Welcome to QAV. Very special episode, this week. We have with us a guest we’ve wanted to get on the show ever since we started the show; for, I guess, about four years ago now. Our guest is the cofounder and managing director of the company that produces Stock Doctor, the tool that I use every day, Tony uses every day, all of our listeners use every day: Tim Lincoln. Today, very successful company, I think about forty finance professionals in the business, thousands of subscribers to Stock Doctor who use it like we use it to manage their investing. Over $800 million, I read, invested in their managed funds. And in 2021, as if COVID wasn’t bad enough, Tim was appointed as a director of the Carlton Football Club. But apparently, I can’t blame him for their performance last year. Going to have a better year, this year, Tim?
Well, Cam, yeah. Who knows? It’s a very even competition, but we’re very hopeful that we’ve had a terrific preseason. It’s the second year with Voss, so the guys aren’t learning from him so much anymore, they’re now practising on implementing a game plan and strategy. So, hopefully, the fans will get a lot more joy than we’ve suffered through over the last fifteen-twenty years. So, the only way is up, Cam.
Well, hopefully you have a better season than the markets been having for the last couple of years. Tony, I’m gonna throw it over to you. I believe you guys have met in the past at various Stock Doctor functions. Where do you want to kick off our chat with Tim, TK?
I think you’ve kicked it off nicely talking about Carlton, because I’m a supporter as well. When I first moved to Melbourne, I lived within a kick of Princes Park, so that’s why I support Carlton. I think one of the first games I went to was at Victoria Park when the Collingwood supporters rolled the police horse during an upset moment when Carlton rolled Collingwood, back in the 80s.
Yeah, it wasn’t a fun place to be at Victoria Park station there, was it, after a game?
Oh, especially wearing a Carlton Jersey.
There were two of us with our backs to each other as we got on the train.
Even the days of venturing out to the Western Oval or Windy Hill or Ardern Street, it was a very, very different environment back then, wasn’t it, to the family friendly environments that we get to enjoy today at the footy.
Yeah, very much so.
Were those the John Elliott days?
Yeah, it was probably even before then, Cam. I remember going to the footy as a really young fella at the MCG with dad. And you know, I’d be standing on the old steel cans that were empty, just so I could see over the heads of the fans in front of me. But after the game, there was a bloodbath outside the ground. There were very few women, very few other kids; it was just men who had had way too much to drink and were incredibly territorial. You know, it’s odd after going today, it’s just so lovely to be able to go with your wife and family, the younger kids and grandkids or whatever. Enjoy a nice safe day at the footy and see a really good spectacle, as opposed to those very territorial days.
You know, I grew up in Bundaberg, Tim, country, you know, regional Queensland, and never really had any idea how serious Melburnians took the sport until I moved there when I was seventeen. And I remember like, it took me a long time to even get my head around it with my work colleagues, how it was serious business. You’d hear the, you know, the banter going backwards and forwards on a Monday morning, and I thought they were joking around. It took me like six months to realise, no, they’re willing to kill each other, over these football teams. It was a real shock to the system.
Yeah. And I suppose its global, though, isn’t it? Whether it be the English soccer, the American football or other form codes of sport. Yeah, we’ve got to release ourselves somehow, and I suppose it’s that territorial element or combative element again, isn’t it? That patriotic support, whatever it might be. It’s that passion that we use as a release to everything else we do in life. And yeah, when we are deeply, deeply passionate it can ooze out in many different ways at times.
Yeah, well, if people aren’t getting their violent–men aren’t getting their violent tendencies out after a game of footy, now where do they take it? Is it Xbox? That’s what I say to my wife; that’s why I need to sit down and play Xbox, it’s to get all my anger out at the end of the day.
Yeah, well, it’s great to hear you say and learn that you’re a blue bagger too, Tony. You know, it’s a mighty brand that we love, and it’s given us a lot of joy throughout our childhood, so hopefully we start to bring a lot more joy to many of our younger supporters–and older supporter’s–lives going forward. Because it is joy, isn’t it? That’s why we do it. And whether it’s that release of passion or whatever it is, it is that joy that it does deliver to so many people’s lives, too.
Yeah, I agree. Well, talking ancient history with Carlton back in the Victoria Park days; my wife had a career, or has a career in banking, she’s still a director of a bank, and she mentioned years ago that she had consulted with your father on credit risk. So, could you maybe take us through the work of your father and how that evolved eventually into Stock Doctor, please?
Yeah, well, with absolute pleasure, Tony. I don’t get to do it as often as I used to, but when I’m asked to, you know, articulate that story, it gives me an enormous amount of pride. So, thanks for asking. So, Dad was obviously a world champion athlete, too, before he became an academic at Melbourne University. He was a world champion fifteen hundred metre runner, seventh man in the world to break four minutes for the mile. So, he was a highly successful man, not only in business, but also in sport and academia. So, it’s a very, very unique mix. Not too many human beings actually can say that they’ve been, you know, world class in all three elements. So, Dad, after his athletic career then along the way became an accountant. So, he got his MBA and became a practising accountant and management accountant, and then he was invited to be senior academic in charge of the economics and finance faculty at Melbourne Uni. And during his tenure there, he completed his PhD, which was entitled “The usefulness of accounting ratios to describe insolvency risk.” And so, it was that piece of work that… Through the 80s, he finished, completed his PhD in ’82, and then left the uni in ’84 to go out and lecture his methodology and theories to the corporate world, and that’s where your wife probably heard of Dad, Tony. So, it was lecturing on credit risk: how to use accounting ratios, analyse balance sheets, profit loss statements, cash flow statements, to identify a company that was healthy, as opposed to one that was that was crook, financially weak and at risk of insolvency. And so, those models could then be applied to credit risk or lending, commercial lending. So, he lectured credit managers and lenders on how to calculate these ratios manually using slide rules, etcetera, to avoid potential disaster within their debtors’ ledgers or credit ledgers. And then through the late 80s, personal computers started to come in the fray, so he started to become quite interested in how technology could actually assist him in the computation of these financial numbers. So, through mainframe computers and the like, he started to work on that, and that’s where in the late 80s/early 90s I came back from travelling overseas after working in the computer programming industry both locally and overseas for a few years. Dad then passed his PhD across the dining room table to me after I’d returned from London and said, “Tim, do you want to have a crack at computerising and then potentially commercialising my academic work?” And of course, I embraced that opportunity. We had to operate for the first four years on the smell of an oily rag while we tested and understood market opportunities and the like and discovered that there was a high correlation with his credit risk models with share price performance as well through that research period. And then we decided the credit risk market wasn’t that attractive or, or sexy, if you like. What we had a real passion, we discovered this real passion for, is to try to help the mum and dad investor avoid these disasters in qualified third-party recommendations from brokers, and the like. And therefore, after years of research, blood, sweat and tears, operating off the smell of an oily rag out of his lounge room, we then developed this tool called Stock Doctor, or branded as Stock Doctor. And in 1997, we finally got to the stage where we could actually start to commercialise it. So, Dad had to go from academic at that point in time to entrepreneur, and I had to go from computer geek at that time to entrepreneur and get out there and try to market and sell this thing, for which we’ve had a quite a large amount of success with since that point in time.
I really love the part of the story which says that your father did work in looking at the various ratios that all bankrupt companies had in common, but then inverted it to say, “if I was far away from those ratios, I must be a good company who is unlikely to go bankrupt.” And that was embedded into Stock Doctor, which I think was very smart.
Yeah, and Dad’s unique piece of work was really identifying from the forty-eight standard accounting ratios out there that are widely used, the ones that are most correlated to either failure or non-failure, success, relative to the industries that they operate in. But at the end of the day, Tony, to really break it down into the most simplistic form is: is a company profitable, yes or no? Has a company got sustainable levels of cashflow, yes or no? And do they have manageable levels of debt, yes or No? If all of those three things are in place, and they’ve got a good management team around the business, then chances are they’re going to survive. If the answer to those three things is “no”, then they’re at high risk of insolvency and corporate failure.
And of course, it’s a statistical analysis, and it’s sometimes a very boring way to invest, to look at those kinds of steady as she goes companies, but there are companies out there which are not making money, have high levels of debt, but their stock price is going north rapidly. But I guess the essence of Dr Lincoln’s work was, they’re at risk of one day turning down and crashing.
Well, they’re purely speculative investments, aren’t they? Unless you know something that others don’t. But surely, if you have a portfolio of those companies, chances are only one or two may at best to do okay over the long term. So, I prefer to sleep well at night, and I think all of our members prefer to sleep well at night, knowing that you’ve got a portfolio of financially healthy companies that have a very, very, very low probability of failure. And if you can invest in those companies, and those companies also achieve the growth metrics that we look for in other ratios, like return on equity, return on invested capital, return on assets, earnings per share growth, have good quality in regard to their accruals and profits; and if that’s from a growth perspective, good profit margins, also from a growth perspective; or from an income perspective, they’ve got really strong free cash flow, good growing dividends per share, also got payout ratios, meet certain thresholds, and they’re paying good solid yield, then combine those growth metrics and income metrics with a high quality business that’s financially stable, and it’s almost common sense that over the long term, a fifteen plus stock portfolio of those types of businesses should do well over the long term. And that’s the basic logic that we apply to our investment thesis.
And I guess the old saying is true that to finish first, first, you must finish. So, that’s important, isn’t it?
Yeah, sustainability is critical.
Yeah. You mentioned a whole heap of numbers there. Why do you think it’s important to be guided by the numbers, to invest in the numbers, and how much emphasis do you place on the stories that CEO’s spin about what’s happening in their companies?
I think that numbers are a wonderful screening tool. I mean, in Australia we’ve got four thousand listed companies, and in the US a lot more. So, I think the numbers allow us to screen and screen really quickly, to come up with a reduced list of stocks to really pay attention to. So, that’s the first step in regard to our star stock selection process, is that data, fact. I think, to answer your first part of your question, data is fact. In a well-regulated environment for which we operate here in Australia, in regard to the regulatory regime around the importance of having accurate numbers and data to analyse, is important. So, when you’ve got that, you can have a high level of confidence that the results the data is producing are reliable. So, that’s the first step. So, we get that confidence in that. But I think what’s really important… So, you’ve done your quant; that your quantitative analysis, or your data analytics, and then what’s important at the end of that is to have that nice qualitative overlay where you do assess management, you know, you do assess their time in the industry, you do assess their capabilities, their products, their services, and the active risks; the risks associated which may be unique to the particular industry. That’s very subjective, and that’s your qualitative overlay to give you that final tick at the end of what should be a very rigorous process, but the data allows it to be very quick. The first part, that most important filtering part, is very, very quick. But the qualitative assessment, the active risks, takes that little bit longer.
Have you put any of that qualitative assessment into numerical form, like timing the industry or how much stock you hold in the company, that kind of thing?
Yeah, we’ve got our nine Golden Rules. So, the first three rules are very much data driven. The final few rules are more qualitative, but still to a large extent data driven. So, Golden Rule Four is share price sentiment. So, share price sentiment relative to the type of investor you are, whether you’re an opportunist and therefore volatility doesn’t really worry you that much, you embrace volatility and take advantage of stocks that have been sold down, or if you’re sensitive to volatility and might use a technical indicator to help manage the volatility, the entry and exits. So, that’s data driven. Or then you get to Golden Rule Six, which is liquidity in size. So, how much liquidity, how much stock is traded in the stock every day. That’s data driven, but relative to the amount of money each individual investor may want to invest, liquidity levels can change. So, you can’t be prescriptive with that particular data point, nor can you with the share price sentiment. Then you start to go into other data points like market cap and size, valuations. And they can mean different things to different people. So, we try not to be too prescriptive outside our first three Golden Rules. But the other rules are there for the user to use, as what meets their particular profile or size of investment. That said, though, Tony, we’re really, really proud of the testing regime that we’ve got in the business here. You know, we’re right into AI now, machine learning, testing different financial factors and data sets. As we build up history of data sets, we can now see if they can add value to becoming more of a statistical model going forward. So, we’re always looking to see if we can optimise our models relative to new data sets that we identify that could become more prescriptive in time.
Yeah, interesting. You mentioned star stocks before. For the uninitiated, what’s a star stock?
A star stock is a stock that meets our first three Golden Rules. So, we’ve got three categories of star stocks. One is the star growth stock that are ideal for investors looking for capital growth over the long term; borderline star growth stocks that just don’t quite meet our star growth criteria, but there’s still their elite businesses; or star income stocks, and those stocks are generally on the larger cap side of things but have sustainable income or dividend distribution models. So, out of the two thousand listed stocks in Australia, I think I said four thousand before, I should have said two thousand, so excuse me on that one. Out of the two thousand listed stocks in Australia, generally there’s around seventy stocks that meet our star stock criteria. And that’s probably representative of the filtering process that I mentioned earlier, Tony, whereby we go through all of those two thousand stocks very, very quickly with data to get down to about one hundred stocks that meet our quantitative metrics. Then that qualitative overlay allows us to then get down to the seventy stocks that meet our star stock criteria. But relative to the economic environment, that seventy isn’t a hard number. It can obviously float around quite a bit relative to the economic environment.
I’ve always found it interesting that the converse is also true; that if only seventy are investable in the Australian market, there’s a lot of flotsam out there, isn’t there, really?
Yeah. But I suppose you could extend it out again. There are some great businesses that are probably up to number two hundred, but they just don’t quite meet our metrics. And we provide all the filtering tools, as you know, to prospect amongst the ones that don’t quite meet our criteria. But you’re right, there’s actually around 75% of the market that doesn’t pass our financial health check, Golden Rule one, and therefore they’re the ones that are at risk of corporate failure. And we’ve got five categories with our health model: distress, marginal, early warning, satisfactory or strong. Star stocks must be satisfactory and strong. The other three categories, distress, early warning, or marginal, means they’re at risk of corporate failure. That’s 75% of all listed companies. So yeah, around one thousand five hundred businesses, certainly, we don’t regard as being investment grade. Speculative businesses.
Getting back to the star stocks. So, if there are seventy-odd on the star stock list, how do subscribers to star stock build a portfolio? How do they invest? When do you suggest they buy and sell from that list?
Firstly, it depends on their investment profile. Are you in accumulation phase? Therefore, the growth stocks would be probably more appealing. Or are you in retirement phase or nearing retirement? Or you might prefer a more defensive style portfolio, that’s where the star income stocks would play a role. So, it’s first of all determining what type of investor you are and where to fish amongst the star stocks. So, then it’s a matter of the investor then having a look and identifying other rules that they should apply. Are they a trend sensitive investor or are they a non-trend sensitive investor? That would then determine are they going to apply some of our technical indicators or not? And therefore, using our portfolio optimiser and portfolio constructed tools to then answer some of those questions, to then produce a list of stocks that ideally meet their criteria and their investment profile. From there it’s really important though, Tony, that they drill into each of those stocks. That they don’t just take it on face value, that they really like the businesses, explore management, explore what the companies do. They might have ethical or moral reasons why they don’t want to invest in a particular stock because of the industry, whether it be tobacco, gambling, uranium, mining, whatever. So, it’s really important that they then construct a portfolio of stocks that really resonate with them, and also meet the criteria of our star stocks, and then construct a portfolio ideally of fifteen plus stocks to avoid over-concentration risk. So, fifteen plus stocks, and then it’s up to them to really just actively manage those portfolios relative to the evolving fundamentals or changing golden rules relative to their profile and objectives, again, or when a star stock might be moved out of the portfolio and who they then replace it with. But we’ve got all the tools in Stock Doctor, as you know, to help them manage when there is that churn of star stock.
Star stocks have been around a long time, what kind of performance have they gained over the years?
Well, since inception, which is back to… Stock Doctor was launched in ’97, but star stocks were actually created in ’96. So, since then it’s around 17.5% return per annum, which is, you know, when you consider what we’ve been through in that almost thirty years now, you know, we’ve been through some pretty major events. Sure, it’s sort of remained quite stable through time now that return, but on a year-on-year basis, it can look quite volatile. But it is that rock solid result. The last two years let’s be honest, the last two-two and a half years have been really challenging for star stocks, because it’s really only been the larger cap stocks, the larger banks, and to a certain extent, the larger miners, that have done okay in the current market. Anything below them, including our star stocks, have really had a challenging environment. So, the performance has been dragged back a bit. But as we know, cycles change on what we believe, cycles certainly change, and that’s when opportunity presents and hopefully the star stocks have a better run in the not-too-distant future once that cycle shift changes. But you know, just because they’ve produced 17.5% return per annum over the last seventeen years, there are years in there that are incredibly challenging. Again, it’s just about the disciplined approach and staying with the methodology through all evolving economic environments and cycles. Yeah, not giving up after a year as some people could certainly think of doing after the year or two that we’ve been through recently.
Yeah, capitulation is certainly a sign that things are getting close to the bottom, aren’t they? When people give up with the market. It’s not good for them but it can be an indicator that things will change for those that remain.
Yeah, for sure. And, you know, we like to think we’re contrary, we never want to follow the herd. We don’t want to adopt that mentality at all. Just stick to the fundamentals, stick to quality, stick to the stocks that align with your profile and stay with that for the long term. It’s worked for almost a hundred and fifty years now for other highly successful investors. And I don’t think balance sheets and profit loss statements and cash flow statements are going anywhere in a hurry. So, hopefully, they still must form the basis of informed and confident decision making going forward. But yeah, it’s got to be for the long term, that’s for sure.
What’s the Tim Lincoln philosophy about value? Is it quality at any price, or is there a value overlay to your process?
I think from a growth perspective, if you’ve got a portfolio of fifteen plus stocks, you’re going to have some high tech plays in there that trade at ridiculous valuations, whether it be PE or traditional valuation methodologies like DCF or discounted cash flow valuations, whatever. So, some are always traded at high valuations. I think you have to accept that for some high-tech plays. But in this environment, it’s always a bonus now, I love seeing that so many stocks are now trading at deep discounts to valuation. For me, that’s just a massive tick and represents great opportunity. But I just think at times, if we intend to stay fully invested and not use technical indicators now with entry and exit, sometimes in markets, we just have to be prepared to pay a premium for high quality. So, that’s how I treat valuations. It’s certainly not a primary indicator for me: primary indicator is quality. Absolutely. Value is Golden Rule five, as far as we’re concerned. So, it’s a golden rule. It’s certainly there in bright lights, but it is part of more of our nine Golden Rule checklist as opposed to being a primary lead indicator for star stock selection.
Can I ask about the evolution into funds management? What drove that? How’s that going? What do you offer in that space?
So, we offer the Lincoln Australian Growth Fund, which is an Aussie–obviously–an Aussie growth fund, we offer the Lincoln Australian Income Fund, which is obviously an income or high yielding fund, and then we’ve got the Lincoln US Growth Funds: one hedge fund and one unhedged to cover for currency risk, or not currency risk. So, what they are is really using our methodology that we applied to star stocks and investing in a full universe of all of our star stocks in those particular funds, even though we don’t have star stocks yet for the US, but that’s hopefully not too far away. And the reason for creating those products were there’s a lot of DIY investors out there, a lot of self-managed super funds who’d love to do it themselves, but there’s a lot more who don’t have the time, desire or inclination to do it themselves, but believe in our methodology. So, that was the reason why we launched the funds, is to still give those who are more time poor but believe in what we do, to give them access to our methodology through managed fund services.
Just for example, the Australian Growth Fund, does that just hold star growth stocks, or are there other stocks in there as well?
Borderline star growth stocks as well.
And what we do now is strictly invest in a full universe of those stocks, so long as the liquidity is there. Because that fund is now around three hundred million, some of those beautiful little star stocks are simply too small and too illiquid for us to invest in now. And that’s, I suppose, the leg up, or the advantage that DIY investors and stockbroker subscribers have, is that they’re nimble enough to be able to still invest in those stocks because they’re not managing, generally, that size of portfolio. But yeah, it’s very disciplined that they must be star stocks.
Does the fund performance match the sort of performance you were talking about before for star stocks?
Since 2003, when we launched the Lincoln Australian Growth Fund as an IDPS Service, it’s sitting at around 9% per annum. So, we didn’t have that nice little period before that to invest in, plus it was almost hot on the heels of the GFC and other things, but it’s still close to performing equally with the market. But the reason why it’s probably dragged back a bit, too, is that we can’t invest in those smaller caps that really turbocharge portfolios. But we’re always looking to optimise the funds. But over that period, I think, probably underperforming the star growth stocks by about 4% because of the reasons I just mentioned.
And is a similar methodology used for the US funds? Are they as if star growth stocks were available in the US market?
Yeah, very similar, but different factors I’ll mention. So, financial health is pretty much the same, the financial health metric, but the factors we look for the growth metrics… Like in Australia, we’ve got return on invested capital for the miners, we’ve got return on equity for the industrial companies, return on assets for REITs. Over in the US, the factors relating to the industries that exist over there, there’s a much more diversified market, the factors that we use, those ratios that we use to identify growth are slightly different. And different weightings to different factors because of the uniqueness of the American market. Whereas we’re dominated by banks and resource stocks and some industrials, over there they’re obviously dominated by a vast array of companies, especially from a growth perspective, high tech. So, different ratios for those businesses.
I think you let slip that you might be doing a US Stock Doctor offering in the future. Can you tell me more about that, please?
Yeah, a lot of research now, Tony, to make sure that we’re optimising those US models, the factors. Doing a lot of testing, final testing there to make sure before we go there, or before we offer Stock Doctor US in Australia, and ideally take that to the US market and Asian market as well, that we’ve got it right. So, a bit more work to do there. But I’d like to think within the next six to twelve months that, yeah, we’d have that product on offer for our Aussie clients. And maybe if we can get our distribution strategy right or find the right distribution partners through Asia in the US, then we might be able to offer it there as well, which is exciting.
Very exciting, yeah. That’s great, isn’t it? Before I hand you back to Cam, because I’m getting to the end of my list, can you maybe just give us the benefits of your experience in the markets and tell us what you think about the current market.
Yeah, experiences in the market. It’s one of endurance, that’s for sure. And belief. You know, you’ve just got to, you’ve got to have that conviction. And an equity portfolio is an essential asset class at the end of the day, isn’t it? We love our property. We’d love it if we’re fortunate enough to own our businesses, and that’s great, too. But I think we all realise that it’s really important that we, as part of wealth creation and income generation afterwards, we also need ideally a share portfolio. So, that’s the solution that I’m so proud that we deliver to so many Australians, is the ability to have that share portfolio. But in order to be successful in the market, it’s just about that endurance and that ongoing belief and conviction that, hey, we’ll get through these tougher times, and we’ve been through them, and we always come out the other end. So, it is about, you know, not flip-flopping with methodologies, not saying after a few months of underperformance, “this doesn’t work anymore, we needed to look for something else.” It’s just staying with methodologies that make logical sense and staying with them for the long term and having that belief that you’re supported by something that’s real and tangible. And the current market, yeah, it’s just another one of those times, but this one’s been longer. I mean, all of the other corrections in the past have been quick, haven’t they? The GFC went on for a bit long, but even COVID and other major economic events, geopolitical, whatever, over the last twenty-odd-years, have been quick, a lot quicker. This has been two-and-a-half years. So, I’ve never had to endure this long a period where our style of investing, or stock selection, has been under pressure. So, again, the resilience, the patience, the belief, everything has not been tested, but you’ve just got to stay true to it and try to just hold on and wait for that cycle to turn back in your favour. So, yeah, it’s just conviction, resilience, belief, patience, and ideally, being supported by something that you trust, that has worked for you in the past. And don’t flip flop.
Very important, as I say, to listeners who ask, that when they start with a process like ours or yours, it’s a process for the rest of your life. It’s every day. It’s not something you would change in six months.
No, that’s right. And I suppose that people have a propensity to procrastinate or flip-flop or are highly influenced by others out there. They can’t block out the noise or whatever. That’s why, again, why we offer the managed fund, I think, too, so they can get on and do what they do, it’s just that they’re relieved of inclination to change, you know. And so, yeah, it’s really important.
Tim, thanks, I’m going to hand you over to Cam. But before I do, just let me say I’ve lived in Canada, I lived in New Zealand, and had a bit of exposure to the US, and there’s never been another product like Stock Doctor in those places, and anywhere else that I’ve encountered. So, looking forward to the US release, and thank you very much for what you brought to market.
Thanks. And thanks for your long-term custom, too, Tony. Incredibly grateful, and thanks for those words then, too, and encouragement for what we… You know, we just want to try to help people as broad and wide as we can invest with that peace of mind and confidence. So, thank you. Appreciate it.
Thanks, Tony. That was great, Tim. And I’m excited about your upcoming US version, because we have a number of US listeners to our show, and one of the things they’re always asking us to do is to focus on US stocks and we haven’t been able to find anything that gives us what Stock Doctor gives us. So, keep us in the loop on that. That’ll be really useful for us and our American audience as well, when we can start to use it.
Will do, Cam.
I’ve got a couple of questions from our audience about potential features or functions I’d like to ask you about. Michael asks, “what are the chances of being able to set up alerts in Stock Doctor for commodity price turnarounds?” One of the things that we track is the performance of the underlying commodities, particularly for mining stocks and other stocks built on top of commodities. Have you ever looked into having that as an option with the alert functions?
No, because we’re purely, I suppose, really centric around equities. So, commodity prices are all in the charting tool. We’ve got all of the commodity prices there, so it shouldn’t be too hard, I wouldn’t have thought, to put alerts and alert functionality in there for commodity prices if the demands there. So, certainly one we can add to the list that’s always has being reprioritised every single week. So, no, we’ll put that one on the dev list and see how far it goes. But yeah, I’d love to hear from yourselves if there is demand from that from your subscribers, and that would mean that helps us retain your members as our members over the long term. Then yeah, we’d be silly not to consider it.
Okay, so everybody listening to this email your Stock Doctor rep today and say, Tim said…
We’d love to set up a focus group, too. What we’re developing is relative to what they need. So, I’d love to have those discussions.
We’ll get you on the Melbourne user group WhatsApp list.
No, don’t do that to him. Tim, you mentioned the use of AI before. I have a couple of twenty-two-year-old boys, and all I’ve heard from them for the last few months is “mate, you’ve just got to get Chat GPT. You’ve got to do it all. You’ve gotta run your investing, QAV, through Chat GPT.” Interested in your take on tools like Chat GPT, or the analogous versions that are coming out of Google and Meta and people like that. How do you see that playing into investing, if at all? You mentioned before that you’re using some AI stuff somewhere in the back end of Stock Doctor. What do you think the future looks like in the next couple of years for those sorts of tools?
Well, it’s very interesting, isn’t it? Yeah, Chat GPT, I actually played around with it and said, “give me the factors that are highly correlated to share price performance for US stocks.” And it came back at a very high level with the factors that are actually coming out of our testing here. I mean, data analytics at the end of the day, machine learning is all data analytics. It’s just pattern recognition that’s highly associated or related to AI. It’s all sort of the same thing. And so, we’re on that pathway. It’s the future, Cam, it has to be the future. And it’s probably not that far away. What does that mean for businesses like mine? Well, I’m not sure. I’m not sure. But we’ve still got many years before it actually starts to become a real threat, I suppose. Or we’re ahead of it. I don’t know. Our AI might be ahead of it from a stock selection perspective. But that’s impressive stuff. It’s really impressive stuff, to be able to produce what I produced the other day on this almost beta version of the tool is… Righto, well, this AI or computer-generated intelligence, whatever you want to call it, is going to provide solutions to a lot of things in the not-too-distant future.
Yeah, I think one of the challenges I have, you know, I’m subscribed to Chat GPT4, and I’ve been playing and testing with that a lot. But it’s data set is only up to September 2021. There’s a big challenge with how large language learning models work to be feeding in real time data, because it’s got this whole analysis process that needs to go through before it can spit out its output. So, you know, that’s too old for us. If I say, you know, run some numbers on BHP, its numbers are eighteen months old, right? Or, no, what is that? Two and a half years old. So, it’s not very useful for me right now from an investing perspective, but I’ll be certainly keeping an eye on where it goes in the next few years.
Yeah, I’m sure data capture, data storage, efficiency around all of that will only increase enormously over the next few years. Perhaps real time answers to real time data analysis is the future. It’s just how we evolve with it and how innovative we can become as things speed up.
How we adapt to the new technology.
Yeah, how we embrace it, how we use it. Yeah, just gotta try to be ahead of the game, I suppose, and certainly play the game. It’s exciting.
So, just to wrap up, Tim, at the end of every episode, Tony and I stop talking about investing and we just talk about everything else that’s going on in our lives. It’s the one time a week Tony and I actually get to catch up and be mates rather than talk about investing these days. So, we know that you’re into investing, we know that you’re into the footy. What else are you into? What’s good? What fills up your life outside of those things, Tim Lincoln?
Business, obviously, what we’re talking about now. We’ve got, you know, forty-odd staff here in Melbourne and I’m a single director, sole-owner, so the buck stops with me. I’m managing a lot of money and clients, so looking to expand my support from a business management perspective, even though I’ve got a great management team. You met Julio, head of marketing earlier, great management team. But I’m looking to get more serious structure around the business. You know, proper board and potentially CEO in the not-too-distant future so I can become exec chairman, to then focus on the other things and get really nice balance again in life. And there’s so much in my life that I love. Number one is family. I’ve got a beautiful family. My wife Sarah, it’s our thirtieth wedding anniversary in April. So, that’s exciting. We’ve got a beautiful lifestyle. We want to enjoy as much of our beautiful lifestyle as we can and spend as much time with our adult kids as we can, but not too much time. Bit more time to ourselves. We love travel. We’ve got, as I said, a couple of residences around the country, so we’d love to get to those. I’m right into my tennis as well, right into golf, right into boating. Got a nice boat. I love leisurely days out in the bay, having a fish or just leisurely time with family. I do Ironman competitions and run marathons and all that sort of stuff, too. So, whether it be just a beautiful long bush walk with Sarah, we love our hiking and things, too. Being really proud how I could get all of that balance in life with, you know, business and family and doing all of that too, but as we get a little bit older, I think it’s really important that we do smell those roses so we can maintain the clarity and the balance to do everything else we want to do in business. Hence why I’ll look to get a little bit more structure around me so I can do more of the things I just mentioned.
Iron Man Wow, one of our one of our QAV subscribers was doing an Ironman thing in Maui, I think, a couple of months ago. I’m always a little bit scared of you Ironman types, that’s pretty scary stuff. You reading anything good at the moment? I like to get Book and TV and film recommendations from Tony each week, he’s got good tastes in that stuff. Is there anything you can recommend? Books, music, films, TV?
Start with the books. Just one I’ve recently read, the best book I’ve ever read, and it’s all relative to what I need to do in life going forward, what we just spoke about. And I’m not trying to push religion at all here, but it was “Buddhism for Busy People”. And it was so enlightening, just the importance of meditation, the importance of being in the moment, the importance, you know, the principles of Buddhism, it’s so pure, and it was really interesting. It was the quickest book I’ve ever read, only because I was just so engrossed, and probably next to “The Warren Buffett Way” or “The Intelligent Investor”, you know, it’s right up there. It was just, it was really profound for me. So, I recommend anyone who’s really busy and looking to get balance and clarity and things in their life, “Buddhism for Busy People”. And another great book I just read on the markets was “Physics of Wall Street”. And that’s all about a lot of things we were talking about before, too; where it’s all come from, when physics was first discovered in regard to stock selection, and where it is now. And its sort tapping on the AI door as well. So, that was another recent great read. So, they were the two things that occupy my time. Now it’s all about sitting on that little cushion and trying to do as much meditation as I can.
That’s great. I think that’s really good for you, staying in the moment.
I believe in that myself. What are you watching at the moment? Anything good? TV series, films?
Oh look, we love The Crown, the latest series of The Crown. I love “The Whale”, we went and saw “The Whale” last week. Went and saw Avatar last week, obviously the cinematography in that was just… The story was okay, whatever, but the creativity associated with what they produced there was just mind blowing.
What was that, sorry, Tim? I missed out the name of that one.
That was Avatar.
Avatar. Yeah, gotcha.
The latest Avatar. The storylines a bit weak, but just what people can do these days in regard to just pure creative talent was just amazing. Whale was a good show. I don’t watch a lot of telly, to be honest. I’m too busy to. If it’s not doing the things I mentioned before, then it’s sleep, or quality time with the family. But they’re the things.
Terrific. Well, thanks for that, Tim, we really appreciate your time and your insights. And again, thanks for everything you’ve done with Stock Doctor. It’s the cornerstone of everything we and our members do in terms of investing, so we really value it. Keep doing a great job.
Thanks, Cam, and thanks, Tony, too. Keep your great work up, too. Its education and empowering people, and providing them with methodologies and things that they can replicate and implement is so important. So, well done on your deploying of your passions to people who need it, and obviously love it too. Well done.
Thanks. And I want to give a shout out to your staff, too. Your staff are always very helpful, very friendly. Victor, in particular, is always reaching out, saying, “hey, can I help with anything?” Answering all my technical questions. And if we find problems with some datasets, he’s always digging into it. Couldn’t be better. So, you’ve got a really great customer service ethic there, obviously, which, you know, in this day and age is rare, when you come across companies that really do customer service well and take it seriously. And I’ve got huge respect for the way that your staff reach out and help us and our members. I’ve never heard anything but really great feedback on your customer service. So, well done.
Well, it’s critical, isn’t it? I think all great businesses are client centric, in a genuine way. In a genuine desire to help based on, again, genuine care. And if you do that right and you do it naturally and you’ve got a good product to back that up, then it’s a reasonable business model. There’s a lot more to managing a business successfully than just that, of course, but I think they’re critical ingredients.
Basics. Like investing, right? You have a good product, give good service.
I mean, it’s not that hard, really, on paper anyway.
Yeah, not that hard. It’s about the discipline of consistent implementation, isn’t it?
Exactly. All right, we’ll let you get back to your day. Thanks a lot, Tim. Appreciate it.
Thanks very much, Tim.
Thanks, Cam. Thanks, Tony. Really appreciate it, it was great fun. Thank you.
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