Transcript QAV #546

QAV 546 CLUB

Sun, Nov 27, 2022 1:45PM • 1:05:10

Cameron  00:06

Wel­come back to QAV. This is episode 546. We’re record­ing this Tues­day the 22nd of Novem­ber 2022 at 1:42pm Bris­bane time, 2:42pm Syd­ney time. You’re back in Syd­ney, Tony?

Tony  00:27

I am.

Cameron  00:27

How was the dri­ve up from Cape Schanck to Syd­ney, Tony?

Tony  00:33

Yeah, it was fine.

Cameron  00:34

You got to do it in the South African accent now. We’re going to do the whole Richie Benaud, Tony what­ev­er his name was…

Tony  00:40

Greig.

Cameron  00:40

Tony Greig. You’re Tony Greig.

Tony  00:42

I’ll just take my keys on the wick­et here and tell you what I said.

Cameron  00:45

Oh, very good, Tony, how’s things in Syd­ney today, Tony?

Tony  00:49

That’s Bill Lawry, isn’t it?

Cameron  00:51

I don’t know.

Tony  00:52

You’re the Twelfth Man. I think I’ve got the bone jack­et on today. He went to the clos­et and there was the white, the off white, the bone, the cream.

Cameron  01:07

Wow, the Twelfth Man. That’s tak­en me back to the 80s.

Tony  01:11

Oh yeah. Bil­ly Birm­ing­ham, that was a great series. The Pak­istani open­ing bats­man was, “I don’t give a shit.”

Cameron  01:18

You could­n’t do that these days. You could not do that these days. How are you, TK?

Tony  01:23

I’m good. Yeah, dri­ve up from Cape Schanck was good, long, but broke it up with Rud­dy in Wag­ga. Played a bit of golf and then head­ed back here. He’s got me off the booze, Cam, that’s the big news.

Cameron  01:35

So, he’s got you off the booze?

Tony  01:37

Yeah. So, he’s off the booze and I can see some health ben­e­fits in him already. So, I’ve been off for three weeks now as well.

Cameron  01:43

Tay­lor told me that Rud­dy told him that he was off the booze, and I was like, “they were just at the races down in Mel­bourne. I don’t think they were off the booze at the races.”

Tony  01:53

I was­n’t but he was.

Cameron  01:55

He was off the booze at the races. Why? What do you two when you’re off the booze? I can’t imag­ine you and Rud­dy… like, what do you have to talk about if you’re off the booze? Like what are you… What does that look like? Are you sip­ping tea and watch­ing Down­ton Abbey togeth­er? What?

Tony  02:12

It’s still pret­ty sim­i­lar, but it was fun­ny. So, I was in Wag­ga for two nights, and on the sec­ond night, around five o’clock, we played golf, we caught up on some work we had to do, and we looked to each oth­er and went “oh this is unusu­al. We’d usu­al­ly have a beer in our hands by now.”

Cameron  02:32

Oh, yeah.

Tony  02:34

Rud­dy had already cooked din­ner and we just watched some Net­flix.

Cameron  02:38

That’s good. So, how long have you off it for? Do you have a plan?

Tony  02:42

Well, I don’t know. Well, Rud­dy says his doc­tor is telling him it takes three months to have an effect, so I’m gonna call it a soft tar­get of three months. I don’t know if I’ll get that far, because it’s com­ing into Christ­mas and New Year’s.

Cameron  02:56

Wow. Yeah, there’re entire, like, whiskey dis­til­leries that are gonna go broke.

Tony  03:02

Yeah, that’s right. Sell your shares in Lark whiskey.

Cameron  03:08

I actu­al­ly had anoth­er glass of that bot­tle that you gave me for my birth­day. By the way, if you’re not drink­ing and you’ve got any­thing left in that bot­tle you bought, you can send that to me. It’s fine. Just send me all of your booze cup­board. Just put it all in a box, send it to me and I’ll look after it for you.

Tony  03:23

Yeah, “get a box”. I’ll get the semi-trail­er for you.

Cameron  03:28

Yeah. Okay, well, just the whiskey. I had anoth­er glass as I was cel­e­brat­ing the oth­er night, the end of the Cae­sar series. So, I thought that was a fit­ting occa­sion to have a cig­ar and a glass of that spe­cial whiskey. So, for peo­ple who don’t know, I do a pod­cast on ancient Rome. I’ve been doing it for nine years, it’s our nine-year anniver­sary. We just fin­ished Nero. Last episode we’ve record­ed will come out in anoth­er cou­ple of weeks. Yeah, nine years Ray and I’ve been work­ing on the Cae­sar series, every week for nine years talk­ing about all the Julio-Clau­di­ans. So, that’s fin­ished. We’ve wrapped it up and it’s kind of bit­ter­sweet to, you know, fin­ish up a series like that. It was sort of a big deal for us. But yeah, so any­way, had a glass of that scotch.

Cameron  03:37

What’s next? You’re not going to stop, are you?

Cameron  03:55

Yeah. I’m try­ing to scale back the amount of work. You have no idea how much work I’ve been doing for the last nine years. Well, we’re still doing the Cold War series, we’re still doing the Renais­sance series, we’re still doing the bull­shit fil­ter series, but we’re try­ing to just scale back the amount of work so I can put more effort into QAV and get some of our life back, too. But hav­ing to write ten thou­sand words of notes every week for one of these shows that I’m doing is…

Tony  04:46

Not for QAV. Where’s the oth­er nine thou­sand, nine hun­dred and nine­ty words?

Cameron  04:51

This shows my easy show. You take the load on this one, I take the load on all the rest of my shows. So, scal­ing it back.

Tony  04:57

Is that ten thou­sand words for you and ten thou­sand words for Ray?

Cameron  05:00

No, that’s my words. He has one-page, dou­ble lined notes, you know, writ­ten with big spaces in between them. No, any­way, so yeah, I had a glass of scotch.

Tony  05:13

I guess that’s con­grat­u­la­tions, isn’t it then? It’s a bit of a tri­umph. It’s been a long, good series, long great series.

Cameron  05:19

It feels bit­ter­sweet. It was a great series.

Tony  05:24

Are you two now pro con­sole, are you? You’re across the Rubi­con, go back into Rome, this is where you reap all of for your rewards.

Cameron  05:31

Yeah, well, that was the thing about it. It nev­er real­ly was, I guess, as suc­cess­ful in terms of its reach or its size as I would have hoped. So, it’s a lit­tle bit bit­ter­sweet to fin­ish it. But we had a good time. Any­way, peo­ple don’t care about that, they want us to talk about the fact that oil is a sell, now, Tony.

Tony  05:48

It is.

Cameron  05:49

That threw a span­ner in my week. I noticed, though, that when I was post­ing our dis­clo­sure stuff this morn­ing, WDS is still list­ed is one of your stocks. You haven’t sold WDS?

Tony  06:01

No, no. And it’s, I think we’ve talked about Wood­side before, I think it’s more of a nat­ur­al gas play than an oil com­pa­ny.

Cameron  06:09

It is, but LNG is a Josephine. So, LNG is a Josephine, oil is a sell…

Tony  06:16

Well, we don’t sell on Josephine’s, and I don’t know what the split is. Seventy/thirty, some­thing like that?

Cameron  06:21

Sixty/forty I think.

Tony  06:22

I think it’s more. I had a look too.

Cameron  06:24

Okay.

Tony  06:25

But no, I’m not going to sell on a Josephine.

Cameron  06:27

Well, I did. Wish I’d asked you that before I sold it. I was like, “am I gonna hold it just because LNG is a Josephine?” A Josephine is a slip­pery slope. I know we don’t sell on a Josephine. But any­how, okay, so you’re hold­ing on to it. Any­thing else you had to get rid of?

Tony  06:42

Yeah, I had shares in Viva Ener­gy, which is def­i­nite­ly an oil com­pa­ny — or retail­er, refin­er. So, I sold them.

Cameron  06:44

VEA?

Tony  06:50

VEA, the old Shell com­pa­ny.

Cameron  06:53

Oh, real­ly?

Tony  06:54

I get to wipe my hands twice of the com­pa­ny in twen­ty years.

Cameron  06:58

I was sur­prised I did­n’t have more oil stocks, because I have had STO, I’ve owned a lot of things, but I must have got­ten rid of them. Must have rule oned or 3PTL’d them. Any­way, so that’s oil for the moment. We’ll see what hap­pens with oil mov­ing for­wards. I also noticed this inter­est­ing arti­cle in the Fin about iron ore: “Stop Doom scrolling,” it said, iron ore has plen­ty of rea­sons to keep ris­ing.” This was by Peter Kerr, resources reporter. “The good news for Aus­tralian iron ore min­ers is that Spring will be over for anoth­er year in just ten days. The sea­son of rebirth and new blooms has often been the sea­son of exis­ten­tial dread for Aus­tralian iron ore min­ers over the past decade, as Chi­nese con­struc­tion tends to slow down ahead of the North­ern win­ter. Fortes­cue had a near death expe­ri­ence in Sep­tem­ber 2012 when a sud­den slump in iron ore prices left it strug­gling to ser­vice debt and forced it to launch a fire sale of assets and slash staff num­bers.” Maybe that’s the prob­lem with Twit­ter and Face­book; maybe it’s the iron ore slump. “It was Sep­tem­ber last year when the iron ore price slumped by 38% in just twen­ty days.” Ah, we remem­ber it well. Don’t we remem­ber that well?

Tony  08:13

We do.

Cameron  08:14

So, he’s basi­cal­ly say­ing that there is, his­tor­i­cal­ly, a cor­re­la­tion between Spring and iron ore prices col­laps­ing. I was inter­est­ed in your thoughts on this. Have you seen that trend before? Are you expect­ing iron ore prices to spike again?

Tony  08:30

I’ve got no opin­ion, Cam, no pre­dic­tion abil­i­ty. It’s not my area of exper­tise.

Cameron  08:35

That’s bor­ing, come on.

Tony  08:36

Look, it makes sense. But again, it’s a pre­dic­tion. I would think, giv­en the fact that a lot of Chi­na’s in COVID lock­down, that’s more impor­tant than the sea­son. So, I think that’s why oil is com­ing off and prob­a­bly why iron ore is in a sim­i­lar posi­tion. No, I’ll just wait until the cards are dealt and then play them as they’re dealt, rather than try­ing to guess what’s com­ing out next.

Cameron  09:00

You’re so pre­dictable and bor­ing, Kynas­ton. Any thoughts on this arti­cle, anoth­er Fin Review arti­cle: “These ten shares would have made you 888% plus in a decade.” Is that good? 888% in a decade?

Tony  09:19

It’s okay. Yeah, no, it’s good. Ten times is bet­ter.

Cameron  09:25

“Investors who leave tech expo­sure to over­seas bours­es are miss­ing out. An analy­sis of the top-per­form­ing stocks in the S&P/ASX 100 over the past 10 years shows that while home-grown IT com­pa­nies might have been late to the tech par­ty, they have caught up with a bang.  Four of the top five and five of the top 10 per­form­ers are in the IT space. They are Pro Medicus, Altium, Wisetech Glob­al, Xero and Tech­nol­o­gy One. All are soft­ware com­pa­nies. All are high­ly focused spe­cial­ists in pro­vid­ing soft­ware and ser­vices to a spe­cif­ic indus­try or prod­uct group. The top 10 also reflect the impor­tance of the decar­bon­i­sa­tion the­mat­ic – par­tic­u­lar­ly around elec­tric vehi­cles and the cur­rent pre­ferred pow­er source in the form of the lithi­um-ion bat­tery.  The 10 best-per­form­ing stocks in the cur­rent S&P/ASX 100 over the last 10 years (ranked in order) are: Pil­bara Min­er­als; Pro Medicus; Altium; Wisetech Glob­al; Xero; Aris­to­crat Leisure;” I know they were on our buy list once, I think, a long time ago. At least, we talked about them on an ear­ly show. “The a2 Milk Com­pa­ny; Allkem; Fish­er & Paykel Health­care; and Tech­nol­o­gy One. A2 Milk and Wisetech Glob­al have been list­ed for less than 10 years but still made the top 10.” Now, most of these com­pa­nies have nev­er appeared on our buy list that I can remem­ber, apart from maybe Aris­to­crat. Pil­bara, I don’t real­ly remem­ber them being on, they may have been on at some point. A2 milk; I think we’ve talked about them, but they may have been on briefly once, A2M. Any­way, what do you think about this analy­sis? These are the top ten stocks, none of them are sort of on our radar. Is there any­thing we can learn from this?

Tony  11:02

I think, first of all, it’s hind­sight bias. So, this guy is pick­ing a ten-year peri­od where tech stocks and high PE stocks have done well, and we’ve spo­ken about this end­less­ly over the last three or four years. I haven’t been able to find a way of pick­ing the good ones from the bad ones and the suc­cess­ful ones from the unsuc­cess­ful ones along the way. So, it’s just not my core com­pe­tence. Invest­ing in the­mat­ics is not my thing, I think it’s hard to do. And on top of all that, they’ve all come back quite a bit. So, I’m not sure what his end date was for this, whether it was the end of the cal­en­dar year or what, but if you look at Altium, I think it dropped down again yes­ter­day. I was read­ing some­thing in the paper about it hav­ing some more prob­lems.

Cameron  11:42

Accord­ing to his arti­cle, it’s had a share price increase of 3,002%. So, can prob­a­bly afford to come back a lit­tle bit.

Tony  11:49

Yeah, I mean, short of just using three-point trend lines to trade high PE stocks, I can’t think of a way to invest in it.

Cameron  11:56

So, the peri­od he looked at was ten years to Novem­ber 1, 2022.

Tony  12:00

So, it would have done bet­ter if he got out ear­li­er in the year. Look, it’s impres­sive, I’m not gonna belit­tle it, but it’s not how I invest. And ten years ago, if you had asked me to invest in these stocks, there’s no way I would have picked them from oth­er tech stocks or high PE stocks, which haven’t been as suc­cess­ful. So, I’m guess­ing ten years ago, even if I had put togeth­er a port­fo­lio of high PE stocks or tech stocks, or what­ev­er the theme was for the stocks, that there’d be some duds in there as well and you would­n’t be get­ting the kind of return that you do from stand­ing here and look­ing back.

Cameron  12:30

And look­ing at the top ten per­form­ing stocks. If you could pick, accu­rate­ly, the top ten stocks, you would have done this well.

Tony  12:38

Yeah, exact­ly. So, much bet­ter invest­ing in the TARDIS and going back ten years and buy­ing these stocks.

Cameron  12:44

I’d love a TARDIS. What are we doing? What’s the human race doing we don’t have a TARDIS? Yeah. So, you made the real­ly good point that you don’t have a mod­el for fig­ur­ing out which high tech stocks are going to do well, and which ones aren’t. It’s not that you’re intrin­si­cal­ly fun­da­men­tal­ly against the idea of high-tech stocks, you just don’t have a mod­el for fig­ur­ing out which ones are gonna sur­vive and which ones are gonna go bel­ly up. There’s been plen­ty that have lit­er­al­ly gone bel­ly up in the last cou­ple of years.

Tony  13:11

I noticed that the buy now, pay lat­er stocks aren’t in this list, but if you had writ­ten the arti­cle a year ago: “if you’d bought Zip Co ten years ago,” I don’t know if it was list­ed ten years ago, but “if you’d done that, look how much you would have made.” So, yeah. And if you think about lithi­um min­ers, I mean, there’s prob­a­bly oth­er ones out there which haven’t done as well. So, if you had ten years ago just bought lithi­um min­ers… Pil­bara met­als is the one that has shot the lights out, but what hap­pened to the rest of them? Some of them will have gone broke.

Cameron  13:41

Pil­bara Min­er­als has had a 17,000% increase over the peri­od. It went from $0.03 to $5.31. Alkem is the oth­er lithi­um min­er in that list, it’s gone up by near­ly 1,000%. So, not as good as 17,000, but not not bad either I imag­ine. Over ten years, what’s that?

Tony  14:00

But ten years ago, at three cents a share, what was your invest­ment the­sis for buy­ing Pil­bara min­er­als? If it was even called that back then.

Cameron  14:11

Yeah, well, you would have been think­ing lithi­um, isn’t that some­thing they used to give peo­ple that were suf­fer­ing from anx­i­ety? There’s got­ta be a lot of anx­i­ety in the world.

Tony  14:22

Maybe you’re a Nir­vana fan and you’re gone, “great. There’s going to be anoth­er Lithi­um record. We bet­ter buy some lithi­um stocks.”

Cameron  14:28

For bipo­lar dis­or­der and major depres­sion. I thought it was some­thing that peo­ple with schiz­o­phre­nia some­times take, too.

Tony  14:35

Yeah, this is going back to 2012, first of Novem­ber. I’m not sure, was the first Tes­la on the road by then? I don’t think so.

Cameron  14:45

Maybe.

Tony  14:45

So, would you even have been think­ing about bat­tery oper­at­ed elec­tric vehi­cles back then?

Cameron  14:49

Not vehi­cles nec­es­sar­i­ly, but we’ve had lithi­um bat­ter­ies for a long time. Recharge­able bat­ter­ies are all lithi­um, aren’t they?

Tony  14:56

Yeah, they are, but they were using exist­ing resources. No one was going out open­ing up new mines to ser­vice Nokia or Sam­sung or what­ev­er.

Cameron  15:06

Well, this arti­cle says lithi­um min­ers were on their knees less than two years ago. Look at the ten year chart for PBM.

Tony  15:15

I don’t think it goes back that far.

Cameron  15:17

Ten years, real­ly? Yes. Oh, let’s look: “we do not have any price data for PBM.” What?

Tony  15:25

It’s delist­ed.

Cameron  15:28

Well, it was real­ly good until it delist­ed.

Tony  15:32

Okay, try PLS.

Cameron  15:35

PLS, that’s a new code, hey?

Tony  15:38

No, I think it’s always been called that. Yeah, it does go back to 2012. No, I accept that. And it’s been fair­ly par­a­bol­ic except for the last cou­ple of years, where it’s retraced and then went up again.

Cameron  15:49

Okay, cool. So, noth­ing we can take away from that arti­cle. Okay.

Tony  15:54

Well, yeah, just don’t be swayed by those kinds of arti­cles. It’s just hack jour­nal­ism in the finan­cial press. Well, he may as well have said “if you’d bought Apple, Ama­zon and Tes­la when they were first list­ed, you’d now be a bil­lion­aire.” Yeah, you’re right. You’re also very late to tell me that.

Cameron  16:20

Tell me what’s going to be suc­cess­ful in the next ten years, and then we can have a con­ver­sa­tion.

Cameron  16:24

The only oth­er arti­cle I read this week was Rear Win­dows’ “FTX’s Alame­da bought out Fred Schebesta for $300,000.” Now, Fred Schebesta is an old friend of mine from the old dot­com days, and now he’s a friend of Tay­lor’s. Tay­lor has been hang­ing out with him when he goes down to Syd­ney. Fred’s your local dot­com mil­lion­aire, co-found­ed Find­er, but he also had a cryp­to busi­ness that he sold and he’s the only per­son to have made mon­ey out of run­ning a cryp­to com­pa­ny. But there was this one quote in the arti­cle that tick­led me. “Speak­ing of whiplash, Kor­da­Men­tha’s tele­con­fer­ence with FTX Aus­tralia direc­tor Jamie Kennedy came but a month after he spoke at a Bloomberg pan­el on the next fron­tier for cryp­to in Aus­tralia. Did any­one sug­gest then that the next fron­tier was the Cen­tre­link cue? Inter­est­ing­ly, Kennedy’s bio for the event not­ed the FTX Aus­tralia Coun­try Man­ag­er, quote, ‘helped to over­see the imple­men­ta­tion of the CHESS replace­ment project,’ end quote, at the ASX,” which we found out this week has been put on hold. I think they’ve dumped $250 mil­lion into it or some­thing and it’s not work­ing, so they’ve killed it.

Tony  16:24

Yeah.

Tony  17:40

Yeah. And that was the blockchain project that all the oth­er stock exchanges around the world we’re look­ing at to see if I’ve got­ta work or not.

Cameron  17:48

You and I worked in the tech indus­try long enough to know that…

Tony  17:53

You don’t feel on edge.

Cameron  17:54

Yeah, you don’t want to be the per­son on the bleed­ing edge with this stuff. I mean, if you pull it off..

Tony  18:01

Don’t go first.

Cameron  18:01

Yeah. When Ray and I talk about Alexan­der the Great and how he used to throw him­self into extreme dan­ger­ous sit­u­a­tions in bat­tles, it was like sui­cide. He would throw him­self in. And I’ve always fig­ured that he fig­ured it was a win-win sce­nario; if he pulled it off and won the bat­tle, he’s a god­damn leg­end that peo­ple will be talk­ing about for­ev­er. If he throws him­self into it and gets killed, he gets to go to Ely­si­um, as, you know, a great, brave Greek gen­er­al, and he’ll be immor­talised in poems. So, it was a win-win sit­u­a­tion. There’s no los­ing if you’re Alexan­der the Great in that sit­u­a­tion. On the oth­er hand, when you’re try­ing to do a bleed­ing edge tech project, if you pull it off, you’re a super­star. But most of the time, it does­n’t work out that way.

Tony  18:54

And what’s the upside for the ASX to be a super­star in the tech world? It’s not their core busi­ness. What ben­e­fit do they get from it? Just a huge sup­port and main­te­nance bill.

Cameron  19:02

Yeah, well, maybe there were cost sav­ing ben­e­fits, I don’t know, things that they can do tech-wise. New ser­vices they could have run on it. I don’t know. But any­way, there you go. Port­fo­lio update. Now, we have spo­ken in recent weeks about bench­marks in Navexa and the port­fo­lio, and you said “I don’t think it’s show­ing us the total return,” and we did con­firm that STW is a total return index. But one of our — I don’t even think he’s a club mem­ber, I think he’s just one of the free lis­ten­ers or a light sub­scriber — point­ed out that the Navexa chart was, in fact, only show­ing us the cap­i­tal return for STW. They had a sep­a­rate chart that you could drill down into that would show you the total return for STW, it just was­n’t the one that they show you on the front page. So, I emailed Navare at Navexa and they fixed it. So, thank you to the per­son that point­ed this out, I think it was some­body called Alex. Thank you to Alex if you’re lis­ten­ing to this, for point­ing that out. We have it fixed now. So, now the port­fo­lio update is a lit­tle bit less bro­ken, but still kind of weird. If I look at it in Navexa now, the dum­my port­fo­lio, it says we’re run­ning about 15% per annum CAGR since incep­tion ver­sus the STW total return run­ning at about 7% over the same time­frame. So, we’re doing twice as good instead of fif­teen times as good. We knew we were good, but we did­n’t think we were that good. How­ev­er, if you go and look at the embed­ded ver­sion of the dum­my port­fo­lio on our web­site page, it says we’re doing about a point bet­ter than it says we’re doing when I look at their web­site. It says we’re doing like 15.6 or 15.7% per annum, not 14.5%. So, I’ve emailed Navare again today say­ing, “why am I get­ting two dif­fer­ent results on this? Am I doing some­thing wrong? Am I look­ing at some­thing wrong?” Any­way, as of right now, it says we’re at 15.02% per annum ver­sus 7.33% for the STW. So, that makes way more sense. We’re doing twice as good over the long haul, which is kind of what we aim for. So, Holy shit, it works. Look at that.

Tony  21:21

I’m glad you sort­ed that one out, thank you. I could­n’t make heads or tails of it. And yeah, we’re doing twice the mar­ket, which is pret­ty much what we should be doing.

Cameron  21:29

So, thank you again to Alex for solv­ing that. The QAV brains trust comes through yet again. What have you got to talk about, TK?

Tony  21:40

Yeah, just a fol­low on from the deep dive and pulled pork on Self­wealth last week. One of our lis­ten­ers emailed and said that he has reached out to Self­wealth about how safe his cash deposits were, and they came back with quite a good answer, I thought, to say that they use ANZ, and any cash deposits are held on trust with ANZ. And so, I think that gives me a lev­el of com­fort that would mean I would­n’t hes­i­tate to put — well, I would still think about it, but I would­n’t nec­es­sar­i­ly not put mon­ey in with Self­wealth.

Cameron  22:14

Of course, the reply came in the form of a video mes­sage, and it was the CEO of Self­wealth snort­ing coke on a yacht some­where in the Bahamas. Kid­ding. Satire.

Tony  22:28

I think it’s fair to clean that one up for peo­ple who are either invest­ing in Self­wealth or who use Self­wealth. Two points, I think, still are out­stand­ing for me; one is whether you get the gov­ern­ment guar­an­tee for deposits with Self­wealth. So, just a quick recap for peo­ple, if you put up to a cer­tain amount, which I think is $200,000 in a bank in Aus­tralia, the gov­ern­ment will guar­an­tee that deposit. So, if there’s ever a run on the banks, your deposits are safe, and gov­ern­ment guar­an­teed. Of course, you pay for that, because the banks them­selves have to pay the gov­ern­ment insur­ance pre­mi­um.

Cameron  23:03

Only $200,000? Like, if you put $198,000 or $202,00, you’re not cov­ered? It’s only for $200,000?

Tony  23:10

No, it’s up to $200,000

Cameron  23:12

Oh, up to $200,000. So what hap­pens if you put in a mil­lion?

Tony  23:15

You could still lose the sec­ond $800,000.

Cameron  23:19

Real­ly, it’s not all guar­an­teed? I thought it was all guar­an­teed?

Tony  23:21

I don’t think so. I mean, it’s been a while since I looked at it, but my mem­o­ry is that it’s up to $200,000.

Cameron  23:27

And the rest of it they’re just like, “meh, sor­ry.”

Tony  23:29

Cor­rect.

Cameron  23:29

You know, “safe as banks”

Tony  23:32

Yeah, no.

Cameron  23:33

Real­ly? Oh.

Tony  23:34

I mean, the first thing to note is I don’t think there’ll ever be a run on Aus­tralian banks which would bank­rupt them, because they’re very well run, very well reg­u­lat­ed and have large cap­i­tal reserves. But yeah, dur­ing the GFC, the gov­ern­ment stepped in and said we just want to calm every­thing down, and we’re gonna guar­an­tee up to — I think it’s $200,000. I should check that and come back to you on that, but it was $200,00; or it was a guar­an­tee up to a cer­tain amount, but I’ll check whether it’s 200k or not. That’s the first thing. So, my ques­tion to Self­wealth would be, if I deposit with you and it goes to ANZ, am I guar­an­teed if there’s a run on Self­wealth? That’s the first ques­tion. My point is, it may not be as com­plete­ly safe as putting it in the bank. It’ll be admin­is­tra­tive­ly hard­er to deal with, because you’ve got to trans­fer mon­ey across between accounts if you want to trade on Self­wealth, but that might be an issue for you. And sec­ond­ly, file it away and watch it for the future, but I’d just be care­ful if Self­wealth ever came out and changed the sit­u­a­tion. And I’m not say­ing they will or that, you know, that could hap­pen, but a red flag for me would be if Self­weath changed their bank­ing rela­tion­ship. Say, for exam­ple, they swapped to minor bank or build­ing soci­ety or some­thing like that, for their bank­ing rela­tion­ship

Tony  24:46

So, just to fol­low up on Self­wealth. I think it looks fine. Does­n’t take away from the fact they’ve got three years of run­way ahead before they run out of cash, and they can start turn­ing a prof­it. So, that’s all still ahead of him, so we’ll see how that goes. So, that’s Self­wealth. Last thing I want to do was a pulled pork, and this week my pulled pork is on South 32, S32.

Cameron  24:46

Or a cryp­to fund. They’ll put all your mon­ey in a cryp­to fund, it’ll be fine. Yeah, it’ll be fine, don’t wor­ry about it.

Cameron  25:16

I own South 32, Tony, don’t put the kibosh on it just yet.

Tony  25:21

But what’s it worth?

Cameron  25:22

I don’t know?

Tony  25:24

What’s it worth to you for me to lose the notes on South32?

Cameron  25:32

Yeah, we need to have a pulled pork index.

Tony  25:36

Com­mit­tee? “Has­n’t been signed off by the pulled pork risk com­mit­tee.”

Cameron  25:45

While you’re doing that, I’m just going to mute my micro­phone and go sell all my South32 shares.

Tony  25:51

Yeah, sure. Well, I’ll let you do that. The rea­son for doing South32 is a) it’s a large stock, and b) I noticed recent­ly it’s back on the buy list and it’s above its sec­ond buy line, so it’s able to be bought. South 32, for peo­ple who don’t know, spun out of the BHP sev­en years ago and was rather noto­ri­ous­ly at the time known as the “bad BHP”. BHP pro­mot­ed itself as the good. Part of their port­fo­lio was going to remain with BHP, the iron ore in par­tic­u­lar, and they were going to clean up their port­fo­lio of min­ing assets because they’d got­ten too big and com­plex. They were going to roll up all the oth­er mines and put them into a spin off called South 32, which was quick­ly called the “bad BHP”. But it has­n’t been too bad. South 32 is main­ly an alu­mi­na and alu­mini­um busi­ness, prob­a­bly about half their mines and smelters are in those two busi­ness­es. But they also have cop­per mines, which is a buy at the moment on the com­mod­i­ty charts, man­ganese which is a sell, zinc which is a sell, met coal which is a Josephine, and lead and nick­el which I haven’t looked up. So, you know, some­thing like 40% comes in those small­er met­als, so they could still have issues with com­modi­ties. But cer­tain­ly, alu­mini­um is strong at the moment. They’ve changed what they ini­tial­ly list­ed over the years. They’ve been try­ing to become a bet­ter cor­po­rate play­er, in their eyes any­way, and they’ve got­ten out of ther­mal coal, and they’ve got­ten into things like hydro pow­ered alu­mini­um smelters. Their strat­e­gy is to tran­si­tion away from car­bon and make them­selves a bet­ter cor­po­rate play­er in terms of cli­mate change. That’s a good thing. But you know, I just want­ed to flag the fact that I real­ly don’t think it makes you a bet­ter cor­po­rate play­er if you divest your­self of ther­mal coal if it’s still being bought by some­one else and oper­at­ed by some­one else. I mean, it makes no dif­fer­ence to the plan­et in that cir­cum­stance. If you want­ed to get ticks in my book for being good on cli­mate change, you bury the coal and plant trees above it. And South 32 did­n’t do that, they just divest­ed their coal; as oth­er min­ing com­pa­nies have done in try­ing to clean up their act, but it does­n’t help the plan­et because they just divest the mines some­where else. Any­way, that’s my lit­tle rant on cor­po­rate green­wash­ing. Going through the num­bers, the ADT is large for this stock. It’s $80 mil­lion bucks, so it’s gonna suit, I would think, all of our lis­ten­ers. Large mar­ket cap stock: $17 bil­lion. It’s a recent sec­ond buy line cross as I said. A cou­ple of oth­er things; it’s fair­ly share­hold­er friend­ly at the moment. They’ve had an ongo­ing buy­back for a long time to use up the oper­at­ing cash which has been thrown off by this com­pa­ny. They’re pay­ing a high div­i­dend, which is cur­rent­ly at an 8.5% yield, so that’s very good. And this is one of the stocks that I come to at cer­tain points in the cycle which I like from a val­ue per­spec­tive, and we’ll see there’s a fair bit of val­ue in this one. But it’s one of those stocks where the PE is low­er than the yield, which is an inter­est­ing sit­u­a­tion that min­ing com­pa­nies in par­tic­u­lar can find them­selves at cer­tain times in their lives, and I quite liked that crossover when the PE falls below the yield. The num­bers: I’m using a share price of $391, which is less than the con­sen­sus tar­get, less than IV 1 and IV2, and also less than book plus 30%. So, on all those met­rics it scores for us. Finan­cial health is strong and steady; this is a com­pa­ny with lots of cash and low debt, so it’s finan­cial­ly very strong. For any­one who’s inter­est­ed, the ROE on this com­pa­ny’s 27.4%, and of more inter­est to us, the Pr/OpCaf is four times. So, you’re buy­ing a very large com­pa­ny and only four times the cash it’s throw­ing off. PE is 4.8, again, which is very low, which is also the low­est in the last three years, and so it scores on that basis for us. I guess where the num­bers start to become a bit murky, and this is prob­a­bly why we’re buy­ing it cheap­ly, is the fore­cast earn­ings per share is to drop 45% next year. So, straight­away it scores a neg­a­tive one on our growth over PE hur­dle. And this is cer­tain­ly the risk in this stock. How­ev­er, at these kinds of prices, I think that risk is well and tru­ly baked into the price. There are oth­er risks, though; as I said, near­ly 40% of the com­pa­ny is invest­ing in com­modi­ties or oper­at­ing mines that have com­modi­ties, which are Josephine out­right sells, so that could be a prob­lem for them. This com­pa­ny is still devel­op­ing all of its mines and doing drilling, so the cap­i­tal require­ments are rea­son­ably large. And then there’s the usu­al min­ing indus­try risks at the moment of COVID break­ing out again and shut­ting down mines, ris­ing sup­ply chain costs, as well as increas­ing wages and dif­fi­cul­ty find­ing work­ers. So, I should also point out, this is an inter­na­tion­al com­pa­ny. It has a lot of oper­a­tions in South Africa and in South Amer­i­ca, par­tic­u­lar­ly in Brazil. So, there could be risks in those oper­at­ing in dif­fer­ent coun­tries. I don’t think those coun­tries nec­es­sar­i­ly pose sov­er­eign risks, although they could, but it’s more like­ly that if there are risks to sup­ply chains and find­ing staff that they could have dif­fer­ent per­spec­tives on them com­pared to how it goes in Aus­tralia. So, that could be bet­ter or worse com­pared to Aus­tralia. Last thing I should say is no founder/owner because it spun out of BHP, and scores well from the Stock Doc­tor point of view. It’s a bor­der­line star stock and a star income stock, which get half a point each, so total of one in our check­list for a total qual­i­ty score of 88% and a QAV score of 0.22. So, quite healthy on those met­rics, not high up the buy list, but cer­tain­ly worth look­ing at if you’re after a large ADT stock.

Cameron  1:04:24

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.