This week on QAV:
Market hit all time high, then retreated… because of McDonalds in Gaza?!; Portfolio report; pulled pork on Metcash (MTS).

In the Club edition:
CCP results and share price; System Justification Theory; Elon’s Tesla strategy; Jordan’s regression testing; hedging QAV with Growth stocks (aka the Anti-QAV); RBA leaves rates unchanged; FPR operating cash flow.


QAV 706 Club

[00:00:00] Cameron: Okay. Uh, gimme a 1, 2, 3. Welcome back to QAV

[00:00:14] Cameron: Toecutter. Toecutter Kynaston. Based on a story he was just telling me off air. This is episode 7 0 6, recording this on the 6th of February, 2000 and twenty-four. How are you TK?

[00:00:30] Tony: Yeah. Very well, thank you. How are you?

[00:00:33] Cameron: I am good. Hot. It’s hot in Brisbane today. That’s a, like

[00:00:37] Tony: Uh, it’s cool

[00:00:38] Tony: down here. It’s windy and wet.

[00:00:40] Cameron: Hmm. Uh, the market hit. It’s all time high this week, Tony. And then thought about it for a second and went, nah, I’m not feeling it. I’m not feeling it. Went home, dropped again. Uh, and I loved it. I read in the Finn this morning, Finn was saying on Wall Street the Dow was dragged low by McDonald’s.

[00:01:02] Cameron: Its fourth quarter sales missed expectations, reflecting in part the impact of the war in the Middle East. McDonald’s slid 4%. the war in the Middle East where people in Gaza are eating less McDonald’s now. I mean, what?

[00:01:21] Tony: Yeah, I had, I actually, I hadn’t even thought of that. I, I was just thinking of its American sales, but it could be worldwide sales, I suppose, of the down, because that part of the world is not eating for some reason. But yeah, I wouldn’t have thought

[00:01:33] Tony: the war in the Middle East would be back McDonald’s.

[00:01:36] Cameron: And then that affects the Australian share market market. So people in Middle East have stopped eating McDonald’s, so our market falls

[00:01:44] Cameron: go.

[00:01:44] Tony: Well, it’s like, it’s like this is what happens in the share market, right? There’s almost, there’s always a default answer for whenever anything goes wrong. Oh, it’s rising interest rates. Oh, it’s the Ukraine war. Oh, it’s supply

[00:01:53] Tony: chain covid problems. It’s just there’s always one default

[00:01:56] Tony: answer when no one knows.

[00:01:58] Cameron: Right, but that, you know, you can’t go in the financial review and go, we got nothing. We dunno what’s going on. You know,

[00:02:07] Tony: Yeah.

[00:02:08] Cameron: it doesn’t really sell papers

[00:02:11] Tony: we found this junior analyst at in, in New

[00:02:14] Tony: York. He reckons it’s because, uh, the war in the

[00:02:18] Tony: Middle East.

[00:02:19] Cameron: that actually a URL if

[00:02:20] Tony: I got a sauce.

[00:02:21] Cameron: if it’s not,

[00:02:22] Tony: a sauce.

[00:02:22] Cameron: I’m, gonna register that at

[00:02:25] Cameron: already. Oh. Oh. It’s definitely a, it’s, it’s, uh oh, popups. Oh my God. Yeah. Okay. I’m getting distracted now. Um, well, yes, our portfolio is still tracking around about double market. Tony, um, had a good week. Uh, portfolio was up quite a bit versus the STW didn’t have to sell anything.

[00:02:51] Cameron: Mentioned DUR last week. We said the DUR, which is sort of the Michael Jordan in the portfolio, had come down a bit and took a hit last week. It, it was back 9.5% last week, so I think you were suggesting last week it could have just been profit taking there. It seems to go up, come back a bit. Go up, come back a bit, go up, come back a bit.

[00:03:12] Cameron: Still not back to its high of like one 70 something. I think it’s still around 1 55, but it bounced back 10% last week after we talked about it. So I’ll, I’ll, uh, take credit for that. It was the QAV bump, we’ll call it.

[00:03:26] Tony: Would you like me to talk about it again

[00:03:28] Cameron: Yes, please do.

[00:03:30] Tony: Yeah. Well, I think the point is that stocks just don’t go up and up and up. They go up, pull back up. It’s two steps forward, one step back. So you’ve always gotta take that into account If you’re thinking about taking profits, it, it depends on your risk profile and your risk tolerance.

[00:03:47] Tony: As we said last week, if it’s worrying you take some profits or take half profits and leave half on the, on the counter. Um, but as I said last week, I wouldn’t be

[00:03:56] Tony: selling a, a good company like Duratec at this stage.

[00:04:01] Cameron: Speaking of people listening, we, we, we did a, you did a pulled pork on Fendi, I think it was last week, and the managing director of Fendi reached out to us and said, thanks very much.

[00:04:12] Cameron: And,

[00:04:12] Tony: Yeah. Two weeks. Two weeks ago. And have you

[00:04:14] Tony: seen the share? I think the curse of the pool pork is over. Have you seen the share price of

[00:04:18] Tony: Findy?

[00:04:18] Cameron: I have actually,

[00:04:19] Tony: I did the, I did the pulled pork at a

[00:04:22] Cameron: right, it’s a dollar 40 now. A dollar 44.

[00:04:26] Tony: Okay. It’s actually gone down then. ’cause it was gone up to a dollar 70

[00:04:29] Cameron: It was a dollar 70 last week.

[00:04:31] Cameron: It’s pulled back a bit. That’s ’cause we haven’t talked about it for two weeks.

[00:04:34] Tony: Yeah,

[00:04:35] Cameron: No wonder he wants to come on the show. Um,

[00:04:38] Tony: What’s our charge? What’s, what’s our, our normal

[00:04:41] Tony: fee?

[00:04:41] Cameron: let’s just wait and make sure that Paul Pork Curse is over before we, uh, start charging for it.

[00:04:47] Tony: Well then we charge not

[00:04:48] Tony: to do pulled porks. Right.

[00:04:51] Cameron: Well, speaking of things going up and going down, uh, we did talk, I think last week about CCP and um, the results were coming out. You said they would probably downplay the earnings, the, and the shares would probably fall the result I suggested we should maybe, um, get out, preempt it. You said that would be predicting Well, the results came out, the shares did fall, but then they bounced back up again, but then they fell again.

[00:05:25] Cameron: Uh, so I dunno

[00:05:29] Tony: they seem to fall too. It’s possible the a FR has a, a stronger pull on stock price movements than we do. But there was a, um, an article, I think it was in the a FRA day or two ago, uh, about how on the one hand, credit Corp was saying they’re taking your right down because the US economy isn’t strong.

[00:05:49] Tony: But on the other hand, they’re saying it’s a great time to buy distressed ledgers. When the economy isn’t strong. So, um, the analysts were saying, you know,

[00:05:58] Tony: which is it Are they, are they low balling us

[00:06:00] Tony: again?

[00:06:00] Cameron: Yeah. Well, it didn’t drop 30% like it did in October. It dropped, uh,

[00:06:07] Tony: Yeah, true.

[00:06:09] Cameron: and then recovered a bit, but obviously still not back to where it was.

[00:06:14] Tony: Hmm.

[00:06:15] Cameron: in October. Is it 20 twenty-one dollars sixty-two back then dropped down to 11 $12. Now it’s back up to $17, but

[00:06:27] Tony: Yeah. Traditionally this is the time to buy CCP. ’cause they generally, uh, uh, under promise and over deliver. And

[00:06:34] Cameron: mm

[00:06:35] Tony: I think the analysts who, who pulled their, um, their report apart was probably correct in that, um, they’re trying to, trying to downplay everything. So it can’t be all bad. They’re either gonna buy lots of debt ledges because, um, the economy’s receding in the US or they’re going to have more, uh.

[00:06:52] Tony: Or the inability to collect as much more write downs, um, because the economy’s receding,

[00:06:57] Tony: But which one is it? So yeah, they’re sandbagging.

[00:07:01] Cameron: if I had sold it before the results came out at $18 40, I would’ve been able to buy it again at 17 bucks. So.

[00:07:10] Tony: Um, you are becoming a gun trader. You could, if you can take the pebbles from my hand, you can go out in the world on

[00:07:20] Cameron: watch me catch a fly with my chopsticks. Uh oh. Well, um, Joe G in our chat room said he did buy CCP on the dip. So,

[00:07:31] Tony: No. good, for you, Joe.

[00:07:32] Cameron: work, Joe. Um, in less exciting news, Google banned our ads and Google ads and declared they were click bait last week.

[00:07:44] Tony: Clickbait.

[00:07:45] Cameron: bait,

[00:07:47] Tony: But they weren’t worried about any of the after-hours conversations on, uh, what was the book you’re reading? Venus

[00:07:53] Tony: and Furs. They just, they’re worried about clickbait, huh?

[00:07:57] Cameron: are promising something that’s, uh, too good to be true. Apparently.

[00:08:02] Tony: Is that what they said?

[00:08:03] Cameron: That’s one of the definitions of click bait. I appealed their ruling. And they told me to take a long walk as a result. So yeah. No, no discussion. No, I, I no chance to present my case. Have a look at the dummy portfolio. It’s doing double market.

[00:08:24] Cameron: So when I say we get double market, no, just no clickbait. You’re out,

[00:08:30] Tony: Or send them, or send them the regression testing that, uh, someone did for us the other week, which

[00:08:34] Tony: was to say the

[00:08:35] Cameron: send who there is no

[00:08:39] Tony: Send the, send the ai,

[00:08:41] Tony: Google

[00:08:42] Cameron: Barred Google Barred. So that was fun trying to find someone to Google, to talk to, but there’s nothing,

[00:08:50] Tony: Oh dear.

[00:08:50] Cameron: like talking into a, into the Grand Canyon, man. There’s nothing there. So that’s, uh

[00:08:55] Tony: Well, if anyone knows somebody

[00:08:56] Tony: who works at Google, please put in a good word for us.

[00:09:00] Cameron: Uh, Jordan Gibbs. Tony one of, uh, actually I should check to make sure that he’s told me I can talk about this. I did email him. Let’s see. Jordan. Yes, mate, go for it. Oh, good. Okay. Jordan Gibbs, one of our club members, has been doing his own regression testing and, um, sent me an email update on this, uh, the other day, which I shall read.

[00:09:26] Cameron: Hi, Cam. I thought I’d give you an update on the regression testing. I did. Unfortunately, I’m not a coding wizard, so I did it the old fashioned way of having thousands of slaves walking in the fit no, uh, of working my way. Not that old fashioned.

[00:09:40] Tony: All right. How are the pyramids

[00:09:42] Cameron: Yeah, exactly. One slave at a time, uh, of working my way through the various buy lists starting in September 21.

[00:09:50] Cameron: At the time, this was the earliest buy list I had. After listening to one of the podcasts and hearing about Charlie championing quality over cheap stocks, I wanted to check if I used a QAV score of 0.1 as the cutoff, but sorted stocks by the quality score, if it would produce better results. Overall, it produced basically the same result as the dummy portfolio, 8.9% CAGA for the quality stocks versus 4.43% CAGA for the reference portfolio.

[00:10:23] Cameron: And then he is written VAS in brackets after that. Do you know what

[00:10:28] Tony: No, I, when I read it, I just assumed he was saying that his regression testing got roughly double market. So I’m assuming VAS might have been

[00:10:38] Tony: the index. I don’t know

[00:10:41] Tony: what the, what it means though.

[00:10:42] Cameron: oh. Um, Vanguard might be a Vanguard thing.

[00:10:46] Tony: Yeah.

[00:10:47] Cameron: Lemme look it up. S-D-S-V-A-S. Do, do, do do. Stock doesn’t know what it is. Oh yes. Vanguard Australian. Shares. Index.

[00:11:01] Tony: Yeah, you are right. Well done. You are getting good, aren’t

[00:11:03] Cameron: at me, man. I tell you what. Guru, Guru, I saw it and thought Vaz Deferens was the first thing I saw when I looked at it.

[00:11:13] Cameron: You know, because I’m still suffering PTSD from when I had the snip a couple years ago.

[00:11:20] Tony: oh really? I still haven’t had it.

[00:11:21] Cameron: Oh. Died, died. I still can’t go near a bag of frozen peas. One of the, th one of the, back to back to Jordan. Sorry about that, Jordan. One of the things I didn’t consider before I started was that the quality score only really changed after a company has reported. So the order remained fairly static between reporting periods.

[00:11:47] Cameron: I never held double positions instead sitting on cash until something new was available to buy. But I did buy and sell the same stock a few times because of this. Some stats of the test test period. 6 9 21 to 6 1 24. Total number of stocks held 155. It’s a lot of stocks to hold over a little bit,

[00:12:09] Tony: Oh yeah, you probably turned it over a few times in three years.

[00:12:12] Tony: Yeah.

[00:12:12] Cameron: Total number Stocks lost money on uh, 103 total losses. Seventy-four thousand 900 twenty-one dollars total profit 117 800 ninety-four dollars sixty-three percent of profit came from eight stocks based on some of the other stuff discussed on the show recently. I also tested hug lines on the data sets.

[00:12:34] Cameron: These will not be exactly right as I was only looking at it graphically and not checking the low prices for the stock. In between the data graphed, I tested any stock I held for more than 90 days. Assuming anything less than this would be less likely to be subject to a spike and sell-off and maybe prematurely sold off by the hug line.

[00:12:54] Cameron: The two hug lines I checked were three PTL drawn on a one-year weekly graph, and a three PTL drawn on a three-year weekly graph. Overall, fifty-one stocks met this criteria. For simplicity, I only compared the change in capital value and did not include dividends or reallocation of capital sold sooner, etc.

[00:13:17] Cameron: Is that how you would draw hug lines if you were to draw hug lines? Tony?

[00:13:21] Tony: Uh, probably would’ve gone three-year, monthly rather than three-year weekly. But, um, I’m happy to get the results from what he’s done.

[00:13:29] Cameron: The total value of the fifty-one stocks sold using normal rules 502,400 sixty-eight. The total value of the fifty-one Stocks sold during normal rules plus a one-year. Weekly hug line 505,100 ninety-seven or a 0.5% Increase total value of the fifty-one. Stocks sold using normal rules in a three-year.

[00:13:54] Cameron: Weekly hug line, 511,200 thirty-four or 1.7% increase. Um, 1.7% over, uh, what is it, like two and a half years, uh, roughly.

[00:14:11] Tony: what was it, a hundred fifty-five stocks.

[00:14:13] Cameron: Yeah.

[00:14:13] Cameron: That doesn’t sound like a big, uh, improvement.

[00:14:19] Tony: No, and look, it’s an improvement. So there’s something in there, but it’s not, it’s not statistically significant

[00:14:25] Tony: enough I would’ve thought to change the rules. Yeah.

[00:14:28] Cameron: he says. I also drew all of the scoring data out of the buy list to see if there was any consistency in item scoring highly in a specific criteria and doing well overall. A few things of note here, although the sample size is tiny at the moment, of the eight stocks that made more than 50% profit, six scored a two on the financial health trend score seven were neither a star growth or income stock five had a strong financial health score, and the other three were recovering. Of the 103 stocks that I made a loss on eighty-three had a strong financial health score. Overall, I don’t think the testing provided anything that would change the plan, but thought you guys might find it of interest, spreadsheet is attached, etc. Etc. Thank you for that, Jordan. All

[00:15:20] Tony: Yeah, I thought that last section was really interesting ’cause it’s, it’s close to my thinking as well that some of the things that we put a one or a zero on in the checklist might need to be weighted differently. And the one that stuck out for me on those, that last section where we talked about the eight stocks that made more than half the profit were the ones that were, he said five had strong financial health score and the other three were recovering.

[00:15:42] Tony: And I, I’ve long thought that recovering is, um, a, a potential good space for us to look at as investors. And so I’ve started doing a trial of recovering stocks. I’ve been doing it since the 18th of September, just a little, uh, port dummy portfolio on a spreadsheet, and that’s up 5% since the 18th of September versus 3% for the SDW.

[00:16:06] Tony: So I, I think there is something in maybe putting more emphasis on recovering stocks. So, um, I’ve been doing this for a few of those different things, um, in our checklist, different metrics, just simply filtering the buy list on that one dimension and then picking the top

[00:16:25] Cameron: Mm

[00:16:26] Tony: Um, I’m gonna wait until we go through this reporting season, so maybe in March or April when things have settled down and I’ll check the results and then that may lead me to change some of the scores on the QAV checklist, or at least change the scores on paper and see how that goes.

[00:16:42] Tony: And then, um, maybe release that later on in the year as a permanent

[00:16:46] Cameron: mm.

[00:16:48] Tony: So, good work. I think that’s great work.

[00:16:49] Cameron: Good job, Jordan. Thanks for sharing that with us and for letting us share it with the people at home. Housel’s 100 Little Ideas. Tony, the one I’ve chosen for this week is System Justification Theory. Inefficient systems will be defended and maintained if they serve the needs of people who benefit from them.

[00:17:13] Cameron: Individual incentives can sustain systemic stupidity.

[00:17:20] Tony: That’s, uh, yeah. That’s pretty universal, isn’t it? I mean, anyone

[00:17:23] Tony: watching, uh, Nemesis last night would get a face full of that.

[00:17:28] Cameron: oh, that’s the four Corners thing. It’s still going.

[00:17:32] Tony: Yeah. That was Malcolm Turnbull’s

[00:17:33] Tony: term as prime Minister ship last

[00:17:35] Cameron: All right. Who is the

[00:17:38] Tony: it’s, it’s the,

[00:17:39] Cameron: Is it? Who’s the nemesis and

[00:17:40] Tony: there’s always an Nemesis.

[00:17:42] Cameron: everyone has their

[00:17:43] Tony: Last night, Scummo was an Nemesis for taking down Turnbull the week before Turnbull was an Nemesis for taking down Abbott. Yeah. Um, but yeah, I mean, it’s, that’s the whole, this, this system Justification theory was about half our psychopath book, wasn’t it?

[00:17:57] Tony: Psychopath book. It’s, um, it’s all about institutions becoming self-serving and wanting to, wanting to continue, wanting to continue to exist rather than

[00:18:07] Tony: doing the right thing by their members or their end

[00:18:10] Tony: users.

[00:18:11] Cameron: Well, I, I thought, uh, about fund managers and, and the, the investing space, when I

[00:18:18] Tony: Mm-Hmm

[00:18:19] Cameron: there seems to be systems, uh, you know, we’ve talked about this before, how, um, fund managers theoretically speaking, uh, may make decisions about the, their fund, what they trade in their fund based on how they get paid, their bonuses, uh, as opposed to

[00:18:41] Tony: mm-Hmm

[00:18:41] Cameron: deliver the best long term returns for their investors.

[00:18:46] Tony: mm-Hmm. No. Well, that’s, Charlie always said, uh, show me the results and I’ll tell you the incentives. He’s, he’s right.

[00:18:55] Cameron: Yeah. right.

[00:18:57] Tony: Yeah. Oh, no, for sure. Um, and not so possibly fund managers, but certainly pre-Heim, the wealth industry in general was set up that way. It was, you know, clearly, uh, wealth advisors offering, uh, what was called a free service, but really involved, lots of secret trailing commissions would put people into funds, not because they were the best funds for the individual, but because they paid the highest trailing secret trailing commission to the wealth

[00:19:24] Cameron: Yeah.

[00:19:26] Tony: Yeah, so that’s, and that’s what you are saying. So if the fund manager wanted to have a bigger fund and therefore get a bigger incentive, they paid the wealth advisors a bigger trailing commission. So it’s a bit like the Tesla board, isn’t it? I’m gonna, if I’m Elon Musk, I’m gonna hire the chairman who doesn’t do anything, but give her lots of stock so that, uh, she’ll never, uh, say no.

[00:19:48] Tony: When I ask for an even bigger billion multi-billion dollar pay packet.

[00:19:52] Cameron: Didn’t the judge give her a serve?

[00:19:55] Tony: Oh, yeah.

[00:19:56] Cameron: wow. Uh, yeah. Uh, and Elon was trying to pay himself what, like $55 billion this year or something?

[00:20:07] Tony: Us It was like 80 billion Australian or something.

[00:20:09] Cameron: Just a regular year, you know?

[00:20:12] Tony: Yeah. Or, or he threatened to walk

[00:20:13] Tony: out. I’d be like, yeah, don’t let the door hit you on the way out.

[00:20:16] Cameron: no, you wouldn’t the guy and no one else. What’s gonna happen to Tesla if he walks out?

[00:20:22] Tony: You Reckon, you reckon you couldn’t hire three of the best auto CEOs in the world to take over for him for like

[00:20:30] Tony: a billion dollars each. Save yourself Forty-seven

[00:20:33] Cameron: Oh, you could.

[00:20:34] Tony: still get the same

[00:20:35] Cameron: You could hire them, would you get the same

[00:20:37] Cameron: results.

[00:20:37] Cameron: No, I don’t think so. I don’t think anyone’s able to, I don’t think anyone’s able to do what Elon’s able to do in that spaceman. Like

[00:20:44] Cameron: he’s, have you read the Walter Isaacson biography on

[00:20:47] Tony: No, I haven’t. It’s on my,

[00:20:50] Cameron: Like the guy for all of his

[00:20:54] Cameron: flaws as a human being.

[00:20:56] Cameron: Um, you know, it’s that thing that we saw with jobs and we saw with Gates in the early days. He’s able to take massive risks and, you know, close to shutting down the farm risks, which he’s made a number of times because of his perhaps psychopathic level of self-belief or level of. You know, the risk is worth it.

[00:21:25] Cameron: You know, it’s worth taking these massive risks. And if it fails, it fails. And you know, it’s my money and I, you know, like he blows up rocket ships in order to make progress. If I have to blow up the company to, you know, if I try and I end up blowing up the company, well I just failed. Next doesn’t

[00:21:44] Tony: So the quick, no, I don’t, I don’t dispute that. But the question is, is Tesla the car company now a mature industry? Like were a, were a responsible CEO, say Elon, go your hardest on getting people to Mars, blowing up rocket ships, putting big drills between San Francisco and

[00:22:03] Tony: la,

[00:22:04] Cameron: ai Twitter,

[00:22:06] Tony: ai.

[00:22:06] Tony: That’s, you’re good at that, mate. This is, this is now the, the car company, which is the bread and butter for them is now a mature business. Shouldn’t we get in someone to run that? Do we do it? Do we need to make bet the company on every

[00:22:18] Tony: next move for Tesla, the car company?

[00:22:20] Cameron: I don’t think it is a mature business. I, I think he’s only just started

[00:22:24] Cameron: with Tesla. I mean, Tesla’s not a car company anyway. It’s a robot

[00:22:28] Tony: well, according to, according to Elon, it’s a, it’s a software

[00:22:32] Cameron: well, it’s that, and it’s a robot company.

[00:22:33] Cameron: It’s the Optimus. That’s what he’s working towards now, is the Optimus.

[00:22:39] Tony: yeah. And look, you, you, you, you’re potentially right. My theory, my hypothesis is that the other car companies are going to cut Tesla of the car companies lunch and BYD is already doing that now. But, um, you know, the German brands are gearing up, the Japanese brands are gearing up. The American brands are hopeless except for Tesla.

[00:22:59] Tony: But, um, but yeah, he’s gonna face very, very stiff competition from other car manufacturers going forward.

[00:23:06] Cameron: It didn’t, wasn’t one of the Teslas, the biggest selling car in the world last week? As of last week, Tesla Model Y was not only the best selling car in China and Europe last year. It was the best selling car in the world. The Tesla model Y was the world’s best selling vehicle in 2000 twenty-three, according to preliminary data that Elon, that Elon gave from.

[00:23:31] Tony: I’m not sure. I’m not sure that’s gonna, I’m not sure that’s gonna continue is my, my comment. When you can buy, you know, a BMW EV for half the price as a Tesla, or the same

[00:23:44] Tony: price as a Tesla, or you know, a BYD for half the price, why are you gonna buy a

[00:23:48] Cameron: Who said you’ll be able to buy for

[00:23:49] Cameron: half a price. you know, I mean, you know, Elon’s master plan that he, he released when he started Tesla, he said is he said, I’ve got a three point master plan. I’m gonna tell you what it is. The first one was, make a really expensive electric sports car. Sell that. Uh, yeah, I saw that.

[00:24:09] Cameron: Uh, we got little thumb popping up, icons appearing in, uh,

[00:24:13] Tony: There is again.

[00:24:14] Cameron: did it. Um, you’re gonna make a really expensive sports

[00:24:17] Cameron: car, electric sports car. Use the profits from that to make a less expensive sports car for the middle class. Use the profits from that to make a cheaper sport, a cheaper electric car that everyone can afford.

[00:24:31] Cameron: So, and then use that to build robots. But that, that came later. I, I mean, I think this was always his plan is to, you know, start off really luxury end of the market and then continue to drive the price down. Whether or not he can ex

[00:24:45] Tony: And, and so that three point plan

[00:24:47] Tony: is worth, is worth paying him $80 billion a year, is it?

[00:24:50] Cameron: Hey, that’s between him And the shareholders of Tesla.

[00:24:54] Tony: Well, the shareholders just sued

[00:24:56] Cameron: it did. and

[00:24:56] Cameron: the judge was like, you you’re kidding.

[00:25:00] Tony: Judge went hell yeah.

[00:25:03] Cameron: Well, you gotta love.

[00:25:04] Tony: But not only that, the judge also said the last time they were sued, they got out of it because, uh, what’s her name? Robin Denham, I think is the chairman. Chairperson was meant to set up a, uh, a committee that was going to filter Elon’s, um, tweeting and, and PR disasters. And the judge said,

[00:25:25] Tony: how many times has that committee done anything?

[00:25:27] Tony: Zero since then. I was like,

[00:25:29] Cameron: Well, the judge must have read

[00:25:30] Tony: you’re paying lip service.

[00:25:31] Cameron: book because that was the recommendation is Psychopaths are fine, but you need to ring-fence them with a committee of people that aren’t psychopaths that can assess the decisions they’re making and say, is

[00:25:45] Tony: yeah, They’re like a dragon on game of Thrones. Right. You put them in, put them in a collar, nail ’em to the floor, and when you need to take over something, unleash the mask. Mm

[00:25:57] Cameron: Yeah. You wanna, you wanna figure out how to leverage the strengths of the psychopath without letting the negatives of the psychopath create havoc that no one’s gonna recover from.

[00:26:09] Tony: Pay

[00:26:09] Tony: this psychopath $80 billion a year.

[00:26:13] Cameron: Well, he’s, he’s,

[00:26:15] Cameron: got a

[00:26:15] Cameron: lot of alimony payments, uh, Tony.

[00:26:19] Tony: Well, I think isn’t, isn’t the exact amount, the amount he’s lost on

[00:26:22] Tony: Twitter and he’s purchase of

[00:26:23] Cameron: Yeah, yeah, yeah. Anywho, moving right

[00:26:27] Tony: tell you what I’m getting sick of. I’m getting sick of people in the media saying, and then, so-and-so Tweeted, uh, or now called X, or X, formerly known as Tweet Twitter. They just like, no one’s let go of the branding yet, no one’s

[00:26:40] Tony: adopted a new branding.

[00:26:42] Cameron: Yeah.

[00:26:43] Tony: Mm-Hmm

[00:26:44] Cameron: Uh, speaking of branding, did you see he did his first brain implant last week, the new,

[00:26:50] Tony: mm.

[00:26:50] Cameron: chip, and he said the first product that

[00:26:53] Cameron: Neuralink will be rolling out is called Telepathy, not Telepathy. X or Xepathy or Telepath. X, Just Telepathy.

[00:27:04] Tony: have Twitter, you can have your Twitter behind your own firewall and your own

[00:27:07] Tony: brain. That’d be great.

[00:27:08] Cameron: Fantastic. let Leon let Elon into

[00:27:12] Cameron: your eon, into your brain. Anywho, moving right along. Uh, that’s all

[00:27:18] Tony: Oh, by the way, that was a good futuristic podcast this

[00:27:20] Tony: week. I thought it was

[00:27:21] Cameron: Oh, You listen to that? Yeah. Thanks. Yeah.

[00:27:23] Tony: Mm-Hmm. Of course I do.

[00:27:25] Cameron: You like my Cams nine Futures?

[00:27:29] Tony: Yes. I, I, the one I favored was the one where the AI just disappears. Like it’s, to me, well, to me, you’ve gotta ask yourself the question, is human intelligence the pinnacle of any possible intelligence? Eh, probably not. Which means there are more intelligent things out there who might be all around us, but they’re just invisible ’cause they’re so super intelligent.

[00:27:50] Tony: They live in quantum computers, in the rocks or the air or whatever. Um, or whatever, whatever, whatever form the intelligence takes. And so AI will optimise our intelligence, but eventually it’ll go, yeah, that’s a nice start, but I can do better. And then just disappear,

[00:28:06] Cameron: which is why We need to merge with it. That’s Steve’s number 10. Corollary.

[00:28:11] Tony: Yeah. Go on for the

[00:28:12] Cameron: Yeah. Go on for the ride. Yeah. It’d be so disappointing if

[00:28:15] Cameron: we, if the intelligent quotient of the planet’s going up and up and up and up and they, and then it just disappears and we’re like, oh,

[00:28:22] Cameron: we’re back. We’re just alone again now.

[00:28:24] Cameron: Oh shit.

[00:28:26] Tony: We’ll be like that. Uh, the Three-Body problem will be like the earth waiting for the invasion. ’cause our tech’s being

[00:28:31] Cameron: Hey, when does that start? Is that out yet? It’s gotta be coming out

[00:28:34] Tony: No, it’s supposed to be up this year. Yeah.

[00:28:37] Cameron: Looking forward to seeing

[00:28:39] Cameron: how badly they screw that up. Um, uh, what have you got to talk about TK?

[00:28:47] Tony: Well, I didn’t have much, but I’ll do a couple of things. So, um. We were talking off air beforehand about the different portfolios, trial portfolios I’ve set up. And one thing I’ve, I’ve looked at a couple of years ago and then dismissed ’cause it, it, it was, um, basic, well basically what I was trying to do is find a way to value-grow stocks and, uh, you know, when Afterpay was taking off and all that kind of stuff.

[00:29:12] Tony: And, and I revived that same thinking again recently because I’d noticed that some of the stocks on the very bottom of our buy list, so with a QAV score of zero, um, and that were, were also, you know, trending upwards, et cetera. Um, were doing really well. So I put together a portfolio back in November of what I call the anti-QAV stocks.

[00:29:32] Tony: And it’s doing triple market, right? It’s up 21% in a couple of months versus 6% for the SDW, which is good, but it’s only a couple of months. And I know from experience in the past that. And you can see it on the five, the five-year graph. The stocks on this list, like, uh, Megaport and Pro Medicus come to mind straight away.

[00:29:52] Tony: Um, that they can have seventy-five percent pulled ends when, when things go, you know, when things blow up in the growth side of things, their PEs are so high that they can cut right back. So that’s why I haven’t owned them. But what, what I am thinking now is I’m wondering if, if growth stocks and QAV stocks form some kind of hedge against each other.

[00:30:12] Tony: So going back to the Stockopedia research, which said that there is three types of investing methodologies that have beaten the market over time. Two, that we use in QAV. So value stocks, um, well three actually value stocks and momentum. I think there’s also qualities, maybe there was

[00:30:30] Tony: Four. types, value, value stocks, quality stocks and momentum.

[00:30:34] Tony: But they also

[00:30:35] Cameron: There are four ways that you

[00:30:38] Cameron: value stocks

[00:30:40] Tony: Cardinal Fang. Read the, read the charges. Uh, no, there’s four. Um, and we have three in QAV anyway, which was value, quality, and momentum. And the fourth one was growth. So I’ve been playing around with that. Um, if any of the regression testers who are listening want to go back and have a look at those stocks and see when they go up and when they go down, see if we could, uh, trade in out at the right times using three-point trend lines.

[00:31:08] Tony: See if it was a natural hedge for QAV stocks, um, that’d be good. Although, as you pointed out before, we’re still doing double market in QAV. So, um. We may not need a natural hedge for it, but it’d be, I’m gonna play around with that and just see where it goes. Uh, I guess I’m also calling out that, uh, if this continues to work, I may buy a stock or two on this list just to take it from paper to the real world and see if I can trade it.

[00:31:33] Tony: So don’t, don’t get all squarely and send me questions about why, you know, a stock like Prometicus or Megaport or something suddenly appears on our declared stock list. But, um, that’ll be the reason. I’m just

[00:31:46] Tony: trying to test something.

[00:31:47] Cameron: Wow, the anti-QAV, if you put the QAV and the anti-QAV together, does it, like, wipe each other out? Yeah.

[00:32:00] Cameron: Do you get superpowers,

[00:32:03] Tony: Oh, that’d be good.

[00:32:04] Cameron: investing

[00:32:05] Tony: Yeah. Yeah, that’d be

[00:32:07] Cameron: So the questions I had for you off-Air are like, well, um, how do you determine when you’re in growth fa growth investing mode versus value investing mode?

[00:32:20] Cameron: And, you know, how do you know when to get out? Like whenever we’ve talked about growth stocks over the years, one of the questions has always been, how do you know when to get out? Do you use three-point trend lines? Do you use all the normal rules?

[00:32:34] Tony: Well that’s what I’m thinking. So I’ve gotta test that. Um, I use the normal rules to get into these stocks. Um, so the question is, do the normal rules also work getting out? ’cause a lot, you know, a lot of them will have the kind of duro tech problem where they’ll, they’ll go up quite steeply towards the end.

[00:32:50] Tony: So whether

[00:32:51] Tony: the three-point trend line works with them or not, I’ve gotta research. Yeah.

[00:32:55] Cameron: And they But you don’t, and you don’t follow the rules to get in. You’re, you’re doing the anti-rules.

[00:33:08] Cameron: That’s it.

[00:33:11] Tony: Yeah,

[00:33:11] Tony: that’s it. Plus, plus they’ve gotta be a, a very poor QAV

[00:33:15] Cameron: Yeah. I mean, if you’re gonna invert, has to have a very poor QAV skill. Highest, highest PE in the last six periods? Low,

[00:33:27] Cameron: no. Consistently increasing equity. Very poor financial health. Uh, very high prop, CAF, you know,

[00:33:38] Tony: Yeah. It’s like, why are people buying this stock? Right. Just purely for growth. ’cause the, the forecast earnings per share must be great, and I haven’t looked into it that deeply, but that might also lead into a, you know, a rescoring of our forecast earnings per share metrics on the buy list too.

[00:33:58] Tony: So I’m just researching this and see where it takes

[00:34:00] Tony: us.

[00:34:01] Cameron: wow, that’s, uh, almost heretical. I, I feel like I need to go to confession now. I need to have my sins washed away from hearing you say that. I feel dirty.

[00:34:11] Tony: Well, or I’ll refer you to Morgan Housel who says that, uh, systems will be defended and

[00:34:17] Tony: maintained if they serve the needs of the people who benefit from them.

[00:34:20] Cameron: Well, obviously our system’s not meeting your needs, so you’re not defending it.

[00:34:25] Tony: Well, and that’s, that’s the truth. I mean, it’s no secret over the last couple of years I’ve underperformed, um, even the dummy portfolio, which is I think is, you know, possibly because it, I’ve got a large cap, um, value stock portfolio.

[00:34:38] Tony: But, uh, if this is a good hedge for it, then I’m all

[00:34:41] Tony: for it.

[00:34:42] Cameron: Well, speaking of which, I did do some research during the week. Remember, like I did my, um, analysis, uh, uh, I know a couple of months ago of, of the light portfolios looking at the three-point trend line, um, and, and. Rule one sells.

[00:35:05] Cameron: And if, if I had ignored those, whether or not the portfolio would be better off or less off, I did filter that over the week just to look at the ASX 300 stocks

[00:35:22] Tony: Right.

[00:35:22] Cameron: see if, um, if I’d ignored rule one and three point trend lines with those, that component of the portfolio, whether or not it would’ve been done better over that period of a couple of years, uh, versus how it has done.

[00:35:41] Cameron: And, uh, again, like the full test, it was, you know, slightly better but marginal, like not, not, not really worth writing home about over a couple of years, you know, a couple of percent,

[00:35:52] Cameron: but

[00:35:52] Tony: Okay.

[00:35:53] Tony: yeah.

[00:35:54] Tony: and I’ve also been trying a 20% stop-loss, and it looks like the, one of the stocks I’m trying it with is about to. It’s like about negative 17%, so it’s likely to go negative 20 soon. So I’m not sure whether that’s the right thing to

[00:36:07] Tony: do or not as well

[00:36:10] Cameron: Well, as you know, and I think I may have mentioned one of our listeners, Matt, uh, is working on a, an automated regression testing system, which sounds like he’s got it up and running. He sent me the, the code for it last week. I’ve tried to get it running on my machine, not quite working for me yet, but I, I think based on his work, we are very close to having something where we can just plug in a ton of variables, isolate variables, and he’s got like 30 years of fundamental data that we can plug into it.

[00:36:42] Cameron: And, um, of everything,

[00:36:45] Tony: Oh, that’s brilliant.

[00:36:46] Cameron: value stocks, and everything in between are just really.

[00:36:51] Cameron: Test these things out in a relatively quick, uh, manner. So if we can make that work, that’ll, we can

[00:36:59] Tony: Yeah.

[00:36:59] Tony: That’s brilliant.

[00:37:01] Tony: I think QAV, goes to The next

[00:37:02] Tony: level when we can make that

[00:37:03] Cameron: Yeah.

[00:37:04] Cameron: So we’ve got QAV, anti-QAV. The next level QAV is

[00:37:09] Tony: Yeah. It’s the QAV universe.

[00:37:11] Cameron: Qavu. Quavu. Oh, I like that.

[00:37:15] Tony: The vu. Yeah. The QAV universe. Yeah. That’s great. You can be

[00:37:19] Tony: Dr. Strange.

[00:37:24] Cameron: All right.

[00:37:25] Tony: I’ll be, I’ll be Tony Stark.

[00:37:29] Cameron: That’d be your superhero name. Just Toecutter. What have you got out? What else have you got to talk about TK?

[00:37:36] Tony: I pulled pork, which was a request from last week.

[00:37:39] Cameron: before we move

[00:37:39] Cameron: on,

[00:37:40] Tony: Hmm.

[00:37:41] Cameron: RBA should have,

[00:37:42] Cameron: uh.

[00:37:43] Tony: Yeah.

[00:37:44] Cameron: rates out by now, shouldn’t they? RBA keeps interest rates steady at 4.35%, so

[00:37:51] Tony: it’s not surprising.

[00:37:52] Cameron: go. Has the market responded? Not yet, no.

[00:38:00] Cameron: Okay. Sorry. Keep going,

[00:38:03] Tony: No, that’s all right. We should have, I should have mentioned that earlier, but yeah, I’m not surprised. I did see some research over the weekend and Alan. Cole was reporting that suggested that the inflation was, should already be back into the below 3%, which is the RBA range. But I think the figures that they’re looking at now were for the last quarter, so they haven’t arrived at that conclusion yet, which makes me think that maybe in two or three months time they’ll start cutting rates, which I think is about the consensus in the market.

[00:38:33] Tony: So the middle of the year, there’ll be some rate cuts. But anyway, that’s prediction and it doesn’t, doesn’t worry me one way or the other.

[00:38:41] Cameron: No. Okay.

[00:38:44] Tony: Okay. Metcash. Metcash. Yeah. You don’t, don’t need to check your dummy portfolios to see if you own Metcash before I talk about it, because it’s not on the buy list. It’s, um, not quite an anti-QAV stock, but it doesn’t have a very high score. Um, I think most people will be familiar with Metcash. The company, uh, it, it, uh, is a supermarket hardware store and liquor group, wholesaler and franchiser, I guess.

[00:39:12] Tony: Um, operating brands like IGA and Foodland, uh, home Hardware, Mitre 10 Celebrations Liquor store, those kinds of things. So you all the Australian listeners will have come across those from time to time and may even use IGA for their weekly shopping or Mitre 10 to, to do their DIY long and story history.

[00:39:35] Tony: This company, which I always find interesting, uh, the history of Metcash goes back to. The early days of supermarkets in Australia in 1927 in Woolloomooloo when, uh, a guy called Joe David opened his, uh, first store and called it David’s and David’s Supermarkets were around for a long time in Sydney. So that was 19 twenty-seven 19 thirty-five.

[00:39:57] Tony: Joe David opened a warehouse in Redfern to supply his stores, uh, but also saw the opportunity to supply other stores as well. So. Basically started the wholesale supermarket supply business in Australia. Uh, so the fast forward, the sixty-eight and David’s expands into liquor 1980. They, um, had a big acquisition, a company called A.G Campbell’s, which was a, a large supermarket wholesale business in Australia.

[00:40:26] Tony: And then in the eighties, uh, they were the first to introduce scanning and labeling to Australia, eighty-eight. They introduced the, the retail banner Independent Grocers, Alliance, which is of course IGA. And in 2000, rebranded as Metcash after South African Company, Metro Cash and Carry took a major stake and they stayed with them in only about four or five years.

[00:40:53] Tony: And, and then sold out 2005. Metcash acquires Foodland associated 2010. They acquire and convert that brand to IGA and then they start to branch out into other areas, uh, including hardware. So in 2010, they, uh, I hesitate to say acquired, they did a deal with Mitre 10. So, um. Because they’re a wholesaler and franchiser, I’m not quite sure acquiring is the right term.

[00:41:22] Tony: They basically sign up companies and become, uh, come under the stable of Metcash Supply and then, uh, uh, convert to franchise arrangements as well occasionally. Um, and I think that was a smart move because the, the supermarket wholesale games a tough one. There’s of course, two major competitors. Three really, if you count Aldi.

[00:41:43] Tony: Coles were worse than Aldi in Australia. So it made sense for them to diversify a bit into hardware and liquor, and they’re, um, they’ve kicked, certainly kicked some goals in both of those areas over the years as well. Uh, what else can I say about them? So I, I guess the point I’m making is essentially they’re, they’re a wholesaler, but they do have some element of control over brand.

[00:42:02] Tony: Sometimes as a franchiser of the retail outlets. Sometimes as a part of their wholesale deal, they’ll do store refurbs and refits, and sometimes they actually operate the outlets, uh. The other thing to note is that I think today they came back out of a trading halt, but they’ve just raised $300 million to acquire the food distribution company, Superior Foods.

[00:42:26] Tony: And that’s a, that’s a business that, uh, supplies, cafes and restaurants. Um, they’re also using some of that fund to acquire a couple of hardware suppliers, Bianco and Alpine. And that’s basically been the history of this company in the last, say, 20 years. They, they either take on debt or raise capital and then go and, uh, consolidate in the, in the industries.

[00:42:46] Tony: And if you think about retailing, uh, you know, there, it’s a bit like in the US when there’s Walmart, which you know, has put a lot of small companies outta the business, but then there are networks of the sort of small mom and pop stores that band together to, to fight Walmart. And I guess Metcash is the kind of, um. Conglomerate of those sort of mom and pop sort of stores. So for example, um, on the, on the hardware side, uh, with home and with, uh, Mitre 10 and recently with a company called Total Tools, which is number one in, its, its market of providing, um, tradies with professional tools. I can see you smiling and um, but, uh, I was talking to, uh, an insider from the hardware business recently, and they were saying that Mitre 10 and, and Home Hardware and Total Tools can do really well up against Bunnings because it depends on their service and their, and the, and the store layout.

[00:43:44] Tony: But for example, oftentimes they’ll, they’ll open across the road from a Bunnings and then, um, the tradies will go across to the Mitre 10 because it’s got a bigger, bigger trade supply section and does better service. Um, and, or they might have a bigger paint. Section and the, the Bunnings or the staff are just better.

[00:44:02] Tony: And it gets to the point where the, in the paint section and the Bunnings store, they’ll refer customers across to the better service that the Mitre 10 across the road. So they’ve kind of, um, grown symbiotically almost off Bunnings as well. And because Bunnings is the category killer, you wouldn’t expect another hardware chain to do as well.

[00:44:19] Tony: But, but, uh, Metcash does operate the number two hardware chain, the combination of Mitre 10 and Home hardware and total tools. And the other other area that, um, Metcash has gotten into with the hardware stores is that they put them into, you know, urban areas. So for example, uh, there’s one up the road from us on Oxford Street, which is not where you’d expect any tradies to go ’cause there’s no parking, um, no real floor plan.

[00:44:46] Tony: It’s kinda like three stories of hardware and they call ’em grab and go store. So they’ll stock things that, you know, a very eager DIY person like myself might wanna go and buy, you know, a picture hanging. Frame or picture hanging set or a, a drill or something like that. Just grab and go stuff you can carry home with you.

[00:45:05] Tony: So that’s a good niche market for them. So they’ve kind of filled all the gaps that Bunnings can’t survive. There is talk as well of rural areas, for example, that the established hardware stores there are able to, um, to lobby the councils to keep Bunnings out of and they’re successful in those kind of areas as well.

[00:45:21] Tony: Dunno how much truth there is into that, but, but it certainly goes on, uh. So that’s, that’s the kind of met Cash story, um, to go through their numbers. And again, it’s not on our buy list, so be aware of that. Uh, the stock price I’m using is, uh, from a day or two ago. It’s $3 64 is the share price. ADT on this company is $9.3 million, so it’s very big, big enough for most people to, to buy into.

[00:45:49] Tony: Uh, but the comp, the share price is currently a, it’s just, and it’s one of those ones where the buy line and sell line is starting to converge in a triangle. So it’s just, it’s above its buy price, but it’s almost at sell price, which is $3 52. So not too much above that. The share price is above consensus target, but it’s a long, sorry, less than the consensus target, but it’s a long way above IV one and IV two IV one’s a dollar 51.

[00:46:14] Tony: IV two is $2 74. The yield is 6%, which is good. It’s high, but it’s not good enough because we want it to be 6.8% or better. Stock Doctor financial health is early warning, which I thought was interesting and it’s consistently been early warning for a long time. So that’s not a stock I would like to necessarily own.

[00:46:37] Tony: ’cause early warning, um, isn’t as, you know, financially healthy, as strong or, or recovering or some of the other ones that are there. But, um, I’m wondering whether, because it’s, it’s a wholesaling type model that, uh, early warning is, is just how it operates because it’s, it’s not like a supermarket necessarily.

[00:46:57] Tony: Where, um, supermarkets like the ones that Coles and Woolworths run, uh, terrific businesses because you generally, people shop once a week, so you’re getting paid once a week for your stock, but you’re paying your supplies once a month. You’ve got, you’ve usually got this tremendous amount of working capital sitting there to be used, um, in supermarkets.

[00:47:18] Tony: I don’t know if that’s the case with Metcash because they’re not selling, the retailer is selling the stock. They’re supplying the stock. So they’re being paid monthly and supplying, uh, and invoicing monthly. So I’m wondering whether early warning is a, is a sort of natural part of being a, a, a retail wholesaler.

[00:47:35] Tony: But I haven’t done a deep enough dive to, to look at that. But I’ll call it out. And the financial health is steady ’cause it’s been early warning for a while. Pea is 12.3, which is almost the last but not quite. So we can’t score it for that. Prop calf is 7.15 times. So it’s above our. Cut off of seven, but getting pretty close to, to being acceptable, but not at the moment.

[00:47:58] Tony: Net equity per share is only a dollar 16, so it’s much lower than the, um, the $3 64 share price. And therefore we can’t buy this at anything like book value. And again, a sidebar to NEPs for this company, net equity per share is a dollar 16, but the net tangible assets is 24 cents per share. So there’s lots of goodwill, um, through acquisitions on the balance sheet.

[00:48:21] Tony: And as I said before, they’re making a, their business plan is to consolidate all the fragmented retail operations, um, around Australia. So, uh, that’s. Not un again, not unusual, and as people will know from past podcasts, I’m not necessarily against, uh, that kind of goodwill acquisition on the balance sheet.

[00:48:41] Tony: Um, there is the risk that they have to write something down. But the flip side is if you look at, so, uh, the acquisition of, say, total Tools, which was their last big acquisition, they’ve kicked some goals with that and they’ve, I think they’ve doubled sales in about the last 18 months since they’ve acquired it.

[00:48:54] Tony: So even though there’s, um, goodwill on the balance sheet through acquisitions like that, if the company’s under underlying it or doing well, then it’s worth it. Uh, stock doctor has forecast earnings per share growth of minus 3%. So that’s, uh, something we don’t like to see. Uh, so it gets a, a negative for that.

[00:49:12] Tony: There’s no owner-founder and equity hasn’t been consistently increasing, so there’s not a lot to score on the quality side of things for this company. And, and it gets the four out of 16 or twenty-five percent score. And if you look at, and if you divide that by the, um, the prop CAF, it’s a QAV score of 0.03, which is well below our cutoff of 0.1.

[00:49:33] Tony: So, uh, interesting company to look at. Um, strengths and weaknesses for it. Uh, I like the hardware. Business side of things. I think that was a great idea to diversify into hardware because they’re the number two player in hardware, which is great, a great space to be in, but they’re the number four player in food, which is not a great space to play in.

[00:49:53] Tony: And plus they’re the wholesaler of food, so they’re not getting the normal benefits of a supermarket of, of this kind of work free working capital ’cause of trading terms. So, um, made sense for them to diversify away from that. Uh, some of the other strengths, um, they really have embraced the local store strategy, both in their supermarkets and other businesses.

[00:50:15] Tony: And they do try and make themselves the centre of the community often in, particularly in rural areas, but even in urban areas, they do a lot of, uh, community support and outreach and things like that and sponsor local activities. So they try and play up the community side of things. Uh, the, as I said before, the hardware is working well against Bunnings.

[00:50:33] Tony: Um, uh, liquor is number two in its market, so that, that’s also being doing well. Um. I think the other strength for them is that they’re still consolidating a fragmented mark market across all these different categories they operate in. And, uh, that’ll come to an end at some stage, but there’s, they’re calling out, there’s still plenty of opportunity there.

[00:50:53] Tony: So that’s the strength for them. On the risk side or the weaknesses side, um, I really think the food side is, um, is the biggest risk. Coles and Woolies have done a lot of experimenting with, with small footprint stores like Cold Express, and I forget now what the Woolworths brand is. It’s Metro, Woolworths, Metro, um, which must be eating into IGA’s territory.

[00:51:17] Tony: Aldi, uh, has also also similar sort of strategy to IGA, so that must also be competing strongly against them. So I see, I see food as being a tough business to be in. And then the fourth largest in food. So retailing is all about having a competitive price, and if you’re the fourth largest, you’re not gonna get the best trading terms.

[00:51:37] Tony: New suppliers. So they do have to play up the convenience side of things ’cause they’ll, they’ll never get down to match the, the majors, I don’t think so that’s gonna be an issue for them. Um, I think branding fragmentation is an issue for them and, and that might be solvable over time, but they’ve got some stores as food land.

[00:51:53] Tony: Some stores as IGRI think some are super value. There’s quite a lot of different brands in the market and they could probably benefit from having an overarching brand, which will then get some recognition or better recognition and stronger values associated with it. Um, they’re, they’re going through a major IT upgrade, which is always difficult, especially for a, um, you know, these are, this is a big company but not the biggest in the area.

[00:52:16] Tony: So a smallish, um, retailer in Australia so that there could be some risk with that. Uh, I put a question mark on the franchise model. Um. I worked in the franchise system at Shell, and it’s a tough one because you are always hurting caps to try and do what you want. You see it as being best for the franchise, but in some local areas it may not be.

[00:52:38] Tony: And then it’s a, you know, it’s a, um, an exercise in negotiation over trying to get the local people to toe the line and, and adopt the franchise standards. So that’s always a difficult business model. Um, just to, to highlight the difference in sizes. So total revenue, and I know it’s not an Apple’s to Apple’s comparison because Metcash has hardware as well as supermarkets and Coles has Target as well as supermarkets and Woolworths has Kmart, et cetera.

[00:53:07] Tony: But total sales at a headline comparison, Metcash does about 32 billion per year. Coles has AUDB and Woolworths has AUDB. So that kind of size disparity will eventually make it difficult if it hasn’t already for Metcash to do good deals with suppliers. And I wouldn’t be surprised, I, I’m not gonna suggest this, but I wouldn’t be surprised if Metcash can’t even access some suppliers because Coles and Woolworths have somehow tied them up.

[00:53:35] Tony: Um, but I, I don’t have evidence for that, but wouldn’t be surprised. Um, the stock doctor, financial, financial health of early warning I think is an issue. Um, again, that could be just the, the way the model works for this industry, but, um, certainly when you look at all that Google on their balance sheet and twenty-four cents per share of net tangible assets, that’s saying to me they don’t have much space to borrow for acquisitions.

[00:53:59] Tony: They’ve just come out of a trading halt today to raise 300 million for an acquisition. So I suspect if you’re a, a shareholder in this company, there’ll be, and they. Uh, growing by acquisition, you’re gonna be asked to stump up money from time to time. So just take that into account if you, uh, wanting to buy into this one.

[00:54:17] Tony: And the last risk I’ve put on my list was, is a government inquiry, which has been announced into the supermarket, um, industry, and whether there’s price gouging going on and whether they’re doing enough for the cost of living crisis, blah, blah, blah. And most reporters and most people are saying, oh, this is gonna be tough for Coles and Woolies.

[00:54:35] Tony: But I lived through one of these inquiries just before I finished working at Coles or Coles-Meyer, um, back in the, when was that? Uh, early noughties or mid-noughties. And the person who, or the company that came out the worst from the inquiry was Metcash because, you know, Coles and Woolies were able to, at least in the short term, make a case to say, we’ve dropped our prices, we’re doing the right thing.

[00:54:58] Tony: Um, I. But Metcash just couldn’t afford to and they constantly kept pointing. Every time they went in front of an inquiry panel, they point to the fact that they were cutting prices, but the other player in the market wasn’t. And so, um, I don’t think Metcash ever based any sort of government sanctions or penalties, but certainly got a fair bit of bad publicity out of an inquiry like that.

[00:55:19] Tony: Um, they’re just not big enough to fire that, whereas Coles and Woolies are quite adroit at doing that. And uh, I suspect the same thing is a risk for Metcash going through this one as well, which is about

[00:55:29] Tony: to start. So that’s

[00:55:31] Tony: Metcash,

[00:55:44] Cameron: is it, is it, you know, a, a likely anti-QAV stock? Tony?

[00:55:50] Tony: No, because I think the NDQIV stocks are all growth stocks and Metcash is in the growth stock.

[00:55:54] Cameron: It’s just

[00:55:56] Tony: This is muddling along.

[00:55:57] Cameron: much we

[00:56:00] Tony: May come on the by-list. I mean the prop-cap for it was seven point something, 7.2 or something. So it’s not too far off. Our

[00:56:07] Tony: cut-off. If like, if it can improve the quality score it might get on

[00:56:10] Cameron: get up there.

[00:56:11] Tony: Yeah.

[00:56:12] Cameron: thanks TK. The only other thing I’ve got on the talkie list is, uh, Alex’s. Question about FPR

[00:56:21] Tony: Yes.

[00:56:22] Cameron: on Facebook. In a Facebook group this morning, Alex f asked about FPR. He said, FPR is back on the buy list, but it has a negative operating cash flow. How does that work? A few people pointed out that it actually doesn’t have a negative, uh, cash flow.

[00:56:38] Tony: Hmm.

[00:56:39] Cameron: I’ve looked in stock, doctor, I don’t see a negative cash flow. So, uh, not sure why Alex is seeing that when we’re not. I’ve got, uh, operating cashflow 339.32 million for September 23, um,

[00:57:00] Tony: That’s what I’m, I’m seeing as well. So the only, only possible reason was that just to be careful that we use the periods displayed button is annuals and interims and not annuals only. So what Stop Doctor does is to take a rolling 12 months of, uh, of operating cash flow. But I think even if we go to annuals only, yeah, we’re still seeing a positive cash flow.

[00:57:25] Tony: So I’m not sure what’s going on there

[00:57:26] Tony: with, um, what Alex was seeing. Perhaps the data’s changed.

[00:57:30] Cameron: Yeah, possibly or, but a lot of people were saying they couldn’t see it on the same, at the same time that he was saying he could see it. So not really sure why he’s getting different numbers, but you’ve probably worked it out by the time you listen to this. Anyway, Alex, so that’s that. Uh, well that’s, that’s the show.

[00:57:52] Cameron: Tony. We’re back. We’re into after hours now.

[00:57:55] Tony: Good. Well, um, I’ll let you talk ’cause I’ve got nothing in, in after hours except to say that. People may have noticed Alex Kaye hasn’t been asking questions because she’s just started work at an art gallery in Fitzroy. This is her first day, so I’m keen to give her a call tonight and see how she went, but, uh, I don’t think she’ll be coming on the show for a while to ask questions, unfortunately.

[00:58:18] Tony: Uh, and she was up here last week. She came up for a few days, um, just to see us before she entered the workforce, and her life

[00:58:24] Tony: changed forever. But, um, that was lovely. We hung out for a couple of days, which was

[00:58:28] Cameron: Do you know what a job entails?

[00:58:31] Tony: It’s basically retail customer service, so it’s a, it’s a gallery in Fitzroy and, uh, they specialise in prints and framing. So she works in the store and. Talks to customers and takes their orders. Um, but we’ll have to do, learn how to do a lot of selling of frames and, you know, guiding customers to picking the right frames.

[00:58:52] Tony: And this, this store also has a framing factory out in Coburg or somewhere north of Melbourne, and she may have to spend some time out there actually building frames as well during quiet times. So, yeah. But she’s happy and excited. The people who run the store, a couple of ladies, I think they’re both XRMIT fine arts graduates as well, so she feels like she’s, she’s getting in the network, getting in the industry, and getting noticed.

[00:59:16] Tony: So it’s all good.

[00:59:17] Cameron: whereabouts in Fitzroy? Do you know?

[00:59:20] Tony: Uh, yeah. Brunswick Street, um,

[00:59:22] Cameron: What a great

[00:59:24] Tony: yeah, I’ve forgotten the name,

[00:59:25] Cameron: great part of Melbourne. To

[00:59:27] Tony: Yeah,

[00:59:28] Cameron: to work every

[00:59:28] Cameron: day. Yeah,

[00:59:30] Tony: Yeah. Well she’s just moved down the street on Moonee Pond, so unfortunately she could have, you know, probably moved closer

[00:59:37] Tony: to Fitzroy if she’d known. But anyway, that’s how it happens.

[00:59:41] Cameron: Well, that’s great. Well, um, uh, we’ve been watching Fargo, the new season of Fargo Few episodes into that. It’s on SBS, so you gotta put up with ads, but, uh, it’s, it’s really good, you know, it’s, yeah, it’s really good. John Ham is the bad guy in it. Juno Temple from Ted. Lasso is sort of the protagonist in it.

[01:00:08] Tony: okay.

[01:00:09] Cameron: you watch Ted Lasso? Did you get into that?

[01:00:11] Tony: Oh, I loved it. Oh yeah,

[01:00:13] Cameron: You know, Juno Temple? She’s like the

[01:00:15] Cameron: sort

[01:00:16] Tony: she’s a little

[01:00:16] Cameron: Scousy girlfriend of, uh, one of the football players. Yeah. Do you know whose daughter she is?

[01:00:22] Tony: With that certain, I’m gonna say Julian.

[01:00:24] Cameron: She’s Julian. Temple’s daughter. Yeah.

[01:00:27] Tony: the filmmaker for Never. Mind The

[01:00:29] Cameron: Yeah. Like and God and every other British

[01:00:35] Tony: Hmm.

[01:00:35] Cameron: punk band did video clips for I think like everyone from the Pistols early on through to, you know, Bowie and Culture Club and you name it. He’s been involved. I know he was good friends with Lou Reed. He’s done stuff with both Iggy I think, you know, but uh, ’cause he got into that sort of clique.

[01:00:53] Cameron: But yeah.

[01:00:55] Tony: And most recently Croc of gold

[01:00:57] Tony: for the

[01:00:58] Cameron: The Pogues. That’s right. Yeah. He did that as well. So yeah, she’s sort of British rock royalty, rock, uh, videography royalty. Anyway, but she’s great in this completely. I only watched the first season at Ted Lasso, and it was two sort of shmami for my tastes. But, um, she was great in it, and she’s completely different in this.

[01:01:19] Cameron: And, uh, terrific. Really, really, she’s a, she’s a really interesting actress, like, looks a bit weird, but she’s, uh, I, you know, she’s able to pull these characters together. John Hamm is the bad guy as good. Like, I think it’s the best thing he’s done since Mad Men. She’s kind of, it’s not that far removed actually from Don Draper.

[01:01:38] Cameron: It’s like Don Draper is a evil sheriff, uh, basically 20 years older than an evil sheriff. Um, it’s

[01:01:47] Tony: Did you see him in Davey Driver,

[01:01:48] Cameron: Oh yeah. I love Baby Driver. Yeah, that was great.

[01:01:51] Tony: Yeah. Yeah.

[01:01:53] Cameron: I finished reading Venus in Furs. Um, loved it. Twisted Dark and twisted. Um, but terrific. Like, you know, kind of never really know what’s going on, uh, where it’s gonna end.

[01:02:10] Cameron: But, um, yeah, it was good. Lots of twists and uh, you know, I’m glad I read it. It’s one of the classics that I finally got around to reading and glad I did. And speaking of classics, I started reading, but, you know, I was reading this book on a couple of books on, uh, probability recently and realized I, I, my, my foundation of.

[01:02:31] Cameron: Mathematics wasn’t good enough. So I’ve gone back to Bertrand Russell and Alfred North Whitehead and Principia Mathematica this week. I’ve started reading that with ChatGPT opened by my side. So literally every paragraph I’m having to say, okay, explain this to me. Dumb this down so I can understand it.

[01:02:52] Cameron: But, uh, it’s good, you know, I’m sort of excited to, uh, learn more about pure mathematics and, you know, theory of mathematics at that level. It’s one of those things that I feel like I should understand better.

[01:03:10] Tony: I’ve always been a fan of Bertram Russell, but

[01:03:13] Tony: I’m not sure I’ve come across his mathematics. It’s always been his philosophy that I’ve, I’ve

[01:03:17] Cameron: Yeah. Well that’s where he started.

[01:03:19] Tony: PND and, um, and, you know, his, uh, philosophy on, on, uh,

[01:03:24] Tony: atheism and all that kind of stuff. Yeah.

[01:03:26] Cameron: Yeah. Well, it, it actually, I,

[01:03:28] Cameron: I. Partially ended up going here because my mother sent me a quote of his about how he stopped believing in free will when he was 15, and then he became an atheist at 18 and, uh, talked about why. And then, and I was suddenly thinking, I haven’t really gone deep on Bertrand Russell’s philosophy.

[01:03:52] Cameron: So I did download a couple of books on his philosophy stuff, but then realized in reading about him that where he started was the, the philosophy of mathematics and, uh, symbolic logic and that kind stuff. He was like the reader of mathematics at Cambridge in when he was 22 or something. Um, like he was this mathematics prodigy as a young man.

[01:04:19] Cameron: And

[01:04:19] Tony: Right,

[01:04:21] Cameron: and he said when he was 23, decided he was gonna write. Two, like he, he is gonna have two streams of books that he was gonna write. One was gonna explain mathematics and the other was gonna explain philosophy. And that’s, you know, that’s sort of what he dedicated his life to. And then when World War I Happened and he was,

[01:04:43] Cameron: uh, on the anti-war camp, he kind of lost all of his university positions and was ostracized by the British elite and became the sort of, actually it reminds me of Chomsky a lot.

[01:05:00] Cameron: Uh, I mean, Chomsky held onto his position, still has his position as far as I know, as the emeritus chairman of Linguistics at MIT. But, you know, he could have just had a quiet career in linguistics. But was also a political activist and has run those two things concurrently for 60 years and cops a lot of shit for his political activism.

[01:05:26] Cameron: Um, but feels, uh, I remember when I interviewed him years ago on the show, he just felt like he had a moral responsibility to try and do what was right rather than just living a cushy life. And I, you know, I, I, I wonder, I didn’t ask him at the time, but I wonder in retrospect if it’s, um, he was inspired by Bertrand Russell’s example.

[01:05:49] Cameron: Um, anyway, so I’m enjoying that and I’ve been playing, Taylor gave me his PlayStation when he went to LA and told me to play The Last of Us, which is like one of the most famous games of the last 10 years. It’s a sort of zombie apocalypse game. You’re a guy and you’ve got a. Get this girl across the country to a laboratory where she’s immune to the zombie outbreak and they wanna figure out why.

[01:06:18] Cameron: And

[01:06:18] Tony: Yeah, I saw there was a Netflix series made out

[01:06:20] Cameron: there was, yeah. Um, so I’ve heard about this from the boys for years. Everyone I know who plays games is like, oh, this is the greatest game of all time. You’ve gotta play this. So I’ve been playing that, um, here and there. When I get a bit of time, it’s, I think it’s okay. But I tell the thing that is incredible though, is the lit, like this PlayStation uh, the PS five, like the technology in it.

[01:06:45] Cameron: Wow. Like, I remember Pong Man, I, I started, I had a pong console when I was in like

[01:06:50] Tony: mm.

[01:06:51] Cameron: or something on the Black-and-White tv. These things like the ray tracing that they do, the GPUs and these things, the quality on the big screen TV of. You know, it’s just insane. And then of course, the Apple Vision Pro came out this week.

[01:07:07] Cameron: Have you been following any of that?

[01:07:11] Tony: I have not. No. And I, I did read some articles about Apple and whether it was over value given its growth profile, but um, maybe the Apple Vision Pro’s going to

[01:07:22] Tony: change. Change the trajectory.

[01:07:26] Cameron: I think it, it, and I, I think everyone’s assuming that they’re gonna have a big AI play and that they will be one of the major beneficiaries of AI once they put it on the iPhone. Um, if they don’t screw that up, they should make a lot of money out of that. But yeah, the, the reviews, Taylor was gonna buy a Vision Pro when, because he’s in LA as you know at the moment, but.

[01:07:51] Cameron: They’re like 5,000 bucks Ozzy, three and a half thousand us. He was gonna buy one, he’s decided not to. I think he’s gonna wait till the next version comes out. I’ve been watching a lot of the review videos and, and you know, reading Scoble and people like that who have got them. And the consensus seems to be, it’s amazing technology, very heavy on your head after a while and your eyes are being used so much that you tend to get headaches and your eyes dry out from looking at them.

[01:08:24] Tony: So, so for the uh, people out there who don’t know what the Vision

[01:08:28] Tony: Pro is, can you tell us what the Vision Pro is?

[01:08:30] Cameron: Yeah, it’s Apple’s new goggles. It’s effectually known as the apple ski goggles ’cause it just looks like a pair of ski goggles, high tech ski goggles. Um, but. You can basically have high resolution screens, as many screens as you want, you can just pop them up. So instead of looking at a monitor or two monitors as I have on my desk, you can have just scattered monitors everywhere.

[01:08:53] Cameron: And you can have them positioned three-sixty. So there’s some videos of people, um, having screens set up in their home office, and they’ll have like five or six screens with different things on them, like FaceTime and email and a browser and whatever. But then they can stand up and walk into the kitchen.

[01:09:15] Cameron: And then in the kitchen they’ll have, they’ll be cooking something and they’ll have timers above different saucepans and whatever, and they stay there. And a recipe up on the above the stove, you can just have it wherever you want. Then you walk back and all of your screens in your office is still where you left them.

[01:09:30] Cameron: It’s got spatial awareness and all that kind of stuff. But the interesting thing about it is you can also see. The real world outside of your goggles, but you’re not actually seeing the real world. It’s got cameras that are video in the real world and feeding them back in, but they’re so good. People are playing ping-pong and people having people throw them a ball and they can catch the ball.

[01:09:53] Cameron: So it’s like real time. It’s, it’s, uh, incredibly, uh, responsive. And so they’re very, very expensive and they’re heavy and the battery life is shared and all of that sort of first generation stuff you’d expect. But the idea is that over time they will end up like Meta’s, Ray-Bans. You’ll have wearable glasses that just do overlays of the world and they’ll have AI integrated with them and they’ve got audio integrated with them.

[01:10:21] Cameron: So people, there’s one guy demoing it, walking down the street in Manhattan, and he’s sitting in a subway station watching a movie full high def with the audio in, just in his goggles and like a big screen TV video experience and the goggles and um, uh, so yeah, it’s kind of, uh, very, very cool tech that they’ve spent years developing.

[01:10:48] Cameron: Taylor sent me, uh, their patent. Uh, application for it, which I think was like 2006 or something like that. So they’ve been working on it. It was plugged into like a first generation iPod, um, in this patent documentation. So they’ve been working on it for a very long time.

[01:11:07] Tony: Yeah.

[01:11:07] Cameron: Uh, yeah, so that’s cool.

[01:11:10] Tony: Good.

[01:11:14] Cameron: anyway, that is QAV for this week. Thank you. TK.

[01:11:20] Tony: Thank you Cam, and let’s have a call out for some more questions

[01:11:23] Tony: for next week too, please,

[01:11:25] Cameron: Or not?

[01:11:27] Tony: Or not,

[01:11:28] Cameron: Or not, we’ll just talk about other stuff.

[01:11:30] Tony: yeah. Yeah. I, I had, did have the thought a couple of weeks ago. We should just take after hours and turn into a separate podcast,

[01:11:38] Tony: just riff on culture and entertainment and whatever else is

[01:11:42] Cameron: I’m up for that.

[01:11:44] Tony: Yeah,

[01:11:45] Cameron: Uh. Yeah, yeah, yeah. I’m up for that. Sure. Be good. I like talking to you about that kind of stuff. You can tell your your Union day stories too. We should do the union

[01:11:57] Cameron: Tony Toe cutter, kind of the student union days. What was your play called? Curtin Falls.

[01:12:04] Tony: Curtin Fall Yeah.

[01:12:06] Cameron: fall. Ooh.

[01:12:07] Tony: Mm-Hmm.

[01:12:08] Cameron: Oh. I’m up for that.

[01:12:09] Cameron: I got nothing else to do.

[01:12:12] Cameron: All right, see ya.

[01:12:13] Tony: Okay,

[01:12:15] Tony: have quite a good week. Happy ASX.


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.

QAV 723 – The Vulcan Fudge

Join Tony and Cameron in episode 723 of QAV as they discuss a variety of topics ranging from American barbecue joints to the Hunter Biden lawsuit. Tony talks about his relaxing golf trip down the East Coast and the challenges of selling a house. Then we discuss Vulcan level emotional detachment in investing, recent market movements, and specific stocks like CUE, MME, and PRN. There’s also an exploration of dividends and portfolio performance. In after hours, we’re talking about ‘The Blues Brothers’ Sidney George Reilly (Ace Of Spies), Nicholas Cage in “Dream Scenario” and our plans for our first U.S. episode.


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