Mon, Jan 16, 2023 1:35PM • 1:14:44

Cameron  00:06

Welcome back to QAV. This is season six, for some reason. Year four, season six, episode two, and it’s our first real episode for 2023. Happy New Year, TK.

Tony  00:25

Happy New Year, Cam.

Cameron  00:28

It’s been a month since we’ve recorded an episode. How’s your month been?

Tony  00:33

Really good. Great. Been to the Cape Schanck, played a lot of golf, been up here, had Alex and Sean staying with me, had Ruddy up, had a good New Year’s Eve, watched the fireworks. Yeah, it’s been really good.

Cameron  00:48

Didn’t miss the show?

Tony  00:50

I enjoyed listening to your compilations, Cam. Thank you for that, they were great. I actually really enjoyed the last one with the interviews. It was really good to hear the quality of people that we’ve had on the show. They’re really smart people.

Cameron  01:05

Yeah. And, you know, I thought there was some really good insights and timeless insights going back there. My original idea last week was to actually get Samatino on the show to talk about his investing and get an update from him. I tried calling him and I couldn’t get through, so I started doing the edit. Then he did call me back, we had a long chat, and we’ve actually decided we’re going to do a podcast together; which you’ll love, because we’re gonna get back to Futurism and tech.

Tony  01:33

Yeah, good.

Cameron  01:33

And, you know, the whole open AI chat GPT thing. Steve’s a futurist, that’s what he does for a living. Urgh, I can’t talk about it: he’s pitching a TV show — which I’ll tell you about off air, because he probably doesn’t want it out there yet — which sounds really interesting. But anyway, yeah, I think we’ll get back to doing… Because there’s cool stuff happening in tech now for the first time since Steve Jobs died, I think. And rightly or wrongly, I think most of it is being driven in part or in whole by Elon Musk. I know you’re not a big fan of Musk, but between Tesla, open AI, Twitter, obviously, SpaceX, Starlink, Neuralink, and the boring Company — you know, I’m not sure about that one — but out of those half a dozen things, you know, when you add all of those things together, it’s an amazing portfolio of cutting edge businesses that if he can integrate them all, if he can execute on half of them and integrate them, it’s really gonna be an interesting decade. But anyway, so we’ll see what happens with that.

Tony  02:42

Well, yeah, that’s true. However, you left one off that list: Twitter.

Cameron  02:47

No, I said Twitter.

Tony  02:49

Did you? Oh sorry. I’m glad I wasn’t a Tesla shareholder in the last six-twelve months.

Cameron  02:54

Sure. But you know, things go up, things go down, maybe Tesla’s not going to be the leader of the pack that it has been. But Twitter is an amazing asset, whether you like or dislike what he’s doing with it; to have access to five hundred million people that he can then plug his businesses into? As a former bad marketer, having an audience of five hundred million people that you can just manipulate and determine what they get to see and what they don’t get to see; I mean, that’s worth $44 billion, I think, easily. So, we’ll see. Whether or not he can take that asset and do something interesting with it remains to be seen. But anyway…

Tony  03:36

And even if he can’t, he can sell it to Rupert Murdoch on the basis of the pitch you just gave.

Cameron  03:42

Like Myspace.

Tony  03:43

“Here’s Myspace.”

Cameron  03:44

Myspace 2. Dear me. All right let’s get into the show. Charlie Munger turned ninety-nine last week, so Happy Birthday Charlie. Caught up with a local QAV listener, Matthew, for a coffee this morning and Taylor came along. We were talking about Charlie and Taylor said, “yeah, he looks ninety-nine, too.” Well, he does; he looks like he’s about to fall over. He looks like The Walking Dead, but as soon as he opens his mouth you go, “oh shit.” He is not weakened at all in terms of his ability to articulate what he thinks is going on. He’s as sharp as a tack.

Tony  04:24

Yeah. And think about all the stuff he said about Bitcoin in the last couple of years and various other things; he is sharp as and spot on. Do you think if we drink Coke and eat See’s Candy peanut brittle, we can live to be a hundred as well? What is it with Charlie and Warren? Is it just because they’re rich and they get the best medical attention? Like, I just can’t work it out.

Cameron  04:44

Probably part of it, yeah.

Tony  04:45

Because they kind of defy all the conventional medical advice, don’t they?

Cameron  04:50

You know, I’ve got other friends of mine that are in their nineties that are sharp and still with it and relatively healthy. They’re not super rich but, you know, its good luck, a good diet, they’ve looked after themselves.

Tony  05:04

But that’s my point. Charlie and Warren haven’t had a good diet.

Cameron  05:07

No, no.

Tony  05:08

Warren was interviewed a little while ago, I think by one of the last people who bought one of those charity lunches with him for a million dollars or whatever it was. They brought their daughter along, and he said to the daughter who was eight years old, he said, “I eat like I’m still eight years old, so don’t change what you eat.”

Cameron  05:24

Hamburgers, fries and coke.

Tony  05:26

Hamburgers, fries, coke, candy, yeah.

Cameron  05:31

All right. Well, Happy Birthday anyway to Charlie, and may we all be as lucky as he is.

Tony  05:39

Lucky, yeah, but he’s a smart guy. I mean, if people want a New Year’s Eve resolution — and I know that’s one of the questions coming up — but go and read things that Charlie’s put out. And I don’t just mean about investing; read Poor Charlie’s Almanack, which is fantastic, read Lattice, which is fantastic. There’re biographies out about him about how he’s donated so much back to universities in particular. Not just donated the money, but he gets his hands involved and says, “look, the science lab when I was at university was shit. Here’s how you do a science lab,” and he redesigns a science lab. Just things like that. Very, very interesting guy.

Cameron  06:15

He’s really a frustrated architect.

Tony  06:18

Yeah. Well, he was a property developer, that was his first foray into investing. He has some great things to say about that. He talks about how he learned pretty quickly that, you know, if he didn’t just build a box, he could add some value and charge a higher price. If he made it nicer than the other ones that were there, put some palm trees in the front yard, all that kind of stuff, he did well. But then he got introduced to Buffett and he realised that property development was a slow burn and Buffett was getting a much better and quicker return, so he changed.

Cameron  06:47

Yeah. Well, I meant luck in terms of health, not in terms of investment, but how much of that is money or luck or genetics, I don’t know. But I think, you know, we stand a good chance the way technology’s going. I think if you can survive the next fifteen years, you’re probably going to take advantage of all of the stuff that Ray Kurzweil has been promising us for twenty-five years. And who’s that other guy I used to interview? Aubrey de Grey, all of that advanced medical technology.

Tony  07:16

He had some problems recently, too, I read. He was kicked out of his position at wherever it was called.

Cameron  07:22

The Methuselah Foundation.

Tony  07:23

Something like that, yeah.

Cameron  07:25

Well, there you go. Let’s talk about commodities, Tony. I mean, commodities have been going up and down and changing status more often than Scott Morrison and portfolios during his Prime Ministership. I think the status, according to Alex’s analysis on Monday, is we now have iron ore as still a buy, gold as still a buy; both coals, thermal and coking, are Josephine’s; crude oil is a sell; copper’s a Josephine; platinum is a buy; aluminium is a sell; zinc’s a Josephine. Tin’s a buy; magnesium is a sell; manganese is a buy; steel is a sell; LNG is a sell; nickel is a Josephine; and iron and steel scrap is a Josephine. So, there’s not a lot of buys in the whole commodity sector right now. Iron ore and gold, really, of the ones that really matter. Yeah.

Tony  08:20

Yeah. Which are two big ones for us. But yeah, no, I agree. I think commodities have had a good run and they’re probably coming off.

Cameron  08:28

Coal: I mean, if you look at the monthlies which is what we do when we’re doing these charts, obviously, coal is currently a Josephine. Rumours hit the market last week. Again, I have to thank Xi Jinping and the CCP, because Monday for the Light portfolios — Monday, last week — I bought two coal stocks, YAL and TER. I made that decision on Monday when it was a public holiday, and then Tuesday morning when the market opened, I bought them. Then a few hours later somebody in the QAV club, I think it might have been Alice, pointed out that thermal coal had just become a Josephine that day. I was like, “urgh!” By the end of the day, they were both down 5%, and I thought maybe I should just cut our losses and tell the Light subscribers, “Sorry, it became a Josephine, but knowing that I wouldn’t have bought them.” And then I thought, well, I bought them in good faith. They were a buy when I made the decision, so I’ll just stick with it. And then literally, like a day or so later, the rumour came out that China is going to start importing Australian coal again after a two-year break. The Ord shut up, and they were all in the black again. Of course, my other big mistake from a couple of months ago, SMR, that I bought when coking coal was a Josephine and somebody pointed out I shouldn’t have bought it, it’s up 50% since I made that mistake. So, you know, coal keeps saving my ass when I make these decisions. But anyway, my point was gonna be that I think it might be that by the end of this month coal will be a buy again if that is any indication, if China’s opening up. What do you think?

Tony  10:07

You’re asking me to predict where the coal price is going?

Cameron  10:09

Yeah, sure. It was actually back down today, I noticed. I’m just looking at the coal chart on Trading Economics. It was going up for the last few days, it was up to $400. Started the year at, like, $395, went up to $400 a tonne USD, back down to $394 today. So, maybe it’s easing off a bit again.

Tony  10:29

Yeah, I mean, it could just be hype. It could be a news story. There’s that. I mean, the Australian minors have been selling coal, so they’ve found other people to sell it to besides China. So, the question is, if China opens up, is that additional sales, or does Australia just go, “well, we’re full. We’re selling coal to everyone else now, and we don’t have any more to sell to China?” I don’t know, not my core competence.

Cameron  10:51

The market seemed to think it was a good thing, because all of our coal share prices spiked nicely last week. But you were saying earlier off air, was it SMR, you said? You keep buying it…

Tony  11:06

Not SMR, no. Yancoal was one of them.

Cameron  11:10

They go up and then they go back down.

Tony  11:12

Yancoal and New Hope are a couple of ones I’ve just been cycling through all the time.

Cameron  11:17

New Hope has been an absolute champion for me.

Tony  11:20

Oh, good.

Cameron  11:20

It’s sitting in my Super portfolio. I think it’s up 180% since I added it to my Super portfolio.

Tony  11:29

And Whitehaven’s like that for me — not quite 180%. But it seems like if you can get into one and get started, they’ll kick on. But if you just keep cycling through a late-stage start, it’ll just be a pain.

Cameron  11:40

I was telling you off air, I got an email from one of our Light subscribers this morning asking me about SMR. He said, “first of all, Light is great. It’s doing really well, I’m really happy with my returns.” He said, “SMR is up 50% since I bought it, should I sell it and take the profits?” I of course said, “well, look, you know, I can’t give financial advice, so I can’t tell you what you should do. But I can tell you what we will do, is follow the rules and explain that we don’t take profits because your experience is if you’re on a winner, you stick with it, because quite often they’ll continue to win. Sometimes it doesn’t work out. You know, sometimes they don’t, sometimes they do, but it’s your old thing about ‘why would you bench Michael Jordan?'”

Tony  12:21

Yeah. That is Warren Buffett’s old saying, yeah.

Cameron  12:23

You know the rule about that. The first time you say, “as Warren Buffett always says,” the second time you say, “as someone said,” the third time you say, “as I’ve always said.”

Tony  12:31

“As I’ve always said,” yeah.

Cameron  12:35

Anyway. Week by week with commodities at the moment is fairly turbulent. So, yeah, what’s good today may not be good tomorrow.

Tony  12:47

Yeah, there was an article, I think it might have been in today’s Fin, about the commodity super cycle and how over the long term they follow a normal sine graph, and we’re in the downward trend of the latest commodity super cycle. But again, it doesn’t really worry me or predict things, because, you know, I think the trend started in the last commodity super cycle about fifteen years ago. So, you know, you have plenty of ups and downs in that cycle anyway,

Cameron  13:12

is that the El Nino or the La Nina of the commodity cycle?

Tony  13:17

Yeah, no, it’s just called the commodity super cycle.

Cameron  13:19

I did the dummy portfolio report to club members this morning. The dummy portfolio since inception is up about 16.5% per annum versus the STW over the same period, which is up about 6.6% per annum. So, though not quite three times, let’s say two and a half times the STW since inception. Still tracking nicely for the financial year. We’re still lagging the STW quite considerably. We’re still up about 6.5% in the first six months of the financial year. So, that’s not too bad. STW is up 14.7%, though, so it’s had a really good run so far, this financial year. But history does what it does; it will pull back at some point, and we’ll keep going on our little steady journey upwards.

Tony  14:17

Correct, Yeah, there will be periods, especially in a six-monthly time span where we underperformed it. Yeah, we’ve been going, that dummy portfolio has been going for what, three and a half, four years now?

Cameron  14:27

In April It’ll be… No, September it’ll be four years. It was three years last September.

Tony  14:33

Okay, so just under three and a half years. I mean, it’s pretty much done what we said it would do: it’s achieved double market over that time period.

Cameron  14:42

God, what a shock.

Tony  14:43

Yeah. How often in life do you find something that gives you what it says on the cover it’ll give you.

Cameron  14:50

And, you know, I started the Light portfolios at the beginning of last year and we spent all of the capital in the first one in April last year. Or did we start it in April? I think it was fully invested in April, just as the crash happened — the Ukraine war crash, etc., etc. Even so, it’s now doing 11% up. All the portfolios as a whole are up 11% over the last year or since inception versus the STW, which is up about 4.5%. So, even the Light portfolio started at the worst possible time last year to start a portfolio as a whole is doing two and a half times the STW. So, the thing just, like, bugger me, Tony, it works.

Tony  15:45

Now that should go onto a coffee mug,

Cameron  15:47

“Bugger me, it works.” You were telling me you want me to change the text on the website, so maybe that’s what I’ll put as the headline: “Bugger me, it works.” In the last thirty days in the dummy portfolio, the superstar is SMR up 26%. In the last thirty days, LAU — another stock that I’ve had that’s been hit and miss for me over the years — Lindsay, it’s up 18% in the last thirty days. Can’t snort at that. I was telling you, I think in the one of the Light portfolios, SKT, Sky Networks, is up 85% since I added it last year. It’s another one of those stocks that I’ve said to Tony off-air I always feel dirty when I buy anything associated with Rupert Murdoch. It’s even worse than buying a coal stock.

Tony  16:38

A coal stock, I agree.

Cameron  16:40

You know, I feel dirty buying coal stocks, but I understand the rationale behind it. Buying Sky Network always feels dirty too. Up 85% takes a lot of the dirt off.

Tony  16:51

Yeah, if you can’t beat them, join them. Well, you know, you just mentioned two things there which I’m going to join together: one is Rupert Murdoch, and the other one is, you know, the front page of our website and what we should put on it. And if I go back to when we first started talking about writing books and all that kind of stuff together, I had this concept that we’re blind to things affecting us in our life; the way that areas of things which affect our life evolve to optimise the returns to the people in that industry sector, but they have a negative return on us. And one of them is financial advice, right? If you’re financially illiterate, if you’re uneducated, you’re just a ticket to people that are going to clip. They’ll charge as much as they can and provide a pipsqueak service and you’ll get underperformance, and if you do get good performance, you’re overpaying for it. So, I think that society works that way. It’s just like kind of evolutionary, right? If people can make money in an industry, they will, and that’s what Rupert Murdoch’s done. If you’re going into the newspaper game tomorrow, would you have said, “well, tits on page three and ten pages of soccer, and if we can find a soccer player with a girlfriend with big tits, they go on the front cover.” That’s going to be how journalism is going to evolve; you know, cost the lease and produce at the best return, you’d never think of that. But that’s how that industry has evolved and Rupert Murdoch’s a multi billionaire because of that, and that same evolution and dynamic is going on in financial advice, it’s going on in education, it goes on in health, all the other things which affect you and your life. And that’s why you’ve got to have your eyes open to these things. So, I hate investing in Rupert Murdoch, but that’s how the news industry has evolved and it’s successful. That’s why we always have to be vigilant in everything we do; in the media we consume and financial advice. Get financial advice from someone who’s richer than you. That’s the starting point, really, isn’t it?

Cameron  18:44

Well, there’s our TikTok and YouTube clip for the week.

Tony  18:47

So, that’s my rant, but I was thinking about it before.

Cameron  18:49

“Tits on page three.”

Tony  18:52

I wasn’t thinking so much about that, but it was more about how industries evolved. Nash who won the Nobel Prize has this idea that things find a Nash equilibrium: it’s where industries or society or groups of people generally settle, and it’s the least amount of work with the best return. That’s where newspapers have finished, unfortunately, for us, because we’re trying to consume independent media. But yeah, we should be alive to that fact.

Cameron  19:22

And yeah, I think the broader point of what you’re talking about there with how we’re blind is that, a good example is financial sector investing. It’s an entire industry that is largely designed to keep people confused and stupid.

Tony  19:42

Yeah, that’s one of the things that these industries evolved to do.

Cameron  19:46

Yeah, like there’s a whole industry that is designed to profit from people’s ignorance. The more that they can perpetuate that ignorance, the more money brokers make analysts make, the financial media makes, the bankers make, etc., etc. So, we’re doing our little bit to try and educate people, so they don’t fall for those traps. And FinTech TikTokers telling everyone to get into crypto over the last couple of years, etc., etc.

Tony  20:19

Actually, I’m looking forward to the next crypto. I mean, I think that’s when things get interesting, you know, when someone comes along and says, “hey, I’ve just made a million dollars out of investing in whatever.” Lithium. I suspect lithium is the new one, but we’ll see. Or green hydrogen, or whatever. People will get burned; we’ll keep plugging away getting double market.

Cameron  20:41

Well, we need to come up with the next crypto. I think you’re missing the big picture here, Tony.

Tony  20:45

Right. We should join the Rupert Murdoch’s of the world, the evil capitalist.

Cameron  20:49

You know, people have been telling me for thirty years I should start my own religion. Because, you know, I understand the history of religion so well. If anyone’s going to start a fake religion and manipulate people, that should be me. I should be the one doing it. I know how it all works. Part of me goes, you know, can I do an L. Ron Hubbard? Yeah, I think I could. But could I live with myself? No. I could probably do it.

Tony  21:15

That’s the difference, isn’t it.

Cameron  21:16

A sex cult. That’s what Ray and I always talk about: why don’t we have a sex cut? Like, what’s wrong with us?

Tony  21:23

I would have thought that was self-evident, but anyway.

Cameron  21:27

Let’s get back to the conversation about you and the budgie smuggler on the front page of our website. That’s gonna be our new marketing add for people: Tony in a budgie smuggler on the beach.

Tony  21:37

“Join our sex cult.”

Cameron  21:38

“You could be rich like me.” I’ll just say, “pay us $99 a month or I’ll keep sending you photos of Tony in a budgie smuggler.” Oh, speaking of commodities, Matthew who we were out to coffee with today was asking me about the buy list and what the column meant that said “Buy sell Josephine or a blank.” Let me just open up the latest buy list. Okay, so this is column J. And I said, “oh, well, that’s the commodity status column. That’s there because in the past I had jumped the gun and bought a stock without checking the commodity status, and so I integrated it into the middle of the buy list so it would jump out at me too much.” And he was like, “oh, I’ve just been buying the things that said buy on there, I thought they were buys.” So, for anyone else who does not read the title of the column you see up the top, it says “commodity status”. Next to it, column K, is commodity type. So, that’s just telling you the status of the commodity. So, obviously if something is a Josephine or if it’s a sell, we wouldn’t buy it. If it’s a buy it means, it’s clear to buy. If there’s a dash there, it means either it doesn’t have an underlying commodity like N1H, N1 Holdings, or Bell Financial Group doesn’t have a commodity that we can track. Or, in some cases, it means that it has multiple commodities like South 32, nickel, zinc, aluminium, coal, and we need to get a little bit deeper and break down the weightings of the commodities. I’m actually trying to get one of my freelancers to do all of that research for us soon, so we have done that analysis. Unfortunately, in order to do that, if Stock Doctor don’t report it — and they often don’t — you have to go into the annual report, go to the revenue, and break it all down. There’s a bit of work involved, so I’ve asked her to go and do that for us so we can throw that in there. But in the meantime, you have to do it yourself. So, yes, for the buy list, column J is the commodity status, not telling you whether or not you should buy the stock. I mean, yeah, if it’s on the buy list and the commodity’s a buy, it’s probably a safe bet. You’re probably not gonna go too wrong there. But yeah. Well, that’s it. You’re gonna do a pulled pork, I think.

Tony  24:16

I am. Yeah, I’m gonna do a pulled pork on Virgin Money UK.

Cameron  24:20

By the way, the pulled pork compilation episode I did, everyone loved.

Tony  24:25


Cameron  24:25

Yeah, I think the pulled pork is sort of the highlight of the episode for a lot of people.

Tony  24:31


Cameron  24:32

It’s your analysis, you know, the way that you analyse these companies and think it through. So, it is, it’s a winner. I was partially doing it for that reason, because I know it’s popular, and also partially doing it to see how those companies fared. And it was hit or miss, and obviously last year was a tough year in the markets. And I guess that was my takeaway from it, you know; you’re doing pulled porks on companies that look good on paper. The fundamentals are good, they’re good businesses, but being a good business doesn’t necessarily mean that you will do well in the short term. The share price will do well in the short term; over the long term it probably means it will do well. And this gets back to the question the Light subscriber sent me this morning about “should I sell SMR and redeploy those funds.” I was talking about this with Matthew over the coffee today. We’ve gone over this before; it seems good in theory — take my profits reinvest it — but you don’t know how the company’s you reinvest those funds into are gonna do. Because even though these companies look good on paper and Tony does a pulled pork on them, they don’t always do well share pricewise in the short term. So, better to keep your money invested in the thing that’s doing well.

Tony  25:35

I mean, I think it is. On balance it is. It doesn’t mean coal will keep going up, but to get our double market return, we follow a system where we don’t sell things when they’ve gone up 50%: we ride them.

Cameron  25:47

Which is counterintuitive.

Tony  25:48

It is.

Cameron  25:48

And is very different to what a lot of the guests that are value investors that we’ve had on the show do. A lot of them take their profits and reinvest — for a variety of reasons. Sometimes they’re running funds where they’ve got something built into their policies that they’ve gotta do. They mandate, but we don’t, and I think that’s one of the reasons why your results are better than most of the guests that we have on the show.

Tony  26:13

Well, I think so. But again, we’d have to test it. We’d have to run our whole portfolio over a long period of time and see whether you’re better off taking 50% profit, and then run all sorts of different scenarios of whether 50 is better than 60, or 60 is better than 40, and is 100% better. What’s our threshold.

Cameron  26:29

Good job for our new intern.

Tony  26:30

He’s got a lot to do before he gets to that. But yeah, it would be a very interesting job to test that theory. But, I mean, we can do that, or we can just go, “well, Buffett said it. It’s worked for him, it’s worked for me, I’ll probably put that to the bottom of the list.”

Cameron  26:46

Fair enough.

Tony  26:47

Maybe we can optimise it, but it works.

Cameron  26:48

VUK me, Tony, VUK me.

Tony  26:50

Jawohl. VUK, Virgin Money UK. I may have done this before, but it’s just come back onto the buy list. If I have done it, it’s quite a while ago, so it’s worth going over again. So, Virgin Money UK is a couple of banks based in obviously the UK, based in Leeds. It’s changed its name, I think it may have actually merged or acquired the Virgin Money business in the UK, but it was formerly known as CYBG. That was its name and indicator, which stood for the Clydesdale Banking Group. It also has the Yorkshire Banking Group as part of it now, and Virgin Money UK. It’s UK banks. These banks are retail banks, so they’re similar to the ones that operate in Australia. They offer mortgages and savings accounts, they have a little bit of wealth management, superannuation, investments, they offer credit cards, personal loans, etc. So, not too dissimilar to the major banks in Australia. So, we’re not talking about Goldman Sachs or your Wall Street investment banks, we’re talking about the sort of bread-and-butter building society-like banks that we have in Australia. And one of the reasons why we have this listed on the stock exchange here and it’s not just on the UK exchange, is because it used to be a division of the National Australia Bank, NAB. Quite a while ago, a CEO called Frank Cicutto went on a bit of a joyride around the world and bought up stakes and banks in America and the UK. The long story short, it ended really badly, which it always does for Australian banks investing overseas. And that, listeners, is a red flag for me. If I see one of the big four banks investing overseas, it’s never been done profitably — certainly in my investing lifetime. And for a whole variety of reasons. Partly, the banks sometimes oversee work differently in Australia, and that was the reason why NAB’s US investments did poorly. Because in the US, people refinance all the time, you don’t take out a bank loan for a long period of time and the banks over there don’t make it hard to get out of your current banking arrangements. They just flip them whenever the interest rates change in the US. So, a different market, and NAB weren’t part of that culture and they got burned badly when interest rates went down. And yeah, it’s just been a common theme for Australian banks. They don’t invest well overseas. I think the other point is, Australian banks are protected by the four pillars which stops them from being taken over by someone else. So, they’re kind of insular and they’re really not taking any sort of value proposition when they go overseas. It’s not like we’re doing banking vastly different or better than banks in the UK. They do it well, but they’re not world beaters. There’s nothing unique in the Australian market which we can take overseas. They’re not like the only banks with banking apps or internet banking sites; they’re the same as the other banks overseas. The only reason they go overseas is because they want to try and boost their growth profile in Australia, and they can’t take each other out. They’ve pretty much soaked up all the minor banks in Australia. There’s still a couple out there, but no real big ones for them to take over, so occasionally they try and go overseas, and it works out badly for them. So, long story short, NAB split off its UK operations, they became CYBG, and now they’re called Virgin Money UK, VUK. So, that’s what you’re buying if you buy this share. Onto the numbers. The share price was $3.45 when I did this analysis. It’s about that now, might be $3.46, I had a look before we started. $3.45 is actually quite cheap compared to IV 1 and IV 2, which are respectively $4.30 and $4.71. So, this is a cheap buy based on intrinsic value and based on book value as well. So, the book value for this share, the net equity per share, is $7.85. So, it’s a long way below book value for this, and obviously book plus 30. So, it’s scoring really well on those metrics. We’ll find out as I go through that the forecast earnings growth is negative and that’s probably why it’s cheap, but certainly on an asset basis it’s very cheap. This share has just gone back onto the buy list, and so it has a recent upturn. The share price of $3.45 is slightly below consensus estimates on price, so that’s scores for us. The Pr/OpCaf for this company is currently 1.45 times. So, that’s really low, you’re almost paying to buy this stock in what it generates in cash this year. So, on the valuation side of things, it’s really cheap. Stock Doctor health, it’s financial health is strong and steady, so that’s really good, too. But the analysts are forecasting negative 49% growth in earnings per share, so a big fall off and growth. I had a look at the latest results announcements, which for this company was back in November, and they were actually forecasting a margin growth in the company. So, I suspect what’s driving the analyst’s forecasts and downgrades is because of the UK economy. UK inflation is running at 10.7%, so it’s higher than what it is in Australia. And, you know, a lot of people are tipping the UK and Europe will go into a recession. So, that will be negative for the bank. So, that’s the risks, I guess, for this share. But if you’re buying it cheaply, it probably becomes a bit of a risk mitigation scenario. And I go back to our old coffee shop analogy for this one. If you’re being offered a local coffee shop, you know, just to pick some numbers out of the air, say the person that is selling it to you is offering a price of $500,000 to buy this company off them. You know that they spent a million dollars on the fit out on the venue and all that kind of stuff. So, it’s hard for the cost of them to invest in the business and build it up, but this year they made $100,000, so you can pick it up on a PE of 5. But they’re saying, “look, it’s a really tough market. If we go into recession next year, you’ll make half that.” So, even if you do, you can’t go out and buy a coffee shop and start from scratch for the price you’re being offered this coffee shop. In fact, it’s going to cost you twice as much. And even if the sales and income go down, it’s still a PE of 10, which is standard for the market, or it’s even a bit cheap for the market. So, it still stacks up as a good buy even in a worst-case scenario, I think. So, that’s my thinking on this stock. But if the UK goes into recession, the share price could go sideways or could even go down. Who knows? That’s the risk. All in all, the quality metrics on this add up to 67%, and it’s a QAV score of 0.46 which is quite high, and that’s largely driven by the Pr/OpCaf being at 1.45 times.


Cameron  1:13:56

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