Cameron  00:06

Welcome back to QAV, episode 530. Recorded this day of our… who are we worshiping today?

Tony  00:19

Well, it’s always Warren Buffett or Charlie Munger, one or the other.

Cameron  00:22

This day of our Buffett, the second of August 2022. 2/8/22. How are you TK?

Tony  00:32

Yeah, good. It’s a beautiful sunny day in Sydney today. Lovely.

Cameron  00:36

Do you remember what that looks like? How come you’re not out playing golf?

Tony  00:41

I booked into play tomorrow, played on Sunday. So, making hay while the sun shines.

Cameron  00:47

How did you go? Did you shoot under par? Above par?

Tony  00:52

Nowhere near par. Under my handicap, which was good.

Cameron  00:56

You’ve been playing golf all these years, why aren’t you on par?

Tony  01:00

I know. I should be, shouldn’t I? I’m like these muso friends I had when I was at uni, I see them on Facebook now and they haven’t improved. They’ve been doing it for the last forty years, and I think, yeah, it’s just like golf with me.

Cameron  01:11

Chess with me, too. I’ve been playing chess since I was six years old. I’m still no good at it, but I love it.

Tony  01:17

Yeah, exactly. You do it because you enjoy it.

Cameron  01:19

Yeah, that’s right. Let’s get into the news of the week, Tony. Aluminium is now a buy thanks to Duncan, QAV club member, for pointing that out to us. So, that means that we can buy things again, like in theory, CAA. But I checked it yesterday and it was still below its second buy line, but in theory it’s back on the buy list. Why is aluminium now a buy again do you think?

Tony  01:42

I couldn’t say, sorry. Chances are it’s just dropped so far people are buying it again. I don’t know.

Cameron  01:49

CCP issued some results today, Tony, and they fell like 16% in a heartbeat.

Tony  01:56

I saw that. Urgh, I know.

Cameron  01:59

But they’ve recovered a bit the last time I checked.

Tony  02:02

They were still down 10% when I checked before we started recording.

Cameron  02:05

Still down 9.3% according to my stock app. Apparently, it’s interesting, there was some interesting commentary by QAV club member Paul, he read through their report, their results that came through. He says, “it’s a funny one. They reached the top end of revised guidance in a very soft market but failed to reach the consensus target and so got punished. Everything in the report says their progress into the US is going very well except for labour shortages, which they are filling with a new call centre in the Philippines. Lending volumes and market share in the US are increasing while Australia and New Zealand are flat as the market is mature, a fact the company recognised a few years ago and pushed into the US. I think they’re now the number three collector in the US in a short space of time. All in all, looks like market overreaction to me. I should also point out that the guidance given in this report is basically the same as last financial year, meaning little to no growth is forecast for the next twelve months as they buy debt ledgers. So, that’s a legitimate reason for people to sell, I guess.”

Tony  02:06

I’ll just add to that comment, sorry, Cam. Thomas Beregi, the CEO, has a history of low-balling guidance at the start of the year and then upgrading during the year. So, I wouldn’t be surprised if that’s going to happen again this year.

Cameron  03:19

Yeah, that’s what it said in the Fin as well. JP Morgan analyst Russell Guillen in a note to clients said, “the guidance would disappoint the market but Credit Corps investments in the previous year would release substantial cash flow through this year ‘to redeploy capital as the debt ledger market recovers.’ He also pointed out Credit Corps’ guidance was traditionally conservative.”

Tony  03:40

It is. They’re known for under promising and over delivering,

Cameron  03:44

But the market dumped them on that news this morning.

Tony  03:49

It’s a cruel mistress, the market.

Cameron  03:52

I’ve had a few of those in my time, Tony.

Tony  03:54

Oh, really?

Cameron  03:55

Ah, yeah. And you know, it’s exciting at first. But eventually…

Tony  04:02

Yeah, enough about Credit Corp. Tell us about your mistresses.

Cameron  04:07

More crazy than cruel.

Tony  04:08

I have to ask vicariously.

Cameron  04:12

Sure you do, Tony.

Tony  04:14

Just one last point about Credit Corp. If there is a recession, and it’s a technical recession at the moment in the US, then they will underperform. That’s just the fact of what they do. For example, they’ll buy a debt ledger with an assumed collection rate to it, and if we go into a recession and that collection rate proves not to be the case because people just can’t pay, it’s not situation normal, then they will make less of a margin on those debt ledger’s that they buy.

Cameron  04:45

If you buy a debt ledger, aren’t you always buying the debts for somebody who can’t afford to pay it back? What does it matter if it’s in a recession? Isn’t that why they have a debt ledger business in the first place?

Tony  04:57

Kind of. I mean, what they basically do is to say “okay, these are the people who can’t pay their power bill,” for example, but their experience would have said that half the people won’t be able to pay but the other half probably will if we work with them and work out a repayment plan and check up on them and remind them, and all that kind of stuff. But in a recession, if the half that they had banked on paying lose their jobs, then no amount of reminders or working with them is going to get that money paid.

Cameron  05:26

Yeah, okay, that makes sense. Tom asks if you can do a pulled pork on PBP, he says the CEO is a local in his neighbourhood and a good fella. I said, well, you should get him on the show.

Tony  05:37

Yeah, we can do that. Yep, it won’t be for a week or two. We’ve got SOL today and somebody asked for Kelly Partners which we’ll do next week, and then we can do PBP after that.

Cameron  05:48

All right. You’re on the list, Tom. Tell your CEO mate to get ready, because when we do a pulled pork…

Tony  05:57

Our lawyers quake in their boots when we do a pulled pork.

Cameron  06:00

So do investors. The share price is guaranteed to go down by 10% the day we put that episode out. Let me ask you about MLD, Tony, Maca. I added it to one of our portfolios yesterday after it was on the buy list and had passed its second buy line, then I find out it’s under a $350 million takeover offer from Theiss, and yeah, probably not going anywhere.

Tony  06:31

That’s why we say, “do your own research before you buy.”

Cameron  06:36

I bought ten stocks yesterday, and yeah. So, should I not have bought it in this condition?

Tony  06:44

I had a quick look when I saw your question. I don’t think you should have bought it because it’s basically trading at the takeover price, the offer price. So, you can buy it and hold it, and that will be in the hope that somebody else comes in with a higher takeover. But the current ones been recommended by the directors, they say they’re going to accept. You can still get another offer coming in, but that generally is kind of game over. The share price is trading maybe one or two cents below the offer price so the market thinks it’s gonna happen, and you’re taking on the risk of it not going ahead for ACCC reasons if they block it, or the Foreign Investment Review Board could block it. Unlikely, but they could. I think there’s a condition in a takeover that you’ve got to get 90% of acceptances for it to go through, so if some people don’t accept then that could scuttle it as well. So, I think on the balance of probabilities you’re probably too late into this one, so I wouldn’t have bought it.

Cameron  07:35

Should I sell it or just hold on now do you think?

Tony  07:38

I think you should sell it. Unless another bid comes in, which is still possible but unlikely, then you’re just gonna get 1 or 2% return and it’s going to take time for the takeover to play out, get the acceptances in, get the approvals done. You could be waiting for a long time for that money to hit your account.

Cameron  07:55

So, the lesson for me is, should I have done a little bit more background research on this before I bought it or is it just bad luck?

Tony  08:04

A bit of both. I mean, if it’s a stock I haven’t been following closely, I’ll Google it before I buy it and just see if there’s any news out there, I’m not aware of. So, that would have picked it up straight away. This one’s an interesting one, too, I guess. Maybe it’s a bit different from some, but it crossed the buy line because of the takeover offer, so it’s not like it’s starting an upward trend through normal market activities. It started one and it’s probably not going to go on.

Cameron  08:28

All right. To do items: sell Maca. All right, very sad. My son Taylor told me this morning that the crypto that he bought in January, Ethereum, was down 60%

Cameron  08:43

Oh, good.

Tony  08:44

Oh, good. How many times do you have to do that before they learn?

Cameron  08:52

He said “oh, it’ll go back up. It’ll get back up. It might take a couple of years, but it’ll go back up.”

Tony  08:56

We’ve been talking to Tyler about crypto for at least the last two years. Maybe three.

Cameron  09:01

Three, yeah, at least. And he was really cranky at us for a while because it did go up. Anyway, there you go. He said, “my QAV portfolio is down just as much,” and I go, “well, if you’re following a rule one, you’re selling at 10%. How come you’re down 60%, you bloody nong.”

Tony  09:17

His QAV portfolio is down 60%?

Cameron  09:20

It’s not, he’s just talking out his ass.

Tony  09:22


Cameron  09:23

All right. Rio, Tony.

Tony  09:27

Yeah, I just noticed they were one of the first cabs off the rank with results. It is reporting season, we should mention to people to stay close to their alerts and stay close to Stock Doctor and stay close and the Fin Review, which will start to report the results as they come through. Credit Corps reported, Rio’s reported. So, Rio’s come in with a score of 0.16, but it’s still a Josephine. One of the biggest stocks on the buy list at the moment.

Cameron  09:52

And they’re not caught up in any commodity sell situations?

Tony  09:58

Yeah, well they’re iron ore. So, yeah, we’re still waiting for…

Cameron  10:00

Iron ores a Josephine?

Tony  10:00

Iron ores a Josephine too, yeah. Interestingly enough, I had looked today prepping for this show: it’s kind of like halfway between a second buy line and a sell. So, it could go either way at this stage, iron ore, I think. But it’s up like 5% today, so I’m just trying to work out why, but I couldn’t see anything in the news about that either.

Cameron  10:21

All right. What else have you got on your list of things to talk about, TK?

Tony  10:25

Yeah, well, the market does seem to be turning. Anyone out there who is into ETFs and LICs maybe will have noticed that Australian Foundation Investments back to being a buy again after being a sell a month or two ago, so the markets turning. JHG, Janus Henderson Group is back on the buy list. Horizon and AZJ are buys now, two big cap stocks. ABA was last time I looked, I haven’t checked it today, but it may well be back there. Credit Corp was and I haven’t checked it today to see if it’s gone back below its sell price, but it was on the buy list. So, yeah, I think the market seems to be turning, and I think Alek Hay coined it best; he sent me a piece of research today which said that this is the “bad news is good news” rally. So, basically, the Fed in the US has said they’re not going to tighten or they’re not going to raise interest rates as quickly as some people think because the US is in a technical recession, and therefore they shouldn’t be raising interest rates as quickly to try and protect the economy, and the markets rallying on that basis. So, it’s kind of topsy turvy at the moment. Could just be a dead cat bounce, but it certainly seems like there is, well, I’m certainly buying more at the moment while I’ve been sitting on cash up until now. So, interesting time in the market.

Cameron  11:40

Yeah. as I said, I bought ten stocks yesterday just trying to catch up on not having been able to buy much for the last couple of months. Let’s talk about owner managed companies on the ASX, Tony.

Tony  11:53

Yeah, I came across an article by a chap called Matt Williams from Airlie Funds Management, it was in Livewire last week, and he said that the owner managed companies on the ASX outperformed the S&P ASX 200 accumulation index over the last five years by 107%, which is quite a bit. So, I guess that’s justifying putting owner founders in the checklist. But it would be good to talk to him further about that because the article didn’t have any other filters, right? So, there were some owner founder companies which are like tech stocks and high growth stocks, which makes some sense; stocks like Wisetech Global, which has been buying up other logistics software companies around the world. It’s growing fast and has an owner founder. But then more traditional ones, one we’ll talk about soon, Washington H. Sol Patterson, which has been around for a long time, and the Millner families have been running that since inception over one hundred years ago. And then other ones like ARB, which is one that I tend to keep an eye on and favour, has been a well-run company as well. So, there’s certainly something in it and it’d be good to explore further, whether he just invests Airlie Funds investments in owner founder companies or whether he puts some other filters over it, too, it’d be good to know.

Cameron  13:11

Well, I’ll reach out to him and see if we can get him on.

Tony  13:13

Yeah, thanks.

Cameron  13:14

Let’s talk about the portfolio before we move on too much further. Had a look this morning at the DP. Congratulations to everyone who got some laughs out of me using the term DP a couple of weeks ago.

Tony  13:25

Yeah. On the BBC.

Cameron  13:29

Yes, I’m shocked that you know these terms, Tony. I’m a little bit disappointed you know what I’m talking about. Since inception, the DP is up nearly 18%, 17.85% CAGR annualised PA versus the SPDR 200, up 6.26% over the same period. So, we’re still doing roughly three times better than the All Ords since inception. But closer to home this financial year, it’s not looking so good. Not a good start to the financial year. The last year has been bad for us, but the SPDR is up 10% this financial year, just in July, versus our portfolio up 4.3%.

Tony  14:17

10% a lot, isn’t it? So, the market has turned.

Cameron  14:20

Markets definitely turned, yeah. In the last one year, the 200s up 0.16%, we’re down — no, sorry, no, it’s down 0.16% over the last twelve months. We’re down 6.65% over the last twelve months. Has not been a great year for us.

Tony  14:42

Yep, underperforming in the short term. It’s not unusual, it’s the long term that counts. There’ll be periods when we underperform the market. And just recently too, we’ve had a lot of cash in the portfolio. So, as we start to redeploy that I think we should catch up and pass the ASX.

Cameron  14:58

Okay, what do you want to talk next? Got a pulled pork?

Tony  15:02

Yeah, just before I do the pulled pork; on performance, the top movers — Navexa sent me a monthly summary this week. Top movers for the month in the dummy portfolio were NHC, up 27%, IGL up 25%, and The Reject Shop, up 18.4%

Cameron  15:21

Good old TRS.

Tony  15:23

Even though we’re underperforming, there’s still some big moves there.

Cameron  15:26

Yeah, TRS is up, like, 19% in the last month I think, last couple of weeks. We only added it on the 11th of July, so in less than a month it’s up nearly 20%, it had a good run. Didn’t the CEO leave? Is that what happened?

Tony  15:44

They did.

Cameron  15:45

CEO left, share price skyrocketed. That’s got to be depressing.

Tony  15:50

Yeah, that must be heartbreaking for the CEO. The board will be, “I told you so! I told you so.” The Reject Shop, again, if we do go into a recession, it’s one of those counter cyclical stocks that that does well in bad times.

Cameron  16:05

It did very well during the first year of COVID, I recall, because I owned it at the time. I think it went up 80% or something. All right, what else?

Tony  16:14

Pulled Pork.

Cameron  16:15

All right, go for it.

Tony  16:16

Yeah, so I’m doing it on a listener’s request. This is SOL is the code, Washington H. Sol Pattinson and Co. Not quite on our buy list at the moment, the QAV scores only 0.08 which isn’t very far away, but one thing that’s happened to them in the last little while is they merged with a large listed investment company called Milton and that’s provided them with a fair bit of operating cash flow which they didn’t have organically. I wouldn’t be surprised when they share their results whether they score better for us from a Pr/OpCaf measure, because the biggest issue with their numbers at the moment for us is their price to operating cash flow is nine times, which is a bit over our hurdle rate. Interesting company, so thanks for the listener who asked us to talk about it. It’s a very storied company, I mean, it really is an interesting story. It’s worthy of a book if there hasn’t been one written already, or even a documentary. It started off, this company is the second oldest company publicly listed on the ASX. It was listed in 1903 when a couple of pharmacists merged, Washington and Pattinson, and they go right back to the early days of settlement in Australia, in Pitt Street in Sydney. They got together and merged their businesses and over time they had both the chemists’ chain but also the property associated with some of the chemist shops, and both of those did well for them and then started to branch out into other investments. And now it’s kind of like a mixture of a conglomerate and a listed investment company. So, part of its portfolio is invested in businesses; so, for example, they own 12% of TPG, the telecom company, and nearly 40% of New Hope Coal, NHC, which has obviously been doing very well for them in the last twelve months. I remember back when New Hope was actually just an investment in Washington Sol Pattinson like twenty/thirty years ago, and they eventually got so big they eventually spun it out because it was crowding out their portfolio. I think they also kind of did it to take the heat off them as being one of the biggest coal miners in Australia as well, so it’s now at arm’s length even though they still own a big share of it. They own 25% of a Singapore mobile company called Toous, 43% of Brickworks — and I’ll come back to that in a minute, Brickworks is a brick manufacturer — 29% of APEX Healthcare, 36% of Penn Garner Capital. So, that’s their big holdings. They then have 37% of their portfolio in large cap ASX stocks. So, you know, your Woolworths and CSLs and CBAS and the like, and then they have small parts of the portfolio invested in private equity, very small companies — emerging companies, they call it — a little bit in fixed interest and a little bit in property. So, it’s a bit like Berkshire Hathaway in that there’s some listed, some 37%, probably a little bit more than that when you take the small ones into account, maybe 40% is in listed companies, and then the rest is in big chunky holdings of other companies. But the company, even though it was listed in 1903, has always been run by someone from the family of the founders. So, the current chairman is Bob Millner, Robert Millner. He’s the son of the previous chairman, Jim Millner, who was the nephew of William Pattinson, who was the son of the guy who founded the company back in 1903. So, it’s always been in in family ownership, and only had four chair people over that time. They do make a bit of a highlight of the fact that a lot of their staff have been around for a long time, too. So, a bit like with Berkshire Hathaway how they pride themselves on having people work for them for life. The same thing has happened with SOL. However, I did look up on their website, their annual report, and I think if I can pull out the figure their twenty-year performance is more like 13% CAGR. So, not quite up there with Berkshire Hathaway even though I think they do model themselves a bit on that. I wanted to come back to a couple of other quirky things about SOL. The first one is their cross ownership with Brickworks. So, again, the company has been around for a long time, and back in the late 60s, I think it was 1969, they bought 44% of Brickworks and Brickworks bought nearly 43% of Washington Sol Pattinson’s, and that was done as a takeover defence. So, back in the 70s, late 60s/70s/80s, when the corporate raiders were raising money and then trying to take over companies on the ASX, this company came up with their defence which was that if they each owned large chunks of each other, it’s gonna be harder for either to be taken over because they’re never gonna vote for a takeover. So, that practice is now anachronistic, you can’t do that under the current corporations’ regulations, but because this was put in place in 1969, they don’t have to unravel it. But there was a legal case last year, a fund manager at Perpetual took the cross ownership to the High Court, where the High Court ruled in favour of maintaining the cross ownership. And Perpetuals reason for doing that was that they thought that the cross ownership was actually depressing the share price of both businesses. So, because you could never take them over there would never be a takeover premium in the share price, but also, too, if you were a fund manager who wanted to invest in Australian property, you wouldn’t buy Brickworks because it has all this other diversified portfolio through its ownership of Sol Pats. And likewise, if you’re trying to buy a fund that operated like an index you wouldn’t buy Sol Pats because it’s got this big shareholding in Brickworks which can be a cyclical company. So, interesting situation there that doesn’t occur these days, and people should be aware of as well, I spoke about New Hope being spun out, which was a big deal for them. And the Milton merger as well. I think it will be good longer term, but I think the Milton shareholders have seen that their share value drop after the merge. But I think it’ll be fine in the longer term. Let me go through the numbers, I guess. That’s the background on Washington Sol Pat, interesting company. The numbers are yield is 2.5%, so not high enough to score for us but it’s okay. Financial health in Stock Doctor is strong and steady, which is good. As I said before, price to operating cash flow is 9.6 times, so too big. PE 13 times, which means that the cash that’s coming in, a lot of its flowing through to the bottom line. I’m using a share price of $25.69 which was the share price on the weekend, which is just above net equity per share of $25.07. So, it won’t score for being less than book value, but it will score for book plus 30% and it’s below IV2 of $29.46. Growth isn’t too bad, but it isn’t meeting our hurdle of growth over PE being more than 1.5. It’s currently 1.14, so it doesn’t score for that. The directors own 12% of the company and I suspect that might be a bit light because I think the Millner family may have some shareholdings outside of whatever company structure is owning their shares in WHSP. But the directors have 12%, so it’s still scores for us on the owner-founder basis. The price is below consensus forecast, which is a tick. Manually entered data, it’s just below its lowest PE over the last three years, so tick. It’s just turned back up and become a new three-point trend line buy, so it’s a tick for that. Equity overall over the last five years is up but it has bounced around a bit, so it scores a zero for that. So, on a quality basis it’s 75%, 12 out of 16, and on the QAV score it’s 0.08, so just below our cut-off.

Cameron  24:27

So, I was looking at their chart. Going back to just before the merger, late September 2021, they were trading about $38. They’re now trading at $26, so they’re down 30% from where they were pre-merger with MLT. I don’t know why.

Tony  24:50

Nor I, I can’t explain it. But yeah, it did go down.

Cameron  24:54

You would think a merger would make it a better company and therefore it’d be worth more, right?

Tony  24:58

You would think so. Yeah.

Cameron  25:00

In theory.

Tony  25:02

I don’t know either of those companies well enough to comment on that, but I did notice it went down.

Cameron  25:07

All right. So, that’s SOL. Not a buy, but interesting company nonetheless — as you say, a storied history. All right, are you’re ready to get into Q&A, TK?

Tony  25:17

Yeah, sure.

Cameron  25:18

Q&A and V. Glenn asks, “on this week’s podcast, you and Tony were discussing the difference in the iron ore charts. If it’s useful, I think I tried, possibly badly, to explain in my email below. Basically, hoping this makes sense, Tony references Stock Doctor iron ore, which is a 62% iron ore grade. Your reference in the weekly buy list is for a 63.5% grade, e.g., higher content of iron ore per tonne,” that’d be the trading data or…

Tony  25:54

Trading economics.

Cameron  25:55

Yeah, that graph. “If you want some detailed research,” he sent me a report that has the wine selection of iron ore blends. “From what I can tell, Tony’s Stock Doctor reference is more matched to miners in WA as it’s rated as the Pilbara blend, which would be your FMG, BHP and Rio miners.” There’s a link here to this report that says, “Platt considers the following iron ore medium grade fines brands for these assessments: Pilbara blend fines, Newman high grade fines, Brazilian blend fines,” sounds like coffee so far, “mining areas sea finds and Jimbilbar finds. According to the typical specifications of these brands, unless notified of specific cargo quality, Platts continuously reviews whether brands cease to be or become sufficiently fungible to be considered in the IODEX and TSI 62% FE assessment process. There is a different reference in Trading Economics you could use,” and he sends me a link, “this is the same grade that Tony mentions in Stock Doctor. Hope this is useful, regards, Glenn.” All over my head, my paygrade, Glenn.

Tony  27:03

Yeah, similar to me. I think what Glenn is, well, my take out from this was that 62% is probably the most relevant to Australia, because it covers BHP, Rio, FMG, and anyone else from the Pilbara. Whereas there are other grades of iron ore fines is the blend, F-I-N-E-S. So, Brazil has a different one Jimbilbar, which I hadn’t heard of before, has a different one. So, yeah, I think 62% is probably the right one to use, for Australia anyway.

Cameron  27:35

Well, I’ll have a double espresso of Pilbara just with a little macchiato sort of froth on the top. Thank you very much, barista.

Tony  27:45

You need to add some iron to your diet, do you?

Cameron  27:48

No, the opposite. I need to get iron out of my diet. I suffer from hemochromatosis.

Tony  27:54

My father had that.

Cameron  27:55

It’s very common. Got to keep the iron down or I’ll turn into Iron Man. Here’s one from Tom: “what’s everyone’s thoughts? Does this count as a red flag, bad news sell? YAL down 12% this morning.” This is going back a few days. This was related to news that Glencore was selling its stake in Yancoal, $293 million. I ended up having to sell YAL because it rule one’d on me as a result of this, but what do you think of this kind of news, Tony? Would you normally see that as bad news or just business as usual?

Tony  28:36

Well, I’d put it in the business-as-usual camp. I don’t think it’s bad news, per se. Tom’s provide us with a link to an article about it, and in that article, Glencore said their holding wasn’t a core holding and they’ve been trying to sell it for years. So, I think it’s more likely that they just had a high price on it which is finally being met by somebody. So, I wasn’t too worried about it. The thing that struck me more so was that it hasn’t been disclosed yet who bought this stake. If people remember Yancoal has two big shareholders, and now Glencore which had 6% has just been taken out. If it was taken out by one of the other big shareholders there’s even less free liquidity in the stock. I had to look in Stock Doctor at the ADT, and the ADT, I think, was about $2.5 million for this stock.

Cameron  29:28

$2.047 million according to Yahoo Finance.

Tony  29:32

Yeah, so 2.6 is ADT in Stock Doctor, so Yahoo Finance might be more accurate. But the truth of the matter is that big trade from Glencore has boosted the average up. I just did some quick back of the envelope numbers and I reckon the ADT is more like half a million dollars for this stock once you back out the big trade recently. You can see it in the shareholder graph. People who have Stock Doctor can go onto the shareholder page, it gives you a twelve-month liquidity graph for the stock and in most times it’s down around as low as 200,000, up as high as about 900,000. But then the Glencore trade went through at $19.5 million, or part of it did anyway, and that’s boosted the average up. So, just be careful with Yancoal. $500,000 ADT is still gonna suit most people, but potentially this sale is making it more illiquid than it already was.

Cameron  30:26

Yeah, that article says that “the sale comes almost a month after Glencore and other Yancoal shareholders rejected an offer by China’s Yankuang Energy to buy the remaining 37.7% of shares in Yancoal that it did not own at a discount for $1.8 billion. Glencore is said to have rejected that offer but maintained that it would be willing to sell its stake at the right price.” So, I wonder who it got to buy it at the right price?

Cameron  30:26

Yeah, and it’s, I mean, potentially, who knows, but potentially, the Chinese company made a very lowball offer which kind of spooked the market in Yancoal, which is when I had to rule one sell my shareholding in it. But that could have just been the start of negotiation with Glencore, they went in and low balled and then they’ve come back and negotiated with them. I’m not sure.

Tony  31:08

Well, Yankuang was offering to buy 37.7% for $1.8 billion. What’s that as a percentage?

Tony  31:26

I remember at the time the price was well below the market price for Yancoal.

Cameron  31:30

Seven divided by… that’s lots of zeros and a 2 per percent. And they’ve just sold what did you say? 6.4% for $422 million. So, somebody better at maths than me would be able to work out what that means in terms of what the price was, but I’m not going to do that this late in the day.

Tony  31:54


Cameron  31:55

Well, that’s Yancoal. Yeah, I think I just added it to a portfolio, too, and had to dump it when its rule one’d a week later. So, that’s always disappointing. Thanks a lot, Glencore. Last question, Ed: “other than Stock Doctor, is there anyone else that TK or yourself get announcements or release dates or notifications or financial reports from during reporting season? Happy birthday to all of TKs horses for today, too.”

Tony  32:20

August 1 is the birthday of horses.

Cameron  32:23


Tony  32:24

Yeah, they all have a standard birthday to make it easier to line them up as two-year-olds or three year olds or four year olds, etc., which is important in handicapping races.

Cameron  32:34

Right. So, if they’re born on the 31st of July, is their birthday the 1st of August the next day? Are they one year old on the next day?

Tony  32:43

No, they’ll turn one year old the following year, but they’ll actually be 13 months old. It actually becomes important in their first races, because the older horses tend to do better. But over time, it doesn’t matter.

Cameron  32:57

So, if you’re born anywhere in a calendar year, the first of August of that calendar year is considered your birthday?

Tony  33:06

Yeah, but people who know about the horse industry know that we’re coming into spring, which is the birthing season. So, most horses, I’d say probably all horses born between September and early December at the latest.

Cameron  33:19

Okay. Did you get them a cake? What do you do for your horses on their birthday to make them feel loved, Tony?

Tony  33:26

Usually just pay them more money.

Cameron  33:27

Have a jockey whip them and make them run around in circles?

Tony  33:31

No. They don’t have cruel mistresses like you do. They probably get an extra bale of hay or something to chew on. That’s about it.

Cameron  33:43

The whippings not the cruel bit, you expect that. You pay extra for the whipping, that’s not the cruel bit. It’s more the psychological trauma that they put you through that’s the crucial bit that you didn’t sign up for. Ah, okay. Anyway, back to Ed’s question. Where else do you get your news during the reporting season?

Tony  34:01

Yeah, well, if Ed doesn’t have Stock Doctor you can certainly sign up for alerts on the ASX website or check them regularly on the ASX website. But basically, I read the AFR every day, but particularly during company reporting season. And some of the other feeds I get like the Eureka report will talk about companies as they report as well, so general news feeds will have most of the interesting announcements reported on.

Cameron  34:29

But you, what do you do?

Tony  34:32

Yeah, I just use Stock Doctor. I just run downloads more often than usual during this period. And the alerts, when we’re talking about alerts, I don’t get alerts into my email feed. I’ll get Stock Doctor alerts saying that Credit Corp has new figures loaded into Stock Doctor, and I’ll go and check them then. And if it’s something I’m interested in, I’ll do a download. But that’s about it, I’m not bombarded with all the news about every company that’s reporting

Cameron  35:00

That would require you to spend time and effort doing stuff on it, and you don’t want to do that.

Tony  35:04

Correct. The phone has to be turned off on the golf course, Cam.

Cameron  35:06

No, but in a little seriousness, one of the things I’ve come to appreciate over the last few years of doing this with you is that you want to minimise the amount of effort that you spend as much as possible. No less than you need, but no more than you need, either.

Tony  35:22

Yeah, I think it’s a real 80/20 rule. I mean, it’s been hit home in the last couple of weeks when we’ve been talking about what grade of iron ore we should be using. Well, who the fuck cares? Just use the one that’s easily and readily available.

Cameron  35:34

Glenn. Glenn cares. That’s who cares. Yeah, not Glencore, Glen.

Tony  35:41

There’s always a finer and finer point you can put on things, but if you’re getting 80% for 20% effort, then that’s as far as I go normally.

Cameron  35:49

Look, I know there are some people that like to nerd out on this stuff and they either know the field and so they’re interested in the field, which is great, or they just want to learn, and they love getting down into the weeds and understanding what’s going on.

Tony  36:07


Cameron  36:08

I don’t think you and I really fit that category when it comes to investing.

Tony  36:11

No, not at all. Yeah.

Cameron  36:13

I mean, you know a lot about these businesses, but as you’ve told me, it’s because you’ve been reading about them for thirty years and you’ve got a trap of a memory. You’ve got a grease trap memory. Is that a good thing, grease trap?

Tony  36:27

No. No.

Cameron  36:27

Bear trap, steel trap.

Tony  36:29

You know the Homer Simpson trick of selling off the grease trap for waste oil income.

Cameron  36:36

You’re the winner of more than one trivia competition because you’ve got a steel trap of a memory.

Tony  36:45

True. I probably couldn’t go on a trivia competition these days, though, I wouldn’t have the foggiest idea about Beyonce or…

Cameron  36:52

Kylie Jenner.

Tony  36:53

Yeah. Or the Kardashians.

Cameron  36:55

Yeah. What is Kylie Jenner most known for? Who cares, is my answer to that question. Next.

Tony  37:01

Yeah, exactly. She’s not known for anything around here.

Cameron  37:07

All right. Well, that’s all of the questions for today. After hours…

Cameron  51:17

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