Cameron  00:06

Welcome to an unexpected QAV event this week. We’re recording this on Tuesday, the 25th of April 2023. I’m in Brisbane, TKs in Toronto, where I wasn’t expecting to hear from him for a couple of weeks, but he surprised me with his presence. Like Jesus, just popped in all of a sudden. Like, “ah, I’m here.” How are you, TK?

Tony  00:29

Yeah, I’m good. I thought we had planned last week to do one this week at the same time.

Cameron  00:33

There you go.

Tony  00:34

Yeah. Anyway, I’m clear and free, so let’s go.

Cameron  00:37

That’s good. So, how’s the last bit of the travel been going?

Tony  00:42

Yeah, good. We had a couple nights and days in New Orleans before this. Now I’m in Toronto with Jenny and Alex who have arrived, which is good. I haven’t seen them for nearly a month, so that’s great. And Ruddy and I had time before New Orleans in a place called Amelia Island, just outside of Jacksonville in Florida, which was good.

Cameron  01:04


Tony  01:06

It’s called the Redneck Riviera.

Cameron  01:08

I saw your photo of the on the beach of Redneck Riviera. Tell me about the highlights of New Orleans. Did you do anything fun there?

Tony  01:16

I think it’s probably better to talk about the lowlights. I mean, I absolutely hated the French Quarter there. It was just full of people, really touristy. Hard to get around. And then you sort of went one street away and it was like boarded up places and it didn’t feel safe, so I highly recommend people don’t go to New Orleans for the French Quarter, which is the tourist attraction: Bourbon Street and all that. But we jumped on the bus and saw the rest of New Orleans and then went to other parts outside of the French Quarter, and it was a lovely town. Beautiful town.

Cameron  01:50

Well, it’s been, I think, as I said last week, it’s been probably twenty years since I’ve been in New Orleans, but I used to love the French Quarter. I mean, yeah, it’s very touristy. That’s true. But I love once you get off Bourbon Street and went out to, you know, some of the other blocks. You’d hit a few blues clubs and jazz clubs. But I do remember being there once putting my headphones on, just sort of walking, listening to music or something — it was before the era of podcasts. And then all of a sudden, just thinking, I haven’t been paying attention to where I was. I was the only white guy and people were giving me this look. I think one guy said to me, “you must be lost, boy,” or something like that. I was like, “yeah, I am, sorry.”

Tony  02:35

Yeah, we didn’t feel safe in some places of it, so we got out of their quick. But yeah, outside of the French Quarter it was fine. Was really nice, clean, cruisy sort of a place with good restaurants and bars and things. So, yeah, it was good.

Cameron  02:51

Did you see any blues? Any jazz?

Cameron  02:54


Cameron  02:55


Cameron  02:55


Tony  02:56

No, well there was literally nothing in the French Quarter.

Cameron  02:59

Really? Wow.

Tony  03:01

There was one street that the tourist bus guide said, “this is where the music is,” but it just looked really touristy as well.

Cameron  03:07

It’s changed a lot.

Tony  03:08

I don’t know if we were there during spring break or what, but it was full of frat boys and hens nights, and thousands of people just milling about doing nothing, getting in the way. It was just awful.

Cameron  03:19

Not your speed.

Tony  03:20


Cameron  03:21

No women flashing their breasts when people threw them chains of beads from balconies.

Tony  03:27

Oh, is that what that’s about? No, there wasn’t. There were people throwing beads from balconies, but it just seemed to be getting the young boys to fight each other to get them.

Cameron  03:36

No, you’re supposed to flash your boobs if somebody throws you a chain of beads.

Tony  03:41

Okay, no, that wasn’t going on.

Cameron  03:45

I flashed mine a couple of times when I was there, didn’t really get the reaction that I’d hoped for. Anyway. Oh, well, that’s disappointing. Have you’ve been paying attention to investing?

Tony  03:55

I have today. I had a bit of time to go over things today.

Cameron  03:59

Well, I haven’t, because I wasn’t planning on doing a show with you this week, so I’ve got really nothing to talk about. We’ve got a couple of questions that we’ll get into. I guess I can do a portfolio update. The market was tracking along quite nicely for a few days then again last week, and then they must have worked out that you were coming back soon, and everything sort of took a turn for the worst at one point there.

Tony  04:24

Is that because Tucker Carlson left Fox News or something like that?

Cameron  04:30

I saw that in the New York Times this morning. I did have to wonder how he had any credibility left with the audience after all of the revelations came out from the Dominion case, that he secretly didn’t believe anything that he said.

Tony  04:46

That was a good investment for the private equity people who paid $28 million for Dominion four years ago and then made $780 million US in four years.

Cameron  04:57

Well, yeah, they haven’t sold it. But yeah, I’m not sure where that money goes that they got from the settlement, but I’m sure some of it will get back to them. Maybe a special dividend or something. Wasn’t it to make up for lost revenue for the business for the last few years?

Tony  05:12

Oh, well it’s meant to be, yeah. But it’s an outsize payment. And then the second ones coming, which they’re talking about not settling.

Cameron  05:22

Smartmatic, or whatever it is?

Tony  05:24


Cameron  05:25

Well, portfolio report: since inception, were up 18.61% CAGR per annum according to Navexa versus the STW up 7.42% per annum over that time. So, it’s pretty good. What are we, nearly a month into this quarter? This quarter we’re up 4.57% per annum versus the STW, up 2.02%. So, you know, we’re having a good quarter vis a vis the benchmark. This financial year were up 15.7% per annum versus the STW, up 16.81%. So, we’ve nearly caught up to the benchmark for the financial year. We’ve still got a few months left to go and we’re outperforming it so far this quarter, which is fascinating because, you know, going back to November last year, we were at 3.2% versus the STW at 13.4. We were underperforming quite dramatically, and we have nearly caught up. So, that’s interesting.

Tony  06:35

Yeah, I mean, that’s just swings and roundabouts really, isn’t it, in the short term. The market, I think, had one of the best January’s ever, and now it’s come off again since then.

Cameron  06:43

I mean, we’re probably not going to get double market this financial year, but you know, even if we just match the benchmark, I’ll be happy, because not many fund managers, not many investors are able to even meet the benchmark, considering our long-term performance is like three times.

Tony  07:03

Well, as you say, it’s been a very topsy turvy year. So, to get 12% or whatever it was you said before we’re getting is pretty good.

Cameron  07:12


Tony  07:14

15.7, there you go.

Cameron  07:15

Well, and again, as we found the last couple of years, the breakdown of that according to Navexa, capital gain is only 7.17%, income return is 8.54%. So, more than half of that is coming from dividends and, well, we don’t have SKT — did we have SKT this year? It might have been the Sky… no, that’s in the light portfolios, it hasn’t even been in the dummy. They had this massive capital return that I know spiked one of our light portfolios, but that’s not part of this. Let’s look at the big ones for the dummy portfolio this financial year: LAU up 224% so far; RSG up 35; SMR, my accidental buy, up 46; TRS up 33; Woodside up 24; CLX up 36; CVL up 32; DUR up 41; IGL up 55. Yeah, so a lot of them have done well, but LAU what a what a corker that’s been.

Tony  08:34

There must be some big dividend payers in there, though, to have an 8% dividend yield. They’d be the coal stocks I would have thought.

Cameron  08:41

Well, Lindsey, LAU, 9% income return on that. But the share price has been very good as well. But yeah, we’ve done quite well out a couple of dividends from them; one in October and one in April that were both quite good. But yeah, I don’t know the breakdown for the rest of it. Good dividends this financial year from AMO, ASG, BFG, BRI, CVL, FEX. Big one from FEX. IGL, KOV, KSE, LAU, Myer. Myer actually hasn’t done very well from a capital gain perspective, it’s down 12%, but a nice dividend neutralised a lot of that. Yeah, they still haven’t paid out. I think that doesn’t pay out until, like, the 11th of May or something, the Myer dividend. It was crazy. Like, the ex-date was in mid-March and the payment dates in May. It’s one of those terrible ones, you know. Like in my alert spreadsheet, it’s technically a rule one sell except for we’re holding on to it because of the dividend, you know.

Tony  09:59

Well, a classic retailer to pay the invoice on the last day.

Cameron  10:04

Yeah, there on ninety-day terms for paying their dividends. Anyway, so that’s that. Portfolio doing good all in all. It’s been sort of a touchy year, but right now it’s looking pretty strong.

Tony  10:15

Yeah, good.

Cameron  10:16

Well, do you have anything else you want to talk about in terms of news of the investing world this week, TK? Or do we just get into some questions?

Tony  10:25

I guess just get into some questions. I don’t really have any news of the investing world, or news over here. I happened to turn on Bloomberg this morning because I was looking through some channels, and the headline was “Morning opening in Australia,” so I thought, okay, I’ll turn it on. It was nice to see the Opera House and the Harbour Bridge in the background of the TV presenter, who then talked about the US market. Nothing about Australia at all. So, that was disappointing.

Cameron  10:53

And of course, it’s ANZAC day here today and the markets closed anyway.

Tony  10:57

Right, because I did try and download a Fin Review before we went on air and there was none. Well, thanks for working on a public holiday, Cam.

Cameron  11:06

There’s no public holidays when you run your own business, as I’m sure everyone who runs their own business knows. Chrissy said to me, “oh, you’re not taking the day off?” And I’m like, “who’s putting out the podcast if I take the day off? Chat GPT’s not doing it for me, yet.”

Tony  11:23

You’re holding down the fort there. Alex is over here with me, so you’re doing it this week.

Cameron  11:29

So, speaking of which, I had to do the buy list yesterday. And you know, I hadn’t done a buy list for quite a while because I use Alex’s every week, and she uses your sheet. If I do one, I use the Flitman model. And so, I had to grab data out of Alex’s sheet, I had to grab data out of the work that Maxie does for us — I have a freelancer who does some analysis work for us each week and she’s out of New York. I have Chris Stratton who’s built his automated model that also cross references the manual data that he pulls out of Stock Doctor, and we cross reference that against Alex’s call on the manual data each week. So, I had four datasets, and then I had the Stock Doctor data set that I had to pull into the Flitman model, and I needed to pull all that data together and cross reference it against each other and figure out one version of the truth for this. Normally, it would have taken me all day and broken my brain to do that. I just opened up GPT and I said, “listen. I’ve got this problem, I need to integrate these datasets with these columns and this data, I need to compare this column in this sheet to that column in that sheet, and if it agrees I need this result, if it disagrees, I need that result. Blah, blah, blah, blah, blah.” I spent half an hour writing all of my problems into English language, gave it to GPT, and it was like, “sure, here’s how you do it.” Boom, boom, boom, boom, here’s a formula for this, here’s a formula for that, here’s a formula for this. I implemented it, and it bloody worked. And I tell you, it was insane how many problems it solved for me. I couldn’t have got through yesterday without GPT, it just absolutely saved my bacon yesterday without Alex. So, I tell you people, if you still think GPT is just a fancy chatbot and you do anything that involves information work, you’re really missing out. It absolutely blew my mind again yesterday what it enabled me to do.

Tony  13:37

Yeah, well as Ruddy calls it, Chat GDP.

Cameron  13:41

GDP? Okay. So, there you go. Thank you GPT4 for saving my bacon yet again yesterday. All right, well, let’s get into the questions. First one is from John. Hi, John. “In reference to share investing versus share trading on the ATO website for tax purposes, which one does Tony use?” And then he helpfully included a link to the ATO website. And I know we’ve talked about this before over the years. I’ve replied to John, “look, I’m pretty sure you classify yourself as a share investor as opposed to a share trader,” and we talk about CGT implications of buying and selling all the time. But do you just want to talk about that a little bit for John’s benefit, how you think of the difference and how the ATO thinks of the difference?

Tony  14:30

Yeah, sure. And I guess the disclaimer is this is not individual tax advice for John or for anyone else listening. So, look it up yourself on the ATO website, but more importantly, talk to your tax accountant about it. So, my understanding is that you can basically nominate which one you are yourself and as long as you’ve done a reasonable number of trades during the year you can nominate yourself as a share trader or you can nominate yourself as a share investor, and the ATO pretty much from what I’ve been told accepts that nomination. The difference being if you’re a share investor, you get the capital gains tax relief. Which means, if I hold a share for twelve months or more then the capital gains tax has halved, which I think is fairly important. The other option is to be a share trader, which just treats it as normal sort of operating expenses and income, just like you do on your own PAY tax form. So, if you’re investing in your own name and you make a capital gain, you’ll pay whatever your top marginal rate is of tax on that, and you’ll get no CGT relief. The dividends will be taxed at your top marginal rate as well. But if you’re an investor, you do get the CGT relief after twelve months. That’s probably the main difference. And certainly, share trading would help some people if they’re on a low marginal tax rate. It gets to be line ball if you’re, say, operating through a company where the company tax rate is at most 30%, and half of the top marginal rate is 27.5%. So it’s, you know, pretty close either way, really.

Cameron  16:06

So, what are the advantages of calling yourself a trader versus an investor, then?

Tony  16:15

There’s not a whole lot, you just treat it as an operating business. So, you’re conducting your business where your stock is shares, and you’re selling them and taking the income straight away to the P&L. Whereas as an investor, it’s more like a balance sheet item which is seen as an asset, and therefore you get capital gains tax relief. So, it just depends on what investment structure you’re using, what the tax rate is in that structure, and whether you want to get the deductions available for offset maybe against other income. Well, I guess that’s the same both ways. But I’ve never seen an advantage in being a share trader versus being an investor, because you lose that CGT relief.

Cameron  16:57

It sounds like you’re saying that if you’re a trader, you classify it as your source of income, whereas if you’re an investor, it’s a long-term wealth building exercises. Is that right?

Tony  17:09

Yeah, so one is seen as being a movement of assets and one is seen as been operating income, like you’re operating a coffee shop. Instead of selling coffee, you’re selling shares.

Cameron  17:19

Alright, thanks for explaining that. Hope that helps, John. The only other question I have is from Darryl. He’s asking for the latest view on using Renko charts. He says, “been noticing the press lately about WHC returns, and now their decision to go early on their mine expansion. I had a look at the charts and looking back in this case at least, following the Renko chart to sell would have given a much better outcome than the coal price sell.” So, he said Renko would have got him out at $8.50-$9, whereas the coal price commodity sell would have kicked in around $7. And I said, “the last I heard, you were still thinking about Renko charts and testing it.” Is that still where it’s at?

Tony  18:02

Yeah, so Ruddy did some analysis for me, and Ruddy being Ruddy gave it to me the day before we left for the for the States. So, I had a chance to go through it today when I saw the question, or actually I saw the question on Facebook a couple of days ago whenever it was put on there. I think the Renko charts are useful in situations like Whitehaven Coal where you’ve had a big a big increase in the share price and it’s a long way away from its sell price. We’ve talked about this before, when do you, sort of, sell out? Do you wait until the sell price and give all your capital gains back, or do you sell out earlier? And Renko has you selling out earlier. As Brett says, it’s kind of like a moving stop loss. There’s a mathematical formula behind it, which we could actually calculate and put into an alert, but it’s probably just easier to look up the chart and work out when to sell. So, Ruddy’s analysis actually showed that using Renko charts gave about a 10% better return than not using them. Now, that’s the first sort of piece of analysis that he’s done, and I’ve looked at, and it was done way back. It was using the first time I did a transaction dump from the dummy portfolio, which I think was about a year or a year and a half in. So, there’s a year and a half’s worth of data in it. So, we know what the results are from not using Renko charts, and then Mark went back and did two things: he didn’t buy a share that the dummy portfolio did if the Renko chart was red, so it was a sell. And he sold a share when the Renko chart went from green to red, which we may not have done for the dummy portfolio. Certainly, probably wouldn’t have done at the same time as the Renko chart turned to a sell. We use three-point trend lines. And sometimes it works and sometimes it didn’t, but overall, it was a 10% better-off result from using the Renko charts. So, I think it’s worth pursuing. My next plan would be for myself to set up a dummy portfolio and trade it using Renko charts as well as all the other things we use. We don’t change any of those, and give it maybe six months, at least, to see whether it turns out in real life to be better off than just the paper analysis we’ve done. And I think if we have two ticks for that, then I think we can implement it into the process.

Cameron  20:19

Oh, that’s really interesting.

Tony  20:20

Yeah. I think the main thing is it certainly will help in cases like the WHC case, where something’s gone up a lot and it’s a long way above its sell line. But it seemed to me just from what I saw today that it was also helping not buying something that was still red on the Renko chart, even though it may have been passing all our other tests. You know, in a lot of those cases they were still falling knives.

Cameron  20:45

So, you’re going to implement that sort of Renko dummy portfolio, and you’ll report back to us in six months.

Tony  20:54

Yeah, I’ll just pick the next top ten stocks in the buy list and put them into a dummy portfolio and trade them for six months or so, and see how they go.

Cameron  21:03

Oh, fascinating. Good timing on that question, Darryl, and thanks to you and Ruddy for doing that analysis for us, it’s interesting.

Tony  21:10

Yeah, and the other piece of analysis I also had time to go through today was Ryan’s work on buying from the top of the buy list versus buying from the bottom of the buy list, and similar sort of result. So, he did it differently. He went back through the history of all the buy lists that we’ve produced, and at least in their current form, that’s about two and a half years’ worth of buy lists. He picked, I think it was about ten or twelve at random, and then used the top ten stocks on the buy list at that time and traded them forward. And it was a bit of work, because he had to check the commodity charts and check for three-point sells for those stocks, and then if they were a sell, to buy another one from a buy list at that sell time. So, he’s done a fair bit of manual work on it. But again, his results are interesting. They’re showing that buying from the top of the buy list is better than buying from the bottom. And there was, I think, about two cases where it wasn’t, and they were pretty recent ones. But in the main, buying from the top was better than buying from the bottom. So, Dylan had done some work before Ryan to suggest that the QAV cut off should be 0.2 rather than 0.1, and I think from what I’ve seen in Ryan’s early results, that’s probably going to be the case. So, again, I’ll set up a dummy portfolio for that, and run it forward for six months and just see the difference in buying from the top versus buying from the bottom and validate that going forward. And then if that works, then put that into practice as well. And that will come with limitations, because we may not be able to find fifteen to twenty stocks with a QAV score above 0.2. So, that’s why I want to test it on paper first and get the kinks out from doing it live on a desktop going forward.

Cameron  23:00

Did that factor in ADT cut-offs?

Tony  23:03

He did do a bit of analysis for me. He bought the top ten stocks on the buy list and bought the bottom ten stocks on the buy list — and we chose ten because when he bought twenty, there was a big overlap because there weren’t enough stocks to separate them. So, we did ten. And then he also did the top ten with an ADT above, I think it was either $100,000 or $500,000. So, larger ADT stocks from the top, and they also perform better as well.

Cameron  23:32

That’s interesting. So, higher ADT stocks perform better than lower ADT stocks.

Tony  23:32

Well, I think it was just because they were coming from the top of the buy list was the more important thing.

Cameron  23:35

Oh, well good stuff. It’s interesting. I love it when there’s new ideas. Speaking of new ideas, somebody asked me again yesterday when they can get their hands on the latest version of the Brettelator that we’ve been testing for quite a while now, the one with the second buy line built into it. I know that the last email conversation we had about this was, I think, before you went away. You said you were still testing it. That’s still the status on that?

Tony  24:13

Oh, no, it’s fine to go out. It’s okay.

Cameron  24:16


Tony  24:17

Yeah. Looks good to me.

Cameron  24:19

Well, that’s exciting. I’ll work with Brett. I’ll shoot him an email after this and we’ll get a public version of that ready. So, cool. Thanks for that. And thank you to Brett Fisher for his constant work on the Brettelator. One other thing I forgot to mention at the beginning of the show was one of the things I decided doing the buy list yesterday is that steel was a sell. Have you looked at the steel chart?

Tony  24:47

I haven’t, no, I haven’t looked at the charts for a while.

Cameron  24:49

Steel sort of plummeted this month and I decided it was a sell, which had a material impact because we owned a lot of BlueScope in the dummy portfolio and the light portfolio, and in my super. So, I had to sell a tonne of BlueScope yesterday, and sold it all at a profit, too, which was nice. But again, it was one of those indicators where — I didn’t look at the Renko, though, — but it was one of those indicators where the commodity sell got us out while the share price still looked relatively healthy. It hasn’t started to turn down, I don’t think, dramatically. I haven’t looked today. Well, I didn’t look at what happened to it yesterday after I dumped it, but yeah. Actually, it fell a lot yesterday. Yeah, I think a lot of people decided it was a sell. It opened at 21.39 and hit a low of 20.53 yesterday, stabilised around $20.70. But it’s been going up for the last six months/year to date, it’s up. Go back a year ago, it was trading at $16.76, now trading at about $20.64. Apart from a bit of a fall yesterday, it had a bit of a drop, the 20th of April was when it started coming back. It has come back a little bit, I guess, in the last week, but yeah, anyway, our commodity sell got us out of BlueScope, so we’ll see how that works for us. But just an FYI for people if they didn’t notice that in the buy list yesterday, I think steel is a sell. Check it for yourself, obviously, see what you think. But looks like a sell to me. Well, that’s it. I’ve run out of things to talk about.

Tony  26:33

Oh, look, I got a pulled pork ready.

Cameron  26:36

Oh, I forgot. You got a pulled pork. Nice. We should have done that before the Q&A. What are you doing for the pulled pork this week, Tony?

Tony  26:42

The National Australia Bank. I think someone asked for it last week on the ADT stock that was new to the buy list, from memory.

Cameron  26:51


Tony  26:53

So, I mean, I would think all the listeners would know National Australia Bank, it’s one of the big four banks in Australia. The big four banks in Australia tend to have strengths and weaknesses in different areas, and NAB strength is in business banking. So, less so in selling mortgages, a little bit in credit cards. They have a bank in New Zealand. But it’s your vanilla sort of mortgage lender, and in NAB’s case, business lender as well, that’s its strength. And also, wealth. So, they bought one of the old stockbrokers in Melbourne, JBWere, a little while ago, and so that’s enabled them to have links into high-net-worth individuals and home offices and things like that. So, they’re NAB’s strengths. But otherwise, it’s much like the other big four banks. It’s run by a guy called Ross McEwan, who’s very well regarded. I tend to think probably one of the best CEOs in the banking space. And also, the chairman is an experienced banker by the name of Phil Chronican, and he’s also highly regarded. So, I think the bank is well managed at the moment. It does come with a risk, in that there has been a bit of talk around town that Ross McEwan may decide to resign or retire. And the reason for that is that when he took the job, he came across from the UK — he is an Australian, but he’d been over in the UK fixing up banks after the GFC — and came back to run NAB, but said he’d do it for five years. And that time, I think, is in its last year now. And so, there’s speculation about who will take over and what it might mean for NAB. So, that is a risk. CEO changeovers, even when they’re well managed — and I think with someone like Phil Chronican in the chair, whatever happens will be well managed. And of course, Ross McEwan may decide to extend. He won’t be tied to his initial forecast of a five-year term if it suits him. So, I think it’s a risk. There’s always a risk when new CEO comes in that they might clear the deck, so to speak, and write things down, which depresses the share price. And that’s usually for two reasons; one to reset the floor for all their options going forward off a low base, and secondly, it’s probably their only time to do it during their tenure as CEO. Because if you don’t clear the decks when you start and take down all the provisions you need to, then it’s pretty hard to do later on because it will affect the share price. So, there is a risk that may happen. But we don’t know. It’s only a risk, I guess. I’m kind of leaning towards the side, with Chronican as Chairman, that it will be well managed whatever happens. Anyway, that’s the first risk. I guess the other thing to talk about with the big four banks in particular is interest rates. So, interest rates are going up as we all know, and the banks in these kinds of high interest rates or rising interest rates times make more money than when interest rates are lower — out of mortgages anyway — because they raise the rates quickly and they don’t raise the rates on deposits equally as quickly or to the same extent, so their margins improve when interest rates are rising. But I guess the risks at the moment are that if interest rates rise too much and tip the country into recession, then the banks are going to face more mortgage defaults, which is also a bad thing for banks. And one of the biggest indicators of how well the banking sector is, is how much they are providing on their balance sheets for bad and doubtful debts. They’re not providing as much as they have been in the past at the moment, but if we do look like going into recession, they’ll start putting away money to cover their losses for people who default on their mortgages, and that will be a material impact on their profits. So, that’s potentially a risk as well. And then the other risk is that we may be at peak interest rates for this cycle. If we’re not there, we’re close to it. The RBA didn’t put interest rates up this month, they’re calling it a pause, but there are signs inflation may be nearing its peak and might even be coming down. So, if interest rates start to go down again, then that kind of margin increase for the banks is over and they’ll start to reduce their margins. And I guess if interest rates get very low again, they’re going to have to do what they did in the past and look for other ways to grow their, their bottom lines. They’ve all now exited out of insurance and wealth, I guess were the two main adjunct businesses they got into when interest rates were low, and they may start looking at things like that again which comes with risk. And they may also start looking overseas, which has never been a profitable hunting ground for Australian banks for a whole variety of reasons. Least of which is that, particularly in the US, retail mortgages don’t work the same way as they do in Australia, and Australian CEOs don’t have experience with that kind of market in the way they do in Australia. So, there’s risks, I guess, in the big four banks at the moment, but that’s one of the reasons why NAB is on the buy list. It’s a big, strong company with lots of institutional investors, lots of analysts looking at it, and yet it pops up on our value screen. So, I think the reason for that is because people are factoring in some of these risks into the share price. So, that’s, you know, good for us. When the price is right, I’m happy to take on that risk. And so, NABS on the buy list and there’s no reason, I think, not to buy it given all the risks above I’ve just spoken about. In terms of the numbers, like I said, it’s a very large ADT stock: it’s $131 million on average traded per day. So, it’s quite large. I’m using a share price of $28.46 in my analysis, which is roughly about what it traded at yesterday. It’s less than consensus target, but it is above IV1 and just above IV2, and it’s also greater than book plus 30%. So, even though it’s on our value buy list, it doesn’t pass any of those value metrics. But what it does pass with flying colours is Pr/OpCaf. So, price to operating cash flow was about three times for this bank, which is quite low. Stock Doctor rates NAB a star income stock, which we score as half a point, so it’s a different rating to a star growth stock which we give a full point to. And this is the way that Stock Doctor rates companies which are suitable for people who want dividends and income rather than necessarily growth. The yield on NAB is 5.31%, so it’s quite a high yielding stock. But again, doesn’t pass our tests because it is yielding lower than the average of the mortgage rates out there in the market. Just again, slightly lower. And that’s the interesting thing with NAB, I think, is that it keeps scoring just below our thresholds for IV2, book plus 30% and dividend yield, which, again, I think is probably due to the fact that it’s such a highly traded stock with lots of people focusing on it and investing in it. So, I wouldn’t expect it to be materially over any of our normal sort of benchmarks. Forecast growth in EPS of 16%, which again is good, nice and strong, but doesn’t score for our growth over PE target, which we want 1.5 to score a one, and this is 1.21. So, again, a good solid score, but just below our cut-off for our rating. Financial health in Stock Doctor is strong and steady. The PE is 13.1, which isn’t too bad. It’s below the market average I thought, but it’s not quite the lowest of the last five halves. Three years before it had a lower PE, so I think potentially when we roll around into the next half, it will score on that metric. It has had a recent upturn, so it’s back on the buy list which is why we’re talking about it. So, it scores for that, but zero for consistently increasing equity. So, in the last year in particular, usually equity is reduced slightly. All in all, for the numbers, the quality score is 8.5 out of 16, which is 53%, and the QAV is 0.17, which is reasonable but not quite at the top of the buy list. And I guess the other thing to note about NAB is it’s the only big four bank on our buy list currently if you exclude Macquarie, which is the fifth bank and is higher on the list but NAB is our big four bank on the buy list at the moment.

Cameron  35:30

Thanks, Tony. Your scores are a little bit different to what I got yesterday: I gave it 63% and 0.20, but close enough. And it was also at a different share price to, it was $28.77 when I did it.

Tony  35:43

Yeah, I just had a look at the manual score for PE, so I went back and checked it, and the spreadsheet, the download, I think the last one that Alex did, had it scoring as 1, but I think it’s a 0. That was the difference, I think, in those two scores.

Cameron  35:58

Right. I checked all of mine against Chris’s automated report yesterday. Should be right, but I can’t remember. I can look it up, actually.

Tony  36:08

Yeah, have a look in Stock Doctor. I’m pretty sure that the sixth PE in the past was about seven from memory.

Cameron  36:19

Record low PEs. I gave it a minus one. What did you give it?

Tony  36:23

I gave it a zero.

Cameron  36:25


Tony  36:25

So, minus one would be the case if it was the highest PE in the last three years. I get PE currently at 13.11 and the six before that were 14.1 in September, 15.5 in March, 15.7 in September ’21, 17.18 March ’21, 17.82 September ’20, and then 7.74 in March ’20. So, that’s the one that’s lower, and that’s six PEs ago.

Cameron  36:57

I’ll have to drill down into the Stratton report and see why that didn’t get picked up yesterday.

Tony  37:05


Cameron  37:06

All right. Well, thanks for that. NAB. Yeah, looking at the share price — and I did buy some NAB recently — but the share price has been sort of a little bit topsy turvy over the last year. A year ago, it was trading around 3274. It’s currently trading at 29ish today. 2879 when it closed yesterday. But it’s kind of had some peaks and troughs there, down as low as 2592 in May last year. Not exactly a very consistent looking chart, but it’s done really well in the last month. It’s gone from, well, 27 something up.

Tony  37:47

Yeah, I think that’s the case with the banks since the interest rates started rising. No one can work out whether it’s good or bad. On the one hand, it’s because the bank margins increase, but on the other hand it’s bad interest rates have risen so quickly that we could go into recession, which will hurt the banks. So, it has been a topsy turvy year for the big four banks.

Cameron  38:06

And even if I look at the five-year chart on NAB, five years ago it was trading at $28.59. Today, it’s at $28.79. So, you know, apart from the COVID cough when it dropped down to 15 bucks, it really hasn’t done anything in five years. So, you know, blue chip stocks, you don’t really expect a lot of growth out of them. But this is like… Actually, god damn, go back ten years and it was trading at $32.10 ten years ago, so it’s pretty much done nothing in ten years.

Tony  38:43

Yep. It’s basically giving a dividend yield only for the last long period of time. Yeah.

Cameron  38:49

So, why would we even buy it?

Tony  38:52

Yeah, I think for me, the Ross McEwan story I think is a good story. I think he’s a good CEO, well experienced, well credentialed. I think if anyone’s going to make a change to NAB, he will. That’s the first thing. And the second thing is if interest rates don’t cause a recession, banks should do well,

Cameron  39:13

Yeah, okay. So, with him and the business conditions, they might do well as a business, but its share price in ten years has gone nowhere. You think there is still potential for upside in the share price with all of those things you mentioned?

Tony  39:29

Well, we’re playing the forecasting game, right. You know, you and I don’t know enough about banks to accurately predict how they’re going to go. I just like to price and the fact that it’s well run. So, you know, it scores reasonably well on quality and scores reasonably well on price. It’s a big company. It may have gone sideways for a long time; it might be about to have its day in the sun.

Cameron  39:51

Yeah, it’s a good reminder. I mean, I’ve talked about this recently on the show: just trust the numbers and don’t get involved.

Tony  40:01

Yeah, exactly. And there’s also a bit of an old saying about buying the cheapest bank out of the big four and you can’t go wrong. They tend to regress to the mean. Even though NAB’s been going sideways for ten years, it will one day get patched up and shine a bit. So, yeah.

Cameron  40:19

But you know, if the numbers tell us to buy it, we buy it and shut up and trust the system.

Tony  40:24

Yeah. And if it doesn’t, we sell it. You use the system to sell it.

Cameron  40:28

Alright, thank you for taking us through that. Got anything else you want to share with the punters? How are your horses doing?…

Cameron  1:16:17

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