This week: Do ASX investors need to get used to expensive stocks, and a pulled Pork on G8 Education (GEM).

Also in the Club edition: theories on why KSC spiked, whether AMC CEO’s sudden resignation is a red flag, MEA is being sold, Macquarie’s new FOMO meter, ABB’s Superloop troubles, and what to do if you still own VUK.


QAV 713 Club

[00:00:00] Cameron: All right, give me a one, two, three in whatever language you choose.

[00:00:15] Tony: 1, 2, 3.

[00:00:17] Cameron: Welcome back to QAV,

[00:00:18] Cameron: Tony. This is episode 713, 26th of March, 2024. How you doing down

[00:00:26] Cameron: there in Sydney, Tony?

[00:00:28] Tony: Good. Well, yeah, it’s a lovely day in Sydney. We seem to have gotten past that really

[00:00:34] Tony: high humidity phase of summer, so that’s good.

[00:00:37] Cameron: It’s cold and rainy in Brisbane at the moment, which is perfect. I’m loving it. Loving it, Jerry. Loving it.

[00:00:47] Tony: uh, you and Alex, she loves the cold bit weather too. Mm

[00:00:52] Cameron: I um, I started reading this book over the weekend, um, something about, Highly sensitive people. How to, how to, how to deal with highly sensitive people, because Chrissy keeps telling me that she’s a highly sensitive person, and that Fox is a highly sensitive person, and I didn’t even understand what that meant.

[00:01:12] Cameron: I had to ask her a couple of weeks ago, what does that even mean, really? So anyway, I’ve got this book, and I started reading it, and the beginning of the book is a checklist, like the psychopath checklist. It’s like, how to tell if somebody is a highly sensitive person. So I did the checklist, thinking I would score very low.

[00:01:27] Cameron: I scored really high on it. And one of the questions was, um, if you get, do you get really irritable when you’re either really, really hot or really, really cold? And man, you don’t want to be around me when it’s hot and humid. I get, I get really irritable, as Chrissy will attest. Um, you know when your skin starts to get prickly?

[00:01:48] Cameron: And like, ahhhh.

[00:01:50] Cameron: So that’s why I have to sit

[00:01:51] Tony: I hate it. I must be highly sensitive too, ’cause I don’t like it.

[00:01:54] Tony: either. Oh,

[00:01:57] Cameron: like, oh, holy shit. Well, it’s like, do you have a, do you have a, do you, do you get very emotional over music and art and all these sorts of things? And I think I mentioned to Chris, he goes, yeah, I know that. Your mother knows that your mother’s been telling me forever that you’re, you’re a highly sensitive child, but you basically learned to dampen it or control it, you know, and, you know, mask it or whatever.

[00:02:22] Cameron: So, cause I think most people who know me would not put me down as

[00:02:26] Cameron: being highly sensitive, but that’s,

[00:02:28] Tony: Well, no, no, I wouldn’t have done that. Send me, just hypothetically, just send me the book so I can deal with it

[00:02:36] Tony: before next week.

[00:02:38] Cameron: I will. I will do that. Ah, Tony, speaking of highly sensitive, Um, according to the Financial Review, Chanticleer We should be highly sensitive about exp well, not be highly sensitive, I guess, about expensive stocks. Shana Clear article from March 22nd. Why ASX investors may need to get used to expensive stocks.

[00:02:59] Cameron: ASX listed stocks have never been this highly valued. But one strategist says that’s because companies have never been this well run. At the end of every year, this column pulls together a list of the good, bad, and ugly of corporate Australia. Maybe it’s the cynic in me, but it’s always easy to find the stuff ups and missteps.

[00:03:18] Cameron: Examples of really great Australian management often seem few and far between. But new research from UBS strategist Richard Shelbach raises questions about whether we judge Australia’s corporate sector too hard. He argues the fact that stocks have never been as expensive as they are now in large part reflects the fact that corporates are producing higher quality earnings than they used to.

[00:03:41] Cameron: While Shelbach says valuations do not deserve to go higher even when interest rate cuts arrive. He argues that local investors need to get used to valuations settling higher than they have in the past. Says the ASX200, excluding resources, currently trades at 18. 5x forward earnings, which is 40 percent above its long term average of 13.

[00:04:03] Cameron: 5x, but 12 percent above the previous peak in May 2007, just before the global financial crisis. So, uh, what do you think about that, Tony? Do we have to get used to more expensive stocks or is he just looking in the wrong part of the stock market?

[00:04:22] Tony: Well, I guess first of all, thanks for pointing it out. And I did some research onto it once I saw your article. And I went to a site called Market Index. They have a whole lot of long-term averages for the market and they graft them and one of them is PE ratio. I wasn’t able to tell whether it’s the forward PE ratio or the trailing PE ratio on market index ’cause it does differ from the stats you read out there.

[00:04:49] Tony: Um, differ in number but not differ in, differ in trend. Um, and, and I’ve always thought the market average PE ratio was 16 and that’s what. Market index is saying 2. So that could be the trailing PE ratio, but either way, yeah, the market’s pretty high at the moment. I think market index has got it at about 21, 22, which is very high as an average PE for our Our stock market.

[00:05:16] Tony: Um, so a couple of points. Yeah, I think you need to be a little bit worried about the market when it gets to this kind of territory. I don’t think it’s, according to market indexes graph, the highest, but it’s, it’s, you know, in probably the top, it’s in the top bracket of ISP ratios. But, you know, I’m always really wary of regression to the mean.

[00:05:36] Tony: And it, historically, the market doesn’t get much higher than this before it starts to, I’m off. So it may go sideways for a while. It may keep going up and then crash. It’s but it’s the risk of regression to the mean always increases the higher and lower you are from that from that average. So, yeah, I think it is a time of concern.

[00:05:58] Tony: But if I look at the Long term graph. This one goes back to 1980 and it’s available on Market Index. Um, it can take years and years and years for that regression to the mean to occur. Um, so sometimes, like, for example, in the, uh, 80s, or the first half of the 80s, it took, um, It took at least six or seven years for the market to reach a high and then it crashed in 87.

[00:06:26] Tony: Sorry, to be come from less than the market average to be more than the market average and then it crashed and it took another, I’m just guessing here, about 10 years to get back into overvalued territory. So it can take a long time for these regression to the mean events to take place. But yeah, surely if you’re above the market average, it’s not going to double from here.

[00:06:48] Tony: Um, that would be outside of anything that’s happened before, and it’s more likely to regress back to about 16. But whether that takes a long time, whether it happens naturally and the market goes sideways for a

[00:06:57] Tony: while, does earnings improve, who knows?

[00:07:01] Cameron: Well, as Jonathan pointed out in our Facebook group today, um, if the market is expensive, why are so many companies appearing in the buy list? And, you know, somebody. I made the suggestion last year, middle of last year, that I should start charting in the weekly buy list how many buys and sells and josephines, which I have been doing.

[00:07:23] Cameron: And, uh, you know, so I’ve been doing that since the beginning of September last year. And when I look at that, the trend line’s actually going up for the number of buys in our buy list. The trend line for sells and josephines is going down over that. There was a six month period. Um, so. We’ve got more stocks appearing on the buy list now, which means, you know, to, to do that, they need to be reasonably priced by our metrics.

[00:07:56] Cameron: Um, uh, so how do you, how do you pass all of those

[00:08:00] Cameron: things together?

[00:08:02] Tony: Well, the buy list has always had stocks on it. Like, you know, I’ve never, I’ve never not been able to find a value stock in a share market. So I think that’s the first thing to note. And it always tends to have sort of 50, 50 to 100 stocks on it. So, um, whether it’s a bull market or not, even during the GFC, there were plenty of things to buy.

[00:08:21] Tony: at a, at a cheap valuation. Um, although sentiment was against them then, I guess. Uh, so yeah, that’s, that’s always going to happen. Um, and I guess the point I should make is even if the market is overvalued or undervalued, I still, it’s just business as usual, as far as I’m concerned, because there are always value stocks, just as there are always gross stocks in the market.

[00:08:43] Tony: So I’ve never had a problem not finding something to buy. As for more buys now than sells, that’s, that’s a good thing. It certainly bears out my. Portfolio, certainly had a lot less trades in the last 6 months, um, so the market is less volatile, uh, but I’m not sure whether that’s true. That has any sort of bearing on the valuation of the market at all.

[00:09:06] Cameron: I, I made the point, um, when I was doing a blog post yesterday, looking at our chart that It seems to me that we’re, we’re in a good period, uh, for value investing. There’s more stocks appearing to be value buys for us, um, than there have been in the last six months. So we seem to be moving into a value cycle is the way that I read that.

[00:09:30] Cameron: If there’s more value available than there was six months ago. But, so I, I guess when he says stocks are more expensive, it’s not across the board, right? They’re, uh, Still lots of value appearing and they’re probably the stocks that are unloved or not getting attention or whatever it is. As we know out of the two and a half thousand stocks on the ASX, not all of them get an

[00:09:58] Cameron: equal amount of attention.

[00:10:00] Tony: No, correct, and that could be the reason why there’s more value stocks now, because if everyone’s buying large cap stocks or, or, you know, momentum investing and following tech stocks or whatever that are doing well, then, uh, yeah, it’s, it’s gonna leave the value stocks a bit more unloved.

[00:10:19] Cameron: Well,

[00:10:19] Tony: But I guess my point, and I guess the point is that value investing doesn’t change during the cycles, uh, but we’re still bound by the market.

[00:10:28] Tony: If the market crashes tomorrow, value stocks will go down. The difference in my experience is the highly valued stocks all fall by, you know, half to two thirds and the value stocks will fall by 20

[00:10:40] Tony: percent type thing.

[00:10:42] Cameron: We hope,

[00:10:43] Tony: We hope, yeah. But that’s generally what happens.

[00:10:45] Cameron: hopefully not in a day,

[00:10:47] Cameron: like some have done.

[00:10:49] Tony: No, it could happen.

[00:10:50] Cameron: Well, speaking of, uh, stocks doing well, Tony, I wanted to talk about KSC. Uh, KSC is a stock I hold in one of the light portfolios, and one day last week it just shot up out of nowhere. And I was trying to figure out why there was nothing in the announcements, nothing I could see, you know, its results had already come out well before.

[00:11:17] Cameron: And the only thing I could see was that there was a dividend. We hold it in the dummy portfolio, by the way, KNS Corporation. I

[00:11:27] Cameron: think they’re a transport company from memory,

[00:11:29] Tony: They are, yeah.

[00:11:30] Cameron: transportation and logistics. Um, the only thing I could see that might’ve sort of explained this was they have a dividend. Coming up.

[00:11:43] Cameron: I, I, you know, I, I, I, let me go and see what this jump was. Yeah, it jumped from, it was trading on the 14th, it was trading about 3. 24, then it jumped to 3. 68 on the 18th of March. Went up to 3. On the 19th of March, it’s come back down to 375, but, um, sudden jump, nothing really to explain. It could be more going on, I guess, behind the scenes that we’re not aware about, but not aware of.

[00:12:11] Cameron: But have you ever seen something jump like that? I mean, it’s, it’s a tasty dividend. Let’s see, it goes X. Uh, Went ex on the 21st of March, and it’s paying a, uh, 10 cent dividend, 100 percent franked, trading at, as I said, sort of 3 bucks, something 20 at the time. Do you think a dividend like that could cause the share price to go up that much that quickly or is it probably

[00:12:37] Cameron: something else going on?

[00:12:39] Tony: Oh, I think it’s something else going on. The dividend yield on this, on this stock isn’t that high. If, if someone was buying expecting a big payout, then,

[00:12:47] Tony: um, I think the dividend yields like three or four percent,

[00:12:50] Cameron: Could be a takeover?

[00:12:51] Tony: price is up 20 or 30. Could be. The problem with this stock, Cam, and stocks like it, is the 000.

[00:12:58] Tony: It’s not getting covered by brokers because it’s so small. And, and, um, so it’s, it’s, It’s pretty hard to understand what’s going on, especially if they’re not making regular disclosures to the market, which they’re not. So this could be anything. It could be a takeover, it could be, um, you know, someone’s leaked that they’re going to have a good year, and not in any sort of devious way.

[00:13:22] Tony: Someone may, one of the truck drivers may have gone into a pub and said, geez, I’m working hard this year, we’re having a good year, and that could be enough. So

[00:13:30] Tony: who knows?

[00:13:31] Cameron: people still go to Pubs Pubs

[00:13:33] Cameron: still exist like that?

[00:13:35] Tony: They do, especially for truck drivers, too.

[00:13:38] Cameron: I haven’t seen a pub for a long time. Yeah, there’s no pubs in Brisbane where I live anyway. There’s like hotels where you go and have a fancy meal and catch

[00:13:48] Cameron: a band, but not pubs. Like

[00:13:51] Tony: You’ve got pubs with bands in your area?

[00:13:53] Cameron: yeah, it’s all

[00:13:54] Cameron: fancy, very fancy.

[00:13:55] Tony: Okay, that’s

[00:13:57] Tony: unusual. So it’s normally poker machines.

[00:14:00] Cameron: just on KSC, I added it to the portfolio back in August, 2021 It’s up 134 percent since then.

[00:14:11] Cameron: So that’s, that’s been nice. It’s done well.

[00:14:14] Tony: Mmm. Mmm.

[00:14:16] Cameron: ADT must’ve been a bit higher than 9, 000. It

[00:14:18] Cameron: wouldn’t have passed a 15, 000

[00:14:20] Tony: Oh, really? I may have got that wrong. Let me just check the ADT

[00:14:23] Cameron: be smaller now than it.

[00:14:24] Cameron: was back then too. I think it’s like a 90 day sort of, um,

[00:14:29] Cameron: window Stock Doctor use.

[00:14:31] Tony: Yeah, they use a rolling average. But, um, I’ll just have a quick look. I got that from the buy list. The

[00:14:37] Cameron: Yeah, it’s probably right then.

[00:14:39] Tony: 000. Okay, Stock Doctor’s a bit slow. Yeah, 9, 086. 9, 086. So it’s pretty small.

[00:14:47] Cameron: Hmm.

[00:14:47] Cameron: Yeah.

[00:14:49] Tony: Yeah, look, they, um, so the results came out on the 21st of February. So that could just be someone’s liking what they saw in the results a month later. And they’ve taken some time to build up stock in the company because it’s such a thinly traded company.

[00:15:04] Tony: But yeah, I just can’t explain it.

[00:15:06] Cameron: Hmm.

[00:15:07] Tony: But like typically what happens in this situation is the ASX will issue what’s called a speeding ticket and they’ll write to the company and say, Are you aware of anything that could have caused the share price increase or decrease when they had big moves like this?

[00:15:21] Tony: But that hasn’t happened yet. So it may happen, but it should have

[00:15:23] Tony: happened by now.

[00:15:24] Cameron: Mm. Well, I was happy. It was nice. If it’s, I, I, honestly, I expected it to fall back to worth like the next day, um, and it, and it hasn’t yet. So, yeah, it’s all good. Hey, speaking of stocks that I’m happy with, uh, I mentioned last week that I had to sell a parcel of SMR. Thought it was tied to the coke and coal and I said it had been up at 40% at some stage and it had become a rule one.

[00:15:50] Cameron: Um, what I neglected to mention, ’cause I’d forgotten, is they actually own two other parcels of SMR that still are up 40%, um, that we bought a lot earlier than the one I had to sell. So we’ve got two parcels of SMR, one of the dummy portfolio one and one of the light portfolios that we bought back in October 22.

[00:16:08] Cameron: They are both up still 40, 43%. So, uh. I’m not as cranky at

[00:16:14] Cameron: SMR as I was last week. I

[00:16:16] Tony: Not as sensitive?

[00:16:17] Cameron: Yeah. Yeah, highly, I was highly sensitive about SMR

[00:16:20] Cameron: last

[00:16:20] Cameron: week.

[00:16:22] Tony: Um, have you looked at the coking coal graph recently?

[00:16:26] Cameron: Uh, no, because, uh, Alex reported no

[00:16:29] Cameron: changes to our

[00:16:31] Tony: Okay, I just had a look at it when I saw your note on this, but um, it’s

[00:16:35] Tony: still a Josephine, but I think it’s getting pretty close to a sell, so you just

[00:16:39] Cameron: Oh,

[00:16:39] Tony: it. I

[00:16:41] Cameron: say that. Oh, yeah. Ooh.

[00:16:47] Cameron: Yeah. Not,

[00:16:47] Tony: think the graph might have a flat bottom, so that’s got to be taken into account when drawing the sell line.

[00:16:52] Cameron: Right.

[00:16:53] Tony: Yeah,

[00:16:55] Cameron: All right. Sure. Alex will keep an eye on that for us each week. Uh, somebody else who’s got a flat bottom, uh, the CEO of VM Corp. Um, I think that was his health

[00:17:07] Cameron: issue. No, I’m not sure. The CEO of ,

[00:17:10] Tony: we don’t know.

[00:17:12] Cameron: the, uh, CEO of Amcor, uh, resigned suddenly. Last week, um, Ron Delia, Delia, oh Delia, wasn’t that a Johnny Cash song?

[00:17:25] Cameron: Oh yeah, Delia’s gone. Delia,

[00:17:28] Cameron: oh Delia, Delia all my life, If I hadn’t a shop, poor Delia, I’d have had her for my wife. Delia’s gone, one more round, Delia’s gone. I went up to Memphis, and I met Delia there, Found her in her parlor, and I tied her to her chair. Delia’s gone, one more round, Delia’s gone.

[00:17:55] Cameron: First time I shot her, shot her in the side, Hard to watch her suffer, but with the second shot she died.

[00:18:07] Cameron: There you go. Anyway, that’s different Delia. Uh, he said he’s, he informed the board of directors, Ron Delia, that he was, uh, retiring from the company and stepping down effective April 15th. This notice came out on March 19th, uh, within a month for health reasons. Hmm. What do you, we don’t, we don’t own Amcor, so it’s not material.

[00:18:32] Cameron: But, uh, if you did own Amcor and you saw that, what would be your gut reaction,

[00:18:38] Cameron: Tony?

[00:18:40] Tony: that’s a hard one Cam, um, and I, one of the reasons why we don’t own it is because it’s um, uh, well it hasn’t been on the buy list for a long time I don’t think, or if at all, uh, anyway, and this AMCOR is dual listed, it’s um, basically the, um, the AMCOR that I knew from when I used to um, follow it decades ago has split, and the Australian company is listed on the ASX and the overseas company is listed.

[00:19:08] Tony: probably on the MYSE, um, but overseas anyway in America, and it’s all the international Amcor business that, um, that ANCOR used to own when it was based here. Um, so I haven’t really followed it for a long time, uh, but you’ll think you’re talking about a general case, what happens when a CEO resigns quickly for health reasons, and, um, You never know, that’s the problem, and I wonder whether there should be full disclosure in these cases, whether they should have to disclose what the health reason is, um, because it’s, you know, it’s a tussle between their right to privacy, Uh, and the market’s right to know whether this is a concern or, or whether it’s a legitimate

[00:19:49] Cameron: does he have a flat bottom?

[00:19:51] Cameron: inquiring

[00:19:52] Tony: he have a flat bottom?

[00:19:53] Cameron: minds want to know. Last on the buy list, the only

[00:19:55] Cameron: time it’s been on the buy list since I’ve been tracking the buy list was, uh, 22nd of August, 2022. So it has been a while.

[00:20:03] Tony: Okay. has been a

[00:20:04] Tony: while. Um, but the thing I did did see when I was, uh, researching this was that they reaffirm guidance for the end of the year. So if there is, if there is a, a profit based problem that this the CEO’s resigning and trying to avoid, then Amcor will get into trouble. In Australia, that would probably prompt a class action if they reaffirmed guidance and then didn’t achieve it.

[00:20:30] Tony: Um, especially if there was something going on the CEO knew about. Um, and certainly in America, it would too. It’s probably even more litigious over there. So the fact I’ve come out and reaffirmed guidance gives me hope that this is a true health issue for the CEO. But yeah, it’s a, it’s an interesting one.

[00:20:48] Tony: Um, they use two excuses, family reasons or health reasons if they retire, retire or resign suddenly. Um, but it would be better for market transparency if they said I’m retiring for health reasons, and it’s true. You know, serious health issues. Well, you know, it’s, it’s, it’s cancer or it’s, um,

[00:21:10] Tony: or I’m looking after a very sick wife or whatever, but, um, yeah, it is a bit strange when they just,

[00:21:15] Tony: and it’s interesting too, he said retire, like, um, that suggests he’s retiring in total from everything.

[00:21:21] Tony: So it may well be a serious health issue as well.

[00:21:23] Cameron: Right. How

[00:21:24] Tony: So he can’t go and work

[00:21:25] Tony: on somewhere else.

[00:21:26] Cameron: How old? is a Rondelia? Oh,

[00:21:28] Cameron: he doesn’t look that old.

[00:21:31] Tony: It doesn’t does

[00:21:31] Tony: it?

[00:21:32] Cameron: Hmm. Well, anyway, best of luck to Ron Delia. Um, what else? Oh, MEA is being sold. Tony. It hasn’t been on our buy list since

[00:21:46] Cameron: February 2023. I looked it up, McGrath Real Estate, but it just gets back to that conversation we’ve been having in recent weeks about the declining number of stocks.

[00:21:57] Cameron: On the ASX,

[00:21:58] Cameron: mergers and

[00:21:59] Tony: it’s been, been taken over and taken private by a real estate company. Yeah, I did see that and it’s, it’s, you know, it’s taken out of the, I think it was a 25 to 30 percent premium, so that’s good if anyone was still holding it.

[00:22:14] Tony: But it never got back to its listing price, McGrath, um, so it’s been a, it kind of started off as a, um, a gross stock because the idea was it was going to use a high PE to, to roll up other real estate agents.

[00:22:28] Tony: It would pay them in script and, um, that’s it. A cheaper way of doing it than paying them in cash because the script is highly valued. Uh, but, but then, um, it fairly quickly issued profit downgrades and the PE evaporated. So it’s been a value stock for a while

[00:22:43] Tony: too.

[00:22:44] Cameron: Although not on our buy list, uh, since, well, February last year. Um, you, you, you have to wonder again whether the real estate market being so frothy, real estate businesses would be doing

[00:22:59] Cameron: gangbusters.

[00:23:02] Tony: Yeah, and McGrath I think has gone up this year. Um, I read an article today saying the CEO, or the founder, Mr. McGrath, was saying that he didn’t think in retrospect taking a real estate company to the ASX boards was the right thing to do because the markets are so cyclical. And he got smashed when the market turned down, but yeah, it has been a, you would think a good real estate market, moving slowly to sell our apartments, so I’m not sure if that’s just hype, but, but, um, yeah, should have been good times for the, for the company.

[00:23:33] Cameron: You look back at just pre COVID, um, so it was trading January, 2020 at, uh, 34 cents by, uh, April, 2021, it was trading at 67 and a half cents. So it kind of. You know, went down during COVID, but then was back to like double where it was pre COVID, um, after that 2021 boom. Dropped a bit, was up by sort of November 2021, was up to 67 and a half again, and then sort of has been declining up a bit in the last couple of weeks, which is probably the acquisition going on, but it’s sort of been hovering around 30.

[00:24:10] Cameron: Three to 40 cents for the last couple of years. So yeah, interesting, you know, frothy real estate

[00:24:16] Cameron: market.

[00:24:18] Tony: Yeah,

[00:24:19] Cameron: speaking of frothy, uh, Macquarie’s new FOMO meter flashes red, points to these eight stocks. This would be fear of missing out FOMO, not former Mormon FOMO, like my wife is a FOMO. Um, when she refers to FOMOs, it’s former Mormons, Exmos or FOMOs, they are.

[00:24:40] Cameron: This article, again, Chanticleer, Macquarie’s new measure of investor sentiment should be a warning sign for those chasing this impressive rally. A better than expected reporting season, a near universal belief in a soft landing, the ASX 200 seemingly cruising towards 8, 000 points after hitting a series of record highs, What’s not to love for local investors?

[00:25:00] Cameron: Plenty. According to Macquarie strategists Matthew Brooks and Sophie Bolton, they have just constructed a new FOMO, Fear of Missing Out, meter that seeks to measure whether investor sentiment has become overheated. The verdict? Be wary, brace for below average returns, and get defensive. We continue to believe that sentiment needs to cool a little and that investors should wait for a correction.

[00:25:24] Cameron: Before rotating more to risk, the pair say. The FOMO meter is built on seven indicators, all of which tell an interesting story. Um, so on one hand, we’ve got Chanticleer telling us that we should get used to paying higher prices because companies are performing so well. On the other hand, Chanticleer is telling us that, uh, we should wait for the market to correct before we take any risk and invest more.

[00:25:49] Cameron: Which one

[00:25:50] Cameron: is it, Tony? We’re,

[00:25:52] Tony: Well, I think they’re, I think they’re both saying the same thing. If you read the Chanticleer article, even though it says get used to paying for more, I think they’re basically saying the market’s too high and should regress back to the mean. And I think Macquarie Group is saying the same thing, but with a different methodology.

[00:26:06] Tony: They’re talking about the VIX indicator being up and a few other things like that. Um, but it’s the same thing. It’s, it’s the market’s expensive and be careful.

[00:26:16] Tony: And I think that’s correct.

[00:26:19] Cameron: we know that. When interest rates start to come off, uh, in the U. S., which they’re suggesting, and then eventually here, chances are the market’s not gonna come back when interest

[00:26:32] Cameron: rates drop. It’s gonna go through another

[00:26:34] Tony: No, but it’s the question is will I go up because I think that the interest rate drops already factored into the

[00:26:40] Cameron: then.

[00:26:41] Tony: Yeah, and that’s why it’s high.

[00:26:44] Cameron: assuming, the market’s that smart, Tony.

[00:26:48] Tony: Or dumb. Why would you factor in interest rate rises that haven’t happened yet? That’s like

[00:26:54] Tony: It cuts both ways with that one. But um Yeah, but like they’re both saying the same thing that be careful the market’s up.

[00:27:00] Tony: Um, and you know, particularly financial advisors love this kind of article, like the Macquarie Bank one, because it involves transacting. It’s right, it’s like it’s, it’s, it’s time now to go into the fences, and start trading. If people don’t know what defensive stocks are, they tend to be ones that ride through the cycles, like your supermarkets, pubs, that kind of thing.

[00:27:23] Tony: So, um, they don’t do nearly as well as the rest of the market when times are booming because they’re steady as you go type businesses. Coles and Woolworths, usually grow at about CPI or, or GDP growth. So they’re kind of single digit growth companies. Um, and, but they’re favored because if the downturn comes again, they will go down when the market turns down, but not as much as Commonwealth Bank on a very high PE, for example, but it’s, you know, this kind of article.

[00:27:53] Tony: I wouldn’t say it was generated to service the financial advising industry, but it’s used by them a lot to ring up all their clients and say, Hey, have you seen this bit of research from Macquarie? I think it’s time for you to sell ComBank and buy

[00:28:05] Tony: Woolworths. Um, and stockbrokers love it

[00:28:07] Cameron: Leonardo DiCaprio got his, his guys hitting the phones in Wolf of Wall Street. You know,

[00:28:15] Cameron: yeah, cause they,

[00:28:17] Tony: that’s what it

[00:28:18] Cameron: live on transaction fees, right? More transactions their clients

[00:28:21] Cameron: do, the better for them.

[00:28:24] Tony: Well, yeah, well, financial advisors, maybe not so much, but stockbrokers do, for sure. But financial advisors live or die about, um, keeping their customers happy. So it’s, if they get an article like this, they can’t afford to ignore it or go to the, the customer and say, look at, yeah, it’s, I said to you, buy an ETF and the markets kind of go up and down.

[00:28:43] Tony: If we try and time it any more than that, we’ll be in trouble. Um, that’s what a good advisor should be saying, but a bad one will be saying, you know, it’s time to rotate your stocks. And I remember. Years ago, uh, a guy I played golf with We were sitting down having a drink afterwards, and we were talking about the stock market, and he said, I’ve just told all my, all my clients to rotate out of Australia into international shares.

[00:29:08] Tony: And I’m like, oh, okay, why? And he pulled out all this research from different global banks about it. And of course, next year the share market in Australia went up tremendously and the US market pulled back. So it was the wrong thing to do, but, but this whole idea of rotating between sectors is, I think.

[00:29:24] Tony: Fundamentally wrong. You either have, you either have a framework

[00:29:29] Cameron: hmm.

[00:29:30] Tony: and maybe this Macquarie, you know, uh, traffic light is a good framework to use. But you stick to it. You don’t, you don’t sort of pull out a new article. This is the first time I’ve heard of it. You don’t sort of pull it out new as a way of trying to get people to transect.

[00:29:47] Tony: You either say, I’m in an ETF, I’m in an index fund, or I’m, you know, I’m going to take a punt on some growth stocks, or I’m going to take the long term approach on day use stocks, but you stick to that, and you have a framework for it. You don’t just keep rotating because someone thinks it’s time to

[00:30:03] Tony: buy defensives, or gold, or Bitcoin, or overseas.

[00:30:07] Cameron: their framework

[00:30:08] Cameron: to rotate in and out of things

[00:30:10] Tony: Yeah, exactly. That’s the stockbroker’s

[00:30:12] Tony: framework.

[00:30:13] Cameron: and time it. Yeah. Um. Look, Yeah,

[00:30:18] Cameron: if, if, if I’ve learned anything from listening to you over the last five years is that one of the big, uh, secrets to success at this is just to have a framework that’s been proven and just stick to it, like glue.

[00:30:35] Tony: just grind it

[00:30:36] Cameron: Yeah, grind it out. Yeah. And, uh, uh, it doesn’t matter if the market’s up or the market’s down, or you know, what’s going on with interest rates, et cetera. You just keep trying to do what you do, which is, as I say, find companies with a good track record of generating cash and buy them when you can get them at a discount and then hold them until they breach one of the sell triggers.

[00:30:59] Cameron: Then rinse and repeat. It’s that

[00:31:01] Tony: yeah, exactly. And some of our companies will have high PEs, but we score companies for having a low PE. So, um, not too many of them will have a high PE. We’re looking for stocks with low PEs. And one of the reasons for that is regression to the mean. We want them to, we want them to, rewrite back up to a PE which is above the market average now anyway so it’s even

[00:31:24] Tony: a better proposition for us to buy a cheap PE stock.

[00:31:27] Cameron: I was thinking about this

[00:31:28] Cameron: driving around the other day, just about the thesis. What’s the thesis behind your investing? And, you know, I was thinking about the Mag7 stocks and, you know, as we’ve talked about on and off, you know, I, I love what these companies are doing. I don’t know. Did you pay any attention to Nvidia’s, uh, announcements

[00:31:47] Cameron: sort of last week?

[00:31:50] Tony: The only

[00:31:50] Tony: thing I paid attention to was their new

[00:31:51] Tony: chip which yeah

[00:31:53] Cameron: Not a chip, Jensen Huang says. It’s a framework. It’s a platform. The Blackwell platform. But this sort of stuff they’re doing is really incredible and they also announced their robotics platform. They’re rolling out a robotics platform that robot manufacturers can build on top of. They’re going to provide the intelligence and the chipset and everything and you can just plug it into your robot bodies and they’ve got an LLM built into it and all this kind of stuff.

[00:32:19] Cameron: They’re doing amazing stuff. But in terms of investing In Nvidia shares, I’d have to have a thesis that, you know, explained why I’m investing in this, apart from the greater fool theory, which is, I think it’ll be worth, somebody will be willing to pay more for it a year from now than they are today. Why?

[00:32:39] Cameron: Just because it’s going up. Like, it would be incredibly difficult for me, maybe other people are smarter and could do it, but to look at any one of those Mag 7 companies and, Provide a rational, logical, scientific thesis for why it’s going to be worth more, uh, five years from now than it is now, apart from, well, it seems to be going well right now.

[00:33:05] Cameron: Right?

[00:33:06] Cameron: Hmm. Hmm.

[00:33:09] Tony: look I agree with you and look there are tech investors out there who have frameworks for this stuff um and metrics for it and checklists for it. You know, more power to them. But, you know, what I’ve found is that if, if things are expensive and they regress to the mean, then these stocks are going to fall harder because they’ve risen harder.

[00:33:28] Tony: Um, you can see that in history in the dot com crash is the obvious one, but, um, yeah, they’re, they’re highly volatile. Uh, but again, if you’ve got a framework, which tells you how to get in and out of them, good luck to you.

[00:33:39] Tony: I just haven’t found one.

[00:33:42] Cameron: I wanted to talk about, uh, the buy list just briefly for club members. There, uh, I think it was Daryl picked up that, uh, uh, two Josephine calculations were the same calculation and also raised the issue, which had been in the back of my head for a long time, but I hadn’t, Given enough time is why do we have two Josephine calculations?

[00:34:02] Cameron: Why are we looking at the closed price and also the current price? I think it’s an evolutionary thing. I think we had the closed price and then eventually we figured out how to use, somebody figured out how to use, uh, stock history to do the current price. And we just tacked it on. Uh, we probably don’t need it.

[00:34:19] Cameron: You agree that it’s the current price that we really want to look at. So we’ll probably

[00:34:22] Tony: Yeah. Correct.

[00:34:23] Cameron: buy list. Starting next week, and thank you to Daryl for picking up that the current price one was not looking at the current price at all. What, but, you know, and I do use that to filter things when I’m looking at buying stocks, but I always go and double check everything that I do these days before I buy anything.

[00:34:41] Cameron: I check that it’s having an update, I check that it’s good from a Josephine status, because I’ve learned from past mistakes that, uh, you

[00:34:51] Cameron: can’t trust software.

[00:34:53] Tony: Yeah.

[00:34:53] Cameron: It can guide you, but don’t, don’t

[00:34:55] Cameron: rely on

[00:34:56] Tony: Ha. Ha.

[00:34:57] Cameron: Uh, Jordan also wanted to point out that looks like Stock Doctor may still have an issue with shares on issue for URW.

[00:35:10] Cameron: He said using ASX or Yahoo Finance value for shares on issue drops the score down to 0. 11. But I think URW is one of those things that we figured out a while ago is difficult to buy anyway, right? It’s the one that’s listed in Paris

[00:35:25] Cameron: or something.

[00:35:28] Tony: Yeah, well, they have, they have CDIs for it here, but, um, I’m not sure if it’s difficult to buy or not. I think you had problems buying it in your Superfund,

[00:35:35] Cameron: Some people have had,

[00:35:36] Tony: some of our listeners have

[00:35:37] Cameron: Some people have bought it. Other people have struggled

[00:35:39] Cameron: to buy it just as a general rule. I don’t touch it anymore because it seems difficult, but, uh, yeah, anyway, but in case anyone is looking at URW, thank you, Jordan, for pointing that out. I’ll let Stock Doctor know. And a couple of months from now, they will probably do something about it.

[00:35:55] Cameron: Uh, Tony, what do you have

[00:35:57] Tony: Ha. Ha. Ha.

[00:35:58] Cameron: your things to

[00:35:59] Cameron: talk about list for today?

[00:36:01] Tony: Well, I wanted to, to drill down into some articles about Aussie broadband, considering how we talked about it recently, and were wondering why it dropped so much. Um There’s a couple of articles in the Fin Review which covered it, uh, last week, I’m just gonna, um, quote one of them, uh, and the, the title is Exquisite Timing of Aussie Share Rate.

[00:36:25] Tony: Um, in the, in the Fin Review last week, uh, they talk about the m and a fight between Phil Britt’s, Aussie Broadband, and fellow Telco Minnow Superloop. Founded and formally owned by Bevin Slattery, the season Warriors. Slugged it out last year over software provider Symbio, which Aussie won with a $262 million offer.

[00:36:45] Tony: Aussie has since turned its attention to gobbling up Superloop Lobbing an Allscript $466 million offer on February 26. Super Loop’s board. Uh. Led by X. A. Amaysom, I was going to have to say that quietly, guys, slowly, because I think it’s Amaysing, but it’s Amaysom, Boss Peter O’Connell told BritainCode to jog on.

[00:37:08] Tony: But Aussie had already bought a 19. 9 percent stake to take things hostile if needed. Two days later, Aussie settled its trade and lodged its substantial notice. Aussie has some expensive talent in its corner, Goldman Sachs is working the financials and guidance for legal advice. Making it all the stranger that nobody seems to have read Superloop’s constitution before writing the registry.

[00:37:30] Tony: It’s not a hard document to find, it includes a crucial passage which says no shareholder can acquire a more than 12 percent stake without advance approval from Singaporean regulators due to its business in the city state. The matter has now landed in court after Superloop demanded Aussie reduce its stake.

[00:37:45] Tony: Aussie, which says it became aware of the clause only on March 3, has since applied to regulators for permission to keep its stake and labelled Superloop’s sell order oppressive. It’s a right mess. That’s before even examining the timing of Aussie’s share registry raid. Aussie once held a valuable contract to provide white label broadband services to Origin Energy’s customers.

[00:38:08] Tony: We say once because last week it lost the contract to dot dot dot Superloop, which expects it to boost earnings by more than 19 million dollars. So when did Aussie find out the company would lose out on the Origin contract? to its primary rival. Aussie picked up its stake in Superloop for about 95 cents per share, its substantial shareholder notice says.

[00:38:28] Tony: That was a staggering discount to the 1. 31 that the stock jumped to just two weeks later after Superloop announced the Origin contract. Did Aussie have an inkling it was about to lose Origins business to Superloop? The world of white label telco providers in this country is a small pond. But apparently not.

[00:38:44] Tony: The column put questions to Aussie yesterday about when it became aware it was being overlooked for Superloop. Aussie put out an ASX statement that categorically denies any foul play. And the statement reads, as As Aussie Broadband stated in its previous announcement on March 14, relating to the termination of the agreement, the notice received from Origin was unexpected.

[00:39:03] Tony: It said, in fact, ABB, that’s Aussie Broadband, was engaged in negotiations with Origin towards the renewal of the agreement, right up to the time the termination notice was received by ABB. The matter returns to the court on Wednesday. we talked about it. We knew that ABB had lost the Origin contract and we thought that might have been behind the drop.

[00:39:25] Tony: But, uh, it now appears that they’ve launched a bid for Superloop and that bid’s being tied up and looks a bit amateurish, um, based on what’s happening and could leave them in hot water if they actually did know that they had lost the contract and Aussie and Superloop gained the contract. And that happened before they

[00:39:45] Tony: launched their raid on Superloop. we’ll wait and

[00:39:48] Cameron: Why is that a, why is

[00:39:49] Cameron: that a problem? I

[00:39:50] Cameron: mean, I

[00:39:52] Tony: Insider trading. It’s, it’d be like anybody in the public finding out that, that Aussie Broadband was going to lose its origin contract, and it was going to Superloop, and before it was announced to the market they, they buy a stake in Superloop. So it’s critical to, to, for that charts to be proved, it’s critical to know when Aussie Broadband first became aware that the contract was going to Superloop and whether they acted after that and before the general announcement to buy shares in Superloop.

[00:40:20] Cameron: mm mm. The, the whole thing about, uh, needing regulatory approval from the Singaporean government, not, not picking that up, seems.

[00:40:33] Cameron: Very amateurish, doesn’t it?

[00:40:34] Tony: it does. Um, I actually, to be fair to Aussie Broadband, I haven’t, I’ve never heard of a company constitution playing a critical role in a takeover battle like this. Like just because the company corporation, the company constitution says you can’t do it, doesn’t mean you can’t do it. Right, because that would be an obvious takeover defence to anyone who has been taken over.

[00:40:57] Tony: I’ll just change my constitution to prohibit it. But that doesn’t happen. But I think the point here is the constitution would have alerted the takeover company, Aussie Broadband, that there was this problem with the

[00:41:10] Tony: Singapore government needing to give approvals.

[00:41:14] Cameron: Why would the Singaporean

[00:41:15] Cameron: government need to do that though? I mean, it’s, I’m assuming it’s not like Superloop has any particularly fancy IP that, uh, the Singaporean government doesn’t want to provide an export license to, as you know, we talked about on the bullshit filter last week, China and ByteDance and TikTok, the Chinese government apparently are going to be very reluctant to, uh, Allow the sale of that to an American company. Um, I can’t understand what suit, what kind of IP Superloop would have that would make it

[00:41:47] Cameron: a sensitive export. But

[00:41:51] Tony: my guess was something similar, that Singapore has a problem with a broadband provider, again this idea of Data moving, uh, being controlled and moving around in Singapore by a foreign owner. Uh, and they have put this clause into the contract to prevent, say, a Chinese company from buying Superloop and then having access to the data that goes across the broadband in Singapore.

[00:42:14] Tony: That’s all I can think of, but I don’t have any

[00:42:17] Tony: evidence for that.

[00:42:19] Cameron: Superloop was founded by an Australian, Bevan Slattery

[00:42:24] Tony: Yeah,

[00:42:24] Cameron: from

[00:42:24] Cameron: Rocky. So

[00:42:27] Tony: it’s been very successful at these kinds of things too.

[00:42:29] Cameron: what, that has to do with, uh, the Singaporean government, I don’t know. how does

[00:42:38] Cameron: that, how does that work? Let’s

[00:42:40] Tony: Well, they might just have a general, they might just have a general, um, law about companies, you know, not, um, not changing control once they’ve, you know, done due diligence on a company to say, yes, we don’t mind that you operate in our, in our, uh, city, um, state and, uh, provide us with infrastructure, but we want to make sure you don’t change control on that and

[00:43:02] Tony: give us a problem.

[00:43:02] Tony: Well, if, if

[00:43:05] Cameron: Wikipedia says in October 2021, Superloop announced it would sell its Hong Kong subsidiary and certain assets in Singapore to Columbia Capital and Digital Bridge Investment Management for 140 in April 2022. But there’s no mention about how it’s deeply connected with the Singaporean government here.

[00:43:32] Cameron: It’s

[00:43:33] Tony: Superloop have sold their Singaporean business, then that must be just a hangover in their constitution. I wouldn’t have thought the Singapore government gives two hoots about an Australian company that doesn’t do business in Singapore anymore.

[00:43:46] Cameron: very strange.

[00:43:48] Tony: Hmm.

[00:43:49] Cameron: Hmm.

[00:43:50] Tony: Anyway, I think the point of the Rear Window article is that, um, Aussie Broadband should have done better due diligence, and Goldman Sachs and Gadens who are working for Aussie Broadband should have done better

[00:43:59] Tony: due diligence on all of this.

[00:44:01] Cameron: Hmm. But Australian businesses are so well run, uh, according to Chanticleer.

[00:44:09] Cameron: Oh, whoever Chanticleer was quoting.

[00:44:10] Tony: Yes, because their earnings are getting better and they’re worth paying more

[00:44:13] Tony: for.

[00:44:15] Cameron: All right.

[00:44:16] Cameron: You got a pulled pork for us now?

[00:44:18] Tony: I do. I have a pulled pork on childcare company G8. So the code for this one is GEM. They’re recently on the buy list this week. So it’s a new one. Or even though it’s down towards the bottom.

[00:44:34] Tony: But I thought they were large enough to be of interest

[00:44:37] Tony: to people.

[00:44:37] Cameron: Not that new.

[00:44:38] Tony: Speaking of class

[00:44:39] Cameron: We, hold it We hold it in

[00:44:41] Cameron: a portfolio. It might actually be in my

[00:44:43] Cameron: super. So, it’s been

[00:44:45] Cameron: around for a while.

[00:44:48] Tony: you can delay the publication of

[00:44:50] Tony: this podcast while you sell it from your super if you’re worried about the curse of the pulled

[00:44:53] Cameron: I added it to my super and also to one of the live portfolios, uh, towards the end of February, about a month ago. So it’s up 1%, down 2%, depending on the portfolio. So yeah. Okay. Be careful.

[00:45:06] Cameron: Be careful what you say, Tony. Okay.

[00:45:08] Tony: Actually, I thought it was new on the buy list this week, so apologies if it’s been there recently. It was flagged as a new one this week, so maybe it came off and came back on. Anyway, um, it’s a Josephine, so be aware of that. It’s not, uh, it’s not for buying today, but it’s not that much of a Josephine that it can’t be a buy, um, in the next couple of days or in the next few weeks.

[00:45:30] Tony: Um, in researching it today, the first thing that jumped out was that they have settled a class action, um, taken against them for, uh, raising funds after providing profit guidance that, um, didn’t turn out to be accurate. So, just what we were talking about before, um, and I actually, I did think that might have been behind recent share price moves, but, um, I think the price is actually about the same or down today, so, maybe not.

[00:45:58] Tony: Um, the good thing about the class action that was set, and I’ll, I’ll, actually I’ll read a bit about the class action just to, um, round this out. Uh, this comes from the financial review today. G8 Education has settled a class action lawsuit for 46. 5 million just weeks before a trial was due to start over the childcare giant having allegedly botched earnings forecasts.

[00:46:19] Tony: The settlement for Gold Coast based G8, which has 430 centres under brands including Penguin Childcare and G8 Education, Casabranca, I think it’s pronounced, will hit shareholders despite the company having insurance. The net cash flow after tax and insurance would be 24. 5 million, G8 said. Still, the company had early provided for such a payout, with the AFR last month highlighting it as much in their payout.

[00:46:43] Tony: Provisions. The provisions plus insurance meant that no further hits to profit were expected for this calendar year. The company said Slater and Gordon had kicked off the case in November, 2020 in Victoria’s Supreme Court with a trial due next month. The action centered on whether G eight breach continuous disclosure obligations in May.

[00:47:02] Tony: 2017, when having raised 100 million, predicted 2017’s calendar year earnings before interest and tax would be 170 million. The prediction fell short, with G8’s final underlying EBIT figure hitting 156 million, and only in December that year did warned forecasts would be missed, partly due to a glut of centers and new staff break regulations resulting in a shredding of the share price.

[00:47:27] Tony: So Getting back to what I said about Amcor before, they’ve reaffirmed their profit guidance, even though the CEO’s resigned, so companies don’t do it lightly, given that. But given the fact that they’ve settled the class action, so it’s no longer hanging over the share price, and it’s been settled for the amount they provided, plus the insurance claim, I think that it’s actually a bit of a good news story for G8, on that front anyway.

[00:47:51] Tony: So people will have realised from that little snippet there that G8 is a childcare company. Uh, provider around Australia, um, something like 430 centres in Australia, 45, 000 children are looked after per week by this company, and they employ, uh, over 10, 000 team members. So it’s quite a large. Employer and quite a large company in the sector. A couple of things that have happened in the last few years, being a childcare operator was hit pretty hard during the COVID outbreak with centres not being able to operate and difficulty getting staff in when they were able to operate. So, uh, for example, their operating cash flow went from 189 million to 2.

[00:48:35] Tony: 5 million. In December, 2020 down to 75 and June 22, and then it’s now back up to $201 million in its latest half year results. So the, it did get hit pretty hard. The share price dropped from $2 80 down to 88 cents. Um, so of, in that covid time. So it took a big hit for that and it’s now working its way back.

[00:48:57] Tony: Uh. ADT for this company is 671 million, so it’s, it’s pretty large for anyone who’s interested in buying it. Um, it has just posted good results that could also be behind the increase in the share price in the last few months. Revenue was up 9%, net profit after tax was up, uh, 53 percent in fact, and, um, they increased their dividend by 50%.

[00:49:21] Tony: So, uh, They’re basically calling out the worst of the COVID times is over. And last year they did call out they were having problems because of the cost of living issues, so families were dropping out from taking their kids to kindy, especially in hard hit areas, finding it hard to get staff, there’s a bit COVID I guess, and their supply chain costs were increasing.

[00:49:49] Tony: But they seem to be coping with that. They did put their fees up. last year, so that’s to take into account those things. And the other thing they did in the last little while was to hire a new CEO, and I’ll come back to him a bit later. As I said before, this company runs Lots of different brands. Looks like as they acquire a childcare center or network, they keep the branding in place.

[00:50:15] Tony: So there’s no, doesn’t appear to be any G8 branding. It’s various brands like Pelicans, Jelly Beans, Buggles, sort of names you expect for childcare centers. And there’s lots of them. So, what do the numbers tell us? Uh, I’m using a share price of 1. 25, which is less than consensus target, but above IV1 of 0.

[00:50:39] Tony: of 0. 86. The yield on this company is 3. 6%, so even though it’s gone up, it’s still not meeting our checklist cutoff, so we can’t score it for that. Stock Doctor financial health and trend is strong and steady, which are both good. Uh, I’ll highlight the people who are interested. The company has a low ROE of 6.

[00:50:58] Tony: 7%. Not that we score it for that, but it’s a thing. PE for this company is reasonably high, 16. 81, which is not the lowest, um, because during the pandemic the PE dropped to 12 times, so we can’t score it for that. Um, however, PropCaf is, is five times, so plenty of cash being generated by the company, but it does have a reasonably high cost structure, which is why the PE is a little bit on the high side.

[00:51:26] Tony: Uh, net equity per share for this company, um, Scores for us when we add 30 percent to it. So, uh, Neps plus 30 percent is 1. 45, share price is 1. 25. So we can score it for that. Interesting thing is, um, is, uh, that’s net equity per share plus 30 percent 1. 45. Net tangible assets is slightly negative at 18 cents, negative 18 cents.

[00:51:49] Tony: So the history of this company is that it’s been a roll up. They have acquired all these various, uh, assets. Networks of childcare centers and individual childcare centers over time. Uh, and it’s One of those things I’ve warned people about with roll ups is that they go from being a growth stock to being a, in this case, a value stock to being like an operational based stock or operationally focused stock, which seems to be the case now.

[00:52:17] Tony: They’ve just employed a new CEO, has a quite a good career in retail, so managing large teams, managing remote locations and individual site outlets, that kind of thing. Uh, the, uh, throwing off lots of operating cash flow, they’ve been paying down debt, which is good, um, they’ve increased the dividends, so they, they don’t, I haven’t, there was nothing in anything I read about the company that suggested they were about to take over another network of childcare centres, and in fact they’ve been divesting their poor performing ones, so, uh, they, they plan to get rid of, um, I think it’s 31 centres this year.

[00:52:55] Tony: So it looks like this has transitioned from a growth stock to a, um, a sort of business as usual stock with a focus on operational performance, which then brings it, I guess, more squarely into the sights of value investors rather than those looking for a hit to revenue by acquisition. But it does de risk it for us because it probably means they won’t be raising capital and we have to put in more money.

[00:53:19] Tony: Down the track, which often happens with rollups. And it also means that, you know, we get a better, I guess, from my point of view, we’re getting a better look at the operations of the business because we’re not, we’re not having to decide whether the growth is coming from the sites that they’ve just bought or whether the costs are being, you know, hurt because of the integration of new centers, all that kind of thing.

[00:53:41] Tony: Um, so, uh, that appears to be taking place. They haven’t actually, I didn’t actually read anything to say that’s what they were doing, but I, I also haven’t seen any evidence to suggest they’re still rolling up child care centers. Uh, back to the numbers. Um, earnings per share growth is forecast at 20%, which is good, but growth over PE is only 1.

[00:54:02] Tony: 17, and I like to look for 1. 5 times, so we can’t score it for that. Company has no owner founder. It has in the past, but they’ve lost. They’ve gone, so we can’t count it for that. Uh, so all in all, quality score is 8 out of 15, or 53%, and the QAV score is 0. 11. So it’s down towards the bottom of the buy list.

[00:54:22] Tony: Um, but it is a large ADT stock. Uh, a lot of things to like, I thought, about this stock. The re the really the only sort of risk I could see, apart from the fact that they may change their mind and try and raise money and buy another network of, of, um, of centres, uh, is that, um, There’s a lot of focus on the industry and in particular, uh, from, from two ways, is the government funding of childcare spaces enough?

[00:54:48] Tony: And, uh, secondarily, are the workers in the area being paid enough, care workers in the area being paid enough? So, um, there’s a Productivity Commission inquiry. There was an ACCC inquiry. There’s, there’s various other state level government inquiries going on. Um, G8 say they’re being, um, proactive in engaging with all of these inquiries, but it could come out as a good thing or a bad thing.

[00:55:12] Tony: So it could come out recommending the government has to pay more in funding to keep child care viable, or it could come out as a bad thing that the child care So, I saw that as a risk, but it may go either way. On the positive side, one of the things that the company calls out in its reporting is the percentage of women’s participation in the workforce.

[00:55:38] Tony: And I know from Jenny’s engagement with, uh, Chief Executive Women over the years that they see childcare as a key, a key way to get women to, uh, increase their, their hours in the workforce, and that makes sense to me. And this company sees it as well, and, and they’ve called out the fact that that, uh, participation by females is still increasing, and that’s a, a bit of a tailwind for this business.

[00:56:01] Tony: Um. They also say the same thing about net migration, that, uh, that boosts their enrollments too. And, and, um, enrollments, but also the, uh, uh, what’s the word I’m looking for? The capacity, well, the capacity used, utilization rate is the term for the, for child care centers, because again, you can have child care centers, but if they’re not running at a high utilization rate, there are costs.

[00:56:25] Tony: So that’s something else they focus on. But, but, um, Workforce participation by females and net migration are both going up and they both help to support enrollments for this company. Um, what else can I say about it? I wanted to just talk quickly about the CEO. He started, I think, at the end of last year.

[00:56:46] Tony: His name is Pedgeman Okhovat, O K H O V A T, um, and he’s the ex MD of Big W, um, has before been the CEO of the Warehouse Group in New Zealand, a big New Zealand sort of Kmart like, uh, or Walmart like, um, uh, retailer, and had a career in the UK at M& S, Marks Spencer, Marks and Sparks, Marks and Spencers, Sainsbury’s, and Asda Walmart.

[00:57:11] Tony: So they’ve, they’ve picked an operational, a very experienced operational retailer to run this company. Not, not someone with child care experience, I grant, but somebody used to, um, you know, working with slim margins and utilization rates and all that kind of thing. So it does make me think that they’re, I’m going to be more operationally focused going on.

[00:57:33] Tony: Uh, yeah, so they’re all the positives about the company, um, and it scores well for us, so I think it’s worth people having a look

[00:57:40] Tony: at, uh, G8 Education.

[00:57:43] Cameron: There you go, Jim. Just wait until it has its pulled pork curse, gets through

[00:57:50] Cameron: that and, uh, come out the other side, buy it on the dip, buy it on the pulled

[00:57:54] Cameron: pork.

[00:57:56] Tony: to refer you to the sensitive training book that you’ve got. And I also point out, I think I did a pull up walk on

[00:58:02] Tony: KSC a number of years ago too, which has done

[00:58:06] Cameron: Yeah, but it’s, it’s

[00:58:07] Cameron: gone through the dip and come back out

[00:58:08] Cameron: the other side, you know,

[00:58:09] Tony: Oh, I hadn’t. Okay. Right. Ha

[00:58:12] Cameron: on, sell on the pulled

[00:58:12] Cameron: pork.

[00:58:13] Tony: Mmm. Mmm.

[00:58:16] Cameron: Thank you for that, Tony. You talk about other acquisitions. I feel like the childcare center industry has been going through roll ups for, for a long time. 15 years. Is there anything, anything left to roll up?

[00:58:28] Cameron: Haven’t they all been rolled

[00:58:29] Cameron: up?

[00:58:30] Tony: Quite possibly,

[00:58:31] Cameron: Wasn’t it Eddie, Eddie somebody or

[00:58:34] Tony: Eddie Groves.

[00:58:35] Cameron: Kroves, yeah. That was years

[00:58:37] Cameron: ago.

[00:58:38] Tony: Yes. Had one of the best mullets

[00:58:41] Tony: Eddie Groves. The bogan from Brisbane, he was dubbed.

[00:58:44] Cameron: What’s he up to these days I wonder?

[00:58:46] Tony: Oh, I don’t know. Um, I imagine he’s not in, um, in the Bahamas or anything like that because he, he went bankrupt back then.

[00:58:53] Cameron: Uh, it’s the best place to be.

[00:58:55] Cameron: You go bankrupt. Yeah,

[00:58:57] Tony: In Brisbane.

[00:58:58] Cameron: Yeah, it just feels like one of those things that, uh, I’ve been hearing about childcare center roll ups

[00:59:04] Cameron: forever.

[00:59:07] Tony: And quite possibly this company’s not doing any more rollers because there’s no more to roll up. So that’s

[00:59:11] Tony: Entirely

[00:59:12] Cameron: All been rolled.

[00:59:14] Tony: You’ll be enrolled, that’s

[00:59:15] Cameron: So it could be mergers, I guess, with other

[00:59:17] Cameron: big networks. All

[00:59:20] Tony: Well, I think from memory, there’s only two now. There’s G8, that I know of anyway, there could be some more. And there was one that bought Eddie Grove’s company out of administration, but it was set up by a consortium of charities. I think Evan Thornley was involved, um, and, uh, potentially some of the unions for the workers in the sector.

[00:59:40] Tony: And I think they’ve, they’ve been reasonably successful as well since then, but they’re not

[00:59:44] Tony: listed.

[00:59:44] Cameron: right. Thank you for doing that. We’ve only got one question. It’s from Trent. Hypothetically, if I was a rule breaker and held VUK on Takeover News, what would one do now? I like this. I’m going to ask the guys who set the rules what to do if I break the rules. Uh, as it

[01:00:08] Tony: Oh dear. Yeah. it’s

[01:00:08] Cameron: Do whatever the hell you want, Trent.

[01:00:10] Tony: Scottish play in the theatre. Yeah, that’s right. Yeah.

[01:00:13] Cameron: You’re the one breaking the rules.

[01:00:14] Cameron: Like just, he’s like, what are the rules for rule breakers?

[01:00:21] Tony: Well, the only rule is don’t come crying to Mum. I told you not to

[01:00:24] Tony: do it.

[01:00:24] Cameron: I told you not to jump off the roof. As it has a set price, seems a done deal, so share price will only now move based on currency. Therefore, best to move on and reinvest to something else on buy list versus AWC takeover by Alcoa, which will move with price of Alcoa, so assume trade is a 3PTL. Do you have any thoughts on rules for rule breakers, Tony?

[01:00:49] Tony: Well, it’s. They are two separate individual cases, VUK and AWC. My sort of general rule is that once something gets to the stage that VUK’s at, where the board’s accepted, the share price is re rated back up to the takeover offer price, you’ve got a little bit of time before the transaction goes through, so you might hold it for a little bit, wait to see if another offer comes along, but if it doesn’t, you’ve Um, I wouldn’t wait for the transaction to finish.

[01:01:18] Tony: I would sell and move on. That’s, that’s I think the case in VUK. Because there is a risk that the acquirer takes the bid or withdraws the bid and goes away. And there was an article in the Fin Review last week about this particular takeover saying that, uh, I think it’s a co op or a building society co op in the UK that’s, um, merging with VUK or taking over VUK.

[01:01:42] Tony: And, uh, There’s some undiscruntled members of the co op who want the whole thing to be put to a vote of the members. And the management of the co op was saying, no, we don’t need to. So the inference in the article was if it does go to a vote, it may not get up and the whole thing could crumble. So that’s always a risk.

[01:02:03] Tony: If you wait too long, the bidder walks away. Is it possible somebody else will come out of the woodwork and bid for VUK? Well it’s possible but as time goes on it’s less likely. So I’m inclined. Would I feel bad basically if, if, if the bidder walked away and VUK dropped 30%? Yes. Would I feel bad if another bid came and I sold it and I missed out on an increase but I bought something else which was going up?

[01:02:31] Tony: No, so that’s why I tend to, you know, once, once the bid price is in the share price, which sometimes it’s not because sometimes the market is skeptical about the takeover going ahead. Once the bid price is near the share price, the share price is near the bid price, the board have accepted, there’s been a fair valuation report done, which also endorses the bid.

[01:02:52] Tony: That’s usually, I might wait a week or two, but that’s usually good enough for me. And I’ll move on. The same thing applies in AWC’s case. Um, I’m not sure whether AWC has been on our buy list, but it may have been. Um, and the reason why I’m skeptical it’s been on their buy list is they made a 229 million loss last year.

[01:03:09] Tony: So, it’s unlikely they would have

[01:03:11] Tony: been on our buy list recently anyway, since the results came out.

[01:03:15] Cameron: Haven’t been

[01:03:15] Tony: a little bit different.

[01:03:16] Cameron: for the last couple of years, if I go back to September 2021, haven’t been on it

[01:03:21] Cameron: since then.

[01:03:22] Tony: okay, and it’s a, it’s an aluminium smelter and bauxite miner, so I’m not sure where aluminium is in terms of a commodity sale, uh, but that would be another, um, factor to take into account, uh, so again, I, um, The only natural buyer for AWC is Alcoa, which is the US aluminium giant. And the reason why I say that is because the only assets that AWC hold is a 40 percent joint venture with Alcoa in the Australian smelters and refiners and bulk site mines.

[01:03:54] Tony: So it’s, I can’t see a case where somebody else could come in and lob an offer for AWC. to take out a 40 percent of the JV. Um, and that, that being satisfactory to Alcoa, because it’s probably going to be a competitor. So, and Alcoa holds the majority stake in the JV. So it’s unlikely someone else is going to bid for this company and take on that battle.

[01:04:15] Tony: Um, so, you know, I think, I think it’s also fair to say that, um, it’s been sort of stock market law for a long time that this bid would come. I think it’s probably coming at the right time for Alcoa rather than AWC. AWC is losing money. Uh, the. Well, the aluminium price is probably down. Um, compared to its highs.

[01:04:35] Tony: So Alcoa aren’t going to be dumb about when they take over this company, they’ll be smart, but you do have the option if you, if you take that view to, to accept the share offer from Alcoa and take their shares in, um, in the U S and that’s, that’s what, uh, One of these shareholders is doing a check by the name of Simon Marwini, who’s a big shareholder through his fund in, in AWC.

[01:04:57] Tony: He’s happy to take the share offer and, and take a stake in Alcoa because he thinks Alcoa is getting this, um, company for a steal. And that when the aluminium prices turns up, then all these assets will make money. And the other thing is that with the joint venture structure the way it is, both partners have to agree on, um, on things like taking on debt, on acquisitions, all that kind of thing.

[01:05:21] Tony: And AWC’s Being the poor part of, the poor cousin of the relationship, hasn’t been keen to do that. So if Alcoa controls all of these assets, I would expect to see a fresh round of a capital project started by then, which would be good for Alcoa. So, yeah, um, if Trent feels that way as well, and he can do his own research, then happily accept it.

[01:05:42] Tony: Um, if he doesn’t feel that way, then again, I would be a seller on, um, on market of this and move on to something else. As he points out, this is a script offer, so as Alcoa’s price goes up, the share, the takeover becomes more, um, attractive, and the AWC price will go up too, but what goes up can come down, so it’s the risk you take.

[01:06:02] Tony: Um, you know, it’s not, it’s not a straight risk on the upside for this one either.

[01:06:08] Cameron: What goes up must come down, ba ba da ba, spinning wheel. Do you ever go see this band in Melbourne 25 years ago? Um, not the Melody Lords. We did

[01:06:22] Cameron: talk about them last week and I sent you a clip. Did you watch that

[01:06:24] Tony: Yes, come up and see

[01:06:26] Cameron: Yeah, how great was that

[01:06:27] Cameron: clip?

[01:06:28] Tony: good. Yeah.

[01:06:29] Cameron: there was another band I used to go see at the Continental. And it had a girl’s, it was a guy lead singer, but he had a girl’s name and I can’t remember what it was now. But it was a similar sort of, not, not, not glam, but sort of another sort of raunchy comedy rock performance. Um, he used to go down and hit on everyone in the audience. Um, and they used to do that song.

[01:06:52] Cameron: He had like a brass section. I can’t remember. Wasn’t Captain Spaulding, who I used to go watch a lot

[01:06:58] Tony: Right.

[01:06:59] Cameron: Can’t remember the name of the band, but

[01:07:01] Tony: There was a band with horns I used to see called, I think they were called the Kick Ass Horns.

[01:07:05] Cameron: no, it’s not

[01:07:06] Tony: Something

[01:07:06] Tony: like that. but it doesn’t sound like them.

[01:07:09] Cameron: but they used to do

[01:07:10] Cameron: that, you know, whatever, that spinning wheel. And then Bryce said, it was great.

[01:07:16] Cameron: Fantastic. Good times.

[01:07:18] Tony: I love brass.

[01:07:20] Cameron: Um, Well, uh, oh, aluminium is a buy by the way, and CAA is on our buy list at the moment. It’s the one aluminium stock that we normally see come and go when aluminium is a buy.

[01:07:32] Cameron: Aluminium’s been a buy for the last month or so. There was a

[01:07:35] Cameron: Josephine in the sale before that.

[01:07:37] Tony: so good timing for Alcoa to take this

[01:07:39] Tony: company out of the ASX.

[01:07:41] Cameron: Hmm. Uh, we had one last request for next week or a future week from Simmo. Um, he’d like a pulled pork on ASB, Austal, the uh, shipping company. ASB at

[01:07:55] Cameron: some point.

[01:07:57] Tony: I’m happy to do it. I think I’ve already done it though. So maybe just check how long ago

[01:08:01] Tony: that was. Might help Simone

[01:08:03] Cameron: Oh, I’ve been trying to figure out how to come up with a list of all the

[01:08:07] Cameron: pulled books.

[01:08:09] Tony: Yeah.

[01:08:10] Cameron: ASB.

[01:08:10] Tony: had one,

[01:08:11] Cameron: No, let’s see, uh,

[01:08:15] Cameron: I could probably do one

[01:08:17] Tony: I can do it, but I’m fairly sure I’ve

[01:08:19] Tony: done it over the last couple of years.

[01:08:21] Cameron: Well, it’s about that time where you need to start

[01:08:23] Cameron: recycling these, Tony.

[01:08:25] Tony: Here it is, isn’t

[01:08:26] Cameron: Now, I can’t see any in my

[01:08:27] Cameron: notes for ASB.

[01:08:30] Tony: well, happy to do it.

[01:08:32] Cameron: Hostile. No, nothing. All right, see how you go. After hours, Tony. Tell me about the three body problem. Tony, I still haven’t had a

[01:08:43] Cameron: chance to watch it.

[01:08:45] Tony: no, I’ve watched it one and a half times already. It’s so good.

[01:08:51] Tony: No, I watched it when it, when it was released and then Jenny and I, Jenny hadn’t,

[01:08:55] Tony: so I went back And started watching it? with her again last night.

[01:08:59] Cameron: And what did she

[01:08:59] Cameron: think of it? Because she hasn’t read the books, right? So what did she

[01:09:02] Tony: No, she’s liking it. She, I mean, she’s, um, her feedback was it’s really good production values, it’s, you know, high budget thing, and, uh, yeah, um, she’s liking it. It’s great. It’s so good. It’s, it’s, it’s made by the producers of Game of Thrones, so you’d expect it to be a quality production.

[01:09:22] Cameron: Well, except,

[01:09:23] Tony: I know you don’t like the ending of Game of Thrones, but the first

[01:09:26] Tony: five seasons were

[01:09:27] Cameron: yes.

[01:09:28] Tony: Yeah.

[01:09:29] Cameron: Ah, yeah.

[01:09:32] Tony: and watching it a second time, like, there’s so much foreshadowing in it you don’t pick up until you re watch

[01:09:37] Cameron: Right.

[01:09:38] Tony: Um, yeah, one of the, just, I’m not going to give any away, but one of the things that happens in, in, during the movie is that the aliens, um, Let the humans know that they’re there by changing all the messages at Times Square and across the world on TV screens, etc.

[01:09:55] Tony: and says, you are bugs. And that’s all it says. And I didn’t realize it, but the very opening, opening line of the, of the series is, you’re a bug! Because it’s said in the, said in the communist revolution when they’re haranguing the scientists in China in the 60s.

[01:10:17] Cameron: not the communist revolution. It’s the, um,

[01:10:20] Cameron: what did they call that part of it? That was

[01:10:22] Tony: a great leap forward.

[01:10:24] Cameron: Yeah. Yeah.

[01:10:24] Tony: not the revolution. You’re right. Yeah.

[01:10:28] Tony: Yeah. Oh, it’s so good. And it’s, it sends chills. Just, uh, you know, that, that scene when the Chinese scientist who’s been, who’s disaffected with the whole situation replies. I won’t say to whom or to what and what she

[01:10:43] Tony: says, but it’s just like, Oh my God.

[01:10:47] Cameron: Yeah, if you’ve read the books and you know what’s coming, like,

[01:10:49] Cameron: yeah.

[01:10:50] Tony: yeah, but then just seeing

[01:10:53] Tony: it it’s, it’s just, yeah,

[01:10:55] Cameron: And are they just doing the first book with

[01:10:56] Cameron: this or is it the trilogy?

[01:10:59] Tony: Well, that’s the criticism I’ve got. It’s eight episodes and it just stops. So it’s probably halfway through book two from

[01:11:06] Tony: my recollection of where the books are. But it doesn’t come to any

[01:11:09] Cameron: So you’ve watched the whole thing? Wow! That’s, that a busy

[01:11:13] Tony: oh yeah, yeah. I loved it. It’s so good. It’s a, it’s a, it’s a slow bird. It’s like, it’s because it’s British.

[01:11:21] Tony: It’s more like, Jenny said the same thing. It reminds us of Doctor Who. It’s, um, a lot of it’s set in London, um, or in England. And, uh, it’s got that Doctor Who Feel about it. So it’s not like an, if it was an American adaptation, I’m sure it would’ve started with a alien invasion, like in the opening scenes, big space cruises or something on the, on the screen.

[01:11:41] Tony: But it doesn’t, it takes a long time to get into the characters, to get into the backstory,

[01:11:46] Tony: um, to set, to set the whole scene of what’s gonna happen.

[01:11:49] Cameron: And that’s, you know, one

[01:11:50] Cameron: of the great thing about the first book is, yeah, and, and actually the first time I tried to read it years ago when you first recommended it to me, like, I found it very, the book was very slow going. It’s all this stuff happening and you don’t know why or what or what’s going on and, you know, you have to sort of hang in there with it to get to the end of the first book to find out what’s actually going

[01:12:09] Cameron: on really.

[01:12:11] Tony: Yeah. And I think it’s pretty true to the book. Certainly all the story beats are there, but, um, I mean, I’ve done a couple of shortcuts. I, from my, I haven’t read the book in 10 years, but from my memory, the, in the first book that the, the aliens get the humans to play a computer game to try and solve the three body problem.

[01:12:29] Tony: And that’s done in a room above a shop with a computer. But in

[01:12:34] Tony: this version of it, they put on a VR headset.

[01:12:37] Cameron: Oh no,

[01:12:37] Cameron: that was in the book too. That was in the book too, the

[01:12:39] Tony: Oh, was it? Okay. Yeah. All right. Yeah.

[01:12:43] Tony: So, but yeah, so good.

[01:12:45] Cameron: It was more than a

[01:12:46] Cameron: VR headset. It was like a full body, uh, thing that you put on too. So you, you felt all of the sensations of the burning planet and all of that kind of stuff when the sun, the three suns were, uh, in unity or whatever

[01:13:00] Cameron: they called it there.

[01:13:03] Tony: Yeah. No, there’s no, there’s no haptic suit. It’s just, just a, like people call it the bike helmet. It’s just looked like a bike helmet, like a, like an Oculus Rift type thing that goes, but it’s a very space agey

[01:13:14] Tony: version of it.

[01:13:15] Cameron: Yeah.

[01:13:15] Cameron: I’ve seen a photo of it.

[01:13:17] Tony: Yeah. Okay.

[01:13:18] Cameron: yeah, it’s one of the, like, Chrissy and I have had no time to watch much TV this weekend. It’s just been, Chrissy and Fox were sick all weekend. They had some tummy bug and so, you know, wasn’t a lot of TV watching going on. Just throwing up and

[01:13:31] Cameron: late nights, that kind of stuff.

[01:13:34] Cameron: But yeah, it’s, it’s one of those things that like, Chrissy and I did sit down to watch something like 1030 last night was the first time. And I’m like, ah, it’s too late to start, you know, three body problem thing. So, but we have watched a couple of episodes of the gentlemen in the last week. Um,

[01:13:52] Cameron: yeah, which I’m enjoying still.

[01:13:54] Tony: Yeah. I enjoyed that too.

[01:13:55] Cameron: It’s, it’s silly, but it’s,

[01:13:57] Cameron: uh, it’s fun. I really liked the girl in it who, uh, runs the Weed Lab. I’ve never seen her before, but I thought her performance is great. And I saw the episode with Ray Winston. That was good. You know,

[01:14:10] Cameron: he, he always does a good job.

[01:14:13] Tony: Yeah. Him and Vinnie Jones. It’s great to

[01:14:14] Tony: see them

[01:14:15] Cameron: Vinnie Jones’s character is very different from a usual Vinnie Jones character, though, in a Guy

[01:14:19] Cameron: Ritchie thing. He’s quite, quite different.

[01:14:22] Tony: Playing the old

[01:14:22] Cameron: Yeah, quiet, calm, tough, but

[01:14:25] Cameron: he’s obviously got a, he’s got a history. Um,

[01:14:29] Cameron: yeah, but I like it.

[01:14:31] Tony: And he’s, yeah. And I love when he goes,

[01:14:35] Tony: the main character goes to him for

[01:14:36] Tony: advice and he’s just like, matter of fact,

[01:14:40] Cameron: They’re very serious people. Um, did you watch season two of White

[01:14:45] Cameron: Lotus?

[01:14:47] Tony: I haven’t watched season one of White

[01:14:48] Cameron: Oh, you never watched it. I thought you finally

[01:14:50] Cameron: did. Um, okay. So

[01:14:52] Tony: the first episode and didn’t like it.

[01:14:53] Cameron: the guy who’s the new

[01:14:54] Cameron: Duke. in this, uh, was a complete douchebag in the second season of White Lotus. He was like one of the rich, douchey, scumbag slimeballs in, uh, that season.

[01:15:11] Cameron: So it’s interesting to see him in this where he’s the good guy, basically. He’s, he’s, he’s the sensible, calm, rational, good guy. I’m used to seeing him as a complete slimeball douchebag,

[01:15:22] Cameron: so. Yeah.

[01:15:24] Tony: as opposed to his older brother,

[01:15:26] Cameron: Yes.

[01:15:26] Tony: thought was hilarious,

[01:15:28] Cameron: He’s older brothers. Yeah. Yeah. That was fun. Um, that’s about all. I’ve watched a couple of episodes of that.

[01:15:38] Cameron: Um, been reading stuff about highly sensitive people. Um, still trying to find a good book on mathematics. I downloaded the Princeton compendium to mathematics over the weekend and tried to read that. And I was like, nah, I need to go back. I got Calculus for Dummies, I’m going to try that next, but I’m still, I’ve got this, like, I want to go back to, back to uni, I want to go to uni, and, and study mathematics.

[01:16:06] Cameron: I just feel like there’s this whole world of stuff that I don’t understand that is bugging me. And I can go, like, if I’m interested in physics or something like that, there’s a lot of popular books on things like that you can go read and get a sense for what’s going on. I need to find something similar for, uh, Basics of pure mathematics and, you know, maybe applied mathematics as well.

[01:16:30] Cameron: But something that gives me a better, deeper, richer appreciation of mathematics. That’s what I’m looking for. I haven’t

[01:16:37] Cameron: found it yet.

[01:16:40] Tony: yeah, I’ve only must admit my I’m just trying to think the books I’ve read are all usually around investing or probability. So, the history of risk is a good one against the gods, which is, which deals with Fibonacci sequence and etc, etc, etc. So there’s a fair bit of maths in that, um, but that’s what they tend to be.

[01:17:00] Tony: They tend to focus on one thing or the other, not the broad, but there’ll be something out there. I’ll put my mind to it

[01:17:07] Tony: and think of something.

[01:17:08] Cameron: Interesting, the Princeton compendium thing I was reading last night was saying it, you know, tends to surprise non mathematicians to learn that mathematics is now such a specialized field that you can have people that are world experts in one area of mathematics that can read a paper by a closely, you know, by another professor in a closely connected realm of mathematics and not be able to understand anything that they’re reading.

[01:17:33] Cameron: It’s just so specialized

[01:17:36] Cameron: and deep now that,

[01:17:38] Tony: Yeah, it’s not just that though, but I think maths has done itself a disservice by its language. I think it’s, I think for me, once you can decode a mathematical paper, you know, take away all the Greek symbols, understand what they mean. And it’s all shorthand. It makes a lot more sense.

[01:17:54] Tony: It’s much, it’s much, much simpler than it looks.

[01:17:58] Cameron: Well, that’s the problem I’ve been having as I start to read books. So I was trying to read books on probabilities, you know, and I was like, okay, I don’t understand. I’m, this is going way too fast. I’m way out of my depth already. I’m only on page two. I need to go back a step. You know, it’s, it’s assuming a level of a priori knowledge that I don’t have because I didn’t, you know, I didn’t go to uni, it’s been 30 years since I was in high school.

[01:18:19] Cameron: I didn’t really pay much attention to, I did maths one and maths two, but I didn’t really, you know, I think I failed maths too, and I was chasing, chasing girls and singing in rock bands. I wasn’t that interested in

[01:18:31] Cameron: mathematics at the time, so.

[01:18:34] Tony: Well, you had a better time than I did because I did really well in maths too and went on to do a pure

[01:18:37] Tony: maths major at uni.

[01:18:41] Cameron: Hey, that reminds me, I’ve been meaning to ask you for weeks, as I’ve been trying to learn stuff and recall it and remember it, your memory, you obviously have a very good memory for facts and details. Do you have a methodology for learning stuff? Do you have a process, or is it just

[01:19:04] Cameron: gift of the

[01:19:04] Tony: No, just if it’s of interest to me, it just sticks.

[01:19:07] Cameron: Yeah, right.

[01:19:10] Tony: I mean, there are, there are tricks. I mean, when I was at university, if I had an exam the next day, I’d just cram, read over all my notes for the year and put that into short term memory, but it wouldn’t stick. I couldn’t tell you much about the pure maths I learned at university, other than that was very highly specialised.

[01:19:25] Tony: How to take one set and add it to another set, or multiply by sets, all that kind of stuff. Um, yeah. But I mean, things like, I know that if I listen to something, and then walk, and go for a walk, if I go for a walk on that same route again, I’ll remember everything I listened to. Last time. Um, yeah, but no, I think it’s just having an interest in things and, and yeah, having almost like an emotional connection to

[01:19:49] Cameron: hmm. Hmm.

[01:19:52] Tony: them.

[01:19:55] Cameron: Okay. Well, that’s no help

[01:19:57] Tony: Yeah. I don’t know. Maybe I’m just built

[01:19:58] Tony: differently.

[01:19:59] Cameron: How are your horses going?

[01:20:01] Tony: Slow. Actually, before we leave, um, math, another book that, that, again, it’s not on just math. It’s called Fortune’s Formula. One of my favorite books on information

[01:20:13] Cameron: Mm hmm. Mm

[01:20:14] Tony: Yep, and, um, by, uh, about a guy called Claude Shannon, so that’s worth reading too, I think, as a bit of a mathematically based good story.

[01:20:23] Tony: Uh, horses are going slow, so we had one that was meant to race on Sunday, but it was scratched at the barriers, it sat down in the

[01:20:30] Tony: gates, so we sent it all the way to Orange and brought it all the way

[01:20:33] Cameron: What, what, how does that

[01:20:34] Cameron: happen? What happens? Like why was it scratched?

[01:20:37] Tony: I think in Orange they didn’t have enough barrier attendance, so the horse went in, took a long time to load all the other horses, and it got restless, and they You know, you can’t tell from the TV what happened.

[01:20:50] Tony: Jockey said it reared and then sat down. So perhaps it wouldn’t have happened if there were more barrier tendons, but you know, they pulled it out and

[01:20:56] Cameron: a barrier, what’s a barrier

[01:20:58] Cameron: attendant do?

[01:21:00] Tony: uh, load the

[01:21:01] Tony: horses and look after them in the, in the gates, try and settle them down.

[01:21:04] Cameron: Oh, right. It’s not

[01:21:05] Tony: So the idea is you try,

[01:21:08] Tony: no, the jockey usually sits on board and guides the horse, but it normally takes one or two attendants to go with

[01:21:13] Cameron: Oh, right.

[01:21:14] Tony: Um, open the gates, push it in sometimes, close the gates, settle it down. Sometimes they jump in and pat the horse, that kind of thing. But generally, like on a big race day, on the weekend, there’ll be, you know, eight, eight to ten, Barrier attendance, so there’s lots of people working all at once, so the horses get loaded quickly.

[01:21:31] Tony: So, you don’t want a horse sitting in the barriers for too long,

[01:21:34] Tony: they start to get a bit flighty, um, if they’re a nervous

[01:21:37] Cameron: Cause they’re highly

[01:21:38] Tony: Uh, yeah, but that happened to us, yeah, sensitive horses. That happened to us on the weekend, so we had a scratching, and we’ve got one running tomorrow, um, called I Never Dreamed.

[01:21:48] Tony: Uh, but it may get scratched as well and race on Thursday, but it’ll race sometime this week.

[01:21:52] Cameron: Hmm.

[01:21:53] Cameron: Well, good luck with that. Mm

[01:21:55] Tony: Yeah, well, it’s interesting. There’s a lot of horses coming back into work, so I can’t wait to get some prize money in because it’s, you pay for all the training fees in the months before they run, um, but you need the

[01:22:05] Tony: prize money to, um, to offset that. So that’ll be good.

[01:22:08] Cameron: And how’s your

[01:22:09] Cameron: golf going?

[01:22:11] Tony: Uh, pretty ordinary. I actually went and had a lesson last week cause I was that far from where I thought I should be and, and I, I was right, but, um, I’m hoping it’s only going to take one lesson to, to right the ship but he pointed out a couple of flaws in my swing bad habits that it

[01:22:25] Cameron: Mm hmm.

[01:22:26] Tony: so i need to go it won’t happen overnight i’ve got to go and grind that out on the driving range to get my swing back to where it should be but um at least i’m a bit more optimistic it was it was depressing going and playing golf over the last couple of weeks and just continuously hitting a weak

[01:22:40] Tony: fade which is not good

[01:22:42] Cameron: That’s interesting, isn’t it? How, like little weaknesses creep in

[01:22:46] Cameron: over time.

[01:22:48] Tony: Yeah, I think my problem is, um, like everyone’s, if you, if you’re not hitting the ball well, you try and hit it harder.

[01:22:54] Cameron: Mm hmm.

[01:22:54] Tony: And, and what I was doing was rolling my wrist too much on the backswing. So I was kind of exerting to put as much force as I could behind the ball. And that was causing my wrist to roll over, which then couldn’t get back to where they should be at impact.

[01:23:07] Tony: But, um, all it took was the golf instructor to take a video of me and said, here’s what you’re doing. And like, we sort of

[01:23:14] Tony: fixed it up in half an hour. So that was

[01:23:15] Cameron: Mm.

[01:23:17] Tony: Yeah.

[01:23:17] Cameron: similar to Kung Fu. Like,

[01:23:19] Tony: Is it? Yeah,

[01:23:20] Cameron: if your technique’s not right, you try and if you’re a

[01:23:23] Cameron: large person like me, you try and compensate with strength and force. And, you know, my Sifus are always telling me, you know, stop using your strength. It’s not about strength. Strength won’t get you through, you know, it’s about.

[01:23:38] Cameron: Technique, it’s about form, it’s about having your foot at the right angle, your elbow tucked in, you know, it’s all about technique and form. And little things creep in over time. We did a private lesson with one of our Sifus a month or so ago and he stopped me straight away because my feet were at the wrong angle in this position.

[01:23:58] Cameron: Something I knew, but over a few years, you know, it had just gradually gotten out of thing. And I was like, Oh yeah, right. You don’t, you, you’re paying, you’re focusing on one thing and you, you, you, you, you, the other thing falls out and then

[01:24:11] Cameron: you need to come

[01:24:13] Tony: Yeah. and, that’s exactly the same as golf, because like, you know, when I wasn’t playing well, people would give me different tips, and so I changed, I’d focus on that and change that, which would cause another problem, and another problem, and in the end, I’m tying myself up in knots, so I need to just go and have a professional

[01:24:27] Tony: have a look at it and Put me back on the straight and narrow.

[01:24:30] Cameron: It’s one of, golf is one of those things I think like Kung Fu where there’s so much, you’re trying to get your body to do something that is not natural. And so you, there’s like 20 different things that need to work right for it to look seamless and to train your body to do that, uh, is, takes a long time, right?

[01:24:51] Tony: it does, yeah, it does, it really does. Anyway, so I’m optimistic now, I’m looking forward to playing again, but not perhaps this week, I’ll just go back to the range and make sure I’m grooving the right things in and not gonna play poorly and piss myself off and try and hit

[01:25:06] Tony: it too hard, so. Okay, Cam, happy

[01:25:11] Cameron: that’s the show. QAV a good week, everyone. Thank you, Tony.


QAV 721 – Dr No

In 721 we discuss the pain of FND, why Aussie investors keep investing in unprofitable companies, and TK does a Pulled Pork on SRV.

In the club edition only: the myth of the ‘new normal’, why LIC AFIC is selling below its NTA, how Aussie investors can benefit from the AI boom, what we should do about copper prices being up, how to interpret the number of buys going down, how often is TK is making purchases based on factors outside the numbers, and how to interpret the resignation of the PRN CFO.

QAV 720 – Boom!

The Budget cometh, Lessons in Kindness from Buffett, and a Deep Dive into Boom Logistics.

Also in the Club edition: Reflections on Jim Simons and Quant Investing, Navigating Market Fluctuations: FND and FPR Updates, Exploring VYS’s Surge, Elon Musk’s Suggestion to Warren Buffett, Marcus has a question about applying quality score to existing holdings, Jim asks about Life 360, Stock Doctor Data Integrity Issues, Nick asks about Josephine rules, Trent asks about AGL and LNG


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