QAV 541 CLUB

Cameron  00:06

Welcome to QAV, TK. This is episode 541. We’re recording Tuesday the 18th of October, 2:00 pm Brisbane time, 3:00 pm Sydney time. How’re you doing, TK?

Tony  00:21

Good, really good, thank you. How are you?

Cameron  00:24

I’m good. I’m tired. I’m sore. My body took a beating over the last few days at Kung Fu but I’m still here. Tell you what, I’m better off than Murray. Poor Murray. Murray the Ironman — Ironman Murray from WA. Murray Bruce mentioned a few weeks ago that he was going to Hawaii to run in the Ironman. He caught COVID from his daughter a couple of days before. He got there like a week early, I think, too, to climatise. Caught COVID from his daughter apparently and couldn’t run, couldn’t do the Ironman. Our condolences to Murray, that sucks. I’m sure there’s a silver lining in there somewhere.

Tony  01:10

Well, I mean, there’s plenty of triathlons around the country, so hopefully he gets a run somewhere.

Cameron  01:15

Yeah, and he got a holiday in Hawaii.

Tony  01:18

Hey, maybe we should enter next year.

Cameron  01:20

Oh, yeah?

Tony  01:21

Day before, “Oh! Done a hammy. Can’t run. I’ll be at the bar if you need me.”

Cameron  01:32

I’m like that whenever I have to go to Kung Fu and fox goes on “I don’t want to go today.” I’m like, “good. We’re not going.” Usually, we go anyway. But hey, let’s talk about the markets and the portfolio, Tony. The market? I don’t know, man, what’s going on with the market? Like, if I look at the last week, it was all in the doldrums on the 12th, the 13th, then on the 14th: boom, skyrocketed. We were excited on the 14th, and we had a great day. That was Friday. Come back on Monday, crashes again Monday. “Oh no,” the world’s horrible on Monday. Tuesday morning, wake up: boom, it’s back up again. Now we’re all excited again. It’s great. Like, what the hell? One day they’re excited, the next day everyone’s depressed. Talk about Mr Market having bipolar disorder, or whatever it is.

Tony  02:30

Yeah, not just that but, I mean, Australia always does follow the US, but it’s just like we get up in the morning and go “oh, markets up in the US. Beauty. We’ll buy some stocks.” It just doesn’t make much sense, because nothing’s changed here.

Cameron  02:43

Yeah. Or globally, nothing really has changed. I mean, everything is still “inflation, inflation, inflation,” interest rates are going up. Liz Truss fired her Treasury guy and brought in another guy who immediately overturned everything that he said he was gonna do. But apart from that, nothing really changes. Ukraine still is a shit show. China, Xi Jinping still running for his third term, still having zero COVID. But nothing really changes. It’s fascinating to sit and watch just the bipolar nature of the market. It’s up one day, crashing the next day. But from where we are, we just “yeah, whatever.”

Tony  03:30

Well, the reason for it being up today apparently was its quarterly reporting season in the US and the banks have outperformed their expectations, so the market’s jumped in the US. But again, what’s that got to do with us sitting in Sydney and Brisbane? Not much. I just think it’s a jittery time. The market likes certainty and there’s still a lot of uncertainty going on.

Cameron  03:54

Well, speaking of uncertainty, the dummy portfolio in the last thirty days, we’re up 0.21% per annum versus the ASX 200, the “Sexy 2”. It’s up 1.07% over the last thirty days. So, it’s doing better than we are. If I look at since inception — which for new folks we closed this portfolio September 2019, so, a little over three years — we are up about 16%, 15.92% per annum versus the Sexy 200 which is up 5.74%. So, what’s sixteen divided by six, Tony? 2.6?

Tony  04:45

Sound’s right.

Cameron  04:46

About 2.6 times better than the All Ord’s. That particular benchmark anyway, over the last couple of years.

Tony  04:54

By closing the portfolio in September 2019, you mean we closed it to any new capital that’s been operating since then?

Cameron  05:05

Although in theory, I did add a couple of thousand dollars in capital to it that were by accident.

Tony  05:11

I’m not sure you did, did you?

Cameron  05:12

Yeah. Well, that’s what Ruddy determined. So, what happened for listeners at home is for the first couple of years Navexa weren’t tracking our cash account. So, we get paid dividends for the stocks we own, but they weren’t showing up in Navexa as cash that we could then invest. I didn’t notice this until one day Tony goes, “well, where’s all of our dividends?” And I was like, “oh, shit, yeah.” So, we went back, and we said to them, “hey, where are our dividends?” And they were like, “oh, yeah, we’re going to implement that.” But we did some analysis, we figured out there was probably about $2,200 that we should have had of dividends that we could be investing. So, I did a manual entry of $2,211 or something, which we then invested. But then they implemented dividends and a cash account, and they did it retrospectively. I should have taken that $2,211 back out but I didn’t and just kept investing it and not realising that it doubled up until we asked Ruddy to do an audit. And he was like, “well, we’re out $2,200.” And I go, “well, would this be that?” And then I said, “should I pull it out?” And you guys both said “no, you can’t pull it out now.”

Tony  06:30

I didn’t say that. I’ve only been part of this process a little bit. I’d like to go back and check the work; I’ll talk to Ruddy.

Cameron  06:39

The conclusion that he and I came to a week or so ago is, well, that money is reinvested. I mean, if we sell stocks, we could sell some stuff and take that money back out, I guess, that $2,200 But it’s remained invested, so it’s all very confusing.

Tony  06:56

I’ll have a look and try and sort it out. You’re 100% sure Navexa retrospectively put the dividends into the cash account?

Cameron  07:03

Yeah, I mean, when they implemented the feature of the cash account, I did a sync. I followed their process; they do a sync and it will sync all of the dividends going back since the inception of the thing. So, I’m assuming all the dividends were picked up.

Tony  07:21

Okay, that sounds like they did, then.

Cameron  07:24

So, it’s a little bit of a mess. But we’ll fix that. All the numbers I just quoted probably are meaningless, who knows? No, because we still invested the money, so the money went in as capital. So, we did initially close it in September 2019, but then I inadvertently added more capital this year, I think, or last year.

Cameron  07:26

But okay, so if Navexa is doing its job properly, it should take that into account in giving our percentage returns.

Cameron  07:52

Yes. It just means you can’t look at the portfolio total value and say, “well, we started with $20,000 and now we’ve got $30,700,” because there was an extra $2,200 in there.

Tony  08:04

Gotcha.

Cameron  08:05

Yeah, but looking at the percentage numbers, it should be right. That’s just confused the hell out of everybody. Sorry about that, folks.

Tony  08:11

We should do that offline. Or edit it out or something, yep.

Cameron  08:15

So, that’s the portfolio anyway. Over the long haul, still doing good.

Tony  08:20

Because you put more money in.

Cameron  08:22

Don’t confuse me. Now you’re just screwing with people, you’re gonna confuse them again. We just said it’s fine, now you’re just…

Tony  08:31

On a percentage basis its fine.

Cameron  08:33

This financial year, the Sexy 200 is up 9.73. We’re only up 3.58. So, we are up, but not as good as the SPD 200. But as you pointed out recently, you know, we’re mostly small-cap stocks and the small cap index has not been doing as well this year as the SPDR 200.

Tony  08:55

it’s well down. But look, that aside, we’re always going to have periods of underperformance but overall, over the long term a history of outperformance.

Cameron  09:03

Yeah. So, that’s my portfolio update and the market update. Commodity updates. What is going on with the commodities, Tony? We’ve been talking about aluminium this morning offline. If I look at the Stock Doctor chart for aluminium, it looks to me like it’s got a new sell line but is still a Josephine because I can’t draw a second buy line.

Tony  09:32

Yes, this is an interesting one, because when I look at it, doing a buy line follows the sell line it’s almost like the end of July 2022. It was a buy and sell almost at the same time. So, you’ve gone one step further and you’ve looked at redrawing the new buy line after that using Aug 2022. Is that right? As an h2?

Cameron  09:59

No, I’m still using July ’22. So, sorry, for new folks out there, we’re trying to determine the state of aluminium as a commodity. We’re doing this looking in Stock Doctor. If you go to advanced charting in Stock Doctor, under folders you can find commodities, under commodities physical, the top one there is aluminium XAL_. So, we’re looking at the chart for that. I’m using a sell line with L1 April 2020, L2 September 2020.

Tony  10:35

Okay, so, sorry, just on that: I think I worked out April 2020 and May 2020 were within 8%, so I’m using L1 of May 2020.

Cameron  10:47

Well May’s not really a trough, it’s just a point. Doesn’t change things?

Cameron  10:55

No.

Cameron  10:56

So, the new L2 is September ’22. So, it’s bounced off of that. So, it’s got a new sell line, which it’s above, but I can’t draw a second buy line because if I use March ’22 as H1 and then I use July ’22 as H2, it shoots straight through that. There’s no third point where it crosses.

Tony  11:21

Yeah, so sorry. Just go back to your sell line. Where’s your L2?

Cameron  11:25

September ’22, 30 September ’22.

Tony  11:28

Okay, so go back. Why aren’t you using June 2022?

Cameron  11:33

Because it’s got a new trough after that. Don’t I redraw the sell line if there’s a new trough?

Tony  11:38

Yeah, that’s where I was getting confused. You draw it if the buy line is after the sell line, which I think it is.

Cameron  11:41

I can’t draw a buy line, a new buy line, because it was a Josephine. So, I need to draw a second buy line, right. And it needs to go above the second buy line. But to have a second buy line, I need two peaks and then it needs to cross at a third point. Why are you giving me that look?

Tony  12:07

I can’t see you; I’ve got the screen up on Stock Doctor.

Cameron  12:10

I can see you.

Tony  12:12

Yeah, okay. Yeah, look, this is such a tricky one. I think from memory, we can use a point for H2. I know the Brettelator does that for a stop if it’s going down steeply like this chart is and it kicks out to the right, even though it’s not strictly a peak. So, you can use August 2022, which makes it a buy.

Cameron  12:38

Really? You’re just going to ignore that peak? Well, no, even if I draw it through that it just goes straight through. It doesn’t cross it a third time. You know, we had this whole conversation with Brett a month ago about, for it to be a three-point trendline it has to cross the line at a third point. You’ve got H1, H2, and then it has to cross a third point. In this case it doesn’t.

Tony  13:06

I think it does, Cam. So, if you use August 2022, it’s going to the right of that line any time after that, really, isn’t it?

Cameron  13:17

Yeah, but the commodity price line is immediately above the line that you draw as soon as it crosses through H2. It doesn’t cross it a third time.

Tony  13:32

Okay.

Cameron  13:36

Let me explain how QAV works to you, Tony.

Tony  13:39

Thank you.

Cameron  13:42

Well, this is what I was confused about a month ago and I was sure you and Brett both told me it needs to cross at a third point. That’s why it’s a three-point trendline

Tony  13:51

Yeah, that sounds right. I’m just looking at looking at the lines and trying to work out why you’re saying it doesn’t cross.

Cameron  14:01

Because it’s already above it as soon as I draw the line.

Tony  14:04

You’ve got to use the peak.

Cameron  14:06

Well, even that doesn’t help. Even if I do that it’s…

Tony  14:08

It’s never going to cross a third time. If you use July or you use August 2022 as H2, the graph is to the right of that. If the graph continues upwards, it’s never going to cross the line a third time. It’s got to go almost backwards, hasn’t it, or have another peak we can us for H2?

Cameron  14:29

Have another peak, yeah. So, what do we do?

Tony  14:30

Yeah, to me it looks like it’s crossed, even though it’s only gone across twice. Unless you go back. If you go back and use May 2022 as H2 then it crosses a third time, but then it became a sell straight away, so you had to redraw the buy line. Interesting one. So, we’d redraw the buy line and we’d redraw the sell line.

Cameron  14:55

Let’s move on. You can make a captain’s call on this at some point.

Tony  14:59

That’s an interesting one. I think it’s a buy. I hate the friggin’ Bible. It’s tying me up in knots trying to be consistent.

Cameron  15:11

I know, right?

Tony  15:15

Which I know we need to do to try and code things, but we just keep getting new examples to contradict the old rules.

Cameron  15:21

Now you know how the writers of the New Testament felt. They were like, “we never thought that in two thousand years Reilly would be making a film going ‘hold on, this isn’t consistent. You just made shit up.’ Well, yeah, we knew we were making it up, we didn’t know anyone was gonna hold us to it two thousand year later.”

Tony  15:40

I’m going to take the Jesus approach: I didn’t write the Bible, I don’t read the Bible, I don’t care what the Bible says.

Cameron  15:47

What about coal, because coal is sort of a tricky one.

Tony  15:56

Which one? Thermal or coking?

Cameron  15:58

Yeah, well, that too.

Tony  16:01

Which source are you using?

Cameron  16:04

Trading Economics. By the way, speaking of Wing Chun, I was talking to a guy Wing Chun the other day who works on a mine site — a new one up in far north Queensland. I was like, “well, what kind of coal are you digging out of the ground there, Mick, is it thermal or metallurgical — or, as we in the industry call it, coking?” And he said, “it’s coking.” And I said, “oh, it’s the less evil of the coals then.” And he said yeah. Chrissy was like, “what? Isn’t all coal, coal?” He goes, “well, actually, you don’t burn coking coal. It just gets put into the steel.” I thought you used it to melt the steel.

Cameron  16:43

He said you just you grind it up and you put it into the steel, and it strengthens it, or something. So, I didn’t know that. But I just like nodded sagely, I don’t know if that’s right or not. I’m sure somebody out there will tell me if that’s right. That guy could have been taking me for a walk.

Tony  16:43

Yeah, I did too.

Tony  17:05

He’s done a Norm on you.

Cameron  17:06

Yeah, or a Cliffy. “That’s a little-known fact, there, Normy.” So, I’m looking at coal on Trading Economics. This is just thermal, I guess. Looking at one month, trying to get to a five-year chart here. So, it’s down, but it’s still a buy. But it’s probably a Josephine.

Tony  17:32

Yeah, definitely a Josephine.

Cameron  17:34

Coal’s a Josephine. Does that mean we can’t buy any coal stocks?

Tony  17:38

It does.

Cameron  17:40

I’m just trying to see what I put in the checklist that went out yesterday. I can’t remember what status I said coal was.

Tony  17:48

Thanks for pointing that out, because I think I doubled down on my coal positions last week.

Cameron  17:53

Commstatus. I did say it was a Josephine, so that’s good. It was right. Gold. I’ve got Gold USD as a sell but Gold AUD as a buy. So, Gold AUD I use kitco.com. They have it in Australian dollars.

Tony  18:16

I am using goldprice.org.

Cameron  18:19

AUD?

Tony  18:21

Yeah, it’s in AUD. I can get a graph in five-minute intervals.

Cameron  18:25

That sounds like a good use of your time.

Tony  18:29

That’s right. I could be answering questions about the Bible instead.

Cameron  18:33

Well, this is interesting. It could be a buy or maybe it’s a Josephine, actually.

Tony  18:38

It’s definitely a Josephine, it’s less than the last month close.

Cameron  18:41

Well, not on my chart. It was down, but it’s back up now.

Tony  18:48

Oh, you’re right, sorry. I was looking at the weekly.

Cameron  18:50

Yeah, I think it’s below the second buy line. I think when I looked yesterday, it was on the second buy line, but now it’s not. It’s below it.

Tony  19:03

Yes, I’ve got it just below the buy line.

Cameron  19:05

Second buy line?

Tony  19:07

Why are you saying second?

Cameron  19:09

Because it was a Josephine. If you go back to… the price slipped in July and August. It went back up in September, now we’re currently in October. But it was a Josephine, so it needs to cross the second buy line, right? So, I’m drawing a second buy line H1 July ’20, H2 April ’22. And then it’s still below that line.

Tony  19:34

Yes, I agree. Just help me out here, why is there a second buy line? Where’s the first buy line?

Cameron  19:40

Well, the first buy line would have gone back aways.

Tony  19:46

Yep, going back aways. You’re right, sorry. Probably around August 11 and March 16 something. Gotcha. Okay.

Cameron  19:53

Yep. But it’s been a Josephine, so it needs to cross the second one.

Tony  19:56

Yeah, it’s getting close.

Cameron  19:58

Okay, so I’m gonna make a note of that it’s a Josephine, not a buy. Any other commodity changes that you’re aware of? I think they’re the only two things that are changes. Iron ore it still a sell, crude oil is still a buy, copper’s a sell, platinum’s a sell, zinc’s a sell, magnesium, manganese, steel, sell, sell, sell, sell, sell. Yikes.

Tony  20:23

Looks like the commodity cycle’s ended, doesn’t it?

Cameron  20:26

Yeah, except oil. Oil is still going gangbusters, though slowing down a bit, I think.

Tony  20:32

Oh, yeah, definitely.

Cameron  20:34

Okay, the last thing I’ve got to talk about is the PE clarifications in the Bible.

Tony  20:40

Yay.

Cameron  20:43

I’m not going to waste too much time on it, but I’ve been doing some work with Chris Stratton, QAV club member, who’s been trying to code some of the manual data checks along with the rest of the checklist to automate it. And he’s doing a great job, really impressed with the work that he’s done. But in doing this work, it’s raised some questions about some arcane, unusual examples with PEs when we’re trying to do the lowest PE in the last six halves question. So, I’ve added a few bullet points to that in the Bible that people might want to go check out if you get a tricky one. For example, if there’s only one reported PE, and it was a recent one, but the current PE that is today’s PE and it’s lower than the last one, etc., etc. What do we do? How do we score it? I just got Tony to clarify a couple of those, so if you’re interested in how to score lowest PE things in some weird situations, go and have a look in the Bible. There’s a couple of new updates there.

Tony  21:48

I can guarantee no one’s gonna look at that.

Cameron  21:50

Come on, Tony. I will.

Tony  21:53

I had to put a robe on and go “blessed are the PEs. Here are the ten commandments on PEs.”

Cameron  22:02

Yeah, it’s a bit like that. I’m sorry. Hey, well, you know, you started this shit, man.

Tony  22:12

I was loosey and goosey before I had to put it all down. I was just making the rules up on the fly to suit, making money.

Cameron  22:27

Well, I’ll tell you, you know, this is what starting a religion is like.

Tony  22:30

I don’t get any tax benefits either.

Cameron  22:34

Well, not yet. But you will once we have five hundred devotees, I think you need.

Tony  22:39

Is that all?

Cameron  22:43

Well, that might be to start a political party. I think it’s still five hundred to start a religion.

Tony  22:48

Either way, tax deductible.

Cameron  22:49

Yeah, we can do both. The QAV party. What would your platform be?

Tony  22:56

Run for chancellor of the Tory party in the UK. They’ll take anyone, seriously; they had four in the last two months.

Cameron  23:05

Same with Prime Ministers, too. So, what have you got on your list of things to talk about before we do some Q&A?

Tony  23:12

I just had some stock updates to talk about. So, first cab off the rank was Qantas given its confession season. So, Qantas came out and said that the analysts were guiding their profit estimates to lowly, and that profit could be two to three times higher. And so, Qantas went up 10% last week, which was good because I hold it myself.

Cameron  23:33

Hold on, how’s it confession season? We just came out of reporting season, how is it confession season already?

Tony  23:40

Because they’re going into their AGMs, and so they use that as another chance to update the market on what’s happened in the last few months, on the start of the financial year.

Cameron  23:50

Yeah. Okay.

Tony  23:52

So, again, it’s continuous disclosure, but they do tend to happen a lot more around AGM time because they’re making public statements and they’re being asked questions. Yeah. Interestingly enough, though, like, as you know from our place, I can see all the skies over Sydney. I can’t see a plane there at the moment. Pre-COVID I would count them, there would always be eight aircrafts in the sky. You know, four on the glide path in, four taking off. I can see none out there at the moment. So, Qantas reckons they’re back up to 100% domestic capacity and 70% overseas capacity. They must be flying from Alice Springs, because they are not flying from Sydney. I’m calling bullshit on that.

Cameron  24:32

And they’re charging a wounded bull. I was telling you off air, I went to buy tickets to fly Chrissy and Fox and I down to Melbourne the other day, and it was insane. I was like “screw this. I can’t afford this. Like what, am I sitting on a golden seat and being spooned caviar?” It’s ridiculous.

Tony  24:56

Yeah, it is. We flew to Melbourne a little while ago and it was expensive, incredibly expensive. Yeah.

Cameron  25:02

Crazy.

Tony  25:03

So, I think that’s probably the more pertinent thing for Qantas, is they’re just making money hand over fist on margin rather than volume at the moment.

Cameron  25:11

Yeah, well, look, they’ve had a couple of rough years, the airlines. I don’t begrudge them an opportunity to try and make some money, but I mean, I’m not paying that kind of money to fly. It’s ridiculous. Unless it’s an emergency.

Tony  25:23

So, that means the Melbourne dinner is off, does it?

Cameron  25:26

Ah, no, you don’t get out of it that easy, TK.

Tony  25:32

It’s just me and the QAV subscribers down there dishing the dirt on Cameron Reilly.

Cameron  25:38

Well, I said, you know, they just want you to be there. But as I suggested, maybe we could do it down at Cape Schanck, so you don’t need to drive to Melbourne.

Tony  25:46

Yeah, cool.

Cameron  25:47

So, Melbourne listeners, email me and let me know if you’d like to go down and have dinner with Tony at Cape Schanck.

Tony  25:55

Or even lunch.

Cameron  25:56

 Or lunch, yeah.

Tony  25:57

Then you can drive back.

Cameron  25:59

Okay. Or they could stay overnight and play some golf.

Tony  26:02

Yeah. All options.

Tony  26:05

What else? Apollo Tourism?

Tony  26:07

Apollo Tourism, yeah. So, they’ve jumped again as well. So, there was an AFR article a couple of days ago about a company that they own, I think half of, called Camplify, which is like an Airbnb for RVs and caravans. Anyway, Camplify’s just taken over a company in Germany as part of its expansion into Europe. The analysts love Camplify, it’s the growth option in this sector, and now it’s expanding worldwide they’re loving it even more. And Apollo owns half, so it’s a happy camper at the moment.

Tony  26:09

Yeah, we’ve always liked ATL. They haven’t been good to us when we bought them for the portfolio, but we’ve always liked them as a company.

Tony  26:59

Yeah, well, we took them off the buy list because they had a qualified order during COVID, but that seems to have worked out well. Actually, I’ve got Ruddy going through the qualified audits for the last couple of years to see if they’re still working for us, because I’ve read this question mark about COVID and qualified audits. For a lot of companies, auditors were saying, “well, you know, COVID is pretty bad, and you shut down, you gotta continue to operate as a going concern.” But then the companies got splashed with cash and they all survived, so they’ve all, you know, the share prices have risen quite well. Which made me wonder whether we should continue with qualified audits. But Ruddy tells me there still were two or three companies that went broke or got taken over. So, it’s still a good red flag indicator, I think. I think with COVID it’s a bit different. Anyway, I’m waiting for Ruddy to finish that analysis so I can go through it. So, ATL doing well. Doing well, ATL. And the last thing I wanted to talk about was Howard Marks. I’m not really a fan of Howard, but anyway, I do know he’s made a lot of money out of being a deep value investor, but basically being a vulture fund operator. So, you know, he buys the most when the markets at its “blood on the streets” type level. I did see an article saying that he’s going to be in Australia soon doing what’s been called “fireside chats” with analysts and potential investors, because he’s raising new funds. So, that’s probably an indication that he at least sees a silver lining coming up in the markets, anyway. So, that’s it for stocks in the news and people we’ve talked about in the news, and I just wanted to then do a pulled pork on a company called Silk Logistics.

Cameron  28:40

I bought Silk Logistics yesterday, good.

Tony  28:43

Ah, okay.

Cameron  28:44

I hope you give them a good pulled pork. Don’t put the kibosh on them for me.

Tony  28:49

I’m going to do a good pulled pork on Silk Logistics. I picked them because I think they’ve just come onto the buy list recently.

Cameron  28:56

Yeah, and they’re a relatively new float. They’ve only been around a year or two, I think.

Tony  29:01

Yeah, looks like they floated in the middle of last year. So, we don’t have a whole heap of data for them. So, recent listing, you’re right. History of Silk is they’re an amalgamation of various different trucking companies. So, first of all, it’s a logistics company and they label themselves a port logistics company and a freight company. So, I think they manage the import/export logistics and then get it to your destination somewhere in Australia. But they have emerged as an amalgamation of Doolan’s Haulage, Bunker Freight, WA Freight Lines, Kagan Logistics and Hoffman transport. So, all those companies joined, and then eighteen months ago — or middle of last year — they had an IPO and they have acquired one or two companies since then; one’s called Rock Transport. So, you may have seen those brands on trucks in the past, they’re all rebranded now as Silk. That’s the company. The numbers score quite well, only a small cap stock though; their ADT is $41,000, so this won’t suit everyone, but may suit some. The market cap is $176 million, and I’m using a share price of $2.20, which is less than the consensus share price estimate for this company. Financial health in Stock Doctor is satisfactory and recovering, and we love the recovering ones so scores one for satisfactory and two for recovering. Really good price to operating cash flow, Pr/OpCaf of 3.83 times, so that’s why it’s scoring well for us. The price is above IV1, less than IV2, but not half of IV2 so it gets a score of one there, and it’s also above our debt equity per share plus 30%. So, it’s pricey on some of those metrics, but not on the operating cash flow one which is one we focus on. It’s also got forecast growth of 67%, so that’s pretty heavy stuff. But given that we’re not paying much for the shares, if it doesn’t come out at that kind of level, we’re probably not going to retrace too much, but anyway. It does score well on that growth over PE matric; we have a hurdle of 1.5 and this is scoring 4.67, so very good. And paying a decent yield of 3.86%, less than the bank mortgage rates so we’re not scoring it for that. But again, it’s a company which is confident enough to pay at a decent yield but is also forecasting tremendous growth. So, we talked about one last week, a company that was in the sweet spot of both yield and growth, and this is another one of those. And just like last week, the directors in this company are holding a large shareholding. So, directors hold 28% of the company, and although I don’t recognise their names, looking at their bios they’ve had a long and experienced career in logistics, so you’d have to think they know what they’re doing. In terms of manually entered data, even though we only have two halves to report on this the current PE is the lowest, so it scores there. It’s a recent upturn, so scores there. It’s consistently increasing equity, again only for two halves, but it’s still going up. So, all in all, this company scores well on quality. It actually gets a score of 106%, which sounds a bit strange because 100 should be the max, but a lot of the scores were giving it are twos rather than ones, things like directors’ holdings and a recovering financial health. It gets a QAV score of 0.28 which makes it fairly high on the buy list. I just wanted to highlight a couple of risks, though, for logistics companies. Not that I have great experience in them, but certainly had a little bit with the Shell fleet, and of course if the oil price keeps rising that will be a big cost impost to them, which will hurt them. They may have the price of oil hedged though; I didn’t do a deeper dive to look at that. But that’s a risk. And of course, if COVID returns we saw what happened to the international freight markets when there were COVID problems and things were just jammed up. So, a couple of risks there. But all in all, I think it scores well and looks good, so take a look.

Cameron  33:15

We have a Q&A jingle?

Cameron  33:15

Thank you, TK. Share price is up since I bought them yesterday. So, well, this this episode hasn’t gone out yet, but you know, after you do the pulled pork on it who knows what will happen. Tony says it’s a good one, everyone dumps it. Just seems to be what happens. All right, time for some Q&A. Insert Q&A jingle here.

Cameron  33:48

Not yet, but we should have one. This one’s from Steven: “hi Cameron. I’ve looked back on some old newsletters and have noticed that Tony has always been invested in WAM,” not the George Michael band but, Wilson Asset Management. Although I know Tony’s totally invested in George Michaels. You’re a big Andrew Ridgeley fan, though, I seem to recall. You’re always like “uh, George Michael, poser. Andrew Ridgeley, he was the real magic in WHAM.”

Cameron  34:16

He did nothing, Andrew Ridgeley, he literally did nothing. Didn’t sing, didn’t play instruments, didn’t write songs. He was just there to look cute. Okay. “Tony has always been invested in WAM, even after the five-year monthly trend was broken at the start of the year. Is Tony following a core and satellite portfolio where a big portion of his portfolio is in passive investments such as WAM and the satellite part of the portfolio is invested in QAV stocks that outperform? If Tony is happy to share, I’m interested to know why he has held WAM even though it broke the five-year monthly trend, and what portion of his portfolio is made up of WAM. It also seems that WAMs long-term overall performance since 1999 isn’t that great at 87% gain compared to Tony’s overall portfolio performance of 19% per annum. Kind regards, Steven.”

Tony  34:16

Quiet achiever.

Tony  35:10

Yeah, so Steven, this is just a historical legacy. First of all, I don’t own any WAM shares, and I could probably take it out of the disclosure page because it doesn’t make a difference. In fact, I think I would have less than $2,000 of my portfolio in WAM. My portfolio is 99.999 recurring percent invested in QAV type stocks, not in WAM. Look, I guess it’s a soft spot for me. I’ve been a WAM shareholder soon after it listed and follow the story, and people have listened to me talk about going along to the early investor presentations when there was just a handful of people with Jeff Wilson. And I’ve always liked Jeff’s take on investing, he’s always been a good shooter in the market. His process is value investing. He adds one more step, which is to look for a catalyst before he invests in a stock. So, a reason why he thinks the stock will go up, not just regression to the mean. So, I’ve always found that fascinating. But then his style is to go and talk to hundreds and hundreds of company management participants every year, and so he gets an insight into what the catalysts could be. And I don’t do that, so it was an interesting take on value investing to follow him. In terms of performance, I agree that the capital performance on WAM has been terrible over the years. But it’s not always about capital performance for WAM. They kind of pivoted, maybe ten years ago, and became a high dividend payer. So, they’ve tried to position themselves more now as being a reliable yield stock for retirees or anybody who needs a reliable income. And from memory, they’re yielding something like about 6 or 7%, and that grossed up for franking credits, is quite attractive. So, it’s more like an index fund from that point of view, in that they’re paying a solid steady yield. For a long time, they also issued options. So, Jeff’s a very savvy operator, he knows as the fund manager he’s paid based not only on performance, but on the amount of money under investment. So, he’s now of late become a predator in the listed investment company space, and he’s been acquiring funds and merging with funds to put more funds under his management, and therefore line his pockets. You know, can’t blame him for that, but you should be aware of it. But up until maybe the last ten years, he was continuously raising money to increase the money invested in WAM by issuing options. And so, he had the right to buy more shares in the company and the option was usually issued at the start of the year and would expire at the end of the year and would have a strike price which is maybe 5 or 10% above. Usually is was about what the dividend yield was above the share price. And so, and it was tradable, so he listed them. So, you could, if you wanted to, take a second dividend by selling your options into the market, or you could wait and see if they’re in the money and then exercise them and put more funds into WAM, but make a profit on doing that. So, there was a couple of different ways that as a shareholder of WAM we made money. It’s different today, it’s completely about the dividends. But yes, Stephen, not a QAV stock. I hold them to get their comms and to go along to their events, which now are a lot different to what they were originally. You used to be able to ask questions of Jeff; you still can now, but there’s about a thousand hands in the air when you go along to their annual roadshow so it’s a lot harder and a lot less personal. But yeah, I still hold them out of nostalgia, and COVID permitting, I’ll still go along to their AGM and see what they have to say. One more thing I should say too, sorry. Two other reasons why I like keeping WAM in the loop, so to speak, in terms of getting their comms, was Jeff would also… If you looked at where his cash position lay – so, he was someone who would sell stocks and not buy them again if he thought the market was going to go down. So, as Jeff built cash it was a reasonably reliable indicator to say that he thought the market was going to depress, and then he would redeploy when he thought we were at the bottom. So, I wouldn’t say that that was always correct, and I wouldn’t say that I used it myself, but it’s one of those things you file away in the back of your mind. You know, like all the stories you read in the Fin Review, they’re there if you do need to make a call, I guess, that you’ve got someone who’s a professional out there in the market doing something in that direction. And just going back, you know, before QAV, before podcasts, people like Jeff and his regular communications and Roger Montgomery, they were like my QAV club, right? They were just people who were there, they were value investors, they were staying the course, they would say good things or interesting things that would be a good sounding board for my own decisions and when you’re doing it by yourself, that’s an important role they were playing. So, I guess because of all those things I still hold WAM in my portfolio, but not much.

Cameron  40:11

Sentimental.

Tony  40:12

Sentimental, that’s right.

Cameron  40:15

Speaking of meeting with CEOs, did you want to mention your CEO lunch?

Tony  40:20

It wasn’t a lunch; it was just a coffee catch up. Yeah. Alex organised with the managing director of Soul Pattinson’s, which was one of the stocks that someone had a question on and it’s almost on the buy list, I think it’s got a QAV score of about 0.08 at the moment. So, it may creep on. But it was great. Todd Barlow the chaps name is, and he was another person who was a great sounding board and answered all my questions, and we had a great discussion about what they’re doing, what the markets are doing. And, you know, interesting discussion around the coal market, because that’s a large part of my portfolio now and it’s a large part of other’s portfolios, I guess. So, he’s kindly invited to come on the show and repeat the performance and that’ll be happening at some stage late November, we’ll get him on. He’s quite a busy person, of course. But yeah, I really, really enjoyed my time with him. It was a great story that we’ll hear about when we talk to Todd, but just a different approach, again, and Todd can explain it better. But they came out of the chemists’ chains, Soul Pattinsons, which eventually had some other investments and so was set up as a fund that other people could invest in. But basically, it’s only ever three or four investments which have grown into large ones over time; TPG being one of them, New Hope Coal being one of them. I think, maybe API, the retail Priceline chain may be one of them. Anyway, but they only ever had three or four. And so, therefore, even though it was a listed investment company it didn’t attract institutional investors in LICs because it wasn’t operating like an index fund. It has achieved above index performance over a long period of time, so it’s been well managed. They’ve obviously copped a bit of flack from the ESG brigade about their coal holdings, and so they spun off New Hope — although they still retain ownership, a large ownership stake in New Hope, but not direct control of it. And then they merged with Milton, which was a large index-like LIC. So, there’s a few different things going on there at the moment, and they’re also devoting time to try and find replacements to those large stocks like your TPGs and New Hope Coals that they hope can replicate that long term growth story. So, just great to pick the brains with someone who’s operating a company like that. Very interesting. And I guess, too, if people have any questions, send them through. We’ll happily put them to Todd in a month’s time.

Cameron  42:40

Yeah. That’s very good. All right. Moving right along. Josh. So, Josh emailed and asked if you have any advice on how to find a good financial advisor. I said to Josh, look, the only thing I would suggest is find a rich one.

Tony  43:00

And then they stop being financial advisers.

Cameron  43:02

Exactly. Don’t take any financial advice from somebody who’s not rich, but how you find a rich one, good luck. But do you have any suggestions on how to find a Financial Advisor, Tony?

Tony  43:12

I don’t. I mean, I’ve always gone via my accountant. So, for a long time, that was Price Waterhouse and ANZ private bank had a service. I go along and listen to them, and they throw up ideas, but I generally make my own mind up, which Josh needs to do as well. Other than that, just a couple of things on financial advisors. You’re right about getting advice from — what’s the Warren Buffett saying? People who drive to work on Wall Street in a Rolls Royce are taking financial advice from people who go to Wall Street on the subway, and that seems wrong. So, yeah, I’d be careful about making sure the person who is giving advice a) has some experience, and b) has had some financial success themselves, and I don’t really know how to do that. Maybe just ask them some questions or get them to drive to your house and see what kind of car they turn up in, I guess. So, first of all, I think accountants are very good in this space rather than financial advisors, and accountants tend to have to have a higher qualification than a financial adviser. So, you know, you may pay more for an accountant to give you financial advice, but I’ve always struck up a good relationship with an accountant. When they’re doing my tax returns and stuff, they’re the ones who then say, “oh, by the way, did you know about XY and Z that was available to you? You might want to think about structuring differently or claiming a deduction you weren’t necessarily claiming.” So, that’s how I’ve done it over the years. Obviously, recommendations from friends would be important. And again, if listeners out there have recommendations on a good financial advisor, please pass them through. I’m sure the financial advisor wouldn’t mind, and I think listeners like Josh would benefit from it. My last comment would be to try and match the age of the financial advisor to yourself. So, the first good accountant I came across was before really getting into the stock market, although I had a few stocks, but had an investment property. He gave a lot of good advice around that, negatively gearing and advertising different costs, etc., etc. But he was an older guy and soon left the industry after about five years, so I didn’t have the benefit of establishing a long-term relationship with him. And like I said before, I don’t know if I’d take someone straight out of financial advisory school. Even though they’ll stick around for a long time, they probably haven’t seen enough to give you really good advice. So, my other advice would be to try and match ages, at least relatively, with the person you’re getting advice from, so you can grow old with them and not have to chop and change and find another one in five years’ time if that person retires. So, they’re my only comments, but I’d start with your local accountant, or with the account you’re using now.

Cameron  45:52

I know that we’ve got some QAV club members that are financial advisors.

Tony  45:56

Well, there you go.

Cameron  45:56

And, you know for a commission, we will recommend them.

Tony  46:00

We could do the QAV Thunderdome.

Cameron  46:05

Oh, speaking of which, I watched Mad Max 2 the other day. I know this should be in after-hours but watched it on the big TV. You know, it’s been a few years since I’ve seen Mad Max 2. Holds up, bloody good. Bloody good. Like, just fills me with joy, watching Mad Max 2. It’s just one of those intrinsically joyful exercises. Still my favourite performance is the Feral Kid, Emil Ginty, or Flinty, or whatever the name was.

Tony  46:39

Really?

Cameron  46:40

Yeah, the Feral Kid is so great. He’s so feral. It’s just such a great performance, this little animal kid. When Max gives him the little music box, and just the excitement like a monkey, the excitement in his face and whatever, just great. And Bruce Spencer as the Gyro Captain.

Tony  47:00

Yeah, he was great.

Cameron  47:00

Just, you know, they’re all great.

Tony  47:02

They are. Arty Whitely, Mike Preston, the Warrior Woman. What’s her name again?

Cameron  47:08

The model? Yeah, she gets a few arrows in her when they’re trying to make the big getaway. Yeah, it’s just all great. And Wes. I mean, you know, Wes is just great. His eyes. Anyway, so great. Just so much, so much joy. No, but seriously, getting back to financial advisors. If you have a good one or you are a good one, you know, I think whilst I’m being slightly facetious by saying “find a rich one”, find one that understands QAV would be the next best thing. Like, somebody who’s on board with QAV, understands, you know, your sort of mantras around investing, would be good. We should have, you know, we should have some QAV friendly financial advisors on standby. I’m surprised we don’t get this question more often, actually, “do you know any good financial advisors?”

Tony  47:55

I think we did once before because someone had to go and get financial advisors sign off before doing something. It might have been one of our Bondi listeners. Anyway.

Cameron  48:05

Samuel: “I am planning to be away for two weeks out of reach of the internet and unable to trade. TK did cover that topic some time ago saying in case he’s not there for a long period of time, he left instructions to move the money to LICs like AFIC and others. Just wondering if he would do the same if he was away from the internet for a two-week period of time.”

Tony  48:25

I saw this question and I’m struggling to think where that has ever applied. I think I’ve always been… If I’ve gone camping or something, it’s been for a week, and I’ve taken the risk. And I think I probably would for two weeks as well.

Cameron  48:40

Wait, wait, wait, wait, you’ve gone camping?

Tony  48:43

I used to do a lot of bush walking and camping. Yeah.

Cameron  48:47

Staying at the Hilton isn’t camping, you know?

Tony  48:51

Jenny’s not a fan, so we stopped it after we got married. But yeah, I used to love cross country skiing…

Cameron  48:57

Wait, so you’ve been married for how many years?

Tony  49:02

Twenty four.

Cameron  49:04

When did you start your QAV investing?

Tony  49:06

A couple of years before that.

Cameron  49:08

Right. So, you haven’t been caving in twenty-five years?

Tony  49:11

True. There you go. That’s what I said, I struggle to think of a time when I’ve been away from the internet for a long period of time, so I can’t really answer it from experience. It’s a good question, though.

Cameron  49:22

In theory, if you were going to Mars for two weeks…

Tony  49:26

Well, okay, so it’d probably be case by case. Like, you know, you’ve got all of the transaction costs and capital gains tax if you decide to sell out of your positions and put it into an LIC or an ETF. So, I’d be taking that into account. I don’t know, I might be tempted to do it for some of the ones that were at a loss or didn’t have capital gains tax issues, but I’d probably just take the risk. But it’s a risk because you know, the market could drop 20% in two weeks. But the odds of that happening, it’s happened like once or twice in twenty or thirty years. But it is a risk. Chances are if the market dropped 20%, even if you’re off the grid and don’t have the internet, someone’s gonna walk past and go, “shit. You see Wall Street last night?”

Cameron  50:13

Yeah, but if you’re off the net, you can’t do anything about it. You know, maybe we need a QAV babysitting service. We’ll babysit, or not us, but somebody in the community who knows what they’re doing could say, “yeah, we’ll babysit your portfolio for you. Just give me give me all of your logins…

Tony  50:31

Financial power of authority.

Cameron  50:32

“Sign this waiver, and we’ll make all your decisions for you.”

Tony  50:38

Good, that’s a good question. But not one I had to face myself so I can’t give you my experience. Sorry, Sam.

Cameron  50:44

Yeah, that’s tricky. I don’t know. Like, I don’t know where he’s going where he’s going to be off the internet for two weeks. No mobile reception, even?

Tony  50:54

Buy a satellite phone. Or rig a satellite phone. Yeah, maybe he’s going to Antarctica, but I think ships would still have Wi-Fi? I don’t know. Look, it’s a good question. I mean, I’ve been laid up in hospital beds, but that’s usually only for about two or three days after surgery, then you’re back home.

Cameron  51:10

That was when you did your transition?

Tony  51:15

From growth investor to value investor. I cut the bubble off.

Cameron  51:21

You had to have something chopped off.

Tony  51:25

Took the bolts off.

Cameron  51:29

Well, sorry, Samuel. It’s a tricky one.

Tony  51:32

Yeah, good question, though.

Cameron  51:34

I mean, in theory if you did have a financial adviser, somebody you trusted, you could give them power of attorney or a lawyer or somebody like that. But then they’re not going to know how to run QAV. You could just say, “look, Cameron will email you if you need to sell something.”

Tony  51:49

Can’t get email.

Cameron  51:49

No, no, I email the lawyer.

Tony  51:51

Oh, right. Yeah.

Cameron  51:52

You leave it with the lawyer and then I contact your lawyer and say you should sell this, buy that.

Tony  51:57

Yeah. Could do that.

Cameron  51:58

For a fee, Samuel.

Tony  52:00

We could send carrier pigeons out to wherever Sam’s going. Smoke signals.

Cameron  52:06

Couple of tin cans and a really long piece of string. Sorry, Samuel, if anyone has any ideas for Sam, email me and let me know or jump on Facebook and let him know, he’s in the Facebook group.

Tony  52:17

Well, two weeks is a tricky question. Like, if it was six months I would probably go to ETFs and LICs. But for two weeks, I’m not sure it’s worth the incurrence of all the costs on the off chance that the market drops 20%

Cameron  52:28

Go somewhere else on your holiday, Samuel. I am going camping in a couple of weeks to a place where I don’t think there’ll be any internet, but its only for a few days over the weekend. All right. Well, that’s the main part of the show. Now we’re in the after hours, Tony.

Tony  52:43

Which is really the main part of the show.

Cameron  52:45

It is the main part of the show. We do all that just to get after hours.

Tony  52:48

Correct, yeah.

Cameron  52:49

So, I watched Mad Max 2…

Cameron  1:11:48

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