP may have come and gone.

Cameron  07:48

I bought Wood­side last week.

Tony  07:49

Yeah. It’s just come on.

Cameron  07:51

A long with a cou­ple of oth­ers, yeah.

Tony  07:52

It’s a shame about the war and that it has this kind of prob­lem. But, this is exact­ly what hap­pens and many stocks were on our buy list before the war. Maybe not Wood­side, but the oth­ers were for sure. And you can’t pre­dict what events are going to cause them to regress towards the mean and make some mon­ey for us, but this is the event.

Cameron  08:10

So, these sorts of things that you can’t pre­dict, but we’re invest­ed in unpop­u­lar stocks and sounds like they should be going through anoth­er sort of boom peri­od or growth peri­od any­way. A $46 bil­lion increase on 400 bil­lion, that’s a lot a lot of new cash, I guess.

Tony  08:30

And I don’t think Rio or BHP are nec­es­sar­i­ly doing well because of the Ukraine inva­sion. I mean, they’re iron ore exporters, I think it’s got more to do with the iron ore price which is being dri­ven around by Chi­na and what it’s doing with COVID and lock­ing down and then peo­ple look­ing through that and see­ing what’s com­ing out the oth­er side, etc., etc. So, but cer­tain­ly the gas — Wood­side and San­tos — the oil and gas com­pa­nies, yeah, they’re def­i­nite­ly being affect­ed by the Ukrain­ian sit­u­a­tion because the Russ­ian oil tap has been turned off.

Cameron  09:02

Well, yes and no. I mean, there are still lots of peo­ple buy­ing Russ­ian oil and gas in Europe and pay­ing for in rubles, and you know, a lot of talk about them try­ing to get out. I read that the new Chan­cel­lor of Ger­many has said they have come up with a great plan to get off, wean them­selves off of Russ­ian gas. It’s only going to take them three to five years, and… They’ll be weaned off. Obvi­ous­ly, I mean, you know, whilst every­one I’m sure can, I’m sure they all would like to just stop buy­ing it, but it’s not that easy, right? Their entire econ­o­my requires gas and oil, it’s got­ta come from some­where.

Tony  09:47

Yeah, and if it comes from Aus­tralia it’s going to car­ry all the trans­port costs to get it there as opposed to just com­ing out of a pipe from Rus­sia. So, even if Ger­many does switch across tomor­row, the econ­o­my is going take a hit because the oil and gas prices are going up.

Cameron  10:03

Yeah, well, it’s already going up as I under­stand it, tak­ing a hit. I had an email from a lis­ten­er from one of my oth­er shows who’s in Poland the oth­er day, she was talk­ing about how much her ener­gy prices have gone up in the last year but par­tic­u­lar­ly recent­ly, they just keep going up and up and up. It must be hard to keep track of it if you live over there.

Tony  10:24

Well, it’s hard to keep track of it here. I mean, the pump price goes up every day.

Cameron  10:27

The pump price does, yeah.

Tony  10:29

So, yeah, must be must be worse over there though, I agree.

Cameron  10:31

Any­way, so those of us that had invest­ments in the ener­gy sec­tor may ben­e­fit from the tragedy that is the war in Ukraine at the moment, and shout out and our best wish­es to Den­nis and his fam­i­ly and any­one else over there who’s… I guess every­one over there real­ly. Best wish­es to every­one. It’s a ter­ri­ble sit­u­a­tion. Den­nis did give us an update on the show last week, which was nice. Glad to hear that he got his cat out of Kharkiv and to Khmel­nys­tkyi but, yeah, just, the sto­ries that are com­ing out of there every day are just trag­ic, obvi­ous­ly.

Tony  11:06

They are. And I think the oth­er point that’s worth not­ing, if just for his­tor­i­cal pur­pos­es, is the Russ­ian army is not cov­er­ing itself in any sort of glo­ry at the moment. It sounds like the truth isn’t get­ting through to Putin because the gen­er­al who deliv­ers the truth gets tak­en out and shot, prob­a­bly. But, I read some­where there was a mil­i­tary his­to­ri­an, I think, deliv­ered a speech where he said of the eigh­teen gen­er­als who went into Ukraine, I think half of them are dead includ­ing one who com­mit­ted sui­cide and one who was fragged by his own tank com­man­ders, so, it’s not going well for them over there.

Cameron  11:39

Yeah, but hon­est­ly, man, I don’t know what to believe. There’s so much fog of war and West­ern pro­pa­gan­da, too, that comes out in these things. It’s real­ly hard, real­ly hard to real­ly know what’s real­ly going on; who’s com­mit­ting which atroc­i­ties, how many atroc­i­ties are real. I mean, I remem­ber, I’m old enough to remem­ber when, dur­ing the first Gulf War, ’91, the Amer­i­can media was full of sto­ries of Sad­dam Hus­sein’s sol­diers throw­ing babies out of win­dows in hos­pi­tals so they could keep the humidy cribs and all of this. They even had a girl stand up in the Unit­ed Nations — or no, US Con­gress I think, one of the two — and gave a big speech about, you know, what she had seen with her own eyes and she got a stand­ing ova­tion and all this. Then it came out years lat­er that she was the daugh­ter of the Kuwaiti ambas­sador and it was all a PR stunt that was paid for, organ­ised by their PR agency that the Kuwaiti gov­ern­ment had spent mil­lions of — Amer­i­can PR agency — that they’d spent mil­lions of dol­lars engag­ing. There was no truth to it, it was all fake. It was all designed to out­rage the Amer­i­can peo­ple so they could pass more war fund­ing. Now, I’m not say­ing that that’s what’s hap­pen­ing with any­thing that’s hap­pen­ing in Ukraine, but we know this stuff hap­pens. Those of us that study his­to­ry know that in these times there is pro­pa­gan­da on all sides, and it’s real­ly hard to know from the out­side what to believe, what not to believe. So, I don’t know. We’ll find out maybe one day.

Tony  13:17

I agree with you. And, you know, get­ting it back to invest­ments again, I guess the over­all point is it’s an event that came out of left field that was hard to pre­dict and it’s had an impact on our port­fo­lios, but it’s not the rea­son we bought those stocks in our port­fo­lios. They already exist­ed in our port­fo­lios first.

Cameron  13:37

Yeah. And if any­one wants to know more about that Iraqi sto­ry, either read my book Psy­chopath Epi­dem­ic because I talk about it, or Google the Nayi­rah tes­ti­mo­ny, I think Nayi­rah, the Nayi­rah Tes­ti­mo­ny. Read up on it, fas­ci­nat­ing. All right, what’s next on the list? Jere­my: a cou­ple of weeks ago, Jere­my asked a ques­tion about CAA and alu­mini­um prices and all that kind of stuff, and whether or not the ris­ing price of alu­mini­um would affect CAA’s busi­ness. We’ve talked about this I think on a num­ber of occa­sions over the last year. Jere­my, to his cred­it, reached out to Investor Rela­tions at CAA and — this is Capral Alu­mini­um for new folks — and asked them “how do you go about hedg­ing the alu­mini­um price?” They did come back, sent him a reply which he for­ward­ed on to us, as he says, “no meaty detail.” But, they said “Capral has var­i­ous pric­ing mech­a­nisms, most of which con­tain a pass through of alu­mini­um price fluc­tu­a­tions.” Do you under­stand what that means, Tony? What does a pass through of price fluc­tu­a­tions mean?

Tony  14:46

Well, I think it means good news for Capral, because the way I read that was that they’re pass­ing through the alu­mini­um price whether it goes up or down to their cus­tomers. So, they have con­tracts with their cus­tomers that mean that the alu­mini­um price as far as Capral goes is neu­tral, but the price increas­es are borne by the cus­tomers. So, that’s good news for Carpal if that’s the case.

Cameron  15:07

So, the alu­mini­um price goes up, Capral make alu­mini­um prod­ucts — fin­ished alu­mini­um prod­ucts, I think — so their prices go up to their cus­tomers, so their prof­it mar­gins stay the same.

Tony  15:18

Yeah. And poten­tial­ly if their costs don’t go up and I exclude the alu­mini­um price because it’s been passed through, they make more mon­ey because if they, you know, if it’s a 10% mar­gin nor­mal­ly and the alu­mini­um prices dou­ble, the same 10% deliv­ers a lot big­ger dol­lar prof­it to the com­pa­ny.

Cameron  15:36

Good stuff. Well, thanks for fol­low­ing that up, Jere­my. Well done. And as he not­ed in his post, too, the alu­mini­um price — the CAA price, sor­ry — has gone back up since he first asked the ques­tion. So, what­ev­er caused the dip in their price was quite tem­po­rary. Let’s talk about RBA and rates ris­es, Tony.

Tony  15:58

Yeah, I should have checked. I think the RBA might even be meet­ing today. Any­way. I think they meet on the first Thurs­day of every month. The only thing I want­ed to just high­light was my obser­va­tion that ever since 2007 when the RBA raised inter­est rates dur­ing the fed­er­al elec­tion cycle then — which was seen as being a neg­a­tive for the Howard gov­ern­ment, which then lost pow­er — the RBA has been fair­ly stu­dious in avoid­ing putting inter­est rates when an elec­tion is called. So, if they haven’t done it today, and they prob­a­bly haven’t, then I sus­pect we won’t see a rate rise until after the fed­er­al elec­tion in May. Peo­ple have asked lots of ques­tions about inter­est rates and infla­tion and all the rest, but I think call­ing a fed­er­al elec­tion usu­al­ly puts it on ice in recent years any­way.

Cameron  16:47

And so, what are we doing with the rates in the check­list?

Tony  16:50

Yeah, I need to change them. So, I read an arti­cle last week about there being a price war in mort­gages between the big banks, and so I went back and checked the mort­gage rate that I was using to set the mort­gage rate test against the yield of the stock in our check, and I want to low­er down to 3.22%. It’s cell AW32, and we need to low­er it down to 3.22%. And I also used CANSTAR, which gave me the aver­age for the vari­able home rate mort­gage rate in the mar­ket, where­as I’ve been using the ANZ price because that’s who I have my mort­gage with. So, anoth­er rea­son for a slight change in the rate.

Cameron  17:37

So, 3.22%. Set your watch­es peo­ple, adjust your…

Tony  17:42

it’s kind of fun­ny. Inter­est rates are going up, but cap­i­tal­ism is alive and well. Appar­ent­ly, all the hous­ing mar­ket price increas­es are dri­ving peo­ple to get into the mar­ket and that means the banks are being swamped with mort­gage appli­ca­tions, and they’re try­ing to steal share from each oth­er by low­er­ing price.

Cameron  18:01

You’ve been doing some work with Dylan.

Tony  18:04

Yeah, so Dylan gave me a cou­ple of things to look at based on his analy­sis using refini­tive data for the last ten years, and I want­ed to just pull togeth­er all the buy lists that we’ve pro­duced over the last two and a half-odd years and put them into a usable form so I can, sort of, repli­cate that analy­sis — at least in the short term — and see if it’s gonna result in some changes. But I’m still work­ing on it, and there’s a few things like that, I keep start­ing them and they just become so… either time sinks or just tech­ni­cal­ly dif­fi­cult, but I’m almost at the stage of think­ing that I should go and hire some­one full time just to help me with all this stuff. So, if any­one out there knows a grad, or any­one real­ly who’s got good Excel skills and can use refini­tiv which I guess is some kind of SQL, give me a shout out. I need some help.

Cameron  18:56

I think he just has an API that goes into Excel, isn’t that what he’s been doing.

Tony  19:01

No, well, it is an API, yeah, but it’s — I for­get now, it’s some kind of, what do they call it? Not Java. I’ve for­got­ten the lan­guage. Any­way, it’s a query lan­guage.

Cameron  19:10

All right. You want me to talk about Slack?

Tony  19:13

Yeah. I fol­lowed your link, went to the web­site and then it prompt­ed me to down­load Slack and I got all tied up in that and I just stopped. So, are there two groups or is there one, and do we need to down­load the Slack app to use it? Talk me through it.

Cameron  19:29

Yeah, so as club mem­bers know this is for club mem­bers. I’m shut­ting down the Face­book group for club mem­bers and mov­ing to a, just a Face­book clone I guess on our web­site. And then some­body, I think Bar­ry, one of our sub­scribers, sug­gest­ed Slack. All the cool kids today use Slack for this kind of stuff. So, they’re sep­a­rate. The club chat forum and Slack are sep­a­rate. I’m cross post­ing our com­mu­ni­ca­tion stuff between both and on the Face­book group for the moment ’til I shut that down. But mov­ing for­wards, I’ll be doing it on both. My think­ing is that peo­ple can use whichev­er one — if they want to get in touch with me they can use either one, they’ll get to me. They can use whichev­er one to talk to each oth­er that they’re most com­fort­able with. And over time, we might just see if one is far more pop­u­lar than the oth­er, we’ll shut down the unpop­u­lar one and leave the pop­u­lar one.

Tony  20:25

So, should I just hang back and join one when it becomes the win­ner?

Cameron  20:28

Yeah, what you should do is build a check­list, Tony, and fig­ure out how to score all of the inter­ac­tions on the dif­fer­ent things and tell me. Do some regres­sion analy­sis on it.

Tony  20:41

If cool kids are using Slack, let’s use the oth­er one.

Cameron  20:44

The rea­son I would pre­fer to use the oth­er one is the same rea­son I want to get off Face­book, because I don’t trust Face­book. Slack, you know, I don’t know. They could go out of busi­ness next month, they could get acquired by Face­book or Microsoft. I don’t know who owns them now, maybe one of them does own it. Who knows? I’m always reluc­tant to throw stuff off to third par­ties, but I guess for a thing that’s just for chat­ting and mes­sag­ing, it’s not that big a deal if it goes bye bye. But if, you know, if we have it on our own web­site then we kind of own it and we can man­age it and main­tain an archive of the con­ver­sa­tions going back years. I’m not sure how much val­ue there is in that, I don’t ever go back on our Face­book group look­ing for what some­body said to us a year ago. So, it’s more just to give peo­ple con­ve­nient ways to talk to each oth­er in the QAV club com­mu­ni­ty and to ask me ques­tions and ask you if you’re lis­ten­ing, but I assume… I think most peo­ple assume you’re not lis­ten­ing a great deal of the time because you’re too busy play­ing golf or drink­ing expen­sive bot­tles of wine. So, you know, its how they get in touch with me.

Tony  21:48

Well, I’ll join. Just when you sort it out, let me know what to do.

Cameron  21:52

Don’t do any­thing, this isn’t for you. This is for us. This is for the, you know, the pleb lev­el of QAV club. You sit up there in your sky palace, and we’ll talk amongst our­selves. Oh, speak­ing of which, I just want­ed to thank every­body that came to the Zoom Q&A that I did last Wednes­day night. I think we had about a dozen peo­ple on it, went for about nine­ty min­utes. It was great fun, and every­one seemed to real­ly enjoy and appre­ci­ate, I think, the oppor­tu­ni­ty to ask live ques­tions again. And so, we’ll prob­a­bly keep doing it, see how it goes. I’m going to do anoth­er one this Wednes­day night. Even though I’m in Bund­aberg on vaca­tion, I will turn on my lap­top in my bed­room at my moth­er’s house and chat to peo­ple there.

Tony  22:39

In your old bed­room?

Cameron  22:41

No fox is in my old bed­room. I’m in anoth­er one, yeah.

Tony  22:47

I was gonna ask what posters are on the wall?

Cameron  22:50

Lots of peo­ple have lived in that bed­room since I was in that bed­room, Tony. I had two sis­ters who grew up after me. Yes, all of the Play­boy posters that I had sur­rep­ti­tious­ly hid­den behind Van Halen posters have long gone since I left there in 1987, sad­ly, because they’d prob­a­bly be worth mon­ey now — be clas­sics, col­lec­tor’s edi­tions. The Play­boy posters that is, not the Van Halen posters, or maybe, who knows? So, yeah, you can find a link to that on the club mem­ber resources page, go to our Zoom calls, I think you’ll find that. If not, it’s in the newslet­ter, it’s on all the chat things, but email me if you don’t already have it. It’s a good oppor­tu­ni­ty for new and old peo­ple to ask ques­tions. But I think par­tic­u­lar­ly for the new peo­ple, it’s designed for peo­ple that are just get­ting start­ed in QAV: go, “show me how to do a chart. Show me why does this hap­pen in the spread­sheet?” And all that kind of stuff. Basic ques­tions. All right, mov­ing right along. You want to do your pulled pork?

Tony  23:49

Yeah. So, we had a lis­ten­er request for MAM, Micro Equi­ties Man­age­ment group.

Cameron  23:55

That was from Phil on Slack. You’re not even on Slack. See how it works? It’s great.

Tony  24:03

I’ll get Alex to sign up to Slack and ask her to just mon­i­tor what peo­ple are say­ing about me, on Slack.

Cameron  24:10

You could do that, but that’s what I’m here for. I’m doing the job for you. If you don’t trust me to pro­tect your rep­u­ta­tion and mon­i­tor it for you, yeah, have to get Alex to see what I’m say­ing about you on Slack.

Tony  24:19

Any­way, Micro Equi­ties Man­age­ment Group. So, had a good run recent­ly but it is a bit of a Josephine at the moment. So, the recent down­trend is down, but I’ll go through it any­way. Inter­est­ing com­pa­ny. It’s a fund man­ag­er. So, we’ve talked in the past about whether ETFs and LICs should be on our watch list and I took them off. How­ev­er, this is a fund man­ag­er, so it’s busi­ness is man­ag­ing the fund. We’re not talk­ing about the fund, we’re talk­ing about the man­ag­er. A bit equiv­a­lent to Mag­el­lan that we spoke about ear­li­er. And the thing about fund man­agers is their oper­at­ing cash flow is basi­cal­ly fee income, so if the funds are per­form­ing that they’re man­ag­ing then they get more oper­at­ing cash flow. So, they can be incred­i­bly prof­itable, which this com­pa­ny is and I’ll get to that, but they can also be incred­i­bly volatile. So, if they have a bad half, next half, then the share price can reflect that pret­ty sav­age­ly. They can be good invest­ments, but just watch… If peo­ple have a, I guess a thresh­old on volatil­i­ty, just be care­ful that some of these can go up and down quick­ly. But that aside, they’ve had some good results, and I guess the rule of thumb that’s been around for a long time in the stock mar­ket is you’re bet­ter off invest­ing in the fund man­ag­er than the fund. And the rea­son for that is that if you think about it, the fund man­ag­er receives a com­mis­sion for the fund’s per­for­mance. And so, say for exam­ple, I don’t know what the Micro Equi­ties Man­age­ment group fee struc­ture is, but just say for exam­ple, a gener­ic fund man­ag­er charges a 10% per­for­mance fee. So, even if the fund gives its investors an index per­for­mance of 10%, the fund man­ag­er is tak­ing out 1% of their fees for basi­cal­ly giv­ing you no spe­cial type return and that 1% is you straight prof­it to them. If the fund does twice mar­ket, then they’re mak­ing even more mon­ey. And because there’s no extra costs in the fund man­ag­er, their prof­it can go up quite dra­mat­i­cal­ly. That’s some­thing to know. So, if you’re in the fund you might just be get­ting 10%. But if you’re in the fund man­ag­er, you could be get­ting a very high ROE and a very strong­ly prof­itable busi­ness because it’ll have low costs. And we’ll see that when we go through this. So, I guess a bit of an out­line: there focus­ing on micro equi­ties, as their name sug­gests. There’s, I think, five or six funds that they man­age, and they like to take a long-term hold­ing so that they’re, I guess, in some cas­es sig­nif­i­cant share­hold­ers in these small cap funds. And then they’re along for the ride and poten­tial­ly be some­times active­ly involved in those com­pa­nies. And they pro­mote them­selves as being a val­ue man­ag­er, so it might even be worth­while get­ting them on the show at some stage, Cam, to have a chat to. Any­way, they’ve recent­ly opened a new fund which is a pri­vate equi­ty fund, so it’s giv­ing their clients access to unlist­ed assets. But I think all their oth­er funds are list­ed micro-cap stocks. I looked up their web­site, they claim 18.9% per annum across their funds since 2009, so that’s pret­ty good return. I did­n’t dig deep enough to find out whether that was before fees or after fees, I sus­pect that’s before fees which is how that kind of per­for­mance is nor­mal­ly quot­ed. So, it’s good. Again, I haven’t dug in detail, I don’t know if they list­ed in 2009, but using 2009 rais­es a bit of a flag for me because it’s the year that we came out of the GFC and things start­ed to kick goals in. So, if they had been going before the GFC it’d be good to know what their longer-term returns were. Any­way, I won’t dwell on that. QAV by the num­bers. It’s a small-cap stock, so their mar­ket cap is only $103 mil­lion and ADT of 35,000. So, not a big-cap stock and won’t suit all peo­ple, but an inter­est­ing com­pa­ny to go through. I’m doing the analy­sis based on the price of 80 cents, and because it’s a small cap stock there’s no con­sen­sus fore­casts or tar­gets for them so I can’t score them based on that. They have a 13.75% yield, so that’s huge, and we we’re just talk­ing about the mort­gage rate before so they obvi­ous­ly score on the yield being high­er than the mort­gage rate. And, this is one of the inter­est­ing stocks where the yield is high­er than the PE and we haven’t seen that for a long time, but that has been an indi­ca­tor of good val­ue in my expe­ri­ence in the past. So, it scores on that one too. Finan­cial health in Stock Doc­tor is strong and steady, so it gets a point each for that. The Pr/OpCaf for this one is 4.56 and the PE is only 4.62, so, like I said before, that’s almost all the rev­enue flow­ing straight through to prof­it with very lit­tle cost in the busi­ness dri­ven by fund per­for­mance. Net equi­ty per share for this one is only 21 cents and the share price is 80. So, it’s not going to score well on book val­ue or book plus 30. The direc­tors in this com­pa­ny, how­ev­er, hold — accord­ing to Stock Doc­tor — 74% of the com­pa­ny, so huge share­hold­ing and so not much avail­able float which is why the ADT is down but scores for us on the founder-oper­a­tor met­ric. It has a record low PE and con­sis­tent­ly increas­ing equi­ty, so the man­u­al­ly entered data is strong for this one. All up, the qual­i­ty score is 117%, and we get that because some of the things got 2s, which gives us more than 100. But that’s a very good score on qual­i­ty and a QAV score of 0.6. So it’s, it’s up there on the buy list. So, thanks very much for hold­ing that on for us to go through. I was­n’t real­ly aware of it. But you know, a great busi­ness mod­el.

Cameron  30:11

Get­ting back to what you said before about you’re bet­ter off invest­ing in the fund man­ag­er than in the fund. 18 point, what is it? 19%? I think you said 18.9%, is good, but yeah, if I look at their shares two years ago, their shares were trad­ing at 22 cents. They did go as high as 97 late last year, they’re down to about 80 cents now. So, that’s a lot bet­ter than 18.9% a year return for the last cou­ple of years if you bought their shares instead. Going back to 2018 they were at 71 cents, and then, you know, they crashed dur­ing the COVID cough.

Tony  30:48

Prob­a­bly very volatile, I’ll just point that one out, because they’re gonna be dri­ven by the funds per­for­mance.

Cameron  30:54

So, if you bought them back in 2018 at 76.5 cents, it has­n’t done very well if you held it the whole time. But yeah, that’s inter­est­ing. So, last week I think you said you’re bet­ter off buy­ing the bank than putting your mon­ey in the bank, and this week you’re say­ing you bet­ter off buy­ing a fund man­ag­er than invest­ing in the fund.

Tony  31:12

Cor­rect. And that goes not just for fund man­agers, but it also goes for any type of man­ag­er. Like, I remem­ber the clas­sic was when West­field was still list­ed in Aus­tralia. You were bet­ter off buy­ing West­field, which was the list­ed man­age­ment com­pa­ny, than the West­field trust which were the actu­al shop­ping malls that were list­ed. For the same rea­son; the man­ag­er gets a per­for­mance fee and their only cost is staff and the lever­aged upside can be huge.

Cameron  31:40

Good. Well, thank you for that, the MAM sto­ry. Let’s talk about our top per­form­ers in Navexa this week.

Tony  31:48

Yes, so, some big ones. GRR, Grange Resources is up 15.35% and Cham­pi­on Iron is up 7.72%, so some quite large up turns. Grange had an update on, I think it’s called, Sav­age Riv­er and the resources which they fore­cast to come out of it. So, this is kind of the reverse of our dis­cus­sion last week on Aure­lia Met­als; where that one went down because they decreased their min­er­al­iza­tion assets, this one’s gone up. And then Cham­pi­on Iron has just lever­aged to the iron ore price, which has tak­en anoth­er leg up in the last sev­en days.

Cameron  32:23

Wow. And you’re com­ing to Bris­bane, maybe?

Tony  32:26

I am, no, def­i­nite­ly. Def­i­nite­ly. So, I’m up there, I think its the last week in May, the 24th or 25th. But yeah, I’ll be on the Gold Coast any­way, sor­ry. I’ve got a friend who’s sell­ing a horse in the brood­mare sales on the Gold Coast, Mag­ic Mil­lions brood­mare sales that week. So, Rud­dy and I and Jeff are doing a road trip, and we’ll stay at the Gold Coast and come up to Bris­bane — Rud­dy and I’ll come up to the Bris­bane for the week­end and we’ll do a din­ner. 27th or 28th once we work it out.

Cameron  32:53

Great. Well, every­one up here will be very hap­py to see you. It’s been a while. When was the last time you were at a Bris­bane din­ner do you think? A year ago?

Tony  33:01

At least, yeah. Yeah, it was, it was a year ago.

Cameron  33:06

Jol­ly good. Well, any­thing else before we get into Q&A?

Tony  33:11

Nope. Let’s go.

Cameron  33:12

Ali asks, “can we go over this in a pod­cast again, even though Tony has already touched on it pre­vi­ous­ly?” Yes, we can, Ali. “Buy­ing QAV shares in a super­fund, espe­cial­ly through Aus­tralian Super mem­bers direct option top 300 lim­i­ta­tions, I get all that. It’s a clear win­ner to salary sac­ri­fice in the super for some great tax sav­ings to begin with, 32.3% minus 15% equals 17.5% tax in super even before adding QAV returns on shares on top, 19%+. I don’t plan to work after six­ty,” I’m in a co-work­ing space in Bund­aberg. There’s going to be nois­es in the back­ground, peo­ple, I apol­o­gise for that. “I don’t play to work after six­ty so can get to it then, there­fore can go hard with the salary sac­ri­fic­ing and invest­ing now in super. What I don’t get is how to man­age it now that I already have a share port­fo­lio out­side of my super as well. Tony has pre­vi­ous­ly sug­gest­ed hold­ing dif­fer­ent shares in each port­fo­lio and treat­ing shares inside and out­side of super as the one port­fo­lio. Would there be a down­side to run­ning two port­fo­lios of fif­teen, for exam­ple? Some of the same shares might be held in each port­fo­lio, but many might not. Do I risk being too dilut­ed with fif­teen plus fif­teen equals thir­ty shares? Per­haps it’s bet­ter to hold twelve plus twelve? My super shares bal­ance will be dou­ble that of my shares held out­side super as well.” What do you think, TK?

Tony  34:45

A lot to unpack there, so let me just start with the last bit first. So, yes, if you have a larg­er port­fo­lio you’ll get more like index returns. So, I would advo­cate hold­ing fif­teen-twen­ty shares across both. So, across what Ali has in the Super and what she has out­side. Bear­ing in mind, this is not finan­cial advice, I’m talk­ing in gen­er­al about what I would do. And the oth­er point to make is she sounds like she has a big­ger por­tion of her invest­ments in super, so I would have fif­teen-twen­ty stocks start­ing out at equal weight­ing. That means that she’ll have more stocks inside her super and less stocks out­side her super, and the ones out­side her super might be larg­er in terms of their hold­ings and what they are now. So, for exam­ple, if Ali has $100,000, or if I have $100,000 to invest, and I want to buy twen­ty stocks at $5,000 each, and 70,000 is in super and 30,000 is out­side of super, I would still have the four­teen stocks in super and six stocks out­side of super. And if the six stocks out­side of super have to be larg­er than what the hold­ings have been to date, then I’d just migrate to that over time. I mean, the gen­er­al point is if you think about the size of the port­fo­lio and the returns on the port­fo­lio as an x and y graph, and if you start with like a one stock port­fo­lio at the left hand side on the x axis, and then you have maybe a two hun­dred stock port­fo­lio on the right hand side of the x axis, the returns on the two hun­dred stock port­fo­lio are going to cor­re­late exact­ly the same as the ASX 200. Not tak­ing into account you might have dif­fer­ent weight­ings because you bought them at dif­fer­ent times and things like that, but it’s gonna cor­re­late pret­ty close­ly. So, you want to be fur­ther up towards the left-hand side of that graph we you’re get­ting uncor­re­lat­ed returns, or less uncor­re­lat­ed returns. Well, poten­tial­ly you might want to be right down at the left-hand side where you have a one stock port­fo­lio, or a two or three or four stock port­fo­lio which Char­lie Munger advo­cates for. But you’ve just got to be able to han­dle the volatil­i­ty. So, one of the things that I, when I was talk­ing before about imple­ment­ing stuff that Dylan’s research has thrown up and I’m test­ing, is poten­tial­ly hold­ing a greater weight­ing for me in my port­fo­lio of the largest — of the stock that’s high­est up on the buy list because I did do some research which showed a one stock port­fo­lio for the stock that was high­est on the buy list, and in swap­ping it out when it fell down the buy list and anoth­er stock came on top of the buy list pro­duced out­sized returns. How­ev­er, dur­ing some peri­ods, it went neg­a­tive dra­mat­i­cal­ly as well, right? So, you’ve got to be able to stand the volatil­i­ty. So, the kind of hap­py medi­um on the curve as I was talk­ing about before of that port­fo­lio size ver­sus return tends to be around that fif­teen to twen­ty. If you dou­ble that, I think your returns are going to start to dilute and go down. Not a bad thing, you’ll still get clos­er to index. So, you’ll still be in front, but you won’t be get­ting dou­ble mar­ket type returns. That’s the first thing to talk about in terms of Ali’s ques­tion. The sec­ond thing is, I just want­ed to go through super­an­nu­a­tion, and I guess my expe­ri­ences and opin­ions on super­an­nu­a­tion. It sounds like Ali is aggres­sive­ly salary sac­ri­fic­ing, which is fine. And for peo­ple who aren’t aware of that, I mean, talk to your finan­cial advi­sor, obvi­ous­ly, but basi­cal­ly what salary sac­ri­fic­ing means is that, again, a sim­ple anal­o­gy, if I’m earn­ing $100,000 a year, I’m allowed to salary sac­ri­fice up to a lim­it every year into my super­an­nu­a­tion account as a way of encour­ag­ing sav­ings for retire­ment. I think that amount is about $30,000. It was 25 last time I looked, but I think it’s gone up recent­ly. So, it’s $25-$30,000. Say it’s 30. That means that as far as the Tax Office goes, if I salary sac­ri­fice I’ve only earnt $70,000 income for the year, and I pay tax based on that and the oth­er 30 has gone into my super­an­nu­a­tion account. So, that’s a legit­i­mate way of reduc­ing my tax and sav­ing for the future. That’s a good thing to do. How­ev­er, one of the obser­va­tions I’ll make about super­an­nu­a­tion, and I did make an extra con­tri­bu­tion once before I went over­seas to Cana­da, but I’ve nev­er salary sac­ri­ficed and I’m not nec­es­sar­i­ly in favour of doing it, only because super­an­nu­a­tion is locked up until you’re retired, right? So, you can’t take mon­ey out to take a hol­i­day, can’t take mon­ey out to buy a house, you can’t take mon­ey out to buy more shares or any­thing like that, or to use as col­lat­er­al — well, you can in some cas­es, but it’s a non-recourse loan and I won’t go down that track right now. But it’s locked up until you retire. And sec­ond­ly, it’s at the whim of the gov­ern­ment as to whether the rules change or don’t change. And so, they haven’t changed a whole lot but they do change from time to time, and I did­n’t want to be snook­ered by the gov­ern­ment to final­ly get to –it’s like a Twi­light Zone episode, right? You get to the end of your life, about to draw­down your super and the rules change and you can’t get it or it’s not worth­while any­more. And of course, being as one of the baby boomers and going through, at some stage a gov­ern­men­t’s going to look at all that mon­ey sit­ting in the super­an­nu­a­tion sys­tem for us and go, “mm, just imag­ine if we increase the tax on that 5%, we’d be back in the black” or some­thing like that. So, I’ve always been scep­ti­cal about super. I do have a fair bit in there because I’ve rolled over super­an­nu­a­tion from when I was work­ing and Jen­ny’s done the same, so we have that which we’ve been man­ag­ing all the way through. But I’m not nec­es­sar­i­ly advo­cat­ing putting more mon­ey into super. And as far as a tax goes, you know, I’ve been now able to man­age cap­i­tal gains tax — not always, I don’t have a prob­lem pay­ing cap­i­tal gains tax along the way because I’ve made a prof­it, but I do try and back to back it with some shares that run at a loss for me. And then on the income side I get div­i­dends but they have frank­ing cred­its, so there’s some tax ben­e­fits there, too. I’m always a bit leery of doing some­thing just for the tax ben­e­fits, which salary sac­ri­fice is for. I’m not say­ing for Ali’s sit­u­a­tion it’s not the best thing since sliced bread, but just be aware of the fact that super­an­nu­a­tion can be a black box which you may find is a bit dif­fer­ent when you come to open it when you’re six­ty-five. And that was the oth­er thing, I think Ali said she was able to get her super after six­ty. I’d just ask her to check that. I think it’s six­ty-five. I think you can access it at six­ty under cer­tain cir­cum­stances, but my under­stand­ing is that that comes with increased tax­a­tion. There’s a quid pro quo there about get­ting it ear­ly. I think if you wait until you’re six­ty five you get it tax free, or get access to it tax free. But again, these are ques­tions for Ali’s finan­cial plan­ner and tax advi­sor.

Cameron  41:41

And it does­n’t mat­ter if you go, “look, I don’t need to work any­more. I’m fifty-five, I’m retired now?”

Tony  41:44

Yeah, your mon­ey’s all locked up in super, you can’t do much can you? You’ve got to keep work­ing.

Cameron  41:47

Yeah, but I’m retired.

Tony  41:48

Yeah, again, this is where a tax advi­sor or super­an­nu­a­tion advi­sor is required. You can I think, once you reach a cer­tain age — I think for me it was fifty-sev­en, maybe its six­ty for Ali — you can write to the ATO and say “I’m nev­er going to work again,” and you can get access to super­an­nu­a­tion. But if you do work again, and of course if you work again you pay tax, and the ATO finds out there can be con­se­quences. So, that cor­ri­dor is open to you, but again, it comes with con­se­quences.

Cameron  42:17

So, does doing the QAV pod­cast clas­si­fy as work for you, Tony?

Tony  42:23

Well, if I ever get paid… Well, I’ve nev­er writ­ten to the ATO and said I’ve stopped work­ing, because I own shares in so many com­pa­nies which I think fails the work test.

Cameron  42:34

I was wor­ried there for you for a sec­ond there.

Tony  42:37

Well, don’t wor­ry for me. I’d just encour­age Ali to go and get prop­er finan­cial advice on this before she makes plans.

Cameron  42:43

All right. Hope that helps, Ali. Kazi asks, or says, no, asks, “there was an update on GOR regard­ing qual­i­ty of min­ing. Is that news to sell off?” I think he’s ask­ing is that like a bad news sell regard­ing the qual­i­ty of min­ing? And I think after he asked that ques­tion, he heard last week’s episode, and I think he got back to me at some point and said, “yeah, you don’t need to ask that any­more because I heard Tony say last week that prob­a­bly not.”

Tony  43:12

Yeah, that’s right. It’s the same as Aure­lia Met­als and kind of the reverse of Grange Resources. So, these kinds of changes in min­er­al­i­sa­tion assets hap­pen all the time, although I think — and I did have a quick look at GOR today — and I think it was because of their finan­cial results that the price has gone down. And I just made a note from Stock Doc­tor, from the sum­ma­ry of the results where they say, their com­men­tary was: “the rev­enue decreased by 7% in lat­est results, and that was because of a slight decrease in sales and a slight decrease in the price of gold that they were get­ting for those sales,” which I think had to do with the qual­i­ty of the gold that we’re pro­duc­ing. But they then said “how­ev­er, you should note mill issues affect­ed the last quar­ter.” I haven’t drilled down into what that means, but poten­tial­ly, you know, if there was some main­te­nance in the mill or a COVID inter­rup­tion in the mill, that might be a short-term blip in Gold Resources. So, again, I’ll be guid­ed by what the mar­ket does.

Cameron  44:09

“Trou­ble at the mill.”

Tony  44:15

“Trou­ble at the mill. Nobody expects the Span­ish Inqui­si­tion.”

Cameron  44:25

I’m look­ing at GORs share price. It’s been going down for a while, since last month or so. Been going back­wards, don’t know if that’s got any­thing to do with their “trou­ble at the mill.”

Tony  44:41

Well it would be, well not so much trou­ble at the mill, but its their lat­est results weren’t that well received. The ques­tion is, is that long term or short term? And I think if you look at the share graphs on a short-term basis it’s come off, but if you look at it over five years it’s in a gen­er­al uptrend which I guess tracks the gold price. And so, it’s the age old — well, it’s not the age-old sto­ry — some­one raised this point before, should we be sell­ing gold min­ers when the gold price is high? And so, I’d be giv­ing this one the ben­e­fit of the doubt and see how it turns out.

Cameron  45:09

All right, thanks, Tony. Hope that helps., Kazi. Dan asks, “should we be con­sid­er­ing large anom­alies between our OpCaf ver­sus the Stock Doc­tor OpCaf, say greater than 30% plus, to stop any dilu­tion in shares we may pur­chase? I was read­ing the Intel­li­gent Investor not so long ago, and it was some­thing Ben Gra­ham called out that you should be wary of. I know you check for this, Tony, so I just won­dered if you ever put a mar­gin on how much dilu­tion poten­tial­ly you may be com­fort­able with, or whether if there are big dis­crep­an­cies you’ll just skip it and move on to the next one. Cheers, Dan.”

Tony  45:47

Yeah, thanks, Dan. It’s not some­thing I’ve been trou­bled with for a long time. I do put it in the check­list, the dif­fer­ence between Stock Doc­tor’s Prop­Caf and the one I cal­cu­late, and that comes down to the method. So, Stock Doc­tor uses ful­ly dilut­ed shares and I use the num­ber of issued shares. And so, Stock Doc­tor is tak­ing into account any­thing that has­n’t been issued yet but is com­ing down the pipe, like man­age­ment options, for exam­ple. And I don’t count those, because it’s nev­er a sure thing that things which are count­ed as options or of the like may actu­al­ly get issued, and they may get issued in a cou­ple of years’ time. So, there are a few ele­ments there which I don’t like tak­ing into account, I pre­fer to use the shares that are actu­al­ly on issue to do my cal­cu­la­tions. That aside — and this is kind of like a six of one, half a dozen of the oth­er sit­u­a­tion — that aside, I do track the dif­fer­ence. And there’s only a few stocks on our buy list now which have, I’ll call it a large dis­crep­an­cy. It depends on the size of the com­pa­ny, I guess. Like Chal­lenger, which I own, I think has about a 30% dif­fer­ence in the Prop­Caf between Stock Doc­tor and the one that I cal­cu­late man­u­al­ly. But, that dif­fer­ence isn’t mak­ing a whole heap of dif­fer­ence to the Prop­Caf any­way. So, I’ll just call up Chal­lenger, for exam­ple. And that’s because Chal­lenger is a large com­pa­ny, so I can have a per­cent­age dis­crep­an­cy like this but it may not make a big dif­fer­ence to our score. So, Stock Doc­tor have the price to oper­at­ing cash flow for Chal­lenger Lim­it­ed at 1.9 times, and then I have it at 1.46. So, even though that’s a 30% dif­fer­ence between those two num­bers, it’s not going to change the rank­ing of Chal­lenger dra­mat­i­cal­ly in our buy list. So, there’s a big dif­fer­ence there in terms of the per­cent­age dif­fer­ence, but is it going to make a big dif­fer­ence to the buy list? It does­n’t. it’s a dif­fer­ent sto­ry for some of the small­er com­pa­nies, and the one I had looked at today was Hori­zon, Hori­zon Oil. So, for exam­ple, Stock Doc­tor have the Prop­Caf for Hori­zon Oil at 4.93, and when I do the cal­cu­la­tion based on the num­ber of issued shares I have 3.63. There’s a 36% dif­fer­ence there, but they’re both still less than our tar­get of sev­en times. So, it would change the rank­ing a lit­tle bit more dra­mat­i­cal­ly for Hori­zon then for Chal­lenger, but they’re based on the buy list. So, that’s how I tend to look at it, Dan. Most com­pa­nies the dif­fer­ence is 1 or 2%, so it’s not mate­r­i­al. There’s a few where it can be up to 30 or 40%, but I think in most cas­es the dif­fer­ence still keeps it on the buy list and for the big­ger com­pa­nies does­n’t change its rank­ing that much, so I’m not too wor­ried about it.

Cameron  48:44

Okay, thanks for the ques­tion, Dan. Last ques­tion. This is from Jeff down in Mel­bourne. “Can I ask for a PP,” love the fact that we’re know abbre­vi­at­ing pulled pork. “Can I ask for a PP or even just a dis­cus­sion on FFX? Fire Finch was on the buy list for maybe thir­ty sec­onds and then took off. I clung on tena­cious­ly to the falling knife, and before you know it, it was a way again.” He clung on to the falling knife, what? It’s had a Cork­er run.

Tony  49:20

Yeah.

Cameron  49:21

Com­ing from the COVID cough when it was trad­ing at about five cents, it’s now at $1.25. So, it’s the oppo­site of a falling knife. I don’t know when it was a falling knife for you, Jeff.

Tony  49:28

I think it might have been a falling knife maybe back in Decem­ber. You can see it came off it high, what was that? 86 cents down to a low of 69. So, that could have been when Jeff bought it, I’m not sure.

Cameron  49:46

Yeah. Could have been. Oh, okay. Yeah, maybe bought it, went down, then it went back up. “This is my first stock that has gone 100% and now beyond. Lots of sov­er­eign risk with mines in Mali and of late I’ve received a num­ber of FFX noti­fi­ca­tions, pret­ty much every day. While Stock Doc­tor gives this a star stock Antichrist ear­ly warn­ing with poor finan­cial per­for­mance, as you can see pret­ty much all recent announce­ments have been seen favourably by the mar­ket, par­tic­u­lar­ly Gulamein fund­ing received. Whilst I’ll assume that TK will give FFX a sov­er­eign risk wide berth, I’d be very inter­est­ed to know how he sees it. Great for my ongo­ing QAV learn­ing as well. Thank you, mate, and on behalf of QAV Mel­bourne, ready for the next din­ner.” Me too, Jeff, can’t wait to get down to Mel­bourne for anoth­er din­ner with the crew down there.

Tony  50:43

I agree. I love our Mel­bourne crew. Its good. Oh, yeah, well, so many issues here. I can’t do a pull pork, Jeff, because there are no Decem­ber results yet in Stock Doc­tor. I had a quick look at FFX today, I don’t think they’ve report­ed their Decem­ber results. So, that’s a bit of a flag for me. They should have report­ed by now, so I guess we’ll wait and see. So, the fig­ures you’re talk­ing about are still June 21, so I’d just be a lit­tle wary of that giv­en that we’re now into April and it should have report­ed by the end of Feb­ru­ary. I know that com­pa­nies have a leave pass and their audi­tors have a leave pass because of COVID, but if it keeps going for much longer that excuse will wear thin. That aside, this is a lithi­um mine, it’s pret­ty much in devel­op­ment stage from what I can see. They must be get­ting some sales some­where because their oper­at­ing cash turned pos­i­tive in the Decem­ber half, I think. Cer­tain­ly, in the June half on a rolling twelve-month basis, which is what we look at. So, you know, hap­py days for you mate, that’s great. It’s a lithi­um min­er, it’s based over­seas in Africa. So, I’m not at all averse to own­ing stocks that have mines over­seas, and we’ve spo­ken about sov­er­eign risk on the show before. It can be an issue, and I remem­ber… so, I own shares in West African Resources, which is over in that neck of the woods as well. And there was a coup, I think in Burk­i­na Faso, and the share price dropped, and now it’s back up to where it was. So, these stocks do suf­fer from sov­er­eign risk and can be volatile, how­ev­er I’m hap­py to invest in them. And that’s one of the rea­sons why I do, because they are val­ue stocks because of the fact there is sov­er­eign risk, right? We’re being con­trar­i­an investors when we invest in them. If they were based in West­ern Aus­tralia, they would­n’t, you know, the price would be much high­er. We would­n’t have the deep dis­counts that we have now, I don’t think any­way. So, I’m not averse to sov­er­eign risk. Hav­ing said that, I would­n’t hold an entire port­fo­lio of African min­ers or Indone­sian min­ers or any oth­er sort of over­seas min­er or based com­pa­ny, because that would be a large expo­sure to sov­er­eign risk. But I’m hap­py to have a por­tion of my port­fo­lio hold­ing these stocks. So that’s, I guess, how I deal with sov­er­eign risk. And then the oth­er point I want­ed to make was that I don’t have a prob­lem buy­ing a com­pa­ny that has a Stock Doc­tor health rat­ing of ear­ly warn­ing, either, because it could be that the com­pa­ny’s invest­ing in its future, which it seems like to be the case for this com­pa­ny. And, I’ve seen plen­ty of com­pa­nies that have gone from ear­ly warn­ing back into sat­is­fac­to­ry and strong finan­cial health. So, that ele­ment is only one part of our check­list and I’m hap­py to still buy a stock if it does­n’t score on that met­ric for us.

Cameron  53:31

Well, con­grat­u­la­tions as Tony said, Jeff, that sounds like a good win.

Tony  53:36

Yeah, I nev­er saw it on the buy list, but I should be claim­ing it, should­n’t I? It was on the buy list and its up 100%.

Cameron  53:42

Yeah. Yeah, I don’t remem­ber see­ing it before either. Appar­ent­ly, it was­n’t on there very long, he says, Well, that’s the ques­tions for this week, folks. Before we get into after hours I will ask you to leave us a review if you have a minute on Apple pod­casts or Spo­ti­fy. Prob­a­bly the two most impor­tant ones. That’d be nice, it always helps. And what else? That’s it. Okay. Let’s get into after hours.

Cameron  1:04:24

The QAV Pod­cast is a pro­duc­tion of space craft 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. 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.