CAGR reporting, YAL’s PrOpCaF, US Portfolio, SGM market update, Lithium a Sell for PLS, Viva Energy & Vitol, QAN troubles, Mortgage rate change 6.58%, CCP now ex-div, Brisbane catch up, Pulled Pork: WGX, borrowing against a mortgage to invest in shares, ex-dividend and Josephine status, and charting our buy list. 


[00:00:00] Cameron: Welcome back to the QAV podcast, episode 6 38, 19th of September, 2023. How’s the Gold Coast tk

[00:00:10] Tony: Very nice. Very, very good. Jenny’s just left. She’s going to the airport, as we speak. And then I drive

[00:00:19] Tony: out tomorrow morning.

[00:00:21] Cameron: the way back to Sydney, or are you gonna Wagga then to Sydney?

[00:00:25] Tony: Well, what was further than Sydney?

[00:00:27] Cameron: Is it?

[00:00:28] Tony: on the Gold Coast. Yeah, it’s halfway

[00:00:29] Cameron: Oh Yeah. that’s right. The other border.

[00:00:34] Tony: Yeah, I’m not sure. I mean, I plan to drive straight through it, but if it gets late. Or I get delayed, I’ll probably overnight

[00:00:38] Tony: somewhere. I don’t know.

[00:00:41] Cameron: You’ve done a bit of driving in the last few weeks

[00:00:43] Tony: I have, yeah. Cape Shank to the Gold Coast with a couple of

[00:00:47] Cameron: Bri, to Brisbane.

[00:00:49] Tony: To Brisbane, yes, you’re

[00:00:50] Tony: right. Yeah.

[00:00:52] Cameron: Thanks for coming up the

[00:00:53] Tony: Ah, that’s right, that was lovely. Lovely,

[00:00:55] Tony:  to catch up with people.

[00:00:56] Cameron: Sorry, there. weren’t more people there. A lot of people did send their excuses. It was [00:01:00] a little bit late notice, I think. A lot of people had other

[00:01:02] Tony: Yep.

[00:01:03] Cameron: organized, but a couple dropped out on the day. But, it’s nice for the people who turned up to get to, I guess they just got a little bit more quality time with you.

[00:01:12] Tony: Yeah, they had good questions too and good feedback. It

[00:01:14] Tony: was great.

[00:01:16] Cameron: Alex Franklin sent sent me a, summary of all of his questions and all of your answers today, which is good. I sent it to your Alex, because I thought it might be good fodder for the QAV book. There was a lot of good, detailed stuff on, well, why do you do this and not that? And how did you come to the decision to do this and not that?

[00:01:36] Cameron: That’s good stuff.

[00:01:37] Tony: yeah, it was. Yeah, we had a good discussion. He kept apologizing for asking questions and I said, it was fine. Just, we should be talking about this on the podcast.

[00:01:47] Cameron: Yeah, well, we can do that. I’ll invite him to come on and he can re ask them or something.

[00:01:52] Tony: Yeah, there’s lots of good discussions. A couple of things were, were new to me, even. I mean, someone was talking about stage 3 [00:02:00] tax cuts and, how when the 30% Personal income tax rate rises to a new threshold, which I think is 200, 000. basically if your only income is from dividends and they’re fully frank, you’re pretty much paying no tax.

[00:02:16] Tony: So, that was interesting. I hadn’t worked that one out myself. And look, I guess, seek tax advice before you change plans to, to take account of that. But, made sense to me.

[00:02:27] Cameron: And I think that was Phil, who I believe is a doctor who was there with his son, Joe, who’s studying exercise science and sleep science, both of which I need help

[00:02:38] Tony: Yeah, I should have, I should have been asking him questions if

[00:02:41] Tony: I’d known that’s what he was doing.

[00:02:43] Cameron: I said to him, Oh, you can tell me why my body hurts so much. He said, it’s cause you’re old. I was like,

[00:02:48] Tony: Ahahaha!

[00:02:48] Tony: He didn’t say Kung Fu.

[00:02:51] Cameron: I said that

[00:02:51] Cameron: and Kung Fu.

[00:02:52] Cameron: Yeah. I added the Kung Fu on, but my body hurt before Kung Fu. It just hurts in different ways now.

[00:02:58] Tony: Yeah. Oh God, [00:03:00] yeah. I know what you mean. I haven’t been doing much. I strained the calf about a month ago. My body is like when one muscle goes, they all go. It’s like a union.

[00:03:10] Cameron: Hmm.

[00:03:11] Tony: So, I’ve just been, doing lots of sort of physiotype exercises to try and strengthen everything back up again.

[00:03:18] Cameron: How’s it going? You feeling

[00:03:19] Tony: Good! Yeah!

[00:03:20] Cameron: working?

[00:03:21] Tony: Yeah, I played golf three days in Bonneville.

[00:03:24] Tony: In Coffs Harbour, which was lovely. Great course. and survived. I haven’t played on the Gold Coast, and we’ll see how I go back in Sydney

[00:03:31] Tony: when I see the physio. But yeah, getting better.

[00:03:32] Tony: It’s good.

[00:03:33] Cameron: Didn’t play on the Gold Coast. How come? I thought that’d be like perfect golfing opportunity. Just

[00:03:37] Tony: It is, it is. Yeah, it was pretty much a family vacation, which

[00:03:42] Tony: was good. Caught up with Mo.

[00:03:44] Cameron: to. Alex Kynaston for last week or a few days ago, whenever it was.

[00:03:49] Tony: Yeah, she’s travelling too. She’s, she’s driven from Melbourne and she’s on her way up to Cape Tribulation.

[00:03:55] Cameron: Yeah.

[00:03:56] Tony: Must be genetic, the Kynaston’s like travelling by

[00:03:59] Tony: [00:04:00] car. I love road trips,

[00:04:02] Tony: so

[00:04:02] Cameron: Me too.

[00:04:03] Tony: might be genetic. Yeah.

[00:04:04] Cameron: I like, I like just getting off the beaten track and… Going to little towns and stopping at little cafes in little towns and talking to the locals and seeing the little local eccentric, eccentricities of Whether it’s in the US or it’s here like it’s always, well, Europe. It’s always fun.

[00:04:25] Tony: I’m far too introverted for that. I need a buddy to do that for me. Take him with you. like, you spend a lot of time in small towns talking to the locals.

[00:04:33] Cameron: I take, I take Chrissy That’s what Chrissy does.

[00:04:35] Tony: Ah, okay. Oh, good.

[00:04:38] Cameron: Chrissy makes friends easily.

[00:04:40] Tony: Right. Yeah. So

[00:04:41] Tony: is Jenny.

[00:04:42] Cameron: Hmm.

[00:04:42] Tony: And Ruddy. Yeah.

[00:04:43] Cameron: That’s why introverted guys like us are married to women like them and you’re

[00:04:48] Tony: Yeah, we’re good.

[00:04:50] Cameron: Your other

[00:04:51] Tony: We’re good teams, my

[00:04:52] Tony: other wife. Yeah.

[00:04:53] Cameron: Well, speaking of good teams.

[00:04:55] Tony: hang on. Before that, just while we’re talking about the Brisbane catch up, two more points I wanted to highlight, [00:05:00] just because they were so good. One was a question, from Alex. Franklin again about why QAV wasn’t using metrics like return on equity.

[00:05:09] Tony: I think he, he particularly focused on return on invested capital. And,I spoke to him about that. And I think I’ve mentioned before that ROE in particular, and I guess versions of that, like ROIC or ROA have always been focused on by both management and investment investors. And when investors started focusing on it, Management started focusing on it, started gaming it.

[00:05:32] Tony: So it hasn’t always been a clean metric. And of course, equity can be affected by how much gearing there is and what assets are on the balance sheet and which ones are converted to leases, things like that. So I, I kind of lost faith in it. but along the way, one thing I didn’t talk to Alex about, which I I

[00:05:48] Tony: started to use. A metric which I developed for myself, which I called ROPE., which was return on purchased equity. ’cause one of the things I was finding was [00:06:00] stocks with high ROE, high ROIC, et cetera, et cetera, generally, had a high price because people were buying into them. And that kind of made sense, which the, the value of that stock to me.

[00:06:12] Tony: And I was trying to mathematically work that out. So I would just,the r Well, I forget exactly what I did, but I converted the r o e equity per share into what I’d paid for that equity per share. So I, divided it by price and then worked out the return that I was getting based on the high price I had to pay for these companies that had I ROEs.

[00:06:32] Tony: and then I found that was, complicated and, and was correlating to. Things like price to cash flow, which took the price into account as well as how much cash the company was throwing off. So, eventually I ditched it in favor of some of the other things we used, but it was an interesting, thought provoking question and thought I thought it was worthwhile talking

[00:06:51] Tony: about on the show.

[00:06:53] Cameron: Hmm. Well, that’s

[00:06:55] Tony: And I want,

[00:06:55] Cameron: was up, Oh, I was just going to say, yeah, when I was up at

[00:06:58] Cameron: the, Stock Doctor meetup [00:07:00] in Noosa, last week that Ed Nixon invited me up to, yeah, I was talking about the reason we use operating cashflow is it’s priced operating cashflow. It’s just because. You feel like it’s the hardest thing to game.

[00:07:16] Tony: Correct.

[00:07:16] Cameron: It’s the cleanest, the cleanest metric we can get, on the

[00:07:21] Tony: And even, even, even with that, I mean, there’s going to be a question later on about Yankol and how some people wanted to back out the Income tax payments from the operating cashflow to get a cleaner number. So, obviously it’s a sore point for someone, maybe management, that their cashflow looks lower than it should because they had to pay tax.

[00:07:39] Tony: But hey, that’s the fact of life. If you’re a business, you’ve got to pay tax.

[00:07:43] Cameron: Hmm.

[00:07:44] Tony: Yeah. So cashflow is pretty clean, is pretty clean. a couple of other points that were made. I had a good discussion with Ed, so, Ed was lovely enough to bring me a gift, which was fantastic. I haven’t drunk it yet, but I’ll put it, put it away.

[00:07:56] Tony: but the point he, he. He made was that, [00:08:00] he appreciates QAV because he never came across a way to learn the stuff that we talk about. And that got, got us into a discussion about how the whole wealth industry or financial services industry is set up to complicate things and take fees from you.

[00:08:16] Tony: And he had a great quote, which I liked, which was that, returns are negatively correlated to fees. And I thought that was so true. the more you pay someone to manage things for you or to give advice, the worse the returns are. So, yeah, good, good quote, Ed.

[00:08:31] Cameron: Yeah, I like it. It’s a lot of fun. Good guy.

[00:08:34] Tony: Yeah, yeah, and so, I mean, that’s the, I guess, the question that everyone needs to… Focus on is Australians are so shy at talking about their finances and investing, and this stuff isn’t taught in schools and,when it’s taught in universities, it tends to be classical investing type things like,Efficient Market Theory and Black Scholes method for it.

[00:08:58] Tony: Pricing options, etc, etc. [00:09:00] And there’s no real practical advice that I’ve come across except for digging it out of the dirt yourself at the local bookstore, or I guess it’s better now that all the stuff’s online, but yeah, unless we’re, unless we’re keyed into things like the QAV podcast and there’s a couple of other ones out there I guess, but it’s pretty hard to do it, to, to learn this stuff, so I think that’s a real problem with our society.

[00:09:23] Tony: I don’t, we’re going, we’re doing our bit to solve it, I guess, or the help to solve it, but, it needs, it

[00:09:28] Tony: needs to be a lot more done.

[00:09:31] Cameron: Yeah, well that gets back to the argument I’ve been making to the nice folks at Stock Doctor for the last four years. It’s like, you may have other people that, have a long track record of being successful investors using Stock Doctor on top of Tony, but how many of them are willing to teach people?

[00:09:50] Cameron: How they use Stock Doctor to be successful. I mean, I don’t think they have anyone else. I mean, there’s like, there’s plenty of people out there who on [00:10:00] TikTok that’ll teach you how to invest, but I don’t think many of them are actually successful long term investors.

[00:10:06] Tony: Mm.

[00:10:07] Cameron: And the people who are long term successful investors don’t usually don’t want to.

[00:10:11] Cameron: Share, how

[00:10:12] Tony: Yeah, I mean,

[00:10:14] Cameron: can’t be bothered.

[00:10:16] Tony: well, it’s a bit of both, but I think there’s also this kind of truism that you had some kind of precious IP and you shouldn’t share it because it’ll erode your performance. but, yeah, I think that’s the wrong mindset. don’t, if we have more investors in the stock market, there’s more money.

[00:10:32] Tony: So it gives you more opportunity, I think, to, to invest in the stock market rather

[00:10:36] Tony: than less.

[00:10:38] Cameron: Yeah. Well, speaking of investing in the stock market, Tony – CAGR reports. So in the last

[00:10:44] Tony: Yeah. Thanks for giving me all these detailed questions while I’m on holiday.

[00:10:49] Cameron: I held off for the last week and waited till you were ready to do this week. I thought, so, we, you and I had discussed over months that we didn’t understand. [00:11:00] How Navexa reports were working. We tried to talk to the folks at Navexa and they basically tried to explain it but we didn’t get it. And they said you should just, if you feel that way you should just build your own.

[00:11:11] Cameron: So I tried to do that using ChatGPT. And, look, I’ve spent hours and hours and hours on this over the last few weeks. I’m, I’m pretty sure something’s wrong, but I’m not smart enough to figure out what it is, neither is ChatGPT apparently. So, I thought you’d be able to take a quick look at it and figure it out because you’re smarter than ChatGPT.

[00:11:32] Tony: Well, I mean, I did have a look at it, whether I figured it out or not, I’m not sure. But, but I actually think Nevex is pretty close to the calculation, the correct calculation, after I crunched some numbers myself. so, first of all, yeah, I did a similar calculation to you using a spreadsheet and the starting portfolio, which I think was started in September.

[00:11:52] Tony: The second four years ago, starting value was 20, 000 or maybe a little bit higher than that because we had some [00:12:00] investments before then. and then we know what the price is today and it’s four years apart. So we can calculate CAGR using RRI, which is the formula in Excel, which gives you simple CAGR.

[00:12:10] Tony: and I was, I was getting 14. 33 percent with that, which I think you got, which is, what Navexa is telling us. So, well, I think Navexa was about 15. So there was a slight difference between Excel and Navexa. And I’m willing to accept that’s the difference between the simple compound growth calculation of RRI versus what Navexa does, which is… I guess they claim, and it’s probably true, that it’s the calculation that fund managers use, which is about time weighted money. So, I guess in a nutshell, Navexa take every transaction, as a discrete event, sum them all up, and then, work out the number of days that you were invested during that time, and add all that up, and then get a return based on the summation of all the…

[00:12:59] Tony: Different [00:13:00] investments and how long they were in the market for. so we’re not that far apart. I mean, I was getting Navexa at, 15. I’ll

[00:13:07] Cameron: I just looked at it, it says 15. 74, but yeah, around 15 and a half to 16.

[00:13:12] Tony: Yeah. So we’re up by a percent. and I mean, given answers, a simple calculation, there’s, is a bit more accurate, or I shouldn’t say accurate, a bit more complicated, but I think that would be the difference. The big thing that was, that I focused on apart from that was STW. Because, that, that looked, that looked funny.

[00:13:30] Tony: so I went and got, downloaded the, what’s it called?

[00:13:33] Cameron: AXJOA.

[00:13:34] Tony: Yeah it’s available if you Google ASX200, all ordinaries accumulation index.

[00:13:39] Tony: It’s in Yahoo Finance or it’s on, it’s on the, S&P page, I think, to put the index together. And I was getting a CAGR by doing the R R I calculation of 6.7%, which was again, I think the same as Navexa, pretty close to it anyway. So I think, because you were using,

[00:13:58] Tony: what were you using in [00:14:00] Navexa?

[00:14:01] Cameron: I’m using S, STW. Yeah.

[00:14:05] Tony: Yeah. And

[00:14:05] Tony: you’re getting 6. 6 percent

[00:14:08] Cameron: Well, no, in the spreadsheet, and I, again, I’m pretty sure I’m doing something wrong here, but in the spreadsheet I’m getting 2. 12 percent for the STW.

[00:14:19] Tony: No, I think that’s wrong. Let me have a look. I put them into a spreadsheet myself. Okay. So oh, sorry. Yeah. Yeah. Yeah. Okay. I take that back Cam, sorry. STW is getting 1. 4%, is strange. And the ASX 200 Accumulation Index, when I downloaded it, I was getting 6. 7%. And for STW, I was simply using the starting price at the same time we started the dummy portfolio. And the price today so 62. 15 back in September 2019 and I did this this morning 65. 80 so another big [00:15:00] increase 1. 4 percent CAGR. But if I looked at Navexa, Navexa had, so Navexa talks about the It calls it the S P D R 200 fund, but I think the code is STW it’s getting 6.66%, which is what I got when I plugged in the A S X 200 accumulation, a accumulation index amounts for September, 2019 and today.

[00:15:28] Tony: Yeah,

[00:15:29] Cameron: Right.

[00:15:31] Tony: so the, so I think Navexa is right. But if you do the calculation for STW, like using Stock Doctor for example, which is what I did, it doesn’t add up. But if you use, if you google ASX 200 Accumulation Index and do it manually using RRI in Excel, I got 6. 7 percent and Navexa has got 6. 7%, so I think that’s right.

[00:15:55] Cameron: So this is the AXJOA.

[00:15:58] Tony: Yeah, [00:16:00]

[00:16:00] Cameron: Okay.

[00:16:02] Cameron: Alright, well I’ll plug those into my spreadsheet and see if it… what it comes out with. But if, if we’re getting roughly the same results as an Navexa, then I guess I can go back to an Navexa. But I was looking, I guess over the last few months, I was just looking at the STW share price. And

[00:16:17] Tony: I know,

[00:16:18] Cameron: and even when I,

[00:16:19] Cameron: I saw a few people last week pointed out that I hadn’t included the dividend, the STW’s dividends, and then the reinvestment of those dividends.

[00:16:28] Cameron: So I went through and worked all that out, and it, and it didn’t help much. It, it just added, added, a couple of tiny, decimal places to it, but not, not a great improvement. So interesting. Okay. So STW and AXJOA, I’ll compare those. Thanks for figuring that out.

[00:16:48] Tony: yeah, so I don’t know why STW, like in Stock Doctor, has a very small RRI, but if you use Navexa, and if you use the, the All Ords Index, Accumulation Index, or sorry, not the All [00:17:00] Ords, the ASX 200, I’m getting the same number as Navexa, 6.

[00:17:05] Tony: 67%.

[00:17:05] Cameron: Thank you, Tony. Yankol. Now, one of our new members, John, asked me a week or so ago why YAL wasn’t on our buy list. I had a look through the checklist and I said, yeah, the PropCaf was too high. now, I went in and looked at Stock Doctor’s numbers, it reported that the operating cash flow per share was 65.

[00:17:31] Cameron: 3 cents, price was 5. 01 at the time, so it had a PropCaf of 7. 67 above our cutoff of 7. John said, well, that’s not what he was getting with his numbers. He had it down about 2, the PropCaf, looking at the numbers I think he was getting from the, the, financial report. So I went and had a look at Stockopedia’s numbers, and we’re going to [00:18:00] have a guest from Stockopedia, Chris Batchelor, on the show in a couple of weeks to talk to us about Stockopedia and their vision for the world, looking forward to that because I’ve been using them a lot lately, to test different things.

[00:18:11] Cameron: And actually, one of the good things about having Stockopedia is I can see where the anomalies are with things like this, where Stock Doctor reports one thing and Stockopedia reports something different. they reported, Stockopedia this is, reported the price to operating cash flow as 2. 92. So I went back to Stock Doctor and asked them about it.

[00:18:32] Cameron: They reported back that they thought their numbers were right. And they sent me a screenshot of, YAL’s,last report. Where it shows income tax paid of nearly 1. 7 billion that’s coming out of its cash flow number. which then says sort of the net operating cash flow for the period ending the 30th of June, 2023 was 89 million.[00:19:00]

[00:19:00] Cameron: But, I still, I still couldn’t figure that out. Even if that is in fact legitimate, you can take out the. Income tax, which, which I believe is how operating cashflow should work, right? You take out income tax. I went and looked up the definition of operating cashflow and they all said it was after income tax had been paid.

[00:19:21] Cameron: You’re frowning at me though.

[00:19:23] Tony: Well, then, well, unless there’s different accounting statements, standards, I went to the… Operating cash flow statement for Yarn Column, it’s in, so, yeah, it’s a moot point. I would have thought income tax was part of operating, but anyway.

[00:19:37] Cameron: But I still couldn’t work out, why the, how the stock doctor numbers were working because.

[00:19:46] Tony: Yeah,

[00:19:47] Cameron: Yeah, go on.

[00:19:48] Tony: Yeah, so, there’s, I think the key might be that Stock Doctor, do a rolling 12 month operating cash flow figure. So if you go into Stock Doctor, and look at [00:20:00] the Get down, drill down to the operating cash flow page, you have a checkbox, and one says, annualized, and one says, as reported, and that’s, that’s probably, that explains a bit of the difference, so the rolling, or the annualized number is 867 million, which takes the second half of last year and adds it to the first half of this year, first half of this year, On an as reported basis, it’s only 89 million, as you said, so you, so the, so Stock Doctor are using the 867 million number, and that’s the one I use as well, and we’ve talked about this very early on during QAV, that if we go back, we need a 12 month number to use.

[00:20:42] Tony: Because cashflow can move around half by half. But if we go back to the latest full 12 month number without having to add things together, it’s in the last annual report. And it could be as much as 18 months out of date,12 to 18 months out of date and [00:21:00] for a company like Yancoal or mining companies, their cashflow.

[00:21:03] Tony: Does move around a lot and you can see that just looking at the prior numbers in, in this case, and the fact that they’re now starting to pay tax, which they weren’t doing before. and so that’s dramatically reduced their operating cashflow. So the number from Stock Doctor is 867. That’s the annualized operating cashflow.

[00:21:21] Tony: And if I use that number, I get the 7. 6 priced operating cashflow, which is what is in our buy list. But if I back out the tax that was paid, the 1. 78 billion, I get a number closer to three times cash flow. So, it depends how you do this. These are, I guess, calculations as to what the

[00:21:44] Tony: number is.

[00:21:45] Cameron: So, should we be, removing the income tax? Do you agree with Stock Doctor’s accounting principles here?

[00:21:54] Tony: Well, Stock Doctor haven’t removed the income tax. So I’m not sure why they said that in their answer. [00:22:00] Because, because what’s flowed through to our buy list is an annualized cash flow. So two halves, two most recent halves of 867 million. And then dividing, make, doing the calculation to give you the operating cash per share and then dividing by the share price, you get 7.

[00:22:19] Tony: 6, which is the number in our buy list, and I think it’s the correct number. If you want to take the income tax out, it drops down to 3. 7, which is closer to the number that you were saying,

[00:22:33] Tony:  the questioner had.

[00:22:34] Cameron: Yeah.

[00:22:35] Tony: So I’m guessing someone’s backed it out.

[00:22:37] Cameron: When I say take it

[00:22:38] Cameron: out, I mean, we’re, we’re taking it out of the top line and then ending up with the bottom line of 89 million for the half. So that’s what Stock Doctor have done. They’ve, they’ve taken the tax out of the total operating cashflow, the net operating cashflow for the, for the half.

[00:22:56] Cameron: And you, and you’re happy with that.

[00:22:59] Tony: [00:23:00] Yes,

[00:23:00] Cameron: Okay.

[00:23:02] Tony: so what I’m saying is, if you operate a business, you pay tax, I mean, that’s part of the operating, and it’s in the operating cash flow, I went and looked at the operating cash, the operating cash flow statement in the latest results for Yancol, and it’s certainly the last item in the operating cash flow

[00:23:16] Tony: statement.

[00:23:17] Tony: There.

[00:23:17] Cameron: paid. Yeah.

[00:23:19] Tony: Yeah. Now, I know Yankol has a lot of Chinese investment in it, so I don’t know whether that’s a particular Chinese standard versus an Australian standard, but, it makes sense to me that income tax is part of the

[00:23:29] Tony: cash flow statement.

[00:23:31] Cameron: Okay, so that’s a question we can ask Chris Batchelor from Stockopedia when he comes on about why they didn’t remove that from the net operating cash flow figure.

[00:23:42] Tony: Well, they didn’t, or what they did.

[00:23:45] Cameron: Wow. They, they, they didn’t take the tax away from the net number.

[00:23:53] Tony: But if I read this right, Stockopedia has, using Stockopedia’s number, has a Better PropCaf [00:24:00] than using Stock Doctor’s number. I think Stock Doctor is 7. 6 and Stockopedia is around 3 or just less than 3. Yeah, so that sounds like they’ve taken the income tax out. But I haven’t reconciled Stockopedia so I can’t speak for them.

[00:24:14] Cameron: Yes. They’ve reversed the, income tax payment.

[00:24:18] Tony: Okay. Okay, that might be good. Let’s ask Chris. There might be a good reason for that, but from my point of view, right, if the company generates a billion dollars in tax and then pays a billion, sorry, two billion dollars in profit and pays a billion dollars in tax, that’s one billion dollars they don’t have as operating cash flow to invest.

[00:24:36] Tony: So it’s material to us when we’re looking at operating cash flow that we take that into account.

[00:24:42] Cameron: thank you for clarifying that.

[00:24:44] Tony: Okay.

[00:24:45] Cameron: Hope that helps, John.

[00:24:47] Cameron: last point I had here, Tony, is I added the first stock to our dummy U. S. portfolio today.

[00:24:54] Tony: Ooh, good.

[00:24:56] Cameron: Yeah. Do you want to know what it is?

[00:24:59] Tony: [00:25:00] A US what?

[00:25:00] Tony: GameStop.

[00:25:01] Cameron:

[00:25:01] Cameron: MFG, Mitsuho Financial Group. A Japan based bank holding company, mainly engaged in the business of bank holding companies, which is convenient. Banks, security specialist companies and other companies. it was 26 stocks deep in my buy list. The first 25 all had negative sentiment included things like Signature Bank.

[00:25:30] Cameron: Which we talked about a while ago that I think it’s just gone bankrupt. very difficult to,

[00:25:36] Tony: That’s that’s extreme negative sentiment, isn’t it?

[00:25:40] Cameron: well, all 25, except one, there was one company in the, in the top one, a stack ranked by QAV score.

[00:25:48] Tony: Mm hmm.

[00:25:49] Cameron: There was one that had a positive sentiment, but when I dug into it. It was called NM. It, was its ticket code. It, is under an acquisition offer. [00:26:00] So I nixed, nixed that and MFG was the next one I could find, but, slow process, drilling down, but all the ones that were negative, literally we had, were like flatline zero.

[00:26:10] Cameron: They’d, they’d all been doing well. And then for some reason, all of them had just like flatlined recently, crashed off the edge of a cliff and flatlined. I don’t know why, but it was company after company, after company,

[00:26:20] Tony: what data source are you using?

[00:26:23] Cameron: Stockopedia.

[00:26:25] Tony: Okay, but I mean, if I saw something like that, I’d question whether the data source stopped feeding

[00:26:31] Tony: data at a certain date.

[00:26:34] Cameron: Yeah, well,

[00:26:34] Tony: a few into the bread loader and see what you get.

[00:26:37] Cameron: yeah, Bradelator, is a bit tricky because they’re all on different exchanges. Over there. Some are on New York Stock Exchange, some are on NASDAQ, some are on OTC, and I have to keep checking which one they’re on and changing the breadelator thing, and it’s just easier to use this one, but I had checked them, I did, the first round I did this a couple of days ago, I did use the breadelator and I was finding the same thing, [00:27:00] so I don’t, I don’t think it’s a problem, I think there’s just for some reason A

[00:27:04] Cameron: lot of these companies, because there’s so many companies over there and a lot of them,

[00:27:07] Tony: Mm,

[00:27:09] Cameron: for whatever reason have, hit the wall.

[00:27:11] Cameron: Anyway, I learned a lot about finding qualified audits. I had to figure out

[00:27:15] Tony: ha, ha

[00:27:16] Cameron: all the different reportings that they have over there and where, it was supposed to be a 10F, a 10K. Yeah, 10K, that’s right. That sounds about right. But then when I went Looking for the 10K for MFG, they didn’t have one because they’re a foreign based business.

[00:27:36] Cameron: So I think that was a, that was a 20F I had to look in. Here we go. Yeah, the 10K and then the 6K and then the 20F. I had to go find their 20F anyway. It was a bit of a bit of a fun exercise. But anyway, so there you go. One down, 19 to go and then I can track that. But now we’ve found that Stockopedia doesn’t [00:28:00] factor in taxes paid in operating cash flow.

[00:28:04] Cameron: I might have to, revisit that.

[00:28:08] Tony: Well, we

[00:28:08] Tony: don’t know. We need to talk to them about it, I guess.

[00:28:11] Cameron: Well, I can have a look at some more examples, with the Australian checklist and, and have a look at where their PropCaf significantly differs to our Prop, Stock Doctor PropCaf and try and see if I can spot any commonalities. But anyway, I’ve spent a lot of time on the, on the US portfolio thing.

[00:28:29] Cameron: It’s, a lot of work, but I’m getting close to being able to build a checklist and then we’ll see how it goes. Should be fun.

[00:28:36] Tony: Well, thanks for all your hard work. That’s

[00:28:37] Tony: great.

[00:28:38] Cameron: Oh, it’s my pleasure. Thank chat GPT. It’s done most of the work.

[00:28:44] Tony: I know how much you love finances and drilling through reports and data and spreadsheets.

[00:28:49] Cameron: Love it. Love it. Anyway, what have you got to talk

[00:28:53] Tony: I, if I had a time machine and went back to, what was it, 13 years ago when we went out for our first dinner and said, your future is [00:29:00] going to be talking about investing and, and drilling through spreadsheets. No, you wouldn’t have believed me.

[00:29:07] Cameron: I would have shot myself on the spot. Yeah. Would have jabbed a chopstick

[00:29:09] Tony: Yeah.

[00:29:11] Cameron: through one of my eyes.

[00:29:12] Cameron: you go. No, I like, I enjoy it. I mean, it’s hard. I’m not good at it and it’s hard, but I feel good when I get somewhere, like when I finally added a stock today, I was like, okay, it’s taken me six months

[00:29:27] Tony: Wow.

[00:29:27] Cameron: get to this point, like trying to build a checklist for the American market and all that kind of stuff was a lot harder than I thought it was going to be.

[00:29:35] Cameron: I still don’t know if it’s going to work.

[00:29:38] Tony: yeah,

[00:29:38] Cameron: It’s still,

[00:29:39] Cameron: MFG might, go belly

[00:29:41] Cameron: up next week. Who knows? But anyway, we’ll see how, see what happens. I’ll report on it as, as I go.

[00:29:46] Tony: Yeah, thank you. Well, I mean, it’s it’ll be funny if you get to the stage where you’re right and then Stock Doctor releases you as stocks and we can do it using our current system.

[00:29:56] Tony: We’ll see.

[00:29:57] Cameron: Yeah. That’d be about right. Yeah.

[00:29:59] Tony: Yeah, [00:30:00] anyway,

[00:30:01] Cameron: What have you got on your

[00:30:02] Cameron: to do list today? Tk,

[00:30:04] Tony: yeah, well, it’s, it’s Being one of those times in the, in the share market, I, Buy list stocks that are in the news have all been having problems and they’re all negative. So, it started off about a week ago when, Sims Metal Group, one of the stocks I owned, had a market update. And the, they were trashed, I think they dropped 10%.

[00:30:23] Tony: Straight away after the market update. And I read the market update and couldn’t see too much wrong with it. In, in, they were basically saying, we don’t know what’s gonna happen with the market . It’s it’s in a state of flux. And, their shares got sold off. So that was, it came out of nowhere, a bit of a surprise, and they had the rule on them.

[00:30:41] Tony: oh, three point trendline sell, I’m not sure which, lithium became a sell at some stage. Last couple of weeks I had to sell my holding in Pilbara (PLS). So two down, Viva Energy, one of the other stocks I own. It’s, it’s been on the buy list for, for a while. they have a large shareholder called [00:31:00] Vitol, V I T O L, who had, invested in the old Shell company, and, taken it to the ASX boards.

[00:31:09] Tony: they still, I think they had, about just under half of the company. They retain shares in and they did a sell down last week of 16%, which again, trashed the share price for Viva Energy and sparked a 10 percent decline. It’s kind of slowly getting back from that. And Vitol still holds 16 percent and they’ve given all sorts of undertakings that they won’t sell more in the near future or as far as they can see.

[00:31:35] Tony: so that’s been interesting. And I guess I call that one out because companies with large shareholders like that do get knocked down. By Fundies and by Stock Brokers because they fear two things, one that the large stockholder will know more about the company than they will, and when Vitol sells down a large stake, people question whether it’s [00:32:00] some kind of insider knowledge which is provoking that.

[00:32:03] Tony: Vitol came out and said it wasn’t, and they’re just managing their portfolio. So I believe I’m at face value. but the, both the LNG, and oil price has been rising, which, is good for this company. So if they do have inside information that hasn’t come out yet and everything else seems to be okay.

[00:32:21] Tony: the other thing that, that, stockbrokers and fundies don’t like about a company with a large shareholder like this is, is, it lowers the free flight. So the ADT. Average daily transaction which can keep some people out. It also is looked on poorly by the index makers, Standard Poor’s, etc. So it could crimp VEA’s ability, Viva Energy’s ability, to get into or out into indexes, to be promoted up into indexes.

[00:32:47] Tony: It’s a fairly large company, so I think it’s being included in the large indexes, but I haven’t checked. So anyway, it’s, I haven’t had to sell them, which is good, because I think it will recover from from this. but, yeah, it was, a surprise to [00:33:00] see Bittol sell down and to see the reaction

[00:33:01] Tony: from the market, which was interesting.

[00:33:04] Tony: And, yeah, I think from memory, they didn’t sell down at a big discount, they only got about a 5 percent discount to the price, because oftentimes when a company sells down like this, you can imagine the markets flowed with, with trade, so it happens off market. And the brokers ring around hectically trying to get people to take such a large chunk of the company.

[00:33:24] Tony: And so they have to get those shares away at a discount, which when the market opens again the next day, does mean that the share price is straight away down. But it did go down further than the discount for this

[00:33:35] Tony: particular company selling.

[00:33:38] Cameron: Sorry, you scared me there. ’cause I own a bunch of Viva Leisure.

[00:33:45] Tony: Ah, different.

[00:33:45] Cameron: V E A, but yeah, I was trying to work out what’s the difference between Viva Energy and Viva Leisure? What the, what’s the share code? So, because it’s interesting for, I, I had noticed that on my alerts report today, Viva Leisure, VVA.[00:34:00]

[00:34:00] Cameron: Isn’t showing up in stock history. It looks like something’s happened to it. And if I go into, Yahoo Finance and look at today’s chart, it’s saying graph unavailable, so I don’t know what’s happening with Viva leisure. But yes, Viva Energy also down nearly a rlue one sell in our light portfolios by the looks of it.

[00:34:22] Tony: Right. Yeah. And that’s, I guess, another point to make at this time of year, too, is before you sell something with a Rule 1 or even a 3PTL, just check to see it’s not ex dividend and you’re waiting for payment because that’s happening a bit at the moment, too. And of course, the last stock to mention is Qantas, again, a buy list stock for a while.

[00:34:40] Tony: It’s had its troubles. luckily it hasn’t been a 3PTL sell or a, hasn’t been a real one for me, but I think you may have sold it from some of the, of the light portfolios. again, I mean, it’s, it’s going to face its challenges, but this could be a buying opportunity. It’s not at the moment because the share price is still going down, but if it turns around again, [00:35:00] the numbers are

[00:35:00] Tony: still quite compelling for it.

[00:35:03] Cameron: yeah I had to sell that out of my super too, I think I had to rule 1 it, but I notice you’re still holding onto it so you must have

[00:35:12] Tony: I am, yeah.

[00:35:13] Cameron: at a different price than I did.

[00:35:15] Tony: Yeah, I did. I bought it quite a while ago, about a year ago, I think.

[00:35:19] Cameron: Right.

[00:35:20] Tony: and happily rode it up and now it’s come back down to earth. And look, it’s going to be an interesting AGM. I know we talked about it with Steve last week, but,I think that my guess, and it’s only a guess, is that there will be a protest vote against the remuneration report.

[00:35:34] Tony: and I’m not sure what the board will have to do then to… Stop getting a second one next year, but I imagine it’s going to have to be to get some kind of repayment from Alan Joyce and potentially, some of the directors not restanding or even retiring or potentially the chairman. Whilst I’m not a fan of the chairman, it’s going to be hard for the company if they turn over both the CEO and the chairman at the same time.[00:36:00]

[00:36:00] Tony: but maybe if there is a REM strike, he may well, agree to leave after a certain period. But, that’s all just guessing. Yeah, the last thing I had to talk about was Alex told me that, as part of her checking of, market information, she changed the mortgage rate in the spreadsheet. Just recently, and it looks like it’s now, let me just find it, 6.

[00:36:22] Tony: 58, which is our, 6. 58 percent which is our PCV yield, so I know that’s something which people can, need to update in their own spreadsheets if they’re not using the one you put out, so just be aware of that. It’s now 6. 58, which is the average, Mortgage rate across the, the lenders in Australia.

[00:36:39] Cameron: Right. Thank you for that. Good pick up, Alex. Well that’s it!

[00:36:44] Tony: I’ve got a pulled pork to do and that’s it for me.

[00:36:46] Cameron: Oh, you’re doing a pulled pork, on holidays, wow,

[00:36:50] Tony: Working hard.

[00:36:50] Cameron: yeah, who are you pulling today, Tony?

[00:36:53] Tony: Westgold Resources, WGX,

[00:36:57] Cameron: WGX.

[00:36:59] Tony: yeah, I didn’t tell you [00:37:00] beforehand cause I know you’d probably

[00:37:01] Tony: go out and sell it if we had it in the portfolios to avoid

[00:37:03] Cameron: Don’t hold it in the portfolio. So do your

[00:37:06] Cameron: best, go nuts.

[00:37:08] Tony: okay. So, it came onto the buy list this week for the first time, that I can see for a while. it’s been, it’s pretty much a turnaround story, so it’s very interesting, from a, a investment perspective if people want to have a look at it. WGX, West Gold Resources, WA Gold Miner. it’s based in the Murchison area of WA, which is in the northwest part of WA, inland from the Carnarvon Geraldton area, and northwest of Perth.

[00:37:37] Tony: it’s got three big mining areas, in that overall basin, six underground mines, a few open pits, and three gold processing plants. they also operate their kind of own services business internally. West Gold Mining Services, which they claim gives them an edge in underground mining. They’ve developed a lot of knowledge and they can apply [00:38:00] it more cost effectively than going out and hiring mining services companies to do it.

[00:38:04] Tony: So they’re kind of the main parts of this business. The really interesting thing, I think, from an investment point of view is that they had a turnover in management and board about a year or two ago. So a refresh for the company and they’ve made some fairly dramatic changes. The company is now debt free.

[00:38:23] Tony: And because of that, and because of the, the gold price rising, they can. Exploration, which the market’s taken, a kind view to, they had no more forward contracts, which means there’s, they’re fully leveraged to the gold price and the Australian dollar gold price, at least as a buy, and it’s been going up recently.

[00:38:42] Tony: So that’s a good thing at the moment. they plan to start paying a dividend next year and they haven’t paid one before, I don’t think, or at least for a long time. So, that’s usually a sign of, Increasing confidence by the board. if I go through the numbers, the ADP for this company is [00:39:00] a little over 2.

[00:39:01] Tony: 1 million per day. So it’s quite a large stock for people out there who are looking at that. I’m using a share price of 1. 79 as my price for these numbers might be slightly different when you hear this. That price is less than the consensus target, which is good. This is one of those companies I’ve spoken about before where the Stock Doctor financial health is strong and recovering.

[00:39:23] Tony: And it scores an extra point for that. I like recovering stocks. They tend to… Perform very well financially as management focuses on costs and focuses on debt and growth, which is, which is good. I know management always focuses on those sort of things, but typically if something’s recovering, they’ve really had to have a look at it to, to turn the company around.

[00:39:45] Tony: the PropCaf for this company is five times. Interestingly enough, the P. E. ratio is 85 times, and when I sort of had a look at that because I thought that was strange, the P. E. ‘s forecast to go down to 8. [00:40:00] 7, so kind of high single digits in June 24, according to Stock Doctor. I guess time will tell whether that’s the case or not, but I guess what it means is that there hasn’t been much earnings.

[00:40:11] Tony: In the last annual numbers, and they, but the cashflow is coming through and we’d expect to see the PE drop going forward. But PE of 85 times is the highest in the last six halves. So it scores a negative one for that. using IV1 and IV2, IV2 in particular is interesting because it’s based on the forecast earnings per share.

[00:40:30] Tony: And so IV2 is 2. 10, their price is 1. 79, 1. 80. So it’s below that. So it scores for that. IV1 is only 11 cents, but that’s using the current earnings per share, which we just said was low, because it’s a turnaround. net equity per share is currently 1. 26,an additional 30 percent takes it to 1.

[00:40:50] Tony: 64, and that’s just below the share price of 1. 79, so we can’t score it for that, but it’s not too far off, which may change if there’s some [00:41:00] kind of retreat in the share price risk in the coming months.

[00:41:02] Tony: Forecast earnings per share growth I wanted to focus on. The analysts covering this company believe that the earnings per share will grow by 900%, which is probably one of the highest forecast growths I’ve seen for a long time. And that means that our metric of putting a hurdle around growth, which is growth over P.

[00:41:24] Tony: E., has a 10. 6. Which is way above our 1. 5 hurdle for that particular score. So that’s a really good thing to say. no yield, but we can’t score it on that, but they will start paying out dividends next year, no owner founder, and the directors are only holding less than 1%, so we can’t score it for that. We do score it for a new three point trend line.

[00:41:48] Tony: it’s, it’s. A classic horseshoe or swoosh or hockey stick type share graph which was going down for a long time and now it’s on its way back up again. I guess because of [00:42:00] that, because of the problems they’ve had in the past which are just being turned around now, we can’t score it for consistently increasing equity.

[00:42:07] Tony: So all those things add up to a score of 11 out of 16 items, some of those scored 2 along the way, and a quality score of 69%, which is not too bad, and a QAV score of 0. 14. So, I think it’s worth investigating, have a look at it, you’re on the buy list, some of the… I guess my comments on the company, the positives are, they’re really, they really seem to be managing cash flow well, very disciplined.

[00:42:32] Tony: There’s a bit of, consolidation going on in the WA gold fields at the moment, and this company bid for another gold company. and then was outbid by, I think, Perseus or Remelius, I think, and, they backed away. They didn’t try and get into a bidding war, so I think, again, it’s a sign of their discipline in these things, and they said we can probably get a better return by taking that bid money and looking for, gold ourselves with their own exploration program, so I think that’s a great approach[00:43:00] to, to cash flow management.

[00:43:02] Tony: yeah, so the other positive is, is the way they’re managing the company now. Plenty of cash flow, no debt. No, no hedging for the gold price. So if the gold price keeps coming up, that’s good. But of course that’s the flip side. That’s a risk if the gold price comes down, they’ll feel it pretty hard in their cashflow as well.

[00:43:19] Tony: yeah, so all in all, worth, worth having a look on you on the buy list and it looks like a

[00:43:24] Tony: turnaround story for us,

[00:43:25] Cameron: Well, that’s interesting. And when I looked at gold on Monday, I decided it was a Josephine, but looking at it today, it’s not,

[00:43:38] Tony: gold or US gold.

[00:43:40] Cameron: no, I’m looking at

[00:43:41] Cameron: Australian gold.

[00:43:42] Tony: When I say Australian, I mean Australian currency, gold,

[00:43:46] Tony: the gold price in Australian currency.

[00:43:48] Cameron: the chart that we normally use, which is kitco. com, I’m looking at that, and now it looks okay, but for some reason, when I looked at it on Monday, I decided that [00:44:00] it was, not. It was a Josephine, but anyway, I’m just pulling up my screenshots that I would have taken on Monday. Here we go. Yesterday.

[00:44:10] Cameron: Yeah, it’s funny, looking at the, looking at the screenshot of the chart that I took and it looked like it was dipping down yesterday in Josephine, but when I look today, it’s back up. I think there’s Kitco, there’s Kitco charts that says it’s monthly, but I don’t think it is. I think the latest price it’s showing is today’s price.

[00:44:34] Cameron: You know what I mean?

[00:44:36] Tony: Oh, it’s monthly to the end of the last month, but it’s, it’s updated daily for the current month.

[00:44:41] Cameron: Yes.

[00:44:42] Tony: Alright,

[00:44:43] Cameron: that’s, I think that’s right. So when I looked at it yesterday, it looked like a Josephine. Gold was going down and today it looks like it’s going back up. So it’s showing it as a buy. So anyway, how should we play that? Do you think just take it as we see it?

[00:44:59] Tony: [00:45:00] yeah, I think, yeah, take it, well, when you’re ready to buy,

[00:45:02] Tony: buy it, I guess, if it’s,

[00:45:04] Tony: well, check The chart.

[00:45:05] Cameron: Check it. Yeah. The fact that they’re

[00:45:07] Tony: but certainly it was a buy.

[00:45:09] Cameron: Yeah. Okay. Yeah. All right. Thank

[00:45:10] Tony: It was certainly a buy when I had a look before.

[00:45:12] Cameron: you. WGX. Good stuff. Couple of questions. Phil.

[00:45:18] Cameron: He says, Tony Kynaston has previously talked about borrowing against his mortgage to invest in shares. Was this similar to debt recycling as per Peter Thornhill? If so, how did he go with his system and the need to ensure he used only dividend producing shares?

[00:45:37] Cameron: And also, with the buying and selling of shares fairly regularly, how did he manage that within a debt recycling setup? Thanks.

[00:45:47] Tony: Yeah. So, I haven’t, I haven’t come across Peter Thorn Hill’s book or Peter Thornhill, but I did Google it this morning. So, his website looked fairly similar to what I, I did, I guess, at the moment I have a.[00:46:00] a principal and interest mortgage with a redraw facility and a, offset account, so that’s pretty standard, but, up until we came back to Australia, I was using more of an overdraft facility, which is, I think, even more advantageous.

[00:46:15] Tony: So basically that was, I mean, we started off using a product called Viridian, which was with the State Bank of Victoria, which became Colonial. And then, so that’s what they called it. but companies have different, different names from it. it’s called Equity Manager with ANZ when we moved to them.

[00:46:32] Tony: but basically what it was is, A mortgage that still charges you interest but doesn’t require a monthly repayment. So it kind of suits taking money like borrowing against your house than investing in the share market because you’re only getting dividends, usually twice a year. Some, some, sometimes you can dig it.

[00:46:51] Tony: So it’s four times a year because some dividend payers come out in, different quarters to the majority of the market. So you can do that. [00:47:00] But anyway, you’ve got monthly cashflow. So your income’s coming in, say, twice a year. with the, with the overdraft type facility, that doesn’t matter because you can pay down the mortgage at any time, pay off interest first and then principal.

[00:47:12] Tony: it also suited me when I was working and, and Jenny’s was working, because, we get bonuses at the end of the year, most years, and so you can pay off the mortgage with that, pay it down and then redraw it and invest it and you made that, tax deductible. So that’s pretty much how I managed it.

[00:47:28] Tony: In terms of going after dividend paying stocks, I mean, I do favor dividend paying stocks anyway, like you see in the checklist, because that’s a sign that management’s comfortable that the profitability will continue and they can pay out dividends. but, I didn’t, I didn’t, pay too much attention to it.

[00:47:47] Tony: I, I generally look at it, but sometimes what I found was that some stocks had a very high yield, which could cover me to buy a stock that had no yield, and I’d still be able to, to pay off the, the mortgage. And as I said, there was income [00:48:00] coming in sometimes from bonuses and things, so we could cover it.

[00:48:04] Tony: And even if we didn’t generate enough income to pay down the, the interest costs for that year, that was still, that was negative gearing, basically, which would be a, a tax return against their other income. So there’s a whole lot of things at play there. If you take, if you do take out that kind of, overdraft type facility, you will pay more interest.

[00:48:23] Tony: And generally it’s about 1 percent higher than the rates you can get on standard mortgages. So take that into account, but it really was worth that. to give us the flexibility of being able to draw down whenever we needed and pay back whenever we needed. And the fact that they could capitalise the interest and not require a monthly payment.

[00:48:42] Tony: Bit different to me now and a bit different since post HANE. When I was talking to the bankers when I came back to Australia, which was around the HANE Royal Commission time, they were saying that banks were either being told by APRA that they couldn’t take out or couldn’t offer more than 10% of those kinds [00:49:00] of loans or they were just being conservative to try and be, tow the line a bit more in terms of how much money they lent to people and under what conditions because of the Hayne Royal Commission.

[00:49:10] Tony: But they’re a lot harder to find now and I don’t have one now because of that reason. even though I prefer it, but I’m coping with the, with the mortgage I’ve got. The big difference is that I’ve got to pay back a monthly repayment now, and then,I’ll get dividends in and lump sums, which, will put me ahead for a bit in the offset account, and I either keep it or invest it, and then,manage my cash flow as I go.

[00:49:35] Tony: So, yeah, I’d prefer to have an overdraft type account, but I still manage. And of course, your tax return also is another lump sum that comes in, which allows you to pay off or get ahead of your mortgage repayments, I guess, and then cover costs going forward. A couple of tips and tricks, though, apart from that, if you are going to do it, Then you do, [00:50:00] from a tax office point of view, you do need to A, invest in them.

[00:50:03] Tony: You do need to take the drawdown from your mortgage and invest it in income producing assets. So you couldn’t, for example, draw down and take a holiday or draw down against your house and, and renovate the house. That, that’s not income producing. as far as the tax office is concerned, even though it improves the value of your house when you eventually sell it, it’s not taxable.

[00:50:21] Tony: So you don’t get The tax office doesn’t like you claiming it as a deduction. So from that point of view, I think it’s easier if you, keep a separate investment mortgage and whatever other kind of funding you need for your personal use. It’s easier. Cleaner from a reporting point of view and to avoid temptation to, to definitely if you’re redrawing against your house for investment to keep that separate from any other mortgages you might have or any other funding you might have.

[00:50:53] Tony: So that’s the first thing. Second thing is that the tax office likes to see you draw down and invest straight away. [00:51:00] So, I don’t know if there are any, if there are firm rules about this, but sort of drawing down and putting it in your bank account while you decide what to do,it’s just kind of a two stage process and the tax office may query that, but again, seek your accountant’s tax advice on that, but, it, it, the idea is that you draw down your mortgage and you put it straight into an income producing asset, and then you get a tax deduction for the interest.

[00:51:24] Tony: And you can use the income from dividends to pay it off. and I guess lastly, the other thing to make note of is that it doesn’t have to be shares that you buy. You could, for example, go out and buy another investment or buy another property and use that as an investment property. So there are all sorts of permutations and combinations to this, but it’s certainly.

[00:51:43] Tony: was a valuable leg up for us to be able to take that fact that we had equity in our properties and to put it to work for us in a tax effective way was, was a real eye opener for me and something we’ve used to our advantage over the

[00:51:55] Tony: years.

[00:51:56] Cameron: Racehorses. Could you buy racehorses with it?[00:52:00]

[00:52:00] Tony: well, yes, as long as it’s a company, a business, that’s the big thing with resources is the tax office treats most people who buy resources, as a hobbyist because you’re not conducting a business. So that’s another test. So yeah, get tax advice before you do anything on this, but,if you’re doing it with shares, you should be fine.

[00:52:19] Cameron: We’ll talk to you

[00:52:20] Cameron: in after hours about how your horses are going. Dave, thank you, Tony. That was for Phil. Thank you. This is a question from Dave. If a stock is ex dividend, but the dividend hasn’t been paid yet, do we add the dividend back into work out if it is a Josephine? I thought that was a good question.

[00:52:38] Cameron: I didn’t know the answer to

[00:52:40] Tony: It is. Yeah, no, and I hadn’t come across it before either, but it does make sense. So we’ve always focused on if you hold the stock, if you own the stock and it goes below one of our sell triggers to have a dividend back, if it’s ex dividend before the dividend’s being paid. because that’s basically your money and part of the investment until you invest it in something else.

[00:52:59] Tony: but, I hadn’t [00:53:00] considered this one, but yeah, it’s actually a good buying opportunity. If a stock goes ex dividend and it drops because of that, because people aren’t going to get the dividend, they don’t pay as much for the stock, it could be a buying opportunity. I mean, if it was selling close to a, a 3PTL, I probably would add it back.

[00:53:17] Tony: Because the stock usually recovers over a period of time back to what it was before it went ex dividend. Because there’s an expectation of getting another dividend in six months time. So, that’s a good, good thought from Dave. I think

[00:53:30] Tony: we should probably do it.

[00:53:31] Cameron: So let me just make sure I understand that. If we’re looking at a stock, we haven’t bought it, it’s on the buy list, it’s a Josephine, but if I factor its dividend back in, if it’s in between the ex date and the payment date, if I factor the dividend back in and that makes it not a Josephine, then it’s still a buy.

[00:53:54] Cameron: Okay,

[00:53:55] Tony: Yeah, so I guess a practical example would be something like, I don’t know,Credit Corp, which I [00:54:00] know is ex dividend at the moment, and it’s dropped by 5 or so percent, if you’re looking at it this month, you’d probably see the share price was down compared to the end of last month, so it’s a Josephine, but it’s down because of the dividend, so I would expect Credit Corp to raise by 5 percent between now and the next month.

[00:54:18] Tony: Dividend payment, because people will be buying it in expectation of that dividend. And so, yeah, if it’s, you could add the 5 percent back and see if it was back above its month end closing price from the

[00:54:29] Tony: last month.

[00:54:30] Cameron: GPT, you’re gonna have to… Help me

[00:54:33] Tony: Yeah. Another process. Exactly.

[00:54:36] Cameron: To factor

[00:54:37] Tony: To your checklist you used to buy from the buy

[00:54:39] Tony: list.

[00:54:41] Cameron: Yeah, The meta checklist.

[00:54:45] Cameron: Thanks, Dave. Good one.

[00:54:47] Tony: It could pick up.

[00:54:48] Cameron: Yeah. Last question

[00:54:50] Cameron: this week is from John. Are you able to supply members a chart or graph relating to the scorecard? Examples. Number one, [00:55:00] quantity of stocks that are a buy over time. For example, weekly, monthly, quarterly. Number two, quantity of sales. 3.

[00:55:09] Cameron: Quantity of Josephines. Comparing these charts to see any correlation. Reasoning. It helps to get a sense of the market. Is it bearish negative? Equal buy quantity rises and during bull positive equals buy quantity declines. Have you ever considered or discussed in the podcast? I don’t think we have, John, and I’m not sure I even understand it, but,

[00:55:33] Cameron: sounds interesting.

[00:55:34] Tony: think. I think what John’s getting to, and it’s not a bad idea, is how much of the buy list are in buys versus Josephines or commodity sells or for some other reason not a buy, and does that ratio change over time, and is it a signal for us to be buying or selling generally, I guess? if there are more buys than sells, it probably means the market’s going up, and if there are more sells than buys, it probably means the market’s going down, [00:56:00] which can, boost or drag on our portfolios too.

[00:56:04] Tony: it’s a fair bit of work I would have thought to go back and do that analysis,

[00:56:07] Tony: but it can be done for sure.

[00:56:09] Cameron: If, if something’s on the buy list, by definition, it’s not a sell.

[00:56:13] Tony: Oh, no, we check for commodities. And we check for Josephines, and it’s already, the three point trend line is already part of the checklist, so it shouldn’t be there if it’s a sell there, but yeah, there’s a couple of steps that we apply to the buy list before we actually buy.

[00:56:34] Cameron: but my, okay, it might be a commodity sell, but it won’t be a three point trendline sell because it won’t be on the buy list if it’s a three point trendline sell. So what, what would, what would I be charting then? The number of stocks that are on the buy list, but are a commodity sell?

[00:56:54] Tony: And, or a Josephine.

[00:56:56] Cameron: Yeah. That’s the third one. Josephines I can do. Yeah. [00:57:00] yeah. Okay. But in terms of John’s point that you could sort of. And I get a sense of the market, bearish, negative, etc.

[00:57:11] Tony: Yeah, well Josephines would do that for us, I would think.

[00:57:14] Tony: How many Josephines are on the buy list?

[00:57:17] Cameron: yeah, yeah. I was thinking I could also, track my alert sheet and chart the percentage of the stocks that I hold in all of our portfolios that are sells and somehow compare that to the number of stocks that are on the buy list or something, but yeah. I’m all for charting. I’ve often wished we had prettier things to show people.

[00:57:47] Tony: For our holiday snaps, or our golf videos,

[00:57:49] Tony: or our horse

[00:57:50] Cameron: ha ha ha ha! Infographics, Tony! Infographics! I’ve gone through various phases over the years trying to figure out how do I turn QAV, the checklist, [00:58:00] predominantly, into an infographic.

[00:58:02] Cameron: That is pretty and communicates some additional layer of information visually than the spreadsheet does. And I’ve never, never kind of worked it out, but maybe John’s onto something here.

[00:58:16] Cameron: Maybe I can talk to GPT about how to do that. Thanks, John.

[00:58:22] Tony: And maybe also too, there’s, maybe there’s, yeah, maybe there’s a chart of… The ratio between the number of stocks on our buy list versus the number of stocks that we download.

[00:58:32] Cameron: Yeah, I mean, I could just look at the length of the buy list.

[00:58:35] Tony: Mmm. Yeah.

[00:58:37] Cameron: during certain times over the last few years, there’s been very, very few stocks on the buy list and sometimes there’s a couple of hundreds. So

[00:58:44] Tony: Yeah. Right.

[00:58:46] Cameron: yeah, no, it’s got some food for thought there. Thank you, John. Well, that’s it for the Q’s of the QAV today, TK.

[00:58:55] Cameron: After hours, I’ll start. Elon Musk. [00:59:00] I started reading Walter Isaacson’s new bio on Elon Musk recently. Big fan of Walter Isaacson’s biographies. I read his Steve Jobs one, which I enjoyed. I read his Leonardo da Vinci one. I’ve used that. Ray and I have just done. About 70 episodes on Leonardo da Vinci on our Renaissance show, which is roughly 70 hours.

[00:59:25] Cameron: We just finished a three part series on the Mona Lisa, which I gotta say, was mind blowing. I know so much more about the Mona Lisa now than I ever thought there was to know, and it’s actually, I don’t know if you know this, pretty, pretty amazing painting, Mona Lisa. Don’t know, don’t know how many people out there know this, the Mona Lisa,

[00:59:46] Tony: Ha

[00:59:46] Tony: ha. Ha ha ha

[00:59:47] Cameron: pretty awesome.

[00:59:50] Tony: I thought it was just an everyday

[00:59:51] Tony: painting until someone stole it and it became famous.

[00:59:54] Cameron: I had heard that story when we went to the Louvre in 2018 from our guide, turns out, [01:00:00] not really true. It was already famous.

[01:00:03] Tony: ha ha.

[01:00:04] Cameron: I mean, it became, sort of more, more people were talking about it after that happened. Really what happened to it though in the 20th century, which sort of coincides with that, is photography.

[01:00:17] Cameron: More photographs were taken of it. Those photographs ended up in newspapers and it starts getting mentioned in art books, which start to become a thing. And then in 1963, er, no, 1960, it went to the United States for the first time. Was on television, JFK and Jackie brought it over as a big thing. They did a big thing.

[01:00:40] Cameron: So people, in the 20th century, more people got to see it, because not a lot, before. Airfares became reasonably available. Not a lot of people went to Paris and got to go to the Louvre, but, Napoleon liked it so much he hung it in his bedroom in, 1800 circa that. So, I mean, it was a big [01:01:00] deal for people, for the Parisians, for the French, the French knew it was a big deal.

[01:01:04] Cameron: Art critics knew it was a big deal. Guide books in the 19th century said, hey, if you go to Paris, make sure you go to the Louvre and see the Mona Lisa. But, outside of France, just people, you didn’t get to see it until, in high quality photographs, probably only, latter half of the 20th century.

[01:01:24] Cameron: But no, it’s, it’s, when you really get deep, deep, deep into it, And the story that it’s telling,

[01:01:32] Tony: Right. Okay.

[01:01:33] Cameron: I, my appreciation of it.

[01:01:36] Cameron: Anyway, so Walter Isaacson wrote a great biography on Leonardo da Vinci.

[01:01:39] Tony: And the other rumor I’ve heard about it was, that it was actually a painting of Leonardo himself.

[01:01:44] Tony: in female form. Is that, is that true?

[01:01:47] Cameron: no, no evidence of that, but I do think there are, there is a, there are, there are a couple of copies of it and a lot of nude versions of it as well. Which I like. that all seemed to have come out of Leonardo’s [01:02:00] studio, by, like, his assistants, were doing copies of it at the same time he was doing the original, and he worked on the original for 16 years.

[01:02:09] Cameron: It was still in his studio when he died. It was a never ending process of perfection. But if you look at some of the copies that were made, they look more feminine than It does, and I think, I don’t think it’s a version of him, I think it’s supposed to be, and sort of gender ambiguous, because what she’s representing is all of humanity.

[01:02:36] Tony: Okay.

[01:02:37] Cameron: If you go back and you look at the background, I don’t know if you’ve ever noticed the background of it, but it starts off way back in the distance, really craggy, bare, prehistoric mountainscape. What are you doing that for?

[01:02:53] Tony: you, you stopped them for a little while.

[01:02:56] Cameron: Oh, did I? I

[01:02:56] Tony: see if it was me or you. Yeah.

[01:02:58] Cameron: thought you were like, this is [01:03:00] boring. Shut up. Stop

[01:03:01] Tony: No, no, no, I thought it’s fascinating, but yes, you, you froze for 10 seconds,

[01:03:07] Cameron: Hey, Chrissy just got back in. If you go, if you look right in the background, it’s prehistoric mountainscapes. And as it gets closer and closer to you, the viewer, the landscape starts to soften and become greener and there’s rivers and a road and a bridge. And it’s sort of telling the passage of time.

[01:03:26] Cameron: It’s the evolution of the earth. And then the river that runs on the right hand side of the painting flows in over her shoulder and becomes the silk over her shoulder, which cascades as a waterfall down her breast. And the road that’s on the left comes in and enters her right breast and goes into her heart.

[01:03:45] Cameron: So he’s sort of talking about. Humans evolving out of the earth and, it’s like this progression of time. Everything that he, all of his macro, the macro world is reflected in the micro world. All of [01:04:00] his study of geology and history and science, he’s tried to put into this one painting and it really is, a masterpiece and, and, then you look at the.

[01:04:10] Cameron: His use of sfumato and chiaroscuro so there’s no hard lines around a face and the shading and the coloring and all of that kind of stuff as well obviously is particularly compared to the other art the other great artists like Botticelli of the time is just way ahead of anything anyone else was doing but it was that layer of The, the scientific and philosophical, messages that he seemed to be packing into it, that blew my mind the most.

[01:04:36] Cameron: Anyway, Walter Isaacson, his biography on Albert Einstein I also read, which was great. So anyway, the Elon one is fascinating. Like, so far he, man, he had a messed up childhood and, and, really crazy start.

[01:04:52] Tony: And it got worse. got

[01:04:55] Tony: worse from there.

[01:04:56] Cameron: Well, I read the bit, the chapters last night of [01:05:00] X. com, his online payments business that he started in the early 90s, which merged with PayPal, and then all the fights that he had with the PayPal founders and Peter Thiel and, but, Yeah, like, the guy was a genius as a kid. Like, he wrote his first computer games when he was 14 and was selling them to computer magazines.

[01:05:24] Cameron: I mean, the guy, there’s these stories that you hear today that, oh, he’s not a genius and he’s never done anything and he just buys other businesses. Not true. And he was, like, he was… Obsessed with building rockets to go to Mars as a teenager. He like interviews with his high school friends and the people he knew as a kid.

[01:05:44] Cameron: That’s all he’s a bit obsessed with for his entire life is sustainable energy, putting humans on Mars, electric cars. And, reforming the banking industry. These are, this has sort of been his [01:06:00] passion since he was a teenager. He’s been obsessed with those things and he’s still obsessed with them now, which, he’s just, he’s just figured out how to buy the businesses that, are gonna, that seem to be helping him get to where he wants to be.

[01:06:15] Cameron: I mean, it’s kind of a fascinating story, but the guy, like his wives, his various wives and baby mothers that he has. Which are a lot, because he’s got about 10 or 11 kids. All seem to refer to him as a bit of a man child, which his father was too. His father sounds like a complete psychopath. so anyway, yeah, fascinating story.

[01:06:36] Tony: Yeah. It’s on my list

[01:06:37] Tony: of books to read.

[01:06:39] Cameron: Chrissy and I watched the Sinead O’Connor documentary on the weekend too, which came out last year, which, so before she passed away. And, yeah, really, really powerful, really good stuff. It’s sort of her early years, childhood up to sort of 1993 when,[01:07:00] the whole SNL thing happened and her career kind of got…

[01:07:04] Cameron: She got, canceled basically, particularly in the United States. but yeah, fascinating, fascinating documentary. And, yeah, she hadn’t just, she was an incredible, had an incredible voice and was incredibly honest about her view of the world and just. Never wanted to be a pop star and, and just wanted to use whatever reach she had to tell the truth about the Catholic Church and all of the horrible things particularly it had done to people in Ireland, women and children in particular.

[01:07:39] Cameron: So yeah, I can recommend that too. It’s on SBS. What

[01:07:42] Tony: Yeah. I don’t know if, dunno if you’ve seen it, but, just that story reminds me something he’s popping up, in my Facebook reels, which I guess means it’s on TikTok a lot, is the, the, the song linger with, Dolores singing almost, I think it’s an acoustic set in the record store or something, but it’s just.[01:08:00]

[01:08:00] Tony: So powerful and haunting. It’s, it’s really, really good. Like every couple of days

[01:08:05] Tony: it serves back up to me. So,

[01:08:07] Cameron: Really? I haven’t seen that. There’s the Cranberries,

[01:08:09] Tony: that’s good. The cranberries. Yeah. Yeah,

[01:08:12] Cameron: away too, not long ago.

[01:08:13] Tony: he did. Yeah. So that just reminded me of that. yeah, I haven’t watched much at all or read much at all. I’ve just been traveling and doing things.

[01:08:20] Tony: So we celebrated Alex’s birthday up on the Gold Coast here, which was good fun. And Sean was here too. And my brother and sister came down with, Their spouses and kids, which was a lot of fun. So it’s been a big family get together for us. Played golf, as I said before, in Bonneville on the way up at Coffs Harbor, which was, it’s a great course, really good course.

[01:08:40] Tony: If anyone’s in the Coffs Harbor area, look it up. And, we had a racehorse cast running a group two race on the weekend and unfortunately finished fifth. it wasn’t a bad run, but even more unfortunately is she looks like she’s injured. So we’re just waiting for the X race to come back. But she might be out for the spring and could even be worse.

[01:08:58] Tony: So, it’s been a bit [01:09:00] depressing the last 24 hours as the dribs and drabs of information come in about that.

[01:09:04] Tony: But, we don’t have the final

[01:09:06] Cameron: What happened? Was it a tumble or something?

[01:09:08] Tony: No, no, they think she got injured in the race. She pulled up lame on one of

[01:09:12] Tony: her legs the next day, which.

[01:09:15] Cameron: just by running, like nothing in

[01:09:17] Tony: Yeah, jarring, she may have been kicked or something in the race, we don’t know.

[01:09:21] Tony: but yeah, it’s devastating to have a good horse like that who may be out forever, but may be out for the spring, well definitely out for the spring, so we’ll see.

[01:09:28] Cameron: Hmm.

[01:09:30] Tony: On a lighter note, we have Poifect, who’s going to run on the weekend, a new horse coming in. we’re just waiting to find out whether she runs Saturday or Sunday, they’re going to assess the fields and either throw her in the deep end or give her an easy start on the Sunday.

[01:09:43] Tony: So that’s something to look forward to, and Negronis, one of our other horses, in Sydney this time, had a trial today and did OK, so she’ll be going off to the races fairly soon as well.

[01:09:54] Cameron: I hope she does better than the, no gronies that we had at, Felon’s Brewing in Brisbane the [01:10:00] other night. They were just no, they’re not no

[01:10:03] Tony: didn’t taste, yeah,

[01:10:05] Cameron: Just

[01:10:05] Tony: didn’t taste much like a

[01:10:06] Tony: Negroni, did they?

[01:10:07] Cameron: No. It was in a glass. That’s about the, where the, commonalities within a no gronies stuff. Poifect, is that a, Three Stooges? reference.

[01:10:18] Cameron: Is that where the name comes from? Perfect.

[01:10:19] Tony: yep, Poifect, yeah, I was playing golf one day with Alex and I hit a good shot and I went, Ah, it’s Poifect! He had a laugh though. I, I named a horse that. And it’s quite funny watching all these, all these, stage racing trainers trying to either call it perfect, or they can’t quite do the three Stooges, they call either Poifect or perfect.

[01:10:41] Tony: Ha ha ha ha ha ha

[01:10:45] Tony: ha ha ha,

[01:10:47] Cameron: I love it. All right. Well, I got to go to Kung Fu. You got to go do what you got to do. Pack up your apartment.

[01:10:55] Tony: up, Yep, drive back to Sydney tomorrow,

[01:10:58] Cameron: Thanks TK. Thanks for [01:11:00] coming on. Thanks for coming up to Brisbane and safe travels back. I’ll talk to you next week. QAV a good week, everyone.

[01:11:07] Tony: thanks mate, you too,



QAV 725 – Mr Lazy & Mr Dumb

In this episode of QAV, Cameron and Tony dive into recent market activities, the RBA’s decisions, the Lindy Effect, substantial shareholder announcements, and GrainCorp’s prospects, along with a detailed analysis of Embark Early Education (EVO). Member questions about living off a share portfolio during down years and the differences between value and quality investing are addressed. Additionally, Tony clarifies the calculation of shares on issue for Rio Tinto, emphasizing global figures for earnings per share. In after hours, the duo also covers Mario Puzo’s ‘The Godfather’, Alphonse Mucha, and the Archibald Prize, and discuss the potential and risks of AI, drawing references from science fiction. They wrap up with thoughts on films and books, including ‘Klara and the Sun’.

QAV 724 – Our First U.S. Episode

In this episode of QAV, Cam and Tony explore the U.S. market for the first time, with a brief introduction of Tony and his QAV system of value investing, a discussion of value v growth investing, a discussion of the performance of our U.S. dummy portfolio, a deep dive or ‘Pulled Pork’ segment on Reinsurance Group of America (RGA), and a review of the FY survey results we’ve received so far from club members.


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