QAV 616 Transcript

QAV 616 CLUB

Cameron  00:06

Wel­come back to QAV. This is 616. We’re record­ing this on the 18th of April 2023, Aus­tralia time, which makes it the evening of the 17th of April 2023 in Savan­nah, Geor­gia, where my wife’s moth­er in law is from I believe. Chris­sy’s always keeps telling me, “oh, I have to take you to Savan­nah. You’d love Savan­nah.” And it’s where Tony Kynas­ton is at the moment. TK, how you doing? How’s your trip going?

Tony  00:34

Good. Yeah, I love Savan­nah, too. It’s a stu­dent town; the SCAD, South Car­oli­na Arts and Design School is here. And it’s got lots of archi­tec­ture in it.

Cameron  00:45

“Does every­body talk like this.”

Tony  00:48

That’s the South­ern Charm. You all have a good day.

Cameron  00:51

“I’ve always relied on the kind­ness of strangers.”

Tony  00:56

We’ve been going around doing this every time some­one talks, we go “Mm-hmm, mh-hmm” after every sen­tence.

Cameron  01:06

I love it already.

Tony  01:07

“Y’all have a good day.” “Mh-hmm, mh-hmm.”

Cameron  01:11

Now, it’s been a cou­ple of weeks since we’ve done a show. I think you were in Vegas last time. You went to watch the Mas­ters?

Tony  01:19

Augus­ta, Geor­gia. Yeah.

Cameron  01:22

Who won the mas­ters?

Tony  01:24

I’ll have to think now. Who won the Mas­ters? Shit, that’s been a cou­ple of weeks ago.

Cameron  01:29

Was­n’t Mag­nus Carlsen?

Tony  01:30

No, no, hang on. I should know this, I was there. Oh, of course: John Rahm.

Cameron  01:36

Not an Aussie?

Tony  01:37

No, Span­ish.

Cameron  01:39

Oh, okay.

Tony  01:40

He was the spir­it of Seve, Seve Balles­teros, who would have turned six­ty-six on the Sun­day, it was his birth­day. But he died of brain can­cer about four years ago, unfor­tu­nate­ly.

Cameron  01:51

He was a golfer?

Tony  01:52

Seve Balles­teros was my favourite golfer grow­ing up. He was a very gift­ed Span­ish golfer, just intu­itive golfer. Could hit a ball from any­where — out of a tree. Won a big tour­na­ment by hit­ting it in from the car park one day.

Cameron  02:05

Hold on a sec­ond. He would have been six­ty-six. You just turned six­ty. When you say you were grow­ing up…

Tony  02:12

Well, yeah, I mean, in my teens. He would have been just start­ing out when I was prob­a­bly about fourteen/fifteen or so. I did­n’t play golf until I was twen­ty, so, you know, start­ed tak­ing inter­est in that sort of age that he was estab­lished as a pro then.

Cameron  02:27

Right. I think you’ve already grown up by the time you’re twen­ty. I was think­ing, like, five, and I was like, oh, he was like eleven?

Cameron  02:29

Well, when you’re six­ty and you say “when you’re young,” that can be any time up to thir­ty, I think, prob­a­bly. Maybe forty.

Cameron  02:41

Right. Okay. So, was it good? Was it your first time being there?

Tony  02:46

No sec­ond time. And fun­ni­ly enough, I saw a Span­ish guy win in 2017, too. Ser­gio Gar­cia one in 2017. So, next time I go to the Mas­ters, I’ll back the Span­ish guy.

Cameron  03:00

Yeah, although the Span­ish golfers will be check­ing to see if you’re there. Obvi­ous­ly you’re the good luck charm.

Tony  03:06

Yeah, so I mean, Augus­ta is amaz­ing. It’s just lives and dies for the golf tour­na­ment. It brings so much mon­ey in and there’s not much else there. It’s a pret­ty poor area over­all, real­ly, and it’s a bit of a rust belt. We shipped around in bus­es the whole time and a cou­ple of times we took some back roads, and they were just all these board­ed up tex­tile mills, we drove through one day. Just lit­er­al­ly…

Cameron  03:30

Owned by Berk­shire Hath­away?

Tony  03:31

Well, that’s what I thought of, but they weren’t. But they were just left, basi­cal­ly. Peo­ple were throw­ing rocks through the win­dows, and it’s almost like some­one just turned the lights off and left one day and left them stand­ing. Pret­ty poor and lots of… Well, actu­al­ly speak­ing of Berk­shire Hath­away, one of their busi­ness­es is demand­able homes, and there’s lots of those pre­fab­ri­cat­ed homes around the South in Amer­i­ca, with a truck parked in the front yards worth more than the house that they live in.

Cameron  04:04

Mm-hmm. And then what are you doing in Savan­nah?

Tony  04:06

Yeah, so we’re mak­ing our way down to New Orleans. We had a week in Hilton Head because I love it there, which is only three hours away from Augus­ta. So, Rud­dy and anoth­er mate of mine, Jeff, drove down there, and we joined up with a US bud­dy and his mate. They came across from Nashville. We played golf. A friend of mine owns a six bed­room house in Hilton Head, so it’s always good to stay there. So, we pitched tent there for a week, and went to the PGA again yes­ter­day there, which was much more relaxed than the Mas­ters — even though John Rahm was play­ing there, too. So, much more acces­si­ble and up close. But that was good. Played golf a cou­ple of days, which was love­ly. There’s like fifty golf cours­es on Hilton Head Island, so it was­n’t hard to get a good round in there, and lots of good food, lots of good seafood. We’ve actu­al­ly been quite busy. I’m get­ting quite weary, because we’ve just been play­ing golf and walk­ing cours­es. We even hired some bikes and went for a ride around Hilton Head and on the beach, and that was a good work­out. Yeah, it’s been good. And then down to Savan­nah. Savan­nah’s where, basi­call,  the Inter­na­tion­al Air­port is for Hilton Head, so that’s about an hour away from Hilton Head Island. And Jeff flew out today, he’s going back to Aus­tralia. So, it’s Rud­dy and I for a week, and then on Sun­day I fly up from New Orleans to Toron­to, where Jen­ny and Alex will join up. We’ll spend a week there.

Cameron  05:31

Oh, they’re­meet­ing you in Toron­to. I did­n’t know that. Oh, fan­tas­tic.

Tony  05:34

Next week. Yeah. So, I think Alex has to tell you she might not be able to do a down­load the next two weeks. Good thing you’re in Bris­bane hold­ing the fort for us.

Cameron  05:44

I’ll have to review her con­tract. How’s Rud­dy? He got over his COVID?

Tony  05:50

Yeah, he’s good.

Tony  05:51

I did­n’t get it, no, but I’ve been snif­fling for a week or so. Every­one’s got snif­fles and coughs and things. And you know, being on a bus with forty oth­er guys and every­one’s snif­fling and cough­ing and stuff. But no, I haven’t got it. I’ve been healthy. Been good.

Cameron  05:51

You did­n’t get it?

Cameron  06:07

That’s good. Well, it sounds like you’re hav­ing a fun time. I’m real­ly glad.

Tony  06:11

I am. It’s great, real­ly enjoy­ing it. And lots of dif­fer­ent things, too, which is good. Vegas, and then we stayed in a place called Aiken, which is half an hour away from Augus­ta, and that was dif­fer­ent. That’s real Amer­i­can sub­ur­bia.

Cameron  06:25

Where did you stay in Vegas?

Tony  06:27

We start­ed off in the Aria, which was a real­ly nice hotel. And then went to the Man­dalay Bay, which was more of a sort of fam­i­ly sort of hotel. Huge place. Which was good. It was fine, too. Went and saw Penn and Teller, which was fan­tas­tic. And The Bea­t­les “Love”, the Cirque du Soleil “Love”, which was great.

Cameron  06:46

Which we saw — when were we there togeth­er? 2017

Tony  06:52

Yeah, I think so.

Cameron  06:53

2017 we saw that, yeah.

Tony  06:55

It was changed. I mean, it’s essen­tial­ly the same show, but it’s changed enough to keep it inter­est­ing. The golf cours­es around Vegas were very diverse and spec­tac­u­lar. So, we had a cou­ple of rounds in Vegas and around Vegas. One day it snowed, it was that cold. We got snow on the course. And then went out into the desert. Went out to a place near Death Val­ley and played there. And so, it was like, yeah, this sort of arti­fi­cial oasis on some days where it’s sur­round­ed by rock and cac­tus and just the fair­ways are green, and then oth­er days you’re play­ing through canyons out in the desert. It was spec­tac­u­lar. Very var­ied, it was love­ly. So, I could rec­om­mend the golf cours­es around Vegas. And then Augus­ta we played-we actu­al­ly had some real­ly spec­tac­u­lar golf in Augus­ta, too. We played on Augus­ta Coun­try Club, which is next door to Augus­ta Nation­al. So, one of the holes shares Rae’s Creek. If you’re a golfer you will know Rae’s Creek, it’s part of Amen Cor­ner at the Mas­ters. So, we were on the oth­er side of the fence to Amen Cor­ner, and you can hear the crowd roar, and it pret­ty spe­cial. Sim­i­lar sort of golf course.

Tony  07:10

In your head they were roar­ing for you.

Tony  08:18

So, that was spe­cial. And then we played a place called Cham­pi­ons Retreat, which is where appar­ent­ly all the golfers go, they’ve got hol­i­day hous­es and things around the area and play there. That was real­ly good. We played three rounds of golf in Augus­ta, love­ly golf cours­es, and then down to Hilton Head and that’s been love­ly. Now Rud­dy and I are going down to Jack­sonville. We’re just gonna wing it between Savan­nah and New Orleans, see what’s at Jack­sonville. And then we’ve been told to go to the Red­neck Riv­iera, the Pen­saco­la in Alaba­ma, on the way through. So, we’ll do that for a night, too, see what that’s like.

Cameron  08:55

And then you’re going to New Orleans, which is one of my favourite places, New Orleans. I’ve been there many times. I’ve nev­er been with Chris­sy; we always talk about going. But back in my Microsoft days, we used to have our annu­al con­fer­ences in New Orleans because it had this big sort of con­fer­ence cen­tre you could fit forty thou­sand Microsoft employ­ees in and got to par­ty there many times. It’s just a great city. I remem­ber just walk­ing down in the French dis­trict and just going into these lit­tle, lit­tle, lit­tle bars, the size of your bed­room, and just see­ing three or four blues guys that all look like they’re in their nineties, these black guys, just sit­ting in this lit­tle bar play­ing the blues like they look like they’ve been doing for eighty-five years. It was just mag­i­cal. They’re prob­a­bly all gone now, and after Hur­ri­cane Kat­ri­na and all that I don’t know what hap­pened to all those guys, but this is back before those days in the 2000s. It was won­der­ful, a real­ly won­der­ful expe­ri­ence. And you know, see­ing the jazz bands there and the blues bands just, yeah, real­ly great.

Tony  10:07

Yeah, look­ing for­ward to that. So, I’ll spend a cou­ple of nights there with Rud­dy and get into that.

Cameron  10:12

Make sure you get down to Treme. Get down to the Treme dis­trict where all the music is.

Tony  10:17

Okay. That’s the HBO series, was­n’t it, Treme?

Cameron  10:22

Yeah, that’s where it was set in. It was set in the Treme Dis­trict. So, you’ve got Bour­bon Street where all the tourists go and the French Dis­trict, which is great, I love that, but get to Treme which is where the real music is. Your skin colour might set you apart, but you know.

Tony  10:38

Yeah, we’ve had a lot of warn­ings about walk­ing around after dark in New Orleans.

Cameron  10:43

Eh, you’re rich, it’ll be fine. Rich white peo­ple get along fine. You’ll be right.

Tony  10:48

I’ll give them Rud­dy. I’ll sac­ri­fice him.

Cameron  10:51

Just make sure you have bet­ter run­ning shoes on than Rud­dy. Peo­ple might be won­der­ing, why am I lis­ten­ing to this? I thought this was an invest­ing show. Well, this is what you get to do if you’re a suc­cess­ful investor, is take six weeks off and go play golf.

Tony  11:05

No, exact­ly. I think I’ve played about twelve rounds of golf in the last few weeks, it’s been full on.

Cameron  11:11

That’s great. I’m real­ly hap­py for you. Well deserved. Well, we should talk about invest­ing at some point.

Tony  11:18

How’s the mar­ket going back there? I haven’t real­ly kept in touch with it.

Cameron  11:21

It’s had a great cou­ple of weeks, you should go away more often. I keep say­ing that when­ev­er you go away, we have a great time. Yeah, the mar­ket has had a great cou­ple of weeks. It obvi­ous­ly just opened twen­ty min­utes ago. The Fin said it was going to take a bit of a hit today, but in the last cou­ple of weeks it’s just been going gang­busters. Let’s start with maybe a port­fo­lio update. The dum­my port­fo­lio since incep­tion — which for new lis­ten­ers is the Sec­ond of Sep­tem­ber 2019, when we’ve ful­ly invest­ed our orig­i­nal $20,000 in cap­i­tal in the dum­my port­fo­lio — it’s up 18.09% per annum over that peri­od, which is pret­ty much right where it should be.

Tony  12:05

Yeah, that’s right.

Cameron  12:06

Ver­sus the bench­mark, which is the SPDR 200, code STW, which is up 7.67% per annum over the same peri­od. So, kind of doing two and a half times the index, which is nice. For the finan­cial year — which is what, a cou­ple of months away from clos­ing — dum­my port­fo­lio’s up 11%, 11.03 per annum. Actu­al­ly no, 13.94 per annum. Navexa gives me two num­bers: one on the chart, one on the result. The results say 13.94% per annum, ver­sus the STW up 17.76 per annum for the finan­cial year. So, again, we’re not doing as well as the bench­mark this finan­cial year, was a tricky one for us. But we’re not that far behind, and we’ve been catch­ing up quite a lot in the last cou­ple of months. And up 14% for the finan­cial year, which still has a few months to go. Not a bad result at all. I’m quite hap­py with that.

Tony  13:12

Yeah, I am too. And it does­n’t wor­ry me that we’re under­per­form­ing the bench­mark in the short term. As you say, the long term, that’s the game to watch.

Cameron  13:22

The buy list this week. One of the things to note is that cop­per is a buy again, which is nor­mal­ly excit­ing. How­ev­er, one of our favourite cop­per stocks that we’ve done very well out of in the past, C6C, Cop­per Moun­tain, has announced it’s being acquired pend­ing reg­u­la­to­ry approval, etc., etc., by a com­pa­ny called Hud­bay. So, I mean, peo­ple who own it, con­grat­u­la­tions. We don’t, because cop­per, you know, I guess it was a sell at some point. But it had a big spike in the last cou­ple of days with that announce­ment. C6C. I think we got a ques­tion about what to do if you are an own­er of that lat­er on. We’ll get to that in the Q&A sec­tion. What else? Max put me on to an Aussie guy called the Chartist on Twit­ter. You ever heard of the Chartist, Tony?

Tony  14:14

No, I haven’t.

Cameron  14:15

He appar­ent­ly just uses chart­ing and has a 20% aver­age CAGR as well. Max sug­gest­ed we invite him onto the show for a chat. I’ll get around to that at some point. But I start­ed fol­low­ing him on Twit­ter and he’s got this great quote I saw from Phil Jack­son, the coach of the Chica­go Bulls? Was­n’t he the Chica­go Bulls guy, Phil Jack­son?

Tony  14:38

I dun­no. Sounds famil­iar, but I’m not sure.

Cameron  14:41

I think that’s where he was. Yes, Chica­go Bulls dur­ing their, sort of, good years. There’s a quote from him that I real­ly liked, which was, “the most we can hope for is to cre­ate the best pos­si­ble con­di­tions for suc­cess, then let go of the out­come.” And I thought yeah, that’s sort of a good def­i­n­i­tion of QAV. We just cre­ate the best pos­si­ble con­di­tions and then let it play out. Don’t think too much about it.

Tony  15:11

Have a good frame­work, exact­ly.

Cameron  15:13

What else? Oh, Buf­fett gave anoth­er great long inter­view with his favourite jour­nal­ist at CNBC. CNBC? I think so. Becky. He was on Beck­y’s Squawk Box show, talk­ing about bank exec­u­tives. I’ve got clips from the show that I could play, but basi­cal­ly, he was talk­ing about the recent bank col­laps­es over in the US and was reflect­ing in large part what you’ve been say­ing, that it’s not the same, real­ly, as it was back in 2008. The investors are okay. Some of the investors in banks are going to take a hit, but he’s talk­ing about how the FDIC is going to cov­er the investors…

Tony  16:02

The depos­i­tors.

Cameron  16:02

Sor­ry, depos­i­tors. And that it’s not cost­ing the gov­ern­ment any­thing, so peo­ple don’t under­stand that and should­n’t wor­ry. There was this quote, though, he said, “all kinds of trou­ble was caused by the banks, but bank exec­u­tives all con­tin­ue to live fine. They may have lost their job, but they’ve got their pen­sions. There have got to be con­se­quences for the peo­ple who make the deci­sions. Penal­is­ing the share­hold­ers lat­er on by bil­lions of dol­lars’ worth of fines, that does­n’t deter the bad action.” He said that “some of these CEOs should go back to liv­ing like a per­son that works on the pro­duc­tion line of Ford or some­thing like that. They don’t deserve any­thing spe­cial.” But she asked him in the inter­view whether or not he saw it com­ing, and he said, “yeah.” He goes, “I read the finan­cial state­ments of all of these banks.” Obvi­ous­ly, Berk­shire have had invest­ments in a lot of banks, and they’ve sold out of a lot of them, I think, not that long ago. He said that he could see all these loss­es going on in the bank’s finan­cials, and he said some­thing like, “if Berk­shire lost $28 bil­lion,” or some­thing, “in a year, we would prob­a­bly talk a lot about it in our earn­ings call.” He said but “they were just bare­ly men­tion­ing it,” it was just sort of being blown off in these earn­ings calls. He said there’s this crazy stuff that they’re doing and crazy think­ing. So, any­way, if any­one’s inter­est­ed in Buf­fet­t’s thoughts on what’s going on with the US econ­o­my and the banks, check that out. You can see clips of it on YouTube. He’s always inter­est­ing.

Tony  17:31

I did see last Mon­day, I think it was, he did a three-hour inter­view on Bloomberg from Japan. I did­n’t see it; I saw it adver­tised. Appar­ent­ly, he’s bull­ish on Japan. He’s been buy­ing up a lot of Japan­ese com­pa­nies recent­ly.

Cameron  17:45

Good stuff. Well, he’s always to lis­ten to. Does­n’t pull his punch­es. Pulls them a lit­tle bit more than Char­lie does.

Tony  17:56

Well, he’s dead right, about the banks, though, or any com­pa­ny real­ly. The CEOs get off Scot free. It’s just com­plete moral haz­ard, espe­cial­ly with this lat­est round of bank col­laps­es in the states. The gov­ern­men­t’s just come in and swept up every­thing, paid the depos­i­tors, share­hold­ers get burnt but the CEOs walk away.

Cameron  18:13

It does seem wrong, does­n’t it? But that’s Amer­i­can cap­i­tal­ism, for you.

Tony  18:18

Yeah, Rud­dy and I were talk­ing about it tonight at din­ner. It is dif­fer­ent over here. Like, it’s much more entre­pre­neur­ial. But then the mar­kets so big, you can have a lot of suc­cess with even a mod­er­ate or a small com­pa­ny, real­ly, because there’s just so many peo­ple here who needs ser­vic­ing. It’s, yeah, it’s dif­fer­ent to Aus­tralia, I think, where your mar­ket is much more lim­it­ed.

Cameron  18:41

Well, that’s all I’ve got to talk about. You got any news you want to get into?

Tony  18:46

No, not at all. Like I said, I’ve been turned off from the mar­kets for a cou­ple of weeks now. I’m play­ing golf. It’s been love­ly.

Cameron  18:52

Good. But you do have a pulled pork to do, I believe?

Tony  18:55

Yeah, I’ll do a pulled pork. Some­one asked the ques­tion for a pulled pork on Min­er­al Resources, which I’ll do. It’s not a com­pa­ny I fol­low. I mean, I’ve cer­tain­ly watched it over the years because it’s been an excit­ing growth stock in the min­ing sec­tor, but it’s not on our buy list. I’ll say that from the out­set. It start­ed off, basi­cal­ly, as a ser­vice com­pa­ny to the min­ing indus­try. It was crush­ing rock, and they still do a lot of rock crush­ing. Basi­cal­ly, I guess that’s part of the process, I think, par­tic­u­lar­ly with iron ore, to get things ready to be export­ed and to extract some of the ore from the rest of the rock that they mine. The com­pa­ny now, Min­er­al Resources, has expand­ed into oth­er areas. It’s now an iron ore min­er of its of its own, and it’s now get­ting into lithi­um min­ing and has some joint ven­tures in that space, and also gas explo­ration. And they’re cur­rent­ly try­ing to take over a com­pa­ny called Nor­west Ener­gy, which has a pres­ence in the gas space. So, what start­ed off as a rel­a­tive­ly small min­ing ser­vices com­pa­ny has grown fast over the last, I dun­no, fif­teen-twen­ty years, I guess, that I’ve been aware of it. And it has an own­er founder by the name of Chris Elli­son, and he’s cer­tain­ly very entre­pre­neur­ial and dynam­ic, and has been dri­ving growth in the com­pa­ny. And it’s grow­ing fast. I mean, rev­enue in the last four months is up 74% year on year. So, cer­tain­ly has a high growth pro­file. But that’s one of the rea­sons why it’s not only our buy list. You know, right off the bat, the Pr/OpCaf for this com­pa­ny is twen­ty-two times cash flow. So, you know, we’re look­ing for com­pa­nies less than sev­en times cash flow, so you’re cer­tain­ly pay­ing for the growth that you’re get­ting in this case. So, to run through the num­bers: it’s a large stock, ADT is $68 mil­lion, I’m doing an analy­sis on the share price of $79.13. I think it’s a lit­tle bit high­er than that now, this is a day or two old. But $79 is still less the con­sen­sus tar­get, but it’s well above our IV 1 and slight­ly above IV 2. It does pay a div­i­dend but the yields 2.78%, so we’re not going to score it for that. Stock Doc­tor finan­cial health is strong and steady, so it gets marks for that. And cer­tain­ly, it’s a well-man­aged com­pa­ny. Net equi­ty per share, how­ev­er, is $18.25, so share price being up around $80 bucks, it’s well above its book val­ue and book val­ue plus 30. So, from a val­u­a­tion side of things, we’re nev­er going to look at this. This is a growth com­pa­ny and peo­ple are pay­ing for that. Fore­cast earn­ings per share growth is 76%. So, even though it’s grown by that kind of num­ber in the last twelve months, it’s fore­cast to keep grow­ing by that kind of num­ber. So, you know, it’s dou­bling every two years based on its cur­rent tra­jec­to­ry. So, it’s cer­tain­ly, cer­tain­ly grow­ing. Growth over PE we score two for, it’s 3.73, and our hur­dle is 1.5. So, even though it’s grow­ing fast, even though it has a high PE, the growth is cer­tain­ly still, I guess, mak­ing it attrac­tive on that met­ric. And the PE is 20.6 times, so it’s quite high, and it’s not the low­est in the last three years. So, we can’t even score it for being the low­est PE for the last six halves. Equi­ty has been increas­ing, but not con­sis­tent­ly, so we give it a zero. There was a peri­od when it did fall back­wards, and that’s not sur­pris­ing for a com­pa­ny like this; they are tak­ing on debt to fund their growth, not just from cash flow, although lots is fund­ed from cash flow. So, all in all, the qual­i­ty score for this one is 64% but the QAV score is only 0.03, and its scores low for us based on the val­u­a­tion side, I think. And this is a clas­sic gross stock. I mean, it’s got the same, sort of, pro­file in terms of its price as an Inter­net stock does, or After­pay did last year. So, its priced to per­fec­tion, and that’s the issue I have with a com­pa­ny like this. And I think it’s been caught up in the lithi­um min­ing boom as well, which is about a quar­ter of its busi­ness now and it’s cer­tain­ly one of the areas which has sparked inter­est with peo­ple. Again, whether that con­tin­ues or not, I don’t know, but you’re pay­ing as if it will con­tin­ue to grow based on a twen­ty times PE and twen­ty-two times cash flow that you’re pay­ing for at the moment. It’ll take you a long time to get your mon­ey back, espe­cial­ly if that growth pro­file slips, and that’s one of the issues I have with buy­ing these growth stocks. They’re great when every­thing works but does­n’t take much to knock a com­pa­ny off a growth path. If inter­est rates keep ris­ing, or sud­den­ly hydro­gen pow­ered cars become more pop­u­lar than elec­tric pow­ered cars, than lithi­um might not be as valu­able. All those kinds of things get thrown curve­balls when they’re priced to per­fec­tion. So, that’s one of the issues that I have with these kinds of growth stocks. But cer­tain­ly, in the last twelve months and pro­ject­ed for the next twelve months, it’s going to dou­ble in size. So, good luck to them.

Cameron  23:54

Thanks for that. One of the things that I plan on using AI to do in the next cou­ple of months is try and fig­ure out a QAV style mod­el for growth stocks.

Tony  24:04

Yeah, right.

Cameron  24:06

See if it can come up with some­thing that checks all of our box­es.

Tony  24:11

Yeah, well, I hope so, because the com­pa­nies them­selves are attrac­tive when they’re grow­ing. The prob­lem is the price you have to pay for them. You’re buy­ing future earn­ings a long way down the track and if they don’t get there, the share price’s come tum­bling down. You’ve done your day.

Cameron  24:24

We’ve talked a lot over the years about fig­ur­ing out a val­u­a­tion mod­el that makes sense to you for these sorts of stocks, and you’ve had a cou­ple of attempts at try­ing to fig­ure out how do you get in, and then when do you get out, and what kind of rules do you set around it? And we’ve nev­er heard any­thing that made sense on the sur­face. But maybe AI can work it out for us.

Tony  24:49

Yeah, but for me it makes sense on the way up. Like, you always get drawn to it, because these growth stocks can do real­ly, real­ly well for two, three, up to five years, but it’s the crash when they go up the stairs and down the ele­va­tor. And it’s that last crash which can destroy a lot of val­ue.

Cameron  25:09

And it’s know­ing when to get out. What are the met­rics for when to get out. Because like every­thing else, they don’t go in a straight line up: they go up, they go down, they go up again, they go down again, they go up again. All right, thanks, TK. That was a ques­tion from Neil, who asked for the MIN pulled pork. So, hope you enjoyed that, Neil. Next ques­tion is from John. “Won­der­ing if TK could do a pull pork on the next new buy that comes into the buy list with an ADT over 100k. The high­er up the list, the bet­ter.” Well, accord­ing to our buy list for this week, that would be the NAB, Tony.

Tony  25:46

Okay. Well, I can do a pulled pork on NAB for sure.

Cameron  25:49

It’s not very high. Like, it’s come in, sort of, around thir­ty-four. Obvi­ous­ly, it has a big ADT, about, what is it? $131 mil­lion, bil­lion? $131 mil­lion, I think. The next one is STO, San­tos, back on the buy list, but crude oil is a sell. No, crude oil is a buy, LNGs a sell. And accord­ing to my chart, San­tos has more LNG than crude oil.

Tony  26:18

It does, def­i­nite­ly.

Cameron  26:20

Right. So, it’s not real­ly a buy for us at the moment. So, maybe NAB is one to look at next week.

Tony  26:26

Yeah, I think the banks are inter­est­ing at the moment. They should be, and they are, mak­ing mon­ey while inter­est rates are ris­ing because they’re pass­ing on the deposit rate ris­es slow­er than they’re pass­ing on the mort­gage rate ris­es. But I think there’s a lot of sen­ti­ment out there against them, because there’s still this the­o­ry that we might go into a reces­sion in the future, and that’ll hurt the banks.

Cameron  26:48

It’s get­ting a lot of media atten­tion over here at the moment. I think on the front page of the Fin today, or at least online, some econ­o­mists are say­ing the RBA does­n’t know what they’re doing and we’re going into a reces­sion and etc., etc., etc.

Tony  27:03

I think the RBA met just after I left and decid­ed not to increase inter­est rates for at least anoth­er month. He’s prob­a­bly play­ing for his job now, so might final­ly be heed­ing the calls to not raise rates so quick­ly.

Cameron  27:17

Yeah, we’ll see what hap­pens. All right. Next ques­tion is from Sue. She says, “I have my very first share posi­tion being bought out with the news about the cop­per min­ing pur­chase offer of Hud­bay mate­ri­als. Won­der­ing where these sit­u­a­tions sit with QAV sub­ject to approval, which reads very, very like­ly. I under­stand that I get 0.0381 of a Hud­bay share per cop­per share. I can’t see Hud­bay on the Aus­tralian exchange, so I’m assum­ing we get NYSC shares. Tony has men­tioned he prefers to stick with Aus shares. Would Tony ever enter­tain keep­ing inter­na­tion­al shares when they buy an Aus­tralian com­pa­ny? If so, would Tony base this deci­sion on its QAV score?” I think we have talked about these sorts of sce­nar­ios in the past, but I can’t remem­ber exact­ly what you said. Would you mind going over it again for us, how you would play this?

Tony  28:09

Yeah, sure. So, I think we had anoth­er min­ing com­pa­ny, a gold min­ing com­pa­ny, I think SR min­ing from mem­o­ry. In this par­tic­u­lar case, no, I’d be sell­ing it on mar­ket now that the bids hap­pen­ing. I don’t think anoth­er bid­der will come out to try and buy Cop­per Moun­tain because this is a scheme of arrange­ment, which basi­cal­ly means the board­’s agreed to merge the com­pa­nies. They go before a judge and get their approval. I think it needs to go into a share­hold­er vote, and then it goes for the reg­u­la­to­ry approvals as well of the coun­try involved. I don’t know the sit­u­a­tion inti­mate­ly, but it is an over­seas com­pa­ny. With a name like Hud­bay, I’d say it’s a Cana­di­an min­er, and I think C6C had its mine in Cana­da. Hud­bay would be short for Hud­son Bay, which is the big bay in the north, in the mid­dle of Cana­da, where it all began with the fur trap­pers and all the rest of it. A big part of Cana­di­an his­to­ry. And no, I would­n’t want to hold an over­seas stock nec­es­sar­i­ly. Apart from the fact that you’ll have cur­ren­cy issues with the share price move­ments over there when it does come time to buy or sell, you will need to take that into account. Div­i­dends will also have that sort of extra com­plex­i­ty to them, I guess. But poten­tial­ly there are tax­a­tion issues, and I could­n’t com­ment on what they would be from Cana­da to some­one in Aus­tralia. There are tax­a­tion treaties involved, but I know there are also lim­i­ta­tions to that. So, you could wind up pay­ing tax twice, although, you know, seek your own advice on that one. But I think the biggest issue for me is that it dis­ap­pears from any sort of scruti­ny in Aus­tralia. You’re not going to see arti­cles about it in the press, the finan­cial press. And so, it’s a sit­u­a­tion where you’ll be track­ing the share price and sud­den­ly see a move­ment, big move­ment up or down, and about a month lat­er you’ll get an email from the com­pa­ny say­ing this or that’s hap­pen­ing. So, you just can’t keep track of what’s hap­pen­ing with the com­pa­ny, real­ly. So, I would­n’t, I’d be sell­ing on mar­ket now and then tak­ing my cash and putting it some­where else. There’s noth­ing wrong with hold­ing over­seas stocks, but I just find that it’s just that extra dif­fi­cul­ty and com­plex­i­ty with track­ing it and deal­ing with cur­ren­cy and tax issues.

Cameron  30:21

A lev­el of com­plex­i­ty that you don’t need in your life.