Transcript #536

QAV 536 CLUB BEEP

Fri, 9/16 4:31PM • 1:09:36

Cameron  00:06

Wel­come back to QAV, TK. Episode 536, we’re record­ing this on the 13th of Sep­tem­ber — what is it? 2022. 2:38 in the PM. How are you TK?

Tony  00:19

Yeah, good mate. How are you?

Cameron  00:21

Oh, I’m good.

Tony  00:23

You’re look­ing knocked around.

Cameron  00:24

I am knocked around. I got tagged a few times at Kung Fu on the week­end. Tony and I have just been rant­i­ng about the Queen and oth­er things for forty min­utes off air. I thought we’d bet­ter sit down and record an actu­al show. My big news I want to open this week’s show with, Tony, is Ralph Mac­chio, The Karate Kid, is six­ty.

Tony  00:40

And why is that good news?

Cameron  00:43

Well, I did­n’t say it’s good news, just big news, because that makes him old­er than you, and he’s doing karate on tele­vi­sion. Have you seen how good he looks? He looks like he’s forty, this guy.

Tony  00:55

Okay, cool. Well, he’s a Hol­ly­wood star and I’m an on-air pod­cast­er, so there’s a bit of dif­fer­ence in our genes.

Cameron  01:02

When he made the Karate Kid in 1984, he was twen­ty-two and he was play­ing a fif­teen-year-old. Now he’s six­ty and he’s play­ing a — I don’t know how old his char­ac­ter is sup­posed to be, but he looks forty/­forty-five. The woman who he’s mar­ried to, the actress who plays his wife on the show… Have you seen Cobra Kai yet?

Tony  01:19

No.

Cameron  01:20

It’s great, you’re miss­ing out. It’s great.

Tony  01:21

Okay.

Cameron  01:23

She’s like, forty, the actress who plays his wife, he’s 60. He’s real­ly good. I got­ta hand it to him, he’s look­ing good.

Tony  01:29

That’s pret­ty stan­dard Hol­ly­wood fair, though, isn’t it?

Cameron  01:32

Well, it is.

Tony  01:32

The male nev­er mar­ries an old­er female, it’s always the oth­er way around.

Cameron  01:36

Yeah, yeah. Jack Nichol­son would be, you know, dat­ing twenty-year-old’s when he was sev­en­ty.

Tony  01:42

So, what’s the point of the sto­ry? If I do karate, I’ll look like a forty-year-old.

Cameron  01:46

That’s it. You got to do more Karate if you want to look good like Ralph Mac­chio.

Tony  01:51

I’m look­ing at you, mate. You’ve got a bust­ed lip, bruis­es every­where.

Cameron  01:56

Yeah, you should see the rest of my body.

Tony  01:58

No, thanks.

Cameron  01:59

I’ve got no nip­ples left, because we were train­ing today. We were doing this tech­nique slam­ming our elbows into peo­ple’s chests. Chris­sy was spar­ring with me, and she kept hit­ting my nip­ples with her very pointy razor-sharp elbows, just sheared them right off, bleed­ing. I’m like David Bowie in The Man Who Fell to Earth. Just no nip­ples. Sor­ry for that visu­al every­body.

Tony  02:23

That freaked me out when I was a kid, that scene in The Man Who Fell to Earth when I was about four­teen.

Cameron  02:27

Yeah, it still freaks me out when I watch it. Alright, enough about that. I gath­er you’re not inter­est­ed. Fol­low­ing up on our mus­ings on last week’s episode about which stocks have been dri­ving up the ASX over the last six months, I ran a report on Stock Doc­tor. I don’t know why I did­n’t think of that when we were doing the show the oth­er day, it took me like one minute. I don’t know if you had a look at it, but yeah, it’s inter­est­ing. Like, these stocks that are dri­ving the ASX up, I haven’t heard of most of them.

Tony  02:55

I don’t think they are dri­ving the ASX up. I had look at what you did, by the way, I don’t think they are dri­ving the ASX up.

Cameron  03:01

No? Well, they’re up.

Tony  03:02

Yeah, they are, but their con­tri­bu­tion to the mar­ket cap is real­ly small.

Cameron  03:07

Right. Newhope Cor­po­ra­tion is on the list.

Tony  03:12

Yeah, but, okay, so what I did in response to what you did was to do anoth­er down­load, but also include the mar­ket cap.

Cameron  03:20

That’s smart, yeah.

Tony  03:21

And then get the weight­ing of that share in the mar­ket cap mul­ti­plied by the con­tri­bu­tion. So, New Corp, if you do that mar­ket weight­ed con­tri­bu­tion, con­tributed, like, 0.18%.

Cameron  03:32

So, did you work out what’s dri­ving the per­for­mance of the All Ords?

Tony  03:36

I’d say near­ly half of its CSL.

Cameron  03:39

Wow, real­ly?

Tony  03:40

Which con­tributes 0.88% That’s the biggest. And then some­thing called Pil­bara Min­er­als is 0.39%. But we’re only talk­ing about, like, over the last six months, my analy­sis is say­ing the All Ords is up 2.8% on an accu­mu­lat­ed basis, which is sim­i­lar to what Navexa is say­ing for STW. I think it’s say­ing 2.5. I had a cou­ple of fudges in my analy­sis because I’m using Stock Doc­tor for the last six months price change, and I don’t know whether that’s, like, today, six months from today, or from the clos­ing of last month, or what­ev­er. So, it’s going to be out slight­ly com­pared to Navexa. Because when I ran the Navexa report it was today, six months ago, like, the 13th of march up to the 13th of Sep­tem­ber. Plus, the div­i­dend yield in Stock Doc­tor just gives you the annu­als, so I had to do a fudge and just divide it by two to add it to the cap­i­tal gain as well. So, I think that’s, you know, a fudge and it’s slight­ly out. But any­way, I’m get­ting 2.8% for the All Ords and Navexa is 2.5 for the last six months, so they’re in the same ball­park. But when you mar­ket weight it, like, there’s a whole lot of ones which are just up a lit­tle bit. Like I said, the biggest one, CSL, 0.88% on a mar­ket weight­ed basis, it’s up 14.5% plus a div­i­dend — so 15% rough­ly — over the last six months, but then when you blend it into the All Ords, it’s con­tribut­ing less than 1%. White­haven Coal 0.36%, Min­er­al Resources 0.36%. So, there’s been some big moves. But yeah, it’s just up 2.5 to 2.8%. Most of its div­i­dends to be hon­est. We don’t have CSL in our port­fo­lio, so that drags us down. I haven’t analysed our port­fo­lio; we’ve had a lot of chop­ping and churn­ing and a lot of rule ones. So, I think that’s prob­a­bly part of it as well.

Cameron  05:25

The stock that came up the top of my list is WYX, West­ern Yil­garn NL, up 4,500% in the last six months. You got that one in your port­fo­lio?

Tony  05:39

No, it’s not even appear­ing. It’s not appear­ing in the ASX 200 when I look out at Stock Doc­tor. WYX? Not part of the ASX 200.

Tony  05:54

There’s a see of red in Stock Doc­tor, too, when you look at their finan­cials. Neg­a­tive oper­at­ing cash flow, neg­a­tive return on assets, neg­a­tive return on equi­ty, but their share price is up 4,500% in the last six months. Now, it’s trad­ing at 16 cents, so, you know.

Tony  06:13

Yeah. What’s its mar­ket cap, though?

Cameron  06:15

Well, it’s huge. It’s $1,573 aver­age dai­ly trad­ed.

Tony  06:23

Yeah, so it’s not going to, even if it was in the ASX 200, it’s not going to con­tribute much to the improve­ment in the ASX 200.

Cameron  06:29

It was trad­ing at 0.003 cents back in May. Now it’s trad­ing at 16 cents. So, con­grat­u­la­tions to any­body that got in on that. They’re a min­er­al explo­ration com­pa­ny focus­ing on baux­ite, locat­ed in West­ern Aus­tralia. So, there you go.

Tony  06:44

So, the NL usu­al­ly means it’s a Nether­lands com­pa­ny, does­n’t it?

Cameron  06:48

North Perth is where its head offices.

Tony  06:50

Oh, okay. Well, I don’t know why its got the NL after it’s name.

Cameron  06:53

For­mer­ly Pacif­ic Baux­ite NL. Yeah, I don’t know about that. But any­way. So, hav­ing a look at these lists of these com­pa­nies that have been per­form­ing well, is there any­thing to be gained for us from that? Or is it just not our game?

Tony  07:09

Yeah, not our game. I mean, it’s an inter­est­ing analy­sis to do. Like I said, I think CSL and maybe one or two oth­er ones — Min­er­al Resources — have done well, and we don’t own them. But that’s always going to be the case. And like we said, I think in Navexa, I think from mem­o­ry, it’s the ASX 200 accu­mu­la­tion index is up 2.5% and we’re down, I think, around three. So, it’s a short-term com­par­i­son. There are going to be peri­ods when we under­per­form, it’s the long term that’s the impor­tant thing.

Cameron  07:39

All right, no prob­lem. I just thought I’d throw that up there for con­ver­sa­tion. You sent me some­thing dur­ing the week, “the mak­ing of a mil­lion­aire study.” You want to talk about that?

Tony  07:48

Yeah, I do. I thought that was real­ly inter­est­ing. And peo­ple might find it inter­est­ing too. So, found it on the inter­webs. And it’s, if peo­ple want to read it, they can just google “themakingofamillionaire.com”. So, it’s a US study. It’s a study of over ten thou­sand US mil­lion­aires and it was done a cou­ple of years ago, Novem­ber 2017 to Jan­u­ary 2018. It was look­ing for com­mon­al­i­ties between Amer­i­ca’s mil­lion­aires. But a cou­ple of inter­est­ing things: so, the per­son who wrote the arti­cle went into the analy­sis think­ing that “aren’t most mil­lion­aires just inher­it­ing their mon­ey?” But that’s not the case, 79% of the mil­lion­aires in the States received no inher­i­tance mon­ey, 21% received some but not enough to make them a mil­lion­aire, and only 3% inher­it­ed more than a mil­lion dol­lars. So, you know, being born into a rich fam­i­ly was one path­way to wealth, but not the over­ar­ch­ing path­way to wealth. A cou­ple of oth­er things that came out of the study: “are most mil­lion­aires attend­ing col­lege? Yes.” So, only 38% of the gen­er­al pop­u­la­tion grad­u­at­ed from col­lege — which I find quite amaz­ing any­way as a stat — but a whop­ping 88% of Amer­i­can mil­lion­aires did. So, quite a skew towards attend­ing col­lege. And I think that bears out in the next one: there is an even stronger cor­re­la­tion between high­er edu­ca­tion and wealth build­ing. Then the per­son doing the analy­sis says, “but what about the cost of col­lege?” But appar­ent­ly, 62% of the mil­lion­aires in the study grad­u­at­ed from pub­lic state schools, while only 8% went to a pri­vate school. And if peo­ple don’t know the gap between them in Amer­i­ca, a pri­vate, high­er edu­ca­tion can cost sort of $50–70,000 a year in the States ver­sus a lot less for the pub­lic state schools. So, again, to me some of these things are kind of self-evi­dent after the fact. So, it would make sense to me that if you’re not inher­it­ing mon­ey, you’re going to col­lege and get­ting a good job and then becom­ing a mil­lion­aire, you’re prob­a­bly not going to sad­dle your­self with a lot of debt to go to col­lege. So, that makes a lot of sense to me; the ones that are sad­dling them­selves with debt, bear­ing that load, it’s imped­ing their abil­i­ty to earn mon­ey. So, it’s not about the degree itself: the top five most com­mon careers of mil­lion­aires sur­veyed were engi­neer, CPA accoun­tant, teacher, man­age­ment and attor­ney. So, most of those are pro­fes­sion­al careers. The sur­vey is say­ing though, that they’re not peo­ple who are run­ning a large amount of mon­ey. Only 31% of the par­tic­i­pants salaries aver­aged $100,000 a year or more. So, you know, two thirds or more were less than $100,000. In fact, one third of par­tic­i­pants nev­er made a six-fig­ure salary at any point in their career. So, how did they become mil­lion­aires? Well, 93% report­ed their wealth as a result of hard work, not because they had a big salary. Eight out of ten invest­ed in — in Amer­i­ca it’s called their 401 K, which is like our Super funds, which would be prob­a­bly 8 out of 10 in Aus­tralia, for sure. But three out of four invest­ed inde­pen­dent­ly in addi­tion, and said that they reg­u­lar­ly, con­sis­tent­ly invest­ed over a long peri­od of time, and that led to their suc­cess. 94% said they live on less than they make, and almost 75% report­ed they had nev­er car­ried a cred­it card bal­ance in their lives. So, poten­tial­ly had cred­it cards, but paid them off every… So, this all rings true to me. Oth­er notable men­tions: many of the mil­lion­aires report­ed inten­tion­al­ly watch­ing expens­es, spend­ing less than $200 a month at restau­rants, and using coupons to save mon­ey when shop­ping. So, what does it mean? I think it rings true for me, it rings true with a book I read many years ago called The Mil­lion­aire Next Door, which I rec­om­mend to peo­ple. Again, it was a sim­i­lar sort of sur­vey — fun­ni­ly enough com­mis­sioned by one of the big pres­tige brands in Europe, I think it was Louis Vuit­ton or one of those types of brands, but I could have that wrong — and they want­ed to know more about the peo­ple who they thought were buy­ing their prod­uct. But it turns out, most mil­lion­aires were liv­ing next door and dri­ving a Sub­aru and were qui­et­ly going about their lives amass­ing mon­ey for their retire­ment. And that struck me as being the type of peo­ple who are lis­ten­ing to our pod­cast as well, and cer­tain­ly how I did it. Just earn a decent wage, cer­tain­ly, some of our lis­ten­ers run their own busi­ness­es and have mon­ey to invest from time to time from that… But yes, start young, invest, keep it up. Don’t be bold. One of the things about the study was say­ing that peo­ple haven’t just put it all into one stock, they’ve invest­ed and spread their risk a bit, have a sys­tem and keep going. And that’s, you know, going to get you to the Mil­lion­aire Club, which is, you know, it’s it’s some­thing we all aspire to, I guess. There’s no trick in there. It was­n’t inher­it­ed, it’s just slow and steady. And the oth­er point is, it did­n’t hap­pen overnight. So, it’s slow and steady win­ning the race, which has been my expe­ri­ence and now borne out by sur­vey.

Tony  07:55

And liv­ing rel­a­tive­ly sim­ply while you’re on the jour­ney; sav­ing as much as you can, invest­ing as much as you can.

Tony  11:40

Yeah, that’s right. And well, you know me, I’m not dri­ving around in Fer­raris. I mean, we have a great lifestyle and we do eat out and I dri­ve a good car and have a beach house and go over­seas for hol­i­days and things, so we’re prob­a­bly past the age of scrimp­ing and sav­ing, but for a long time Jen­ny and I would trav­el when we had a work rea­son to trav­el and try and fit a hol­i­day around that. Did­n’t have an extrav­a­gant lifestyle, we always lived with­in our means — we still do. Our cred­it cards are paid off every month, and I basi­cal­ly run cred­it cards now for the Qan­tas fre­quent fly­er points so I can take flights and not pay for them. So, yeah, I guess you pay for it indi­rect­ly because of mer­chant ser­vice fees. But any­way, yeah, it’s pret­ty much how we did it. And it’s just being smart over the years and not try­ing to be extrav­a­gant.

Cameron  13:34

You know the hacks because you invent­ed fre­quent fly­ers, did­n’t you?

Tony  13:39

Not fre­quent fliers. I did­n’t invent it. Fly­buys. I came on just after it start­ed, the day it start­ed.

Cameron  13:45

Yeah, you know all the secret back­doors and the hacks.

Tony  13:49

Well, one of the hacks is don’t use your points for flights, because that’s the worst redemp­tion.

Cameron  13:53

Real­ly?

Tony  13:54

Yeah. So, occa­sion­al­ly I do, you know, when some­thing’s on sale, buy some of their mer­chan­dise, which is the best redemp­tion. But yeah, I mean, I still gen­er­al­ly just through lazi­ness don’t want to pay for flights so I’ll try and do points plus play when I can. And then that’s pret­ty fre­quent.

Cameron  14:09

She’s talk­ing about liv­ing sim­ply while you’re on the jour­ney to becom­ing rich. You’ve been rich for a long time. You still live, much to Hunter and Tay­lor’s dis­gust, you still live rel­a­tive­ly sim­ply.

Tony  14:23

Well, you should’ve seen Hunter’s eyes when he walked into the apart­ment, though.

Cameron  14:28

First time, he had­n’t been before?

Tony  14:29

No, that’s right. Yeah.

Cameron  14:30

Tay­lor had. My boys caught up with Tony in Syd­ney last week. Yeah, but they’re always like, “oh, I’ll just get Tony to buy a Lam­borgh­i­ni and take pho­tos in front of the Lam­borgh­i­ni. That’s your QAV mar­ket­ing right there.”  I’m like, “yeah, he’s not gonna do that.”

Tony  14:44

No. And it’s not the way to rich­es, it real­ly isn’t.

Cameron  14:48

But even after you’ve had wealth you still don’t like that kind of stuff. You sneer at it.

Tony  14:55

Well, yeah, I mean, again, I give myself the indul­gence of dri­ving a Merc and chang­ing it over every four or five years, but it’s like the ques­tion you asked me when I told you I drank an expen­sive bot­tle of wine. Like, how much bet­ter is it than a cheap­er bot­tle of wine? You’re already dri­ving a Merc, what’s a Maserati or Fer­rari gonna do for me, real­ly?

Cameron  15:16

Yeah. It’s an ego thing, right? It has to be.

Tony  15:19

It is, yeah. And plus, the worst stereo­type you can see is a six­ty-year-old guy dri­ving around in a Fer­rari. Prob­a­bly Ralph Mac­chio dri­ves around in a Fer­rari.

Cameron  15:30

Well, in Cobra Kai he owns a lux­u­ry car deal­er­ship. That’s he’s goal. Good arti­cle. So yeah, that’s themakingofamillionaire.com if you want to look that up and read it for your­self. More news: con­grats to QAV club mem­ber, long-time QAV club mem­ber, Mur­ray Bruce, for his per­for­mance in the warm-up Mooloola­ba Iron­man the oth­er day, and he’s head­ing off to Kona in Hawaii. He placed a hun­dred and eleventh out of a thou­sand blokes, four hours and thir­ty min­utes it took him to do his Iron­man. So, well done, Mur­ray. I won’t say who tipped us off, but it was Richard. Good luck in Hawaii. I hope you get your sell alerts while you’re over there, because you don’t want to take your eye off the ball right now. I don’t care what you’re doing. But that’s impres­sive. “Iron­man Mur­ray”.

Tony  16:17

That’s incred­i­ble. Well done, Mur­ray.

Cameron  16:18

He puts it all down to QAV. He said QAV made in the Iron­man he is today. So, there you go.

Tony  16:25

Well, it gave him the time to spend train­ing.

Cameron  16:27

That’s what it was. He lis­tens to the pod­cast when he’s train­ing, I believe. That gives him the moti­va­tion to keep going.

Tony  16:35

Well, he can be the Ralph Mac­chio of QAV.

Cameron  16:40

Port­fo­lio updates. Wow, gee. Well, we’re still, we’re doing okay: we’re up, the dum­my port­fo­lio is up as it was last week. Not much has changed. We’re up a cou­ple of points. Still lag­ging behind the sexy for this finan­cial year. But, you know, I think we’re still two and a half times bet­ter since incep­tion than the ASX 200. It’s going to be a strug­gle to catch up this finan­cial year unless some­thing big hap­pens.

Tony  17:13

Oh, yeah.

Cameron  17:14

We’ve got ten months.

Tony  17:16

Yeah, we’ve got plen­ty of time, but I’m not wor­ried. Again, I’m not wor­ried, it’s short term. That’s just how things have gone. We don’t own CSL, CSL has done well. It’s gonna hap­pen. It’s the revenge of, what’s that, Rudy?

Cameron  17:28

Yeah. He was plug­ging CSL and we were laugh­ing at him because it was mas­sive­ly over­val­ued from where we sit. So, this finan­cial year we’re up 1.94% CAGR, the sexy 200 is up 12.57%. By the way, I’ve been speak­ing to this new port­fo­lio, Aussie port­fo­lio plat­form, called Nosis who want us to move over to their plat­form. They don’t have CAGR, and I said, “well, I need CAGR” and they go, “okay, we’ll imple­ment CAGR,” and then they looked at Navexa and they said, “well, that’s not CAGR.” I said “what?” He goes, “no, we just did the CAGR, and that’s not CAGR. It’s not the same as our CAGR.” I was like “real­ly?” He was like, “no. CAGR should all be smoothed out. Yours isn’t smoothed out, it’s all over the place.” So, I don’t know. He’s gonna do a CAGR com­par­i­son and then we’ll have to fig­ure out who does the best CAGR.

Tony  18:25

Yeah, okay.

Cameron  18:27

We’ll have a keg­ger while we look at the CAGR. In the last one year, Tony, the dum­my port­fo­lio is up… No, is down 5.78%. And the ASX 200 is up 0.53%. So, it has­n’t been a good year for the dum­my port­fo­lio.

Tony  18:53

It has­n’t been, but it’s not ter­ri­ble. Like, it’s 5%-6% below the All Ords. And like I said, we’ve had a lot of churn and rule 1d out of a lot of things, we had the iron ore sell off end of last year — which is prob­a­bly the main rea­son for it, but any­way.

Cameron  19:09

So, in the words of Cather­ine Tate, you’re not both­ered? “Am I both­ered? Do I look both­ered to you? Does I look both­ered? I’m not both­ered.” You’re not both­ered?

Tony  19:21

No. I’d like it to be bet­ter, and it will get bet­ter, but I’m not both­ered. No.

Cameron  19:26

Well, as I said, since incep­tion, we’re doing two and a half times the sexy 200. So, that’s what mat­ters. I’m sure we will recov­er. What else do you want to talk about before we get into the Q&A, TK?

Tony  19:39

Yeah, so mak­ing peo­ple aware of the inter­est rate ris­es, that hap­pened last week. So, I think you put out some­thing to peo­ple to tell them to update their spread­sheets. But yeah, there’s been two cells that need to be updat­ed in my spread­sheet, and I guess in the Flit­man mod­el, which is the RBA rate rise which affects our IV cal­cu­la­tions and I’ve tak­en a sur­vey of the banks and the mort­gage rates are up, which affects the div­i­dend, the hur­dle rate for div­i­dends that we want. Two changes there. Just did a quick, I’m going to call it com­mod­i­ty cor­ner here, because I did a quick run through of com­modi­ties, because I’ve been check­ing them because oil is close to a sell, but it seems to be hold­ing up at the moment, but it’s only a cou­ple of bucks off a sell. I’ve been focus­ing on watch­ing Brent Oil for that. Iron ore dropped below a sell yes­ter­day, but I think today it’s just above that sell line again, so it’s back to being a buy, but it may well drop again.

Cameron  20:33

Buy, or Josephine?

Tony  20:34

Sor­ry, yeah, it won’t be a buy, it’s just not a sell. So, it’s still a Josephine, for sure. It will take a long time for iron ore to be a buy, I think.

Cameron  20:43

Every­one would have sold all their iron ore stocks when it was a sell a while back, and it’s a long way from being a buy again, so don’t get excit­ed, every­body.

Tony  20:51

Yeah. Steel is a sell. I’m hav­ing a look at nick­el and it looks like it’s no longer a Josephine. So, we have nick­el as a fudge sell based on a two year cycle, but the longer term, five year graph is still a buy. But again, it’s not real­ly a sec­ond buy line again, so it’s some­thing to watch, but it may become a buy soon.

Cameron  21:13

Are you say­ing it’s Nick­el­back?

Tony  21:14

Nick­el’s back, yeah. Nick­el­back.

Cameron  21:18

I was try­ing to think of a Nick­el­back song to sing, and I hon­est to god do not know a sin­gle Nick­el­back song. I don’t think I’ve ever heard a Nick­el­back song. All I know of Nick­el­back is it’s a punch line. That’s all I know about Nick­el­back.

Tony  21:30

It is, yeah. Most hat­ed band in the world. So, few inter­est­ing things to watch. It’s a good time to keep an eye on com­modi­ties, peo­ple. Cou­ple of oth­er things. So, JHG is back to being a buy again, this is Janus Hen­der­son group. It was a sell last week, it’s back to being a buy again. But I want­ed to talk in detail about one called Ter­ra­com, TER is the code. And it looks inter­est­ing. So, it’s been show­ing a qual­i­fied audit in our buy list for a while so we haven’t includ­ed it, but when I did a bit of a deep dive into it in the last few days — I did that because it came back onto our buy list except for the fact that it has a qual­i­fied audit, just some­thing I check from time to time — and its stock price has tak­en off in the last week, I sup­pose, since its results came out. So, when I had a look, the qual­i­fied audit was from the last year’s full results, which is when they do an audit. The cur­rent num­bers are unau­dit­ed, so that’s some­thing we have to be aware of, but the qual­i­fied audit was based on a mate­r­i­al uncer­tain­ty for going con­cern. And the ques­tion was raised because of the fact that cur­rent lia­bil­i­ties exceed­ed cur­rent assets by some $250 mil­lion, and so the audi­tors were con­cerned — as was man­age­ment — that they may have prob­lems if they did­n’t refi­nance. But in the cur­rent half, that gap has reduced from $250 mil­lion to $27 mil­lion, and the total assets exceed total lia­bil­i­ties by a wide mar­gin. So, I’m guess­ing they either refi­nanced or got their shit togeth­er in terms of financ­ing, any­way. They haven’t come out with anoth­er audit report yet, because the half year­ly results aren’t audit­ed, but it looks like it’s out of the woods. So, peo­ple might want to have a look at it. I’m tempt­ed to remove the qual­i­fied audit, and the QAV score if you do that is 0.38, and it’s a high ADT of 3.6 mil­lion. Cer­tain­ly, it’s the mar­ket think­ing it’s okay now, because the share price has turned up.

Cameron  23:28

So, that’s TER, Ter­ra­com, yeah, if peo­ple want to look at it? TER.

Tony  23:33

Yep. So, that’s pret­ty much me for the week, and I’ve got to pulled pork request from Nick on ALO, which I’ll go through now. Inter­est­ing one, thanks, Nick, for bring­ing this to our atten­tion. ALO is Allog­gio Group. Small com­pa­ny, mar­ket cap of $35 mil­lion, small ADT of $8,700 so this won’t suit a lot of peo­ple. But thanks to Nick, it needs to come to our atten­tion. So, it should have been added to the buy list before this when its results were released. So, if peo­ple are using my spread­sheet, they need to add ALO to the Man­u­al­ly Entered Data sheet because it’s a com­pa­ny which was­n’t part of that before. It’s only fair­ly new­ly list­ed. And, maybe to the Flit­man mod­el.

Cameron  24:22

It has been in the offi­cial buy list that we put out each week for a few weeks, yeah.

Tony  24:26

Okay, good.

Cameron  24:26

In fact, I added it to one of our port­fo­lios a cou­ple of weeks ago.

Tony  24:29

Okay, sor­ry. Well, my down­load did­n’t pick it up. Okay, so that’s good. Small ADT. The com­pa­ny is a man­ag­er of four-star hotels and short term rentals, and it’s based in New­cas­tle. And it has prop­er­ties under man­age­ment from Noosa down to the Great Ocean Road, so it’s span­ning a lot of hol­i­day des­ti­na­tions. Things to be aware of, I guess: the man­age­ment of high­light­ed risks in that if there’s anoth­er COVID down­turn, there’ll be affect­ed. Peo­ple can’t move around and take hol­i­days. And they are hav­ing this, I guess, well, I’ll call it nor­mal sup­ply chain issues due to COVID, but they’re prob­a­bly abnor­mal in the longer term, but they are high­light­ing these risks. I guess staff would be an issue for them as well. So, small com­pa­ny. There are some risks, but on the num­bers, real­ly attrac­tive. I’m doing my analy­sis of the price of 16 cents, and there’s no bro­ker cov­er­age for this, which is some­thing I like, because it gives us a bit of an edge that there’s no com­pe­ti­tion in there inves­ti­gat­ing the com­pa­ny. So, I can’t give a con­sen­sus fore­cast or a con­sen­sus IP for this, and there’s no div­i­dends, so it does­n’t score for yield. But it does score under Stock Doc­tor for finan­cial health: it’s strong and recov­er­ing. And recov­er­ing is one that we like, so it scores a two. The price to oper­at­ing cash flow is real­ly rea­son­able with this one, four times, so it’s great for that. We can cal­cu­late IV 1 which is only six cents, so it does­n’t score for that, and it just miss­es out on net equi­ty per share plus 30%. So, price to book plus 30%, which comes out at 14 cents per share, but the share price is 16, so it does­n’t score for that. It scores real­ly well for own­er-founder. So, direc­tors hold 34% of this com­pa­ny, which is real­ly good. And on the man­u­al­ly entered data, we only have a cou­ple of halves of data, but it is the low­er of the two PEs. Its not a new upturn, it’s been around for a lit­tle bit — although that’s kind of bor­der­line because it looks like it became a buy back in June, which is close to the end of the finan­cial year. It does have increas­ing equi­ty again, but only for two halves, but we’ll score it for that. So, just based on a few of the met­rics we look at, the qual­i­ty is actu­al­ly over 100%, 109%, because a cou­ple of the scores are get­ting twos rather than ones, and over­all, a QAV score of 0.27. So, thank you to Nick for point­ing it out. If peo­ple have a small amount to invest, they should have a look at ALO.

Cameron  26:54

Very good. Thank you, Tony. I just got one more note, to tell a rule one anec­dote. So, I got a sell alert from Stock Doc­tor this morn­ing for a stock called REG, and when I had a look at it, I noticed that it had plunged through its rule 1 sell trig­ger and hit its three-point trend­line trig­ger. I was like, “holy hell, how did I miss that?” Then I went to check it and realised I actu­al­ly did sell it a cou­ple of weeks ago when it hit its rule 1 alert. Any­way, I’d just for­got­ten to remove the three-point, because I have two alerts always in Stock Doc­tor. But here’s my point, I sold it when it hit the rule 1 and it’s fall­en anoth­er 10% since then. Peo­ple are always telling us about rule 1 sells where they turn around and go back up. I just want to point out that that isn’t always the case. Some­times rule 1 does save your bacon, but you just prob­a­bly don’t pay atten­tion to those as much. I know Glenn or some­body did an analy­sis recent­ly. I think it’s in the notes today actu­al­ly, we’ll be talk­ing about it. He might be our QAV­er­ick of the week, talk­ing about rule 1 sells. But yeah, that was one instance where I was like, “oh, thank god I sold that a few weeks ago.”

Tony  28:15

Yeah, right. Does QAV­er­ick of the week win an F14 from behind ene­my lines?

Cameron  28:21

Yeah, you have to crash it into ene­my lines and then some­how escape mirac­u­lous­ly unharmed.

Tony  28:29

Luck­i­ly, it’s ful­ly fuelled, ready to go.

Cameron  28:31

Yeah, yeah. And nobody noticed when you were run­ning across the field to get in it and tak­ing it off. No one tried to shoot you down or go “hey, hey you!” After the rest of your air­field had just been bombed, luck­i­ly that one did­n’t get bombed.

Tony  28:45

And no one thought on the oth­er side to fly it, and all heard these two mas­sive jet engines fir­ing up while it was warm­ing up.

Cameron  28:53

Com­plete­ly plau­si­ble. Don’t think too hard, it’s a Top Gun film. Alright, ques­tions of the week. First ones from Mark: “hi Cam. What cri­te­ria should we use to look at Renko charts? Still five-year month­ly?”

Tony  29:07

Yeah, it is, but I’m still play­ing around with Renko charts. In Stock Doc­tor any­way, if you look at a five-year month­ly for a com­pa­ny, it’ll give you only a few num­bers of bars because all it’s doing is tak­ing the all-time peri­od — like, the longest data it has — doing a Renko chart, and then just giv­ing you the last five years. If the last five years haven’t moved around much, you might get only one box in it. So, it does make more sense in Stock Doc­tor at least to look when you select Renko charts, it usu­al­ly defaults to give you a long time peri­od. That’s what I’ve been using to look at these stocks. I haven’t had much fid­dling around with com­modi­ties yet, but stocks. And then if you select five years it gives you just a cou­ple of box­es. It should be five-year month­ly, I haven’t worked out how to do that in Stock Doc­tor yet, but at the moment I’m using “all” which may be bet­ter.

Cameron  29:59

Okay. Thanks Mark. Dar­ryl: “I’m not sure if this has been dis­cussed recent­ly, in which case I missed it, but the RRL chart in the QAV check­er is real­ly weird. Not only is it ignor­ing the 8% rule, but it’s not tak­ing into account recent lows. Does any­one know why? I would have thought the cor­rect L2 would have been the one at 30th of April ’21, since it’s just before the buy line was breached.” I had a quick look at it, and it seemed to me that it has­n’t real­ly been a buy since it breached that sell line. But I thought I’d get your take on it for Dar­ryl.

Tony  30:40

Yeah, sure. Good ques­tion, Dar­ryl. I prob­a­bly should let Brett speak for how he’s cod­ed it, but my under­stand­ing is the cod­ing in the Bret­te­la­tor charts the buy line fol­low­ing the sell line. So, it’s the last sell line and then the buy line is drawn after that and there’s been no more sales since then. So, the chart for RRL has been on a decline for at least a year now. I think what Dar­ryl is look­ing at is the most recent. The sec­ond buy line’s been drawn by the Bret­te­la­tor, and it’s now past that sec­ond buy line, so he could make the case to then draw a sell line across the low­est point and the sec­ond low­est point, which would be kind of recent. So, you know, Brett and I’ve been going to and fro on whether that’s the right way to do things or not. Brett pro­duced some evi­dence which sug­gests using the sec­ond buy line as the buy line and then draw­ing a sell line after that cross is a bet­ter way of doing it. And I must admit, I haven’t had time to go through and con­vince myself that’s the way it is. So, we haven’t changed the Bret­te­la­tor, but cur­rent­ly, what Dar­ryl is see­ing is the buy line fol­low­ing the sell line.

Cameron  31:50

Right. But that buy line, it cross­es that buy line well below the sell line.

Tony  31:56

Cor­rect. So, it’s not a buy.

Cameron  31:57

It’s a Schro­ding­er. It’s above the buy line but below the sell line.

Tony  32:01

Yeah. And you can see from the chart that that’s prob­a­bly the right thing to do, because it’s been in decline since the mid­dle of 2020.

Cameron  32:07

Yeah, it sticks it’s head up every now and again, but then it falls even fur­ther quite rapid­ly.

Tony  32:12

Yeah. And the oth­er thing I’d just make Dar­ryl aware of — he prob­a­bly is already — is that it’s a gold stock, Reg­is Resources, and its com­mod­i­ty is cer­tain­ly not a buy.

Cameron  32:22

Hope that helps, Dar­ryl. Glenn has a ques­tion about tak­ing prof­its off the table: “fol­low­ing on from last week’s pod­cast dis­cus­sion on sell lines for stocks whose cur­rent price is far above the sell 3PTL, con­sid­er­a­tion could be giv­en to a per­cent­age decline. Tony in the past has reject­ed this approach because price may advance again after a per­cent­age drop. This is of course true, but it is also true of the num­ber one sell rule and con­di­tions of the 3PTL con­fig­u­ra­tion. We use oppor­tu­ni­ty cost log­ic for not los­ing cap­i­tal, why not, not los­ing prof­its? Back test­ing shows at about 50/50, but I’ve found that it helps with my con­fi­dence lev­els by occa­sion­al­ly bank­ing a prof­it on par­a­bol­ic price advances. Per­haps lim­it­ing its use to where prices have gone par­a­bol­ic might be con­sid­ered. Also, the ques­tion aris­es on when to buy again. We could wait for a sec­ond 3PTL buy to be crossed if and when it advances again.” What do you think about Glen­n’s analy­sis, Tony?

Tony  33:24

Yeah, I think he’s prob­a­bly sim­i­lar to me: it’s a 50/50. When­ev­er I’ve tried to do a hug line or a more recent buy line, it’s 50/50 as to whether when it cross­es you sell it whether it goes up or down, I think that’s the case. I too have thought long and hard about par­a­bol­ic charts, and I guess what we mean by those are ones which are curv­ing up very steeply and sud­den­ly. Twen­ty-twen­ty five years ago I used to take mon­ey off the table when shares did that, and noth­ing grows to the sky, so they do often have a pull­back, but then, you know, again, a lot of them keep going. They just pull back for a bit and more num­bers come out, or there’s cor­po­rate activ­i­ty or what­ev­er, and they go back up again. So, yeah, my expe­ri­ence is that even though it is hard when they come crash­ing down to our sell line, that’s still, to me, at least any­way, the way I’ve been doing it, the best way to do it. Oth­er­wise, it’s fair­ly volatile and you risk miss­ing out on that sec­ond upswing. I do take Glen­n’s point that you can always buy back into it, so that’s a pos­si­bil­i­ty. I guess where I’m at with this kind of think­ing at the moment is I’m hop­ing the Renko charts might be a, you know, a sav­iour in this kind of sit­u­a­tion, where if they have been going up strong­ly and then turn down that might be a time to look at a sell. But, you know, I plan to do a lot more research on that and prob­a­bly just test it going for­ward to see how it affects our…

Cameron  34:50

In my mind, if some­thing goes up and you sell and you take that mon­ey off the table, you’re going to rein­vest that mon­ey in some oth­er stocks, where you’re again fac­ing the issue of, “okay, these com­pa­nies may per­form, they may not per­form.” You’re putting that mon­ey back into the mar­ket, and you’re run­ning the reg­u­lar risks there. If you’ve already got it invest­ed in a com­pa­ny that fun­da­men­tals are good, should be good, should do well, you’re just mov­ing it around and putting it back into the same sit­u­a­tion.

Tony  35:25

Well, yeah, I mean, we’ve run through sce­nar­ios like that. It’s the age-old ques­tion, I’ll throw this back to Glenn: “when do you sell?” Is it when it’s gone up 30%, 40%, 50%, 100%. And inevitably, what­ev­er num­ber you take is either going to be too soon or too late. So, if you take 100%, it might start crash­ing down at 90% and then you’re gonna regret that, and if you take 20% it might kick on to 100%. I found it very hard to find the right rule to sell out when some­thing’s going up oth­er than the three-point trend­line sell. But I’m not say­ing it’s per­fect, and I think we can improve it. But yeah, I’d be inter­est­ed to know what Glen­n’s expe­ri­ence is. And you’re right, if you do sell out, if you do hap­pen to make a killing and sell out at the right time… Which is real­ly hard to do, I mean, every­one says “buy low, sell high.” So, if you set the bar too low and start sell­ing at 20% but you’re not get­ting that one that shoots the lights out and pays for all the rest. And as you say, you’re putting it into anoth­er invest­ment, and my expe­ri­ence is you’ve got a 60/40 chance of that being one that con­tin­ues to make mon­ey for you or against hav­ing to rule one it or 3PTL it. So, yeah, it’s try­ing to opti­mise that sell out at the right time that is the impor­tant thing, and I haven’t been able to do it.

Cameron  36:43

And every time you trade, you’ve got bro­ker­age and CGT and all that kind of stuff, right?

Tony  36:51

And the old say­ing from War­ren Buf­fett, “why bench Michael Jor­dan?” Because, you know, like we saw before, some­thing like Fortes­cue Met­als Group which was a good earn­er for us — I think it was a three bag­ger from mem­o­ry — there’s prob­a­bly a cou­ple of times we could have sold out because it start­ed to turn down a bit with a more recent hug­line to sell it.

Cameron  37:10

In the­o­ry, any­way. I mean, my tiny brain does­n’t under­stand math­e­mat­ics very well, but if I’ve got $100 invest­ed in stock A and let’s say I bought it at $10 and it’s gone up to $100, right, I’ve got a big prof­it in stock A, but it’s invest­ed in stock A. I sell out of stock A; I have to pay CGT on my prof­it and I’ve got bro­ker­age costs to get out. Then I take that mon­ey and I put it in five stocks, I’ve got five lots of bro­ker­age costs. After I’ve, you know, fac­tored in the CGT, I’ve got a bunch of mon­ey left over, let’s say 60 bucks left over. I put that in five stocks or six stocks, $10 each, got bro­ker­age costs for each of those, then got a 60/40 chance. So, some of those are going to do well and some are going to fail. But 60/40 for doing well, as you point­ed out a minute ago, the suc­cess of your sys­tem over the years, like most sys­tems that work, is pred­i­cat­ed on every now and again get­ting one or two or three that shoot the lights out. And if you’re tak­ing prof­it off the table too soon, you may miss that one that takes the lights out.

Cameron  38:26

Cor­rect.

Cameron  38:27

And you nev­er get that. So, you’re throw­ing the mon­ey back on the table, got the same risks, the same odds, and always pulling out just before you impreg­nate.

Tony  38:39

When you say you have the same odds, you don’t, because the the odds of 60/40 and get­ting 19.5% per annum are based on hold­ing onto the stock and wear­ing the ones that come back with a very low three-point trend line or a rule 1 and turn­ing those over. So, like I said, it’s a sys­tem and we apply it mechan­i­cal­ly, because if we don’t apply it mechan­i­cal­ly, all the emo­tions get to us and then we start sec­ond guess­ing our­selves. And we start doing things like, “oh my god, it’s up 30%, I should sell.” Then it goes up to be a three bag­ger.

Cameron  39:09

So, you nev­er get the three bag­gers that dri­ve the 19.5%. That’s the three bag­gers that you’re count­ing on, right?

Tony  39:18

Yeah. And you might have to sac­ri­fice a cou­ple of ones that go up and come back along the way.

Cameron  39:21

Yeah, yeah. And that’s like, it’s real­ly hard. It’s real­ly coun­ter­in­tu­itive. This is quan­tum mechan­ics shit right here. Like, this is dou­ble slit exper­i­ment stuff. It’s real­ly, it is, it goes against every­thing. It’s real­ly coun­ter­in­tu­itive to just watch paper prof­its dis­ap­pear in the belief that you just got­ta lose a cou­ple every now and again, but it’ll pay off long term. Until, I guess, you’ve been doing it for thir­ty years and you just know how it works. You’re trust­ing the sys­tem.

Tony  39:54

Look, you know, I’ve been through it all. When I dis­cussed it with some of the peo­ple I used to talk to about this, they’d say, “oh, sell half and keep half.” And like, okay, that’s an option, but again, you’re get­ting 1.5% bag­ger rather than a three bag­ger, and you’ve got the 20% you took off the table. So, again, over­all it’s not as opti­mal as rid­ing the moon-shot, the big one.

Tony  39:55

And the three bag­gers, how often do you think you get those in your expe­ri­ence?

Tony  40:13

Oh, it’s a good ques­tion. You know, there’s usu­al­ly always one in the port­fo­lio some­where. Prob­a­bly not at the moment in mine because, you know, I’ve been rule 1’d a lot and turned things over. But yeah, prob­a­bly always. Well, I could­n’t say always because it’s not at the moment. But yeah, last year there was Fortes­cue, and prob­a­bly things like Cham­pi­on Iron. So yeah, there’s usu­al­ly one or two in there.

Cameron  40:44

All right. I get peo­ple’s pain on this man.

Tony  40:49

Yeah, I do too.

Cameron  40:50

It’s real­ly com­plex to get your head around. You just got­ta take a cou­ple of those every now and again, take a cou­ple of punch­es to the bel­ly in order to poke some­body’s eye out. My sifu said today as we were doing some spar­ring, we were talk­ing about close grap­pling, he goes, “oh, I’ll let go of his arm and let him whack me in the chin, but I’ll get a thumb in his eye when he’s doing it. So, I’ll take a tap to the chin in order to get a thumb in his eye.” I don’t know how that’s rel­e­vant to invest­ing, but you’ve got to take a cou­ple of body shots in order to win the fight, you know. You’ve got to pre­pare to give up a cou­ple of body shots.

Tony  41:25

I’m hop­ing that, like I said, I’ll con­tin­ue to do some work on Renko charts. That might be our sav­ing… I don’t know how yet, like, whether we do three-point trend lines plus Renko charts, or whether we do Renko charts only or, or what. I did some analy­sis before we came on the show and com­pared my port­fo­lio, which is based on three-point trend lines, to Renko charts, and four are dif­fer­ences. So, you know, I have AMP in mine, Eclipse I’ve held for a long time, JBH and QBE, which are all sells accord­ing to Renko charts, but they’re buys accord­ing to 3PTLs. So, I’m not going to sell them now, I’ll con­tin­ue to hold them. But, you know, if it becomes obvi­ous after a month or two that those four stocks have under­per­formed and I should have sold them than, yeah, maybe we do some­thing with Renko charts going for­ward.

Cameron  42:14

As my sifu said you can’t con­di­tion your eyes. Does­n’t mat­ter how much you train; you can con­di­tion your eye to take a blow from a thumb.

Tony  42:23

You can wear glass­es.

Cameron  42:24

Well, then I’ll just break your glass­es and push the glass in your eye Tony.

Tony  42:28

Safe­ty glass cam, it’s plas­tic.

Cameron  42:31

Next time some­body tries mug­ging me on the street and hap­pens to be wear­ing safe­ty glass­es…

Tony  42:38

You whip out your squash gog­gles.

Cameron  42:40

That’s why I have my nun chucks tucked down my belt in the back.

Tony  42:44

Well, I would have thought the easy thing to do was take the glass­es off them.

Cameron  42:47

Or that, yeah. There was a great video, a Wing Chun video on Tik­Tok I saw a month or so ago. Some guys just prac­tice spar­ring, and they’re both wear­ing glass­es, just reg­u­lar glass­es. One hit the oth­er guy on the side of the head, the guy’s glass­es flew off, went up in the air and fell on the oth­er guy’s head. Like on his glass­es: glass­es on glass­es. It was pret­ty cool. It was an acci­dent, not say­ing it was delib­er­ate. Okay. Chris: “in the past when ideas have been float­ed that might change the QAV sys­tem, TK has men­tioned he did some regres­sion test­ing. Would he be able to pro­vide a high-lev­el overview of how he does this? Is he still using Excel? Does he keep old Excel ver­sions for each Stock Doc­tor down­load? How would he actu­al­ly go about test­ing, for exam­ple, whether adding the cash rate to the IV 2 hur­dle or adding finan­cial trend as well as health is a good idea or bad idea?”

Tony  43:38

Yes, so yes, it was Excel for a long time. I cur­rent­ly have three years of buy lists and down­loads that we’ve been run­ning since QAV start­ed, so that’s not a bad amount of data to be able to test things through, which I do reg­u­lar­ly. But pri­or to that I had not as elab­o­rate ver­sions of the down­load sheet from Stock Doc­tor. It had a lot of the key met­rics in it, like price to oper­at­ing cash flow, and some of the qual­i­ty ones, but I had about five years’ worth of data there. So, I mean, I used to mechan­i­cal­ly run iter­a­tions through those spread­sheets, which can be quite time con­sum­ing, but it was a good way to do it. Test dif­fer­ent things, often as just a one vari­ant analy­sis. So, you know, “is price to oper­at­ing cash flow ten times dif­fer­ent to five times” and see how that affect­ed the port­fo­lio con­struct­ed of those stocks. Things like the qual­i­ty side of things, how impor­tant that was as a met­ric over­all as a score. I remem­ber doing a lot of analy­sis on whether I should just — in terms of port­fo­lio con­struc­tion — whether I should just buy the big cap stocks, or buy from the top down in the buy list regard­less of how big they were and have a lot of small stocks in the port­fo­lio; which I did once before, had like forty or fifty stocks in the port­fo­lio, but quick­ly found out that when Fortes­cue Met­als went up 30% that was a much big­ger impact on the port­fo­lio than when a tid­dler went up 100%. So, got out of that. But yeah, all that kind of mod­el­ling can be done in Excel. It is fair­ly time con­sum­ing. On the oth­er hand, I also now sub­scribe to Refini­tiv, and we have ten years’ worth of mar­ket data from Refini­tiv. And we’ve had Dylan, up until recent­ly any­way, as an intern crunch­ing num­bers for me. He’s come up with some good stuff which we’ve fold­ed into QAV, or some things we haven’t fold­ed into QAV, but he was writ­ing in Python on ten years’ worth of mar­ket data run­ning sim­u­la­tions which is much eas­i­er to do when you’re using code. You can do things like Monte Car­lo sim­u­la­tions, which is to just con­tin­u­al­ly crunch dif­fer­ent start dates for stocks and folios and see how they go. But I still out of all that kind of num­ber crunch­ing, I still would rec­om­mend a process of test­ing imple­men­ta­tion. So, when you have an idea, do your analy­sis, run it over three years’ worth of spread­sheets, five years’ worth of spread­sheets — or if you have access to Refini­tiv, do it there. But then, run a paper port­fo­lio. So, give it maybe six months on paper to see if it actu­al­ly works. Because regres­sion test­ing, one of the pit­falls of regres­sion test­ing, is it may just fit at the timescale that you were using. Even ten years… If we look at the last ten years of data, it did­n’t have the GFC in it, now, in 2022. So, you know, you don’t know if it works dur­ing the GFC. So, test it on paper going for­ward. Run it then as a cham­pi­on chal­lenger mod­el. So, I’ve gone as far as tak­ing some of Dylan’s analy­sis, and one of those was on rebal­anc­ing, he was a big boost­er for rebal­anc­ing a port­fo­lio, but I ran that for a few months with the cham­pi­on chal­lenger port­fo­lio. So, I’ve devot­ed 10% of my port­fo­lio to it as a tri­al, and it did­n’t work. It was sell­ing out of things which then went on to make a lot of mon­ey. So, I got frus­trat­ed and quit. So, went all the way to there before I decid­ed not to go ahead with it. But yeah, if it does work, then change it, total­ly. So, that’s the kind of process I’ll be going through with these Renko charts, is test­ing it, run­ning a paper port­fo­lio, maybe doing a cham­pi­on chal­lenger after that if it still looks like a good thing to do, and then decid­ing to put it into the mod­el. But that could take twelve months to get there. I’m nev­er in a hur­ry unless some­thing’s real­ly obvi­ous. Like, if I’m using Renko charts and sud­den­ly go “holy shit, this is great. Much bet­ter than what we were doing,” then yeah, I’ll make a change quick­er, but it’s worth­while going slow and steady and method­i­cal­ly before mak­ing changes.

Cameron  47:36

There you go, Chris. Hope that helps. This is the last one, came in on Face­book, Tony. We were talk­ing about DDH. Reg brought up DDH, which I did look at yes­ter­day. It looked real­ly good on the buy list, but it was hav­ing a down day yes­ter­day, so I did­n’t pick it up. It was hav­ing an up day today, last I checked. But Mur­ray points out that it does­n’t yet have a sell line and was ask­ing if that mat­ters for the QAV process. Would you buy some­thing that did­n’t have a sell line? And I went back to look at ALO that we were talk­ing about ear­li­er, because I thought when I looked at ALO last time it did­n’t quite have a sell line yet, but now does. With a new­ly list­ed stock, we’ve had these cou­ple before, I can’t remem­ber what it was, one that Steven Mabb was inter­est­ed in a year or so ago. Occa­sion­al­ly, like ALO and DDH, these rel­a­tive­ly new­ly list­ed stocks hit our buy list, and quite often they haven’t been around long enough to get a prop­er sell line in place. What’s your thoughts on the impor­tance of a sell line before we can buy some­thing?

Tony  48:48

Look­ing at DDH I’d still buy it even though it does­n’t have a sell line yet. It looks like you could draw a sell line in a pinch, because there’s a low point back in June 2020 and there’s anoth­er — it’s a point rather than being a trough — on August 31. So, I would buy and, in a pinch, draw a sell line based on that. I think usu­al­ly with these stocks, it does­n’t take long before they resolve them­selves and we get a sell line because there’s anoth­er peak or trough — anoth­er trough, actu­al­ly, in this case — can be used. But yeah, I’d take the oppor­tu­ni­ty and buy it while it’s look­ing good.

Cameron  49:23

And you’ve got a rule 1 as a fail­safe in place, too.

Tony  49:28

Yeah, I’m not famil­iar with DDH, but I’m assum­ing its not a resource stock, because we also have the com­mod­i­ty under­ly­ing it as an issue but…

Cameron  49:37

DDH1 Ltd. They acquired Swick Min­ing Ser­vices in Feb­ru­ary of this year. I remem­ber those guys were on our buy list from time to time. Aver­age Dai­ly trade is 753,000, so rel­a­tive­ly big — not big enough for you, but rel­a­tive­ly big.

Tony  50:00

So, yeah, no, I’d def­i­nite­ly buy it, and I’m think­ing back to what else was new that we bought? Not Lev­isa. There was anoth­er… What was the com­pa­ny that sold bath bombs and can­dles and per­fumes and things, that was new when it first came on and we bought it? I don’t think it had a sell line.

Cameron  50:17

I think that’s Dusk. I think that’s the one I was think­ing of before that Steven Mabb was talk­ing about. DSK, yeah.

Tony  50:23

Yeah. So, I had no hes­i­ta­tion to buy that. I don’t think I bought it, but I think the dum­my port­fo­lio bought it.

Cameron  50:30

Well, hope that answers that ques­tion for you, Mur­ray. And good luck in Hawaii, Mur­ray, too.

Tony  50:37

Yeah. Well, that’s amaz­ing, to be that fit to do that.

Cameron  50:41

All right after hours, Tony…

 

 

Cameron  1:08:48

The QAV Pod­cast is a pro­duc­tion of Space­craft Pub­lish­ing Pro­pri­etary Lim­it­ed, autho­rised rep­re­sen­ta­tive of AFSL 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.