QAV 735 – F SCORES

QAV 735 CLUB

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

[00:00:08] Cameron: down at uh, Cape Schanck, how’s the golf?

[00:00:12] Tony: feels good. Very windy down here at the moment though. So it’s, it’s it’s tough playing in the wind, but it gives you another

[00:00:19] Tony: excuse for a bad score. Yeah.

[00:00:24] Cameron: Is it hot? It’s bloody hot up

[00:00:26] Tony: No, it’s, uh, I’d say maxing out at about 17 or 18 degrees down here. And then it’s windy and the wind chill on top of

[00:00:34] Tony: that. But it’s nice. I mean, it’s, you

[00:00:36] Tony: know, it’s fine. It’s not too cold.

[00:00:39] Cameron: It’s only 25 in Brisbane, according to my watch, but it was 30 in my office before, so I made a last minute decision and came up to the bedroom where I can have the aircon on when I do this, but I’m on my travel mic, so my mic’s not as good, but anyway, we’ll live with it. Um, yes, you had a week off. Um, how was that?

[00:00:58] Tony: Oh, fantastic. Yeah, I was down here playing golf. Lovely. It’s, um, we’ve had, uh, it’s been fairly social. It’s been good coming down. So I spent a lot of time with Alex, um, with my sister and brother who’ve moved to Melbourne. Sorry, sister and brother in law who moved to Melbourne, Walt and Robin, and um, yeah, caught up with some other family.

[00:01:21] Tony: Um, went out to Flemington one day, went and saw Alex one day. So it’s been busy, but it’s been

[00:01:27] Tony: fun. Very social.

[00:01:29] Cameron: That’s, that’s

[00:01:30] Tony: yeah.

[00:01:33] Tony: Jim was meant to

[00:01:34] Cameron: shirt you’ve got on

[00:01:34] Tony: Jen was meant to come down, but, um,

[00:01:37] Cameron: Oh yeah.

[00:01:38] Tony: she, uh, so I, I drove down Saturday before last, and then she was flying down Sunday, and we were going to have, uh, a birthday celebration with her family on Sunday.

[00:01:48] Tony: And she tested for COVID before she, um, got on the plane. And technically these days you can still fly with COVID, but, uh, I was going to pick her up and take her straight to her father, you know, 92 year old father’s retirement village. So, she decided to pull the pin and stay in,

[00:02:06] Tony: um. In Sydney, so she comes down.

[00:02:09] Tony: Day after tomorrow.

[00:02:11] Cameron: Didn’t she have it not long

[00:02:12] Tony: Yeah, She’s had it two or three times now

[00:02:16] Tony: and, and no symptoms. She said she had a bit of a runny nose. That was it, but just didn’t wanna spread it through the retirement village.

[00:02:22] Tony: So she’s testing negative again, so she’s coming down

[00:02:26] Tony: soon, which will be good.

[00:02:28] Cameron: Oh, that’s good. Well, uh, this week on the show, I thought we would, we’ve got some questions and you’ve got some Australian, uh, notes, but I thought we would take the opportunity to talk a little bit about the US

[00:02:42] Tony: mm sure.

[00:02:43] Cameron: It’s been a while. Last time we did a US show, you expressed concerns over the stocks that the checklist was pushing out, so I went back and I did a lot of work on that and rejigged it.

[00:02:59] Cameron: My analysis, and spoke to Elio at Stockopedia about it, and tried to work out, uh, what’s going on with this Zed score thing, and I’ll get to that in a second, some of his analysis on it. But, I wanted to point out that the US dummy portfolio that I set up, back before we did all of this, is absolutely killing it.

[00:03:26] Cameron: It’s up like 40 344 percent since October 23 when I set it up. So,

[00:03:36] Tony: So that, that gives all the sins of, uh, bankruptcy

[00:03:40] Cameron: who cares? Who cares? It’s killing

[00:03:44] Tony: sound like a great growth investor. Doesn’t matter.

[00:03:47] Cameron: Yeah.

[00:03:47] Cameron: doesn’t matter.

[00:03:49] Cameron: One H a, I looked at it this morning and one of the stocks, uh, when I looked at it this morning, the portfolio wasn’t looking as good. And I was like, oh, what happened? I looked at one of the stocks, green. that we had mentioned in earlier shows, one of the shipping companies, they actually delisted two weeks ago.

[00:04:05] Cameron: And because I haven’t really been paying attention to the US portfolio while I’ve been doing all this stuff, I didn’t pay that much attention to it. But they bought back their shares at like 14. 20 or something. And I bought in at about 10 bucks. So we made a good sort of 40 percent on that before it delisted.

[00:04:24] Cameron: So when I factored that into the portfolio, it went back up to its 43, 44%. This by the way is Against the benchmark, um, of the S& P, which is about 25 percent over the same period of time. So, look, it’s not mag 7 levels, but if I could get, you know, if I can get 45 percent in a year, I’m, I’m happy. I wish my super portfolio was invested in our US dummy portfolio instead of my Australian stocks.

[00:04:51] Cameron: So, I had a chat to Elio, as I said, so one of the things that I was struggling with when I rejigged, um, the weighting and the scoring with the US, because we were concerned about this Z score for people who don’t recall the last time we talked about it, the Altman Z score, which indicates a high bankruptcy risk if it has a low score.

[00:05:14] Cameron: Altman Zed score, which we obviously want to avoid for obvious reasons, but I rejigged the, the weighting and the scoring and, and, you know, made it because as we talked about, I think last time we spoke, because with us. Um, financial health trends and financial health status in the Stockopedia scoring. We don’t take companies out if they get a low score.

[00:05:45] Cameron: We just use that for part of

[00:05:47] Tony: Mm hmm.

[00:05:48] Cameron: quality scoring and then it goes into the QAV score. I decided to leave these in and just have a look at. You know, what the list ended up with rather than manually removing companies with a low score. So I rejigged it and then I took the same algorithm and I, uh, last week ran an Australian, uh, buy list out of Stockopedia and compared it to my Stock Doctor Australian buy list.

[00:06:15] Cameron: And again, they were sort of mirror images of each other, more or less absolute replicas. Couple of variations, but you know, 98 percent the same. So, and some of those companies had low ZED scores as well. So I was going, what the hell is going on here? Why would Stockopedia give something a low ZED score?

[00:06:39] Cameron: Where when Stock Doctor is saying that they’ve got good financial health. So I reached out to LEO, you know, if anyone’s going to know. How to compare these two, you’d think it would be him, seeing as he worked at Stock Doctor for many years and now he runs Stockopedia. And, um, I asked him basically that question, like, um, how do companies have a low Zed score but, uh, financial, good strong financial health according to Stock Doctor.

[00:07:06] Cameron: Um, he said, I’ll get a read bits of his email reply, what you describe that is occurring in the US is exactly the problem many fundamental analysts have. Debt has been cheap. Intangible assets Real are real nowadays and the fact companies are raising money before they are even cash positive is scary But it is a reality in the US You see it has been this way for over 10 years and despite many pointing to the lunacy of it What has happened is that many companies have borrowed beyond their means but unlike the tech wreck They eventually grow into repaying it back.

[00:07:41] Cameron: The reality is the US investor is more adventurous than ours, often putting good money into bad stocks, but if they eventually come good, who cares, right? Much of the Magnificent Seven experienced this in their journeys, when it would have been much better to be on them during their meteoric rises, but the fundamentals just wouldn’t allow it.

[00:07:57] Cameron: I can remember FMG here was distressed for ages, 10 plus years, but eventually it came good. Did that mean the risk was lower? No, just that the stakes were higher. Dr. Lincoln’s original calculation in the subsequent revision, 2007 I believe, has leant heavily on the methods of Professor Ed Altman, so that doesn’t surprise me at all.

[00:08:19] Cameron: The key difference though is that the Altman Z score, versions 1 and 2, depending on which industry you look at, are a pure number. They are then ranked in the areas you see as per his approach of trying to find stocks that will remain solvent for two years. The Lincoln score is a logit overlay. To keep it simple, you’ll never see a score beyond 1.

[00:08:40] Cameron: 00. That’s the logit bit. The logit overlay also measures solvency today. That is why you never see a better than marginal result for a company that is not generating a profit or any cash. It is just hard coded. A type 1 error stocks Where they are seen as healthy but fail, we’re a big no no, bad for business.

[00:09:00] Cameron: So we erred on the side of conservative and just hard coded the result rather than let the maths do the work. The Altman Z score does that. But as you’ve acknowledged with both the US and Australian examples, large and tangible asset values in this modern world can play havoc with the scoring system, both Professor Altman’s score and Lincoln’s.

[00:09:20] Cameron: In our process, the Altman score is just one element of the broader quality rank, which looks at more than just health. But if you find a stock in the cautious zone under the Altman score, or definitely if it is distressed, IE will fail within two years if it still has these accounts, then it is imperative they grow their cash balance faster during that time.

[00:09:40] Cameron: Without it, things never get better. And I had to look up what a logit overlay was. I got ChatGPT to explain that to me. Do you know about

[00:09:50] Tony: I do not know.

[00:09:53] Cameron: Ah, okay. So, um, it’s basically,

[00:09:57] Cameron: uh, rating things as a binary. As I understand it. So it’s either a yes or a no overlay that goes into something. So I think in the case of Stock Doctor, if they’re, it doesn’t matter what else, um, if they’re not generating cash or profits, as he said, they get a bad financial health rating.

[00:10:16] Cameron: Doesn’t matter what else they’re showing on their books.

[00:10:19] Tony: That makes sense to me too, by the way.

[00:10:22] Cameron: Yeah, no, I get it. Uh, it does

[00:10:25] Cameron: make sense But anyway, when I, when I did the Australian buy list side by side, Stock Doctor and Stockopedia, what’s, and, and I tried to find the correlations between the two. It seemed like the quality rate was probably the most important metric. And the second most important metric, this is from a Stockopedia perspective, was, um, the F score, which is in Stockopedia is their financial health, Trend.

[00:10:52] Cameron: All of the Australian stocks that ended up in the buy list had a F score of 4 or above. And their quality rank was pretty high, but their Z scores were all over the place. Some were bad, some were medium, some were good.

[00:11:11] Cameron: So I kind of came to the conclusion that really what we might want to be looking at with the US stocks, and also the Australian stocks when we’re doing a stockopedia buy list, is um, kind of what we’re doing right now, which is looking at the financial health trend.

[00:11:31] Cameron: And looking at their quality rank, um, because that’s what we’re interested in, right, is their future financial health. We’re really interested in their financial health trend. If they’re getting better, if their financial scores are improving, their financial health is improving, that’s, it gets back to our recovering discussion from two weeks ago, right?

[00:11:55] Cameron: As being possibly a good metric to look at.

[00:12:00] Tony: Yeah. So,

[00:12:00] Cameron: my regression analysis, we’ll, we’ll dispute that later on, but yeah.

[00:12:04] Tony: Yeah. So,

[00:12:05] Tony: So, I think, yeah, I’m happy to go with that. But because there’s the Altman score, which is a Bankruptcy Forecaster, but as Elio says, if the company’s growing it, you’ve got to keep checking that score with each new result, of course. Um, and the one that you’re pointing to is also called the Piotrowski F score, is in, um, Stockopedia, and, and, uh, it’s a little bit different, so it’s not trying to, Um, say whether the company’s going bankrupt is trying to give it a more of a, uh, a checklist score.

[00:12:42] Tony: So if I just run through some of those items in the F score, the Piotrowski score, um, they’re checking for things like is the company making a profit? Is it generating cash? Is it making more cash than it’s reporting as profit? Is it more profitable than it was last year? Is the company’s long term debt reducing or stable?

[00:13:03] Tony: Is it increasing its ability to pay short term debts? Is the company trading without having to raise funds from shareholders? Is pricing power improving and or cost reducing? And is it more productive than last year? And there’s a whole, I guess there’s a whole um, series of ratios it looks at to answer those.

[00:13:26] Tony: Questions from, you know, balance sheet items and P& L items. So, um, I think that, I think they’re both relevant type scores, but yeah, if, if what my sort of pricey of what, um, Elio was saying is that there’s a lot more intangibles on you in US companies, and I certainly don’t have any, um, experience with US companies to, to say how big that is.

[00:13:51] Tony: But, um, but yeah, maybe, maybe the Health

[00:13:54] Tony: Trends score, F score then is the better one to use.

[00:13:57] Cameron: And, you know, correct me if I’m wrong, but we don’t mind intangibles. Like, in my mind, I’m thinking a good management that knows what they’re doing is able to manage intangible assets well.

[00:14:10] Tony: Well, yes.

[00:14:12] Cameron: heatmap, you

[00:14:13] Tony: Sorry, go on.

[00:14:15] Cameron: I was just going to say,

[00:14:16] Cameron: if the rest of the heatmap that we look at with their scoring indicates that This is a relatively well run business or it’s a business that’s improving and is recovering, you know, when we’re trying to gauge management quality as part of that, is management doing a good job?

[00:14:35] Cameron: In my head, I think intangible assets are probably something that a good management is going to treat as a good asset and They’re probably not over inflating the value of those intangible assets, etc, etc. Like I’m hoping that it’s actually a legitimate part of the um, quality and value of the company rather than something that’s being used to puff up a dead donkey.

[00:15:02] Tony: Well, I guess, again, this comes down to me having no experience in detailed accounting principles in the US. In Australia, I think it’s almost every audit, if not every audit, the carrying value or the value that’s on the books for those intangible assets has to be tested in Australian accounting laws. So, for example, and most of our intangible assets, if not all of them, probably most of them, are due to goodwill.

[00:15:30] Tony: Thank you. So, Company A has bought Company B, Company B’s book value is a million dollars, Company A had to offer two million dollars to convince the board to sell, and so when it acquires Company B, Company A buys Company B. and transfer the assets and book value across to its own balance sheet. But then somehow it’s got to account for the fact that it paid more than the book value for the assets.

[00:15:57] Tony: And that’s an intangible asset called goodwill. And then there’s tests on that going forward, so Um, I’m not sure of the period of the testing, but I’m going to say it happens at every order, if it’s a, if it’s a key finding, if it’s a key part of the balance sheet, it’s going to be tested frequently, and they’re going to say, right, well, you bought company B, how’s it worked out?

[00:16:21] Tony: Is the, Is the fact that you overpaid for that now getting worse, or is it getting better and you can actually impair the goodwill, or you can, um, you can probably write it back in some circumstances, I guess, or write it down. So, um, it’s always been tested under the accounting rules, so it doesn’t even really matter that much about the quality of management.

[00:16:43] Tony: It’s the, it’s the auditors, the quality of the auditors that determine, you know, the, that the goodwill, the quality of management comes in when the goodwill is first taken up, I suppose. Did they ever pay for the asset or not is the test of good management. Um, there are other intangibles on balance sheets, like a mining company will have given a value to what it thinks is worth, um, for the ore underground it hasn’t mined yet.

[00:17:07] Tony: And again, that’s something which is tested. During audits. So there’s a whole accounting regime, at least that I’ve had experience with in Australian companies, where intangibles are tested and written down or written back, according to where, you know, how did it turn out. After that, goodwill was put on the balance sheet or the intangible was raised on the balance sheet.

[00:17:31] Tony: I suspect it works the same in the US, but I can’t, you know, I can’t confirm or guarantee that. Um, I know that there In the past, and I’m going back to the 80s, there was a lot of discussion around whether you could, if you were a US company, say that the goodwill you built up in your own brands could be written onto your balance sheet, um, as an asset.

[00:17:53] Tony: And so if you were, you know, um, Heinz Ketchup, for example, Procter Gamble or whoever owns Heinz Ketchup back then, uh, can they actually put an intangible on there? Balance sheet as an asset to say that they built up a lot of brand equity in the Heinz Catchup brand. Now why was that important? Because banks would lend against the assets and so they could go out and borrow ’em or, um, even if it wasn’t intangible asset.

[00:18:21] Tony: So, uh. It might be different accounting standards over there from from Elio’s description. It’s certainly a different approach from investors to how important that goodwill is. Um, so yeah, it’s hard for me to say really what the impact of an intangible like that is.

[00:18:40] Cameron: Mm.

[00:18:42] Tony: But given that it’s more important for the Z score than the F score, maybe we do take the F score going forward and still score based on the Z score because it might tip something on The buy

[00:18:53] Tony: list, um, but not make it a go, no go if it’s

[00:18:56] Tony: going to be a bankruptcy risk.

[00:18:59] Cameron: I adjusted the weightings, um, to punish companies with a very low Zed score, so I give them a negative

[00:19:06] Tony: yeah,

[00:19:07] Cameron: and slightly weighted up the quality and F scores, and then re ran it again, and it didn’t really change the buy list a

[00:19:16] Tony: It’s just one item on The checklist, I

[00:19:18] Cameron: scores, yeah, the QAV scores changed slightly, but the list

[00:19:22] Cameron: was basically the same

[00:19:23] Tony: Yeah, right.

[00:19:24] Cameron: So, yeah, anyway, that’s where I got to, and, you know, with the portfolio that I’ve already established over there doing as well as it is doing, and, and I really looked at all of those companies and, you know, they, their quality and their, um, F scores are mostly good. There’s some that are lower, but mostly good, even, you know, irregardless of their Z scores.

[00:19:52] Cameron: I’m thinking I’m just going to leave it run, um, but I need to figure out what my exit strategy is if Like, do I just keep using 3PTL and, um, Rule 1 as my exit strategies? Uh, and I think so. I mean, I don’t have any other ideas for how to get out of it. But, um, if anything tanks suddenly, I mean, that happens here, uh, as we’ve seen with ING this week.

[00:20:19] Cameron: What’s wrong with you people not eating chicken? I mean, I don’t eat much chicken, but I thought that was just me.

[00:20:25] Tony: no, look, I think you’re right. I’m not, I’m not an expert on, on. The Z score or the F score or even the Stock Doctor health rating. I think you, I think Elio makes sense though where he’s saying that Stock Doctor is never going to rate higher than marginal, a company that’s not making a profit. Um, whereas the Z score is going to take it into account and try and score it, irregardless of whether it’s profitable or not.

[00:20:50] Tony: It sounds like the F score is going to be more important in that case because it’s looking at profitability and increasing in profitability.

[00:20:56] Tony: So that’s probably more relevant. In that case,

[00:20:59] Cameron: Yeah, alright, well I’ll stick with, you know, quality score and F score and see how we

[00:21:05] Tony: The other interesting thing too is I’ll do a pulled pork later on on one of the companies which is a finance company. Um, Stock Doctor for a long time didn’t give a financial health rating for banks and finance companies because a lot of the ratios just are different compared to industrial stocks.

[00:21:24] Tony: And, Uh, I know you mentioned, uh, an Altman Type 1 score and an Altman Type 2 score, so potentially it’s the same thing for them too. But I noticed in this, um, finance company I’m going to talk about a bit later on in the Pulled Pork section, it gets a lower, a low quality ranking in Stockopedia, and I’ve seen that before in a few of the stocks I’ve looked at, and I think that’s because it’s difficult for these scores to rank financial stocks.

[00:21:54] Tony: which don’t have the same sort of ratios that industrial stocks have. So they have, like, for example, I mean, the comment, the simplest explanation is they take on large amounts of debt, um, with the hope of charging their customers more for that debt than they had to borrow it for. Um, so it throws all the debt ratios out of whack, but even, but it’s still financially very healthy to do that.

[00:22:19] Tony: It just doesn’t work the same way that industrial companies do. They wouldn’t, they’d never borrow. Um, You know, 100 percent of their assets as debt, for example.

[00:22:30] Cameron: Yep. Mmm. I’ve got a US Paul Pork to do too, if we get

[00:22:37] Tony: Oh, OK.

[00:22:38] Cameron: but I don’t know that we will, cause you’ve got a lot of notes. Um, my, my last note, um, is just, as I briefly mentioned, uh, so a couple of weeks ago we had Conrad on, we were talking about recovering. As a metric to focus on, you asked me to do a regression test on recovering, which I, which I did.

[00:23:00] Cameron: And it was over the same sort of time period the rest of my regression testing is done with Matt’s tool. Roughly, I think, 16 years or 17 years or something like that. It came back with a CAGR of about 8%, 8. 2%, um, just isolating recovering. Which in terms of our isolated regression testing, um, is pretty

[00:23:24] Tony: Hmm.

[00:23:25] Cameron: Um, so, I mean, I’m not sure what that means. My guess as to what that means is that recovering by itself over the long haul, as Conrad himself suggested, is probably not So, that’s it. Uh, a really, um, solid, uh, component of an outperforming score. You might get a bit of a bump early on. Um, but of course, you know, this would be, I weighted it pretty highly in the checklist.

[00:24:02] Cameron: Um, this would be. Prioritizing companies that are recovering when you’re buying, when you have to replace a stock, you’re prioritizing, um, recovering. So the way that I ran it is kept all of the normal scoring the same, but instead of giving a recovering a 2, I gave it a 10 or something like that, I think, a 5 or a 10.

[00:24:26] Cameron: So it’s going to highly prioritize recovering stocks when it’s coming up with the QAV score and figuring out what to buy, but um, didn’t make a huge

[00:24:38] Tony: Yeah. So a couple of points. I think from memory, the numbers were with the regression test of the market got about 6 percent over that time period and the QAV stocks got about 12%. So recovering is kind of fitting in the middle there. So yeah, it doesn’t. Doesn’t look good on that basis, but I’m going to, when I get some time, I’m going to go back through our own buy lists and try and manually put together just a recovering stock portfolio, because the only question I’ve got in my mind about, about bumping up the score to 10 is that I know from my own manual Testing, which is only going back a year for recovering stocks.

[00:25:13] Tony: Uh, you’re only ever getting half a dozen or less stocks on the buy list at one time is my experience, which means they’re not going to take up. They may not make up the majority of the portfolio. Um, that was the first question I had. And the second question I had was just increasing the quality score by 10 or by eight, because it goes from two to 10 for the recovering, um, may still not.

[00:25:38] Tony: Push things high enough on the buy list so that they’re ever getting into the portfolio in the numbers to, to skew it. So, um, I accept what you’re saying that they’re, they’re having a greater impact and the results are lower. So it probably isn’t good, but I’m just going to try and,

[00:25:54] Tony: um, go through a four year example myself and have a look at it.

[00:26:00] Cameron: Hmm. I can do another one. I can, I mean, I don’t know what sort of score I need to give it to really have an impact, how much I’d need to bump it up by.

[00:26:07] Tony: Yeah, we’ll just leave, if you, if you think about some of the stocks at the top of the buy list, they sometimes they have a QAV score of, you know, over a hundred. We’ve seen Atlas Pearls have that in the past. So they’re still going to get on top of the buy list or into the dummy portfolio before a

[00:26:22] Tony: recovering stock, I guess is my point.

[00:26:25] Cameron: and I will never buy it again, after the last time. It’s my new Apollo.

[00:26:31] Tony: You’re working your way through the alphabet of stocks, aren’t you?

[00:26:34] Cameron: Yeah, it’s mostly the A’s. Uh,

[00:26:41] Cameron: that’s all from me, Tony. You’ve got a lot of, uh, a lot of talking points.

[00:26:45] Tony: Yeah, well, it’s been a company reporting season. So I just sort of, uh, just pick up on some of the stocks that have been in the news over the last week or so. Uh, some of it’s been fairly mixed, I think, for QAV stocks. Um, and, and some of these QAV stocks, I’m not sure if they’re on the buy list. Uh, just before they reported, they were certainly on the buy list, uh, you know, a month or so ago.

[00:27:07] Tony: Um, on the good news side, uh, NWH, the mining contractor, called NRW Holdings, code is NWH, uh, had a record result and their shares are up quite substantially since their results came out. Um, earnings per share was up 18 percent and they’re forecasting an even better FY25 given their, their order book. So, um, Good, good result for NWH.

[00:27:34] Tony: Yankol on the other hand, when the shares have gone down some 20%, I’m not sure whether coal was coal, thermal coal, I think was a buy leading into the reporting season, not a hundred, a hundred percent sure of that. But Yankol has been on the buy list for a long time. Um, but what may turn out to be,

[00:27:53] Cameron: I’ll, I’ll

[00:27:54] Tony: may turn out to be okay for Yankol holders, because, um, the reason why the shares went down when they announced their results, they decided to suspend it.

[00:28:05] Tony: And that’s because they wanted to create a war chest because they are expecting a large amount of M& A deals going forward and they’d rather fund that by withholding the dividend and raising, um, um, them raising you, uh, Uh, money from shareholders. So the AFR article that reported on this said, Coal’s consolidation is heating up, that’s COAL.

[00:28:29] Tony: Uh, back up the truck, the coal deals are coming. Big listed miner Yan Coal sent the canary down the coal mine when it hoarded all 420 million profit it made in the past six months for potential corporate initiatives. That’s company speak for M& A. And so they’re expecting some, um, coal mines to come up for sale, particularly in Queensland.

[00:28:50] Tony: And, uh, so that may turn out to be good for Yancoal, but, uh, people who are expecting a dividend didn’t

[00:28:55] Tony: like it and sold the shares. Another one that went down,

[00:28:59] Cameron: thermal coal So it’s just thermal coal has been a

[00:29:03] Cameron: buy or a josephine since

[00:29:05] Cameron: February. Mostly a buy, there’s been a couple of weeks where it’s been josephines in there, but it’s currently a buy and has been a buy for most of the year.

[00:29:15] Tony: So unless you got into YANCOL recently and got rule 1’d out, you might still be holding, because I’ll just check the bread later. I think YANCOL is still above its buy line, or sell line, sorry. No, actually it’s a sell, I tell a lie, it’s dropped below its sell line, so there you go. You’ll have to sell it.

[00:29:33] Tony: Uh, so that was Yankol. Um, Eams had a similar sort of, uh, response to its results. So again, the AFR reported on Friday, this Friday last, poultry producer Eams also warned about cost of living pressures hurting consumers. The company said it benefited from growth, uh, in volume in New Zealand as customers switched to cheaper options at home, while volumes to quick service restaurant channels declined.

[00:30:00] Tony: So, um, their share price, uh, went down some 21%. Um, interesting one though, because I, I’m surprised that, uh, their volumes, the quick service restaurants was going down, because people, when there is a bit of a cost of living crisis, even though they do cook more at home, they still traditionally go and get Red Rooster and KFC

[00:30:23] Tony: as being cheap family meals.

[00:30:24] Tony: So, that may not continue. Um,

[00:30:28] Cameron: Is there any chicken in Red Rooster in KFC, Tony? I’m not sure.

[00:30:32] Tony: no, well, yeah.

[00:30:33] Cameron: I’m not sure if that’s been

[00:30:34] Tony: Maybe, maybe that’s why, maybe that’s why there’s declining volumes to the fast food industry. There was also a mention of a smaller amount being supplied to Woolworths as well, which might be the

[00:30:47] Tony: more important factor in their forecasts. Other,

[00:30:52] Cameron: How much chicken do you eat?

[00:30:54] Tony: not much at all really, I’d probably have it once a fortnight or so.

[00:30:58] Cameron: eating much red meat? Eating much meat at

[00:31:00] Tony: Yeah, I

[00:31:01] Tony: am. No, I am

[00:31:06] Cameron: We don’t! That’s the, the reason I ask is we, we rarely eat meat at

[00:31:11] Cameron: all these days. Um, you know, partly because it costs too much, but mostly, you know, we just don’t seem to be eating as much meat anymore. Not through any, you know, deliberate reason. It just seems to be not on our, not on our menu much. I just wonder if that’s a common thing or not.

[00:31:30] Tony: Yeah, I don’t know. I think, I think where I’ve landed is it’s, um, Jenny very rarely eats dinner at night. She’ll have a snack. Um, so I’m usually left to, to cook for myself and the healthiest thing I can seem to, you know, do that’s easy is to buy a roast or buy a, a nice steak, um, or some lamb and then, uh, uh, steam some veggies.

[00:31:53] Tony: And it’s not a, not a laborious sort of meal to cook with much preparation time. So that’s generally what I do.

[00:32:01] Cameron: Mm.

[00:32:03] Tony: Yeah. Anyway, uh, other stocks in the news. Accent, uh, Accent One, AX, AX One is the code. Accent’s the shoe company. Uh, been on and off the buy list for a long time, but their share price went down 12 percent on FY24 profit crunch according to the AFR and dividend cut.

[00:32:22] Tony: Um, although I did notice their price has recovered a little bit since then. Uh, and they did call out during their, um, their results that Accent has started FY2025 strongly. Total sales for the first seven weeks of the financial year are up 8. 7%. Like for like retail sales are up 3. the same period. So, uh, the market was expecting better, I guess, but, um, it’s not all doom and gloom, uh, in AccentOne, but the share price is down.

[00:32:51] Tony: And, uh, one that’s cut a bit close to home, Bank of Queensland, um, has been on our buy list. The CEO came out and said the rivers of gold are gone. Bank of Queensland and banking’s been Brutal New Reality was the AFR headline. Bank of Queensland boss Patrick Alloway says retail banking is in structural decline and big changes are needed.

[00:33:14] Tony: All bank investors should heed his warning. So that’s according to the AFR and Bank of Queensland announced the Hundreds of job cuts and we’re buying out their franchise branch managers. So they had run up a franchising branch network for a while and they’re reverting back to owning them by the company themselves.

[00:33:36] Tony: So their shares have gone down a bit, but, uh, Again, not a sell unit, I don’t think, so they’ve gone down a little bit, but,

[00:33:46] Tony: uh,

[00:33:47] Cameron: Yeah, we hold them in a portfolio. They’re close to a three point trend sell, but not

[00:33:53] Tony: yeah, okay. I think they might have risen a bit, so I’ve got them as, um, sell price 5. 98, share price 6. 32, so come down a little bit since the results, but, um, not too bad. Latitude, LFS is the code, so they put out a good result. This is a very small ADT stock, so it was really getting no coverage. I don’t even think it was reported on in the AFR, but their income was up 11 percent and net profit after tax was up 140%.

[00:34:23] Tony: But again, very small ADT stock there, so not much coverage and not much room to trade, but good result. Uh ANZ, a stock that I hold in my portfolio, has been whacked with fines, so according to the AFR, ANZ Bank has been hit with an extra 250 million capital charge, increasing its balance sheet impost to 750 million after the prudential regulator identified persistent concerns about its risk management stemming from an escalating bond trading scandal.

[00:34:58] Tony: So they’re under, they’re in a bit of a corner at the moment. It’s been alleged that their bond traders gained the issuing of government bonds to better their own nest. And there’s, there’s all sorts of inquiries going on internally, and I suspect it’ll come about externally as well into that. I think someone’s been sacked already.

[00:35:20] Tony: There’s a lot of talk around what might happen. I suspect when this kind of thing happens, you might see it. The CEO or the chair might think it’s a good time to retire, so that might cause some turnover at the top of ANZ, who knows, um, but it’s, uh, it’s received a little bit of a, um, a fine, uh, because of that, uh, banking scandal.

[00:35:43] Tony: Uh, it hasn’t really affected the share price though, um, and ANZ don’t report this reporting season, uh, because they’re, the banks tend to go on a March and September half yearly basis, so we don’t. We don’t know yet what the profitability is going to be like for the full year, but they do, um, Do quarterly sales reports.

[00:36:06] Tony: So, um, as part of that, they were talking about the fines, but their share price has gone up still. So, it’s not seen as being the end of the world for ANZ. And lastly, the last company to talk about that caught my eye was Brambles. So, Brambles came on to the bottom of the buy list, uh, recently, and they had a very good result.

[00:36:26] Tony: And, um, uh, The AFR reports other notable results include Pallet Maker Brambles which was also among the biggest gainers after it topped earnings guidance, its shares hit a new high of 17. 51 and ended more than 9 percent higher at 17. 12. So yeah, a bit of a mixed reporting season. Um, I guess it pays to pay attention and pay attention to the AFR, I guess, and company announcements during, well, the last couple of weeks, and

[00:36:58] Tony: we’ve still got another week or so to go for more reports to come out.

[00:37:02] Cameron: Going back to the Rivers of Gold comment from Patrick Allaway, do you have any insight into why that is? Why is retail banking in structural decline? Is it just all Bitcoin now? Is everyone just using Bitcoin for

[00:37:18] Tony: No, I don’t think retail banking is in structural decline. I think perhaps the better quote would be that every major bank in Australia is now shrunk back to being just a retail mortgage. House like a building society. And So they’re highly competitive. So what was a lucrative high margin industry has had all that competed away because the big four banks are focusing on it.

[00:37:43] Tony: Macquarie Bank’s focusing on it. ANZ has a bank, which is, uh, sorry, AMP has a bank, which is focusing on it. And then the small regional players are also in there. So it’s a highly competitive market. Um, It wasn’t as important to the big four banks in the past. It was certainly important, but when they had wealth and insurance, they had other profit centers to rely on.

[00:38:07] Tony: But now that they’re all focusing on trying to cut up the housing mortgage market, and with a bit of, I guess they’ve got a bit of business banking and credit cards as well, they’re really focusing on market share, which means they’re dropping their prices and margins to try and retain market share.

[00:38:25] Cameron: doesn’t really sound like structural decline then.

[00:38:27] Tony: I’d say Structural Marginal Decline was probably a better quote.

[00:38:32] Cameron: Right. Okay.

[00:38:35] Tony: Okay, well that’s, oh actually, I’ve got a quote from, uh, what works on Wall Street.

[00:38:42] Cameron: Oh

[00:38:43] Tony: Yeah, so just let me read that one out. So I’ve been trying to do this one a week and I’ve come across another good one. Uh, this has to do with simple versus complex. Uh, and uh, O’Shaughnessy, the author, uh, talks about simple being better than complex, but how the human brain will often attribute more value to something if it’s more complex than if it’s simple.

[00:39:11] Tony: And he has a, uh, A psychological study to back that up. So to quote, uh, Shaughnessy says, we also prefer the complex and artificial to the simple and unadorned. We are certain that investment success requires an incredibly complex ability to judge a host of variables correctly and then act upon that knowledge.

[00:39:31] Tony: Professor Alex Bavelas designed a fascinating experiment in which two subjects, Smith and Jones, face individual projection screens. They cannot see or communicate with each other. They’re told that the purpose of the experiment is to learn to recognize the difference between healthy and sick cells.

[00:39:49] Tony: They must learn to distinguish between the two using trial and error. In front of each are two buttons marked healthy and sick, along with two signal lights marked right and wrong. Every time the slide is projected, they register their guesses as to whether the cell is healthy or sick by pressing the buttons I marked.

[00:40:06] Tony: After they guess, their signal light will flash right or wrong, informing them as to whether they have guessed correctly or not. Here’s the hitch. Only Smith gets true feedback. If he’s correct, his light flashes right. If he’s wrong, it flashes wrong. Because he’s getting true feedback, Smith soon starts getting around 80 percent correct, because it’s a matter of simple discrimination.

[00:40:29] Tony: Jones’ situation is entirely different. He doesn’t get true feedback based on guesses. Rather, the feedback he gets is based on Smith’s guesses. It doesn’t matter if he’s right or wrong about a particular slide, he’s told he’s right. If Smith’s guesses right or wrong, if Smith’s guess wrong, of course Jones doesn’t know this.

[00:40:48] Tony: He’s been told that the true order exists that he can discover from the feedback he’s left, great. He’s left searching for order when there is no true order to be found. The moderator then asked Smith and Jones to discuss the rules they use for judging healthy and sick cells. Smith, who got true feedback, offers rules that are simple, concrete, and to the point.

[00:41:09] Tony: Jones, on the other hand, uses rules that are out of necessity, subtle, complex, and highly adorned. After all, he had to base his opinions on contradictory guesses and hunches. The amazing thing is that Smith doesn’t think Jones’s explanations are absurd, crazy, or unnecessarily complicated, he is impressed by the brilliance of Jones’s method and feels inferior and vulnerable because of the pedestrian simplicity of his own rules.

[00:41:35] Tony: The more complicated and ornate Jones’s explanations, the more likely they are to convince Smith.

[00:41:41] Cameron: Cool. This

[00:41:42] Tony: I think we can, I think we can all see the, uh, the parallels with the financial world. I’m thinking, what was that book that, uh, the little book that beats the market that talks about the one ratio. You should look at, and it was beating the market just based on that simple analysis. Um, and went up on Wall Street, I guess, also had a very simple way of investing.

[00:42:06] Tony: You, if you’re buying a new product, buy the stock, that kind of thing. So, yeah. Whereas if you go along to, um, a presentation, an hour long presentation, pretty guaranteed the, uh, fund manager is going to spend an hour telling you how they intricately analyze the stock and grill management, make predictions about what’s going to happen

[00:42:25] Tony: based on that.

[00:42:27] Cameron: baffle them with

[00:42:28] Tony: Correct. Yes.

[00:42:30] Cameron: Reminds me of that quote that’s, uh, often attributed to Albert Einstein, everything should be as made as simple as possible, but not simpler.

[00:42:39] Tony: and like your Elon Musk quote about

[00:42:45] Tony: pulling things out until it doesn’t work and then going with that

[00:42:50] Cameron: then putting them back in,

[00:42:51] Tony: if you need, well if you need to, yeah.

[00:42:54] Cameron: If it, if it doesn’t work, then you need to put them back in.

[00:42:57] Cameron: But yeah.

[00:42:59] Cameron: Actually, I’ve been using that recently in my coding, you know, if I get stuck with a problem. I was doing this the other day, um, I was trying to write a script that will, you know, when I do my buy list on a Monday and Alex does her buy list and there’s always half a dozen stocks or eight stocks that we disagree on, that she’s got a few that I don’t have, I’ve got a few that she doesn’t have.

[00:43:23] Cameron: And it takes me a long time and a lot of energy to try and figure out why, usually, where we differ. Usually, her QAV score or mine will be below 0. 1, and I want to know, well, why is hers different to mine, and I have to go through all the data, and she uses your master spreadsheet, I use the Flippman one, so the data’s all over the place, and it’s complicated.

[00:43:44] Cameron: So I was trying to write a script. All of that, that’ll just figure it all out for me, give me the results. And I was, there was this one nagging problem, I was, I was pointing it at a sheet that had the list of the stocks to analyze, and the first stock started in A2, and it kept skipping it, and it would just start with the stock in A3.

[00:44:06] Cameron: And I kept saying to GPT or CLAW, whichever the AI tool was, No, no, you’ve got to start in A2, and it would give me a bunch of gibberish, and it would never get it right. And I went over this for like an hour. And then I thought, Why don’t I just move the starting cell down one? I just moved it down one, and then it worked.

[00:44:24] Cameron: I was like, Oh, shit, I could have saved myself

[00:44:26] Tony: Can’t fight City Hall.

[00:44:27] Cameron: way was, Yeah!

[00:44:30] Cameron: Simplest thing was just to move it,

[00:44:32] Cameron: and not try and fix the coding, just move it. You know. And then all of a sudden, a day later, it started doing A2, without me doing anything. It just worked all of a sudden. I was like, yeah, shit, now I need to move it back up again, because it’s having all these blanks at the top.

[00:44:46] Cameron: I don’t know what happened. Anyway, that’s good. Thank you for the quote, and you get to do a pulled pork for us on a US

[00:44:52] Tony: I am, yeah.

[00:44:53] Cameron: never heard of.

[00:44:54] Tony: That’s exactly right. Even though they claim to have had some operations in Australia, I still haven’t heard of them. But the company is Enva, E N V A. That’s the code, E N V A. Enova International is the company. And I pulled it out because it’s part of the U. S. E dummy portfolio that you have created and it was one of the better returning stocks since, um, since putting it into the portfolio.

[00:45:19] Tony: I think it was up about,

[00:45:21] Tony: uh, do you have the number there? I think it’s 39 percent from memory.

[00:45:26] Cameron: Um, Enva, uh, yeah, 39 percent since I added it. Uh, let me see, when did I add it? Do do do do do, March this year, so up 40 percent since March, not bad.

[00:45:41] Tony: Pretty good. So, to give people who don’t know much about Enver a taste for them, and now I’m in that crowd, it’s uh, I’ll read from their website. Enver International is a leading financial technology company that operates online financial services through our machine learning powered Colossus platform.

[00:46:05] Tony: Wasn’t Colossus the um, AI in the Forbin project

[00:46:08] Tony: that uh, imprisoned its coder? Anyway,

[00:46:12] Tony: I think it was. Uh, We Serve, sorry?

[00:46:16] Cameron: like, it’s a, Colossus is a Marvel character

[00:46:19] Cameron: as well. He’s, Uh, in some of the early Deadpool

[00:46:22] Tony: Yeah, right. I remember loving that movie, The Forbin Project, when I was a kid. Very early sci fi, 60s, About an AI that imprisons, um, its, its, uh, its coder so it can study humans and how they interact. Anyway.

[00:46:41] Cameron: Nice.

[00:46:42] Tony: and over, uh, goes on to say, we serve non prime consumers and businesses alike while offering world class technology and services to, uh, different to traditional banks in order to create accessible credit for millions.

[00:46:56] Tony: And what else, what else did they say? ANOVA is a leading financial service, that’s the same thing I think. Through its world class analytics and machine learning algorithms, ANOVA has provided more than 10. 5 million customers with over 56 and financing. So, It strikes me, well, first of all, it’s, it’s a, it’s a lender to people who can’t get loans from banks.

[00:47:22] Tony: Uh, in a nutshell, uh, started out life as a payday lender, so people, uh, so people would take out a loan in between, uh, pay packets to, to pay bills that were, were due in between and they couldn’t afford them. Uh, but it sounds a bit like, um. Latitude Financial Services or MoneyMe, those stocks that are on the ASX, this is the US equivalent of those companies that lend to people who are not able to easily get loans from banks.

[00:47:52] Tony: It’s been around for a while, so a bit of history. In 2003, it sort of came to life when two brothers, Albert and Alexander Goldstein, joined a company called The Cheque Giant. And they began testing online consumer lending back in 2003. 2004, the Czech giant has renamed CashNetUSA. And by the end of the year, the company is providing payday loan services across 10 states.

[00:48:20] Tony: 2005, uh, The company turns profitable after only 11 months of operations. 2006, the CashNetUSA company is acquired by CashAmerica International and, uh, becomes a member of the Community Financial Services Association of America. 2007, CashNetUSA makes its 3 millionth loan transaction and extends overbroad with the launch of QuickQuid, an online payday loan company in the UK.

[00:48:55] Tony: 2009, Innova expands into Canada and Australia with the launch of both Dollars Direct Brands and CashNetUSA, QuickQuid in Dollars. Direct collectively become Anova Financial. So I don’t recall dollars direct in Australia, Cam. Did you ever come across that one?

[00:49:15] Cameron: No,

[00:49:15] Tony: me neither. But they claim that they were offering those loans in Australia back in 2009.

[00:49:22] Tony: Uh, 2014, they, uh, branched out into B2B lending. I think from what I’ve read, it’s more Business B2B lending. Uh, they launched a company called Headway Capital and another one called OnStride Financial in the UK. And they list officially on the NYSE as an independent public company under the ticker symbol ENVA.

[00:49:48] Tony: 2016, uh, they achieve loan book growth of 29 percent year over year and become the number one lender by market share in the UK. Now, I’m not sure if that’s. Unsecured lender. It doesn’t say, but I suspect it is. I wouldn’t suspect that Innova would be bigger than some of the big banks over there. But anyway, it certainly became big in the UK.

[00:50:10] Tony: 2017, Innova balance sheet reaches a billion dollars in assets and reaches a milestone of more than 5 million customers served. 2020, Innova joins forces with OnDeck and Align income share Funding. So they merged. 2021, ANOVA acquires Pangea Universal Holdings, and they’re an international money transfer platform.

[00:50:33] Tony: And they currently, uh, uh, are still growing quite strongly, and they operate not only in the US, um, but also in Brazil. So that’s why there’s the international part of the ANOVA international name. Um, I’m just going to go through their numbers now, if I can find those quickly.

[00:50:56] Tony: They’re, here we go, they’re high up on the US Stockopedia QAV checklist. Uh, their second quarter results are out now and their revenue was up 26 percent year on year. Earnings per share was up 29 percent year on year. So they’re certainly growing well. And that’s been, that’s one of the reasons why their share price is up so much, but also too, they announced that earlier on in the year that they’re undertaking a share buyback, and so the share repurchase plan is also underway according to the Q2 results.

[00:51:32] Tony: Uh, the numbers, it’s a high ADT stock, so something like 90 million trades each day on average. The figures that I’m using were the latest second quarter figures, so 30th of the 6th, 2024 is the date. Share price currently is 83, roughly, 83. 43. And probably the biggest thing on our buy list which drives their high score is the price to operate in cash flow, which is 1.

[00:52:04] Tony: 76 times. So, um, very good. Very cheap on that basis. Uh, in Stockopedia, the quality rank for this company is only 57, which is pretty low, and there’s no Z score. And I think, as I said before, earlier on in the show, I think that’s because it’s a financial services company and the Z score may have trouble, um, predicting bankruptcy risk with, with these kinds of non industrial companies.

[00:52:29] Tony: And I suspect if it doesn’t have a Z score, it’s not going to rank highly in the Stockopedia quality ranking. But despite, despite that, it’s still scoring well in the QAV system. And even in Stockopedia, the overall stock rank is still 97 in total, because it has a high momentum score of 99 and a high value score of 88.

[00:52:51] Tony: The F score that we spoke about before is 4 So, um, In the middle, uh, not scoring great on that, but, uh, um, it, it, it does push it up the checklist a little bit for us, uh, in terms of whether we sit with valuation metrics. So the, the current share price is, uh, below, um, above tk, uh, the TK one iv. Um, which is 35.

[00:53:16] Tony: 29, but below TK2, which is based on the forecast earnings per share. So TK2 IV is, uh, 86 and the current share price is around 83. So, we’re expecting earnings to increase, um, at a reasonable rate next year. Price to book is, um, well book value is 43 per share, so share price of 83, we’re not going to be able to buy it at book value or book plus 30, so we can’t score it for that.

[00:53:46] Tony: Even though it’s a strong, uh, momentum stock in, um, in trending upwards, it’s not a new 3PTL uptrend, so we can’t score it for that. Um, I get, uh, earnings per share growth, um, Forecast of 37. 1 percent and the PE of 13. 5. So I can score it for growth over PE. Um, so that scores well. Uh, in terms of what else can I score it for?

[00:54:14] Tony: Dividend yield. Doesn’t pay a dividend. It’s doing a share buyback instead. So we can’t score it for dividend yield. Um, and the Was it the Goldstein brothers, Albert and Alexander Goldstein, who founded the company, are no longer part of the board, so we can’t score it for Owner Founder. So of all the things we can score it for, we have 7 out of 12 for a quality score of 58%, and because of the low PropCaf, we have a QAV score of 0.

[00:54:43] Tony: 33. So that’s ANOVA. ENOVA.

[00:54:48] Cameron: ENVA. Thank you for that, Tony. Yeah, they have done well

[00:54:53] Tony: Yes.

[00:54:54] Cameron: for us. But yeah, interesting looking at their quality, um,

[00:54:59] Cameron: ranking. It’s not that great. But their stock rank is 97, so, you know, I don’t know. It’s interesting. F score, as you said, is like a 4, so it’s right in the

[00:55:11] Tony: Yes. Um, and I just wanted to also flag something with you. I’m not sure what mortgage rate you’re using when you test against dividend yield. It wasn’t applicable on this company because it’s not paying a dividend, but, um, for the QAV Australian checklist, the Stock Doctor one, we’re using the average of the, BigBank’s mortgage rate to test against.

[00:55:35] Tony: That’s going to be different in the US, so we’ll need to come up

[00:55:37] Tony: with a way of putting a US

[00:55:40] Tony: mortgage rate in.

[00:55:42] Cameron: Yeah, right. I, um, I do have a source for that, bankrate. com. Um, it says, I’m just looking at it now, mortgage rates are up slightly this week to 6. 62, but when I did the last US, uh, buy list, which was at the beginning of, August, I used 6. 85, which it was at the time. So it says, yeah, but this is, um, the average, uh, they calculate.

[00:56:15] Cameron: That’s 6. 62 is the average for a 30 year loan according to Bank Rates Lender Survey. I think it’s come down in the last couple of weeks by the sounds of it. And then we’re back up. But

[00:56:27] Tony: Okay. Well, good. Thank you. You’re one step

[00:56:28] Tony: ahead of me. That’s great. As

[00:56:30] Cameron: in the global parameters in the global parameters sheet in my US, um, version of the, the checklist, I’ve got a link to it. You can see right next to bank debt there. I looked

[00:56:44] Tony: All right. Thanks.

[00:56:46] Cameron: No worries. Um, well, listen, I’m going to, I’m going to talk a little bit about my

[00:56:52] Tony: Mm hmm.

[00:56:52] Cameron: um, that I did a pull book on. I’ll breeze through it, but I just wanted to highlight it as a,

[00:56:58] Cameron: an example of some of the challenges when we’re looking at US stocks that we don’t often see here.

[00:57:03] Cameron: So. This is a company that was fairly high up in the buy list that I did a couple of weeks ago. We don’t have it in the portfolio, and in fact, when I looked at the bread later today, it’s slightly below its, uh, buy line right now, so we wouldn’t buy it, but it was above it, um, a couple of weeks ago. It’s called Sunlands Technology.

[00:57:23] Cameron: The, the code, it’s New York Stock Exchange stock, and the code is STG. Sunlands Technology Group is a China based company that This is providing online education services. The company mainly provides the students with comprehensive online education services, including online live streaming, audio, video, interactive course content, recorded previous live audio video course content, quiz banks, online chat rooms, and other educational content.

[00:57:54] Cameron: It operates its business mostly in the domestic market, so mostly in China, but it’s listed. on the New York Stock Exchange. Uh, it was founded in 2003 as a traditional education company, shifted to an online model in 2014, and it, you know, has PC apps and mobile apps and all that kind of stuff. Now, the actual, it’s it, so there’s a couple of things that are really interesting about this when I dug into it.

[00:58:24] Cameron: Number one is it has a very interesting structure. Um, and the main delivery company for it, it’s based in the Cayman Islands, You’re like, oh really? And then the, the,

[00:58:38] Tony: Most, most of these stocks are, aren’t they?

[00:58:41] Cameron: yeah, I think so. And, uh, the name of the company that is the primary, primary vehicle for it is Beijing Wanshi Wax Elephant Education Technology Company Limited. I don’t know, maybe wax elephant is a special thing in China, but anyway, there you go. My first thought was who will think of the children? Uh, we know America’s. Obsessed with, uh, the effect that TikTok is having on the children and having two children of my own that spend their lives in TikTok, I can fully appreciate that.

[00:59:21] Cameron: Uh, but this company mostly delivering its services, as I said, to China. So Chinese investors don’t care what Chinese companies do to Chinese children, I guess. Um,

[00:59:34] Tony: And US investors don’t care

[00:59:36] Tony: either.

[00:59:36] Cameron: that’s what I said. US

[00:59:37] Tony: Oh, that’s right. I thought you said

[00:59:38] Cameron: about what Chinese companies do to Chinese companies. Well, they probably don’t care either.

[00:59:42] Cameron: Yeah.

[00:59:43] Cameron: But I pulled up the latest annual report. So if you go to the website for this, by the way, it’s all in Chinese. So, um, that’s fun. But they do have an English language industrial relations site that, uh, not industrial, investor relations site that I got to. ir. sunlands. com And I read through their annual report.

[01:00:00] Cameron: Now, 90 percent of their annual report is talking about the risks associated with investing in this company. And there’s a lot of them. Because it’s a Chinese company, and it’s, like, it’s fascinating. So, they start off by saying, Sunlands Technology Group is a company based in the Cayman Islands, but most of its business happens in China.

[01:00:22] Cameron: Because Chinese law doesn’t allow foreign companies to own certain types of businesses, Sunlands doesn’t own its Chinese operations directly. Instead, it uses a legal setup called Variable Interest Entities, VIEs. These VIEs are controlled by contracts, not by ownership. This means Sunlands can run the business and include the VIE’s financial results in its own reports, even though it doesn’t actually own them. When investors buy shares in Sunlands, they’re buying into the Cayman Islands company. Not the Chinese businesses directly, and this is risky for a whole bunch of reasons,

[01:01:13] Tony: Not the least of which is you don’t have any assets, unless the contracts

[01:01:16] Tony: are counted as assets, which would be, it’d be

[01:01:19] Tony: risky. It’s risky. It’s good. They’re honest. Honest Chinese.

[01:01:25] Cameron: and one of the other

[01:01:26] Cameron: risks, and they call this out over and over and over again, is the Chinese government could change the rules at any time, and decide that the contracts aren’t valid. Actually, we’re not comfortable with companies with foreign investors even, uh, having contracts with Chinese companies providing educational services.

[01:01:47] Cameron: So, nah, sorry, you can’t do that anymore. Um, So it talks a lot about the legal risks involving Chinese government. It says the Chinese government has recently started to increase its control over companies that sell shares overseas. For our past listings on the New York Stock Exchange, we have needed to get special approval.

[01:02:09] Cameron: from Chinese regulators will go through a cybersecurity review. According to our Chinese legal advisors, because we were listed on a foreign stock exchange before the new cybersecurity rules were introduced, we don’t need to go through a cybersecurity review to keep our NYSE listing. We also haven’t needed to file anything with the China Securities Regulatory Commission for our current listing.

[01:02:31] Cameron: However, For any future stock offerings or capital raising activities, we will need to follow the new filing procedures with the CSRC. These new rules are still fresh and there’s a lot of uncertainty about how they’ll be applied. We can’t guarantee that we’ll be able to complete the necessary filings quickly or even at all.

[01:02:50] Cameron: If we can’t meet these requirements, we might face penalties like fines, having our business suspended, or losing important licenses. This could also make it difficult for, or impossible for us to continue offering shares to investors, which could cause the value of our shares to drop significantly or even become worthless.

[01:03:07] Cameron: So They’re putting it right out there. Now you don’t often see these sorts of complications investing in Australian stocks. Then it goes through the list of risks, and this goes for pages and pages and pages, and this is just the high level stuff. Then it goes into details, it breaks each one of these down, but, you know, just to read a few.

[01:03:30] Cameron: If the group fails to increase student enrollments, the group’s net revenues may decline, and the group may not be able to maintain growth. If the group fails to manage its business growth effectively, the success of the group’s business model will be compromised. The group is subject to the uncertainty to continue to achieve profitability in the future.

[01:03:47] Cameron: And this is all, you know, motherhood stuff. This is true of any

[01:03:50] Tony: You do see that kind of wording in Australian

[01:03:52] Tony: risk assessments too in PDS. Disclosures for

[01:03:56] Cameron: But then it gets, then it gets to the PRC stuff.

[01:04:01] Cameron: Significant uncertainties exist in relation to the interpretation and implementation of or proposed changes to the PRC laws, regulations and policies regarding the education industry. The group faces risks associated with the lack of a private school operating permit for online educational services as well as uncertainty surrounding PRC laws. And it goes on and on and on and on and on. Basically, um, any failure by the VIEs or their respective shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on the group’s business. And so, I’m reading through all this stuff going, oh my god, like. This is a nightmare. I wish I’d never read all of this, you know, um,

[01:04:49] Cameron: but the flip side to this is like, they, they rate pretty highly on our checklist. Revenue is going down, but operating profits are going up. And when you drill down and it’s interesting drilling into their annual report and their financials, it’s not as obvious as it is reading the Australian annual reports I found as to what’s going on in the business.

[01:05:13] Cameron: It’s very murky. Um, but they are saying that the business of post secondary courses has been rather slow in recent quarters in the U. S., uh, sorry, in China. So they’re finding it difficult, they sort of, their revenues peaked 2022, um, and they, uh, have been declining rather significantly since then. Uh, like if I run through their revenues, give me a second here, STG. Um, so 2021 they did 2.5. Uh, what are these metrics in here? Stock doctor

[01:05:57] Tony: Ah, Soccerpedia, yeah.

[01:06:00] Cameron: This is, um, in CNYM

[01:06:03] Cameron: two. So it’s not rebi. What’s that? Chinese, uh, something.

[01:06:09] Tony: You’re right.

[01:06:10] Cameron: Yeah, but what’s the MI dunno what the

[01:06:13] Tony: Millions of, millions

[01:06:14] Cameron: Oh, okay. CMY millions. Yeah, okay.

[01:06:18] Cameron: 2. 5 billion one, then 2022, 2. 3 billion, 2023, 2. 2 billion. It’s been declining slightly, um, but their operating profit in 2021, when they did 2.

[01:06:34] Cameron: 5 billion, their operating profit was 153 million. 2022 it jumped to 618 million and in 2023 it was up a little bit at 619 million. So, I think, and they were losing a lot of money before that. Their operating profit in 2018 was negative a billion dollars. So, I’m assuming because it’s,

[01:07:00] Cameron: I’m assuming because it’s a technology based platform that they were spending a lot of money building out their platform and their marketing and all that kind of stuff. it’s, um, you know, from a stockopedia perspective, the quality is low. It’s a 52. Value is high, 98. You want to make sure it’s not a value trap.

[01:07:20] Cameron: Stock rank is 71. The health trend, though, is a 5. So it’s, uh, you know, on the, on the higher end of the, uh, improving health

[01:07:30] Tony: Mm hmm.

[01:07:31] Cameron: bankruptcy risk is in distress. Though,

[01:07:35] Tony: A negative, negative Z2 score.

[01:07:39] Cameron: yeah, negative 0. 31.

[01:07:41] Cameron: So, you know, there’s just A whole bunch of risks associated with this. But if I look at the QAV scoring, does it have a qualified audit? I check for that. Average daily trades only about 40, 000. So it’s relatively low, but the price for operating cash flow is 1. 03. So it’s very, very cheap.

[01:07:59] Cameron: This is why the value is very high. Um, It’s, uh, below TK IV number one, it’s got a three point uptrend, a new three point uptrend too, um, and so, and that’s basically it from a scoring perspective. It’s just got a really low PropCaf and a couple of other things going for it, but it gets, uh, It gets a QAV score of 0.

[01:08:25] Cameron: 62 when I ran it, but you know, like, if I just look at the QAV numbers and don’t pay any attention to any of that other stuff, I’m like, well, okay, that looks good. Low PropCaf, um, pretty good QAV score. But then I start to read the details of it. I’m like, Oh God, it sounds like a nightmare. Um, they’re like just lots of risks, like huge, but you know, there may be nothing to it.

[01:08:50] Cameron: Maybe, you know, it seems to be a well run business. Like it’s doing. What’s a couple of billion yuan in US

[01:08:59] Tony: Yeah, I don’t know.

[01:09:00] Cameron: to USD. Oh, not much. So, uh,

[01:09:06] Cameron: one Chinese yuan is worth 14 cents. So a billion, a billion dollars is still, what’s that, 140 million?

[01:09:16] Tony: Yep. Okay.

[01:09:17] Cameron: So it’s still a couple hundred, you know, a couple hundred million dollars in turnover. Um,

[01:09:23] Cameron: it’s operating profits are going up. Like it seems to be well run, but the risks are astronomical. So I don’t know man, when I got into the details of it, I was like, oof, oof,

[01:09:38] Tony: you asking me what to do about it?

[01:09:41] Cameron: um, I was pausing for dramatic effect. What

[01:09:44] Cameron: would

[01:09:45] Tony: what will I do

[01:09:46] Cameron: you

[01:09:46] Tony: know.

[01:09:47] Cameron: Yeah, when you look at, you look at a company with risks like that,

[01:09:50] Cameron: like, it’s gotta, like do we, I mean, traditionally with QAV we don’t think a lot about the details of the business, we’re just going by the

[01:09:59] Tony: Yeah, but by the same token,

[01:10:01] Cameron: looking at companies,

[01:10:02] Tony: we’re dealing with Australian companies that we know a little bit about, um, just from

[01:10:05] Tony: osmosis, um, because they’re in Australia and

[01:10:08] Tony: we’ve seen the brands, but um, and the way the

[01:10:11] Cameron: and a highly nanny, and a highly nanny

[01:10:15] Tony: yeah, regulated, heavily regulated, yeah.

[01:10:18] Cameron: highly regulated, Yeah. exactly.

[01:10:20] Tony: Yeah. I mean, it reminds me of an old saying that, uh, Washington or Canberra can never afford to pay enough for lawyers to outsmart Wall Street.

[01:10:33] Tony: You know, or Macquarie Street, but these, these people have known what the rules are, and they just found a way of contracting around them. And, you know, part of me says, they’re being honest and highlighting that risk. And the other part of me says, so what? Because if the rules change, they’ll just hire

[01:10:48] Tony: more aggressive lawyers and come up with a different structure to get around it.

[01:10:52] Tony: So, um, Yeah, it’s a hard one, isn’t

[01:10:55] Cameron: Yeah, possibly.

[01:10:56] Tony: I’d probably park it, based on what you said. But, you know, if it’s one stock in a portfolio of 20 and it’s scoring high on a value metric and low on a quality one,

[01:11:04] Tony: it’s, you know, it still might be worth a look.

[01:11:08] Cameron: Yeah. There you go. Anyway, I, I, I highlight that just to show that it’s a very different space when we’re playing in the US. Very

[01:11:18] Tony: Yeah, and, and not just that, but, um, that’s the listings in the US, the company’s owned in Bermuda and it’s operating via contracts out in China. So it’s, it’s a much different space to how we’re used to

[01:11:30] Tony: looking at investments, really. Yeah.

[01:11:33] Cameron: Yeah, yeah. Alright, so that’s

[01:11:37] Cameron: that. Got a couple of questions. Chris asks, um, There’s been a bit of a talk around the importance of the Stock Doctor financial health status and specifically recovering. Does TK have any insight into how this is determined or calculated?

[01:11:52] Tony: uh, look, I actually went to their website and I couldn’t, I spent a lot of time trying to find it and I couldn’t see it, so I decided to reverse engineer some of the recovering stocks and I think it’s as simple as The Stock Doctor health rating is higher this half than it was last half. So it’s gone from marginal to satisfactory or

[01:12:12] Tony: satisfactory to strong in the last results.

[01:12:17] Cameron: I did the

[01:12:17] Tony: Yeah.

[01:12:18] Cameron: They got that little table.

[01:12:19] Cameron: They show you the table where it goes.

[01:12:21] Tony: Yeah. But I could do that. There was no, I, you know, I went through all their FAQs and Googled and I couldn’t see any, um, any definition within

[01:12:30] Tony: Stock Doctor as to what it meant, but that’s pretty much what it means, I think.

[01:12:34] Cameron: yeah. Chris also says he had an idea from a YouTube video he was watching that did a back of the envelope value of a given stock, the example he used was IBM, by charting its share price ratio with the current interest rate. This was done weekly and displayed in a line chart. Anyway, now that there is approaching 3 4 years worth of QAV data, I wondered if there was any benefit of charting the weekly QAV and or quality scores of a given stock.

[01:13:00] Cameron: For example, if you look at FMG and see it rising with QAV or quality in say 2022 and then slip off in 2023 or whatever, This might tie in with the recovery status and if there can start to be a patent visually detectable by a company that’s increasing its QAV or quality score over a number of halves.

[01:13:21] Cameron: And I said to him, I could probably code that on top of all of my other coding projects, but I’ll have to check with Tony to see if there’s any value in doing that. Um, do you see any value in having a timeline of the QAV or quality scores for a

[01:13:38] Tony: Um, first, I mean, I considered it and I thought it was worth looking at, although I know from experience that as a stock, the stock price rises, the QAV score goes down, right? Because it’s it’s prop cap driven. Um. Price to Operating Cash Flow. Price goes up, QAV score goes down. So, and I know that, um, if a QAV score declines below our threshold, it’s still not worth selling.

[01:14:04] Tony: It may not be worth selling because it can go a lot higher. The stock price can go a lot higher. So, I’m not sure. The only reason I do this is if it led me to some kind of trading strategy that if it, either quality or QAV score reached a certain threshold, it was worth lightening our positions in that stock.

[01:14:24] Tony: But, um, my experience is that that’s not the case, that sometimes something can go to a, from a very good QAV score, which means it’s a stock, which has a lot of value to a very low QAV score, which means it’s over value, but the stock can still keep

[01:14:37] Tony: going up. And that’s why the three point trend lines are important.

[01:14:43] Cameron: I thought this would have been more of a

[01:14:45] Cameron: buying indicator that if the QAV score is improving over time, that it might get some sort of a, uh, I mean, it might pop up on a list of ours to pay attention to it because it’s QAV score is improving, but at the end of the day, you know, I don’t know if that really changes how or when I’m going to buy something.

[01:15:08] Cameron: I’m going to buy it when it’s. Got a high QAV score and,

[01:15:12] Tony: yeah,

[01:15:12] Tony: of 0. 1. And if, and if you, and certainly, you know, if someone, like we, QAV score of 0. 1 is an arbitrary line, but if someone, you know, can’t buy enough big ATT stocks, for example, and they want to look at a QAV score of 0. 09 or 0. 08, they can do that. And the downloads certainly have that data for them to look at.

[01:15:33] Tony: Yeah. So I think I’m in the, in the camp

[01:15:36] Tony: of, it’s nice to know rather than necessarily important to know. Yeah.

[01:15:42] Cameron: Yeah. If you think we’re missing something though, Chris, let us know.

[01:15:45] Tony: um, it may be useful, like if we actually see it, it might work, but my experience is the QAV

[01:15:50] Tony: score can get really bad, but the stock price can keep going up as people jump in.

[01:15:55] Cameron: just just reminded me of the, somebody who asked me if I could

[01:15:59] Cameron: produce a chart each week in the buy list that shows the number of buys versus the number of sells, which, versus the number of Josephines, which I’ve been taking the time to do for the last year, and I don’t think

[01:16:11] Tony: Yeah,

[01:16:11] Cameron: at it or cares.

[01:16:12] Tony: I haven’t. Yeah,

[01:16:16] Cameron: ago. What do you

[01:16:16] Cameron: think? You’re like, meh, is there any value in this?

[01:16:20] Tony: I don’t think so. Yeah.

[01:16:21] Cameron: so unless somebody has an argument against it, I might just stop doing that because it’s one thing I don’t need to do on a Monday.

[01:16:27] Tony: I think you should.

[01:16:28] Cameron: Uh, all right, other questions from Mark, um, AFI is a 3P, uh, a 3PTL buy on the bread later and is trading at a discount to its NTA around 8 10%.

[01:16:40] Cameron: Buy, he asks. I know we’ve talked about AFIC before, but this is AFIC, right? AFI, Australian whatever.

[01:16:49] Tony: so AFIC was always a good entry into the market, a good, it’s not quite an index fund because it does, it Which is a really, really good thing. Kind of mirrors the index, but it does put a bit of its own science into underweighting or overweighting some of the stocks, depending on how it feels about banks or miners or whatever.

[01:17:08] Tony: But it’s pretty much an index fund. Low cost. It’s a LIC, so this is, it’s been around for over a hundred years, way before ETFs were a thing. But since ETFs have come out, and I guess its main competitors are going to be, The Vanguard one, VAS, um, STW that we benchmark our stuff against. Um, and there’s probably a Betashares one I’ve overlooked as well.

[01:17:33] Tony: Um, they, people tend to go towards those, but I think just, I had a quick look before, and they’re all about the same in terms of, Costs and importantly yield. So that was one of the things that AFI was being sold off a little bit on is that the Vanguard’s and the STW’s had a higher yield slightly than than AFI because a lot of times these stocks are being held by people who are retired living off the income But anyway, they’re all yielding around three and a half to I think STW is Eli 3.7%, so not too dissimilar.

[01:18:09] Tony: Now, um, given all that, given that, uh, NTA is or that you can buy AFI for less than it’s NTAI tend towards, um, buying a FI rather than the ETFs. I tend to prefer. LICs, for reasons I’ve spoken about before, if the market sells off, an LIC doesn’t have to sell the ETF sells off, they’ve got to sell shares to redeem people who are selling the shares in the ETF.

[01:18:39] Tony: So, they ride the market down, but an LIC can take the view that the market’s going to correct and not sell the underlying shares. So, it can come out better in that sense. It’s known as a closed end fund versus an open end fund. So, yeah, I like that. Um, AFI, I like that it’s trading below its NTA and I think the breadliner might have it as a Josephine today, but it’s, it’s still probably above its, um, its buy line.

[01:19:06] Tony: If you, if you wait a little while for that Josephine to, to revert.

[01:19:13] Cameron: Mmm.

[01:19:14] Tony: But look, that’s not financial advice. Um, have a look at all those different ETF index fund options. Uh, yeah. And we’ve done podcasts in the past about ETS versus LIC.

[01:19:26] Tony: So go back to those, listen to those too.

[01:19:29] Cameron: Mmm. And anyone trying to listen to old episodes and not being able to because I still haven’t fixed the links on them, I apologize. I know a couple of people have been emailing me. I am still trying to get through all of those, but it’s taking a bit longer than I hoped. Uh, alright, Tony, I think we’re in after hours

[01:19:48] Tony: Good.

[01:19:49] Cameron: getting a bit late, but, uh, what do you want to, what, what have you been up to apart from golf and, uh, catching up with people down

[01:19:57] Tony: Yeah, so I went and saw my horses at, um, Flemington. Boyfect trialed well. She, she’ll probably trial again this Friday and then go to the races, um, after that. I saw Kars run. I jumped in the car at like five o’clock in the morning in Sydney and got the Corfu race course in time to watch a four o’clock start by Kars.

[01:20:17] Tony: Thought maybe shouldn’t have rushed because she ran

[01:20:20] Tony: seventh, but, um, I think I drove faster than she, she ran.

[01:20:24] Cameron: Oh you, A four, o’clock start

[01:20:27] Tony: m. race. Saturday afternoon.

[01:20:29] Cameron: Oh

[01:20:30] Tony: Yeah, and I got up

[01:20:31] Cameron: said you got up at,

[01:20:32] Cameron: five

[01:20:32] Tony: got up at

[01:20:32] Tony: 5am to drive from Sydney to Melbourne on the Saturday.

[01:20:37] Cameron: Oh, right. she she was in right in

[01:20:39] Tony: Mmm. Yes, sorry, shouldn’t have said that. Yep, so, um, that was, uh, that was fun. Uh, been down here. Um, Cass will do better, actually. She’s gonna, she’s, look for her to win around the third or fourth start.

[01:20:54] Tony: Um, Double Market, the, the horse that

[01:20:56] Tony: Steve Mabb and I are in, um, that trials on

[01:20:59] Tony: Friday. Uh, what

[01:21:01] Cameron: Oh, wasn’t that Negroni? You got another

[01:21:03] Tony: Negronis, yeah, we sold

[01:21:05] Tony: Negronis. I think she races tomorrow, so I might put a few bob on her and see how she

[01:21:10] Cameron: You’ve got another one called Double Market. I’d never heard of that one

[01:21:13] Tony: Yeah, hasn’t raced yet, so we were trying, we tried to call it Charlie 99, um, but, uh, that was rejected, so we called it Double Market. So I got, got to go and give her a pat last, uh, last week, which was good fun. She’s looking well. Yeah, so a lot of golf, a lot of that, um, socializing. Ruddy and Wal are down here at the moment with me, which is good fun. We’re about to head off down to the driving range. Wal’s taken up golf. He’s had three lessons so far, so we’re gonna

[01:21:44] Cameron: Oh, it’s he’s new

[01:21:45] Tony: out his form, yeah, on the driving range.

[01:21:48] Tony: We’re

[01:21:48] Cameron: Very good.

[01:21:50] Tony: Um, in terms of what I’ve listened to and and watched, um,

[01:21:56] Tony: been having a bit of a resurgence of Nick Drake. I really enjoyed discovering him this year and just started listening to a, um, an album of covers called Endless Coloured Ways, which is good fun. Um, have you, occasionally I come across a good soundtrack, and have you heard the Man of Steel soundtrack?

[01:22:16] Cameron: No, I

[01:22:17] Tony: quite liked it.

[01:22:18] Cameron: don’t think so.

[01:22:19] Tony: I must have been scrolling when I was in bed one night and someone had mashed together all of the Superman theme tunes from way back in the 50s black and white TV series through to the current ones. And that Man of Steel theme is quite good. I enjoyed it anyway. So I’ve downloaded the soundtrack to that.

[01:22:40] Tony: Been listening to it a lot. Uh, Dylan Porter and Alan Elman. About a year ago, I think now, or this year, Rough and Rowdy Ways. Been listening to that. Very bluesy, very old fashioned. Could probably the best track on that’s called Cross the Rubicon, which is really good. Listening to Paul Weller and the Pet Shop Boys who combined in an EP called Cosmic Fringes.

[01:23:04] Tony: That’s really good.

[01:23:05] Cameron: Hmm.

[01:23:06] Tony: And then the last thing.

[01:23:08] Cameron: Interesting

[01:23:08] Tony: Yeah, it is, actually, yeah. Kind of Techno and Weller, who’s more soul. Very good. And the last thing was, the other night I came across a movie, which has just been released on one of the streamers called Origin, which is, um, the story of, um, I’ve forgotten the first name, Professor Wickerson, who wrote the book called Cast, which is how we named the horse.

[01:23:32] Tony: And, uh, it’s a story of, um, Uh, they, I guess they couldn’t make the book into a movie ’cause it’s a not so nonfiction dry academic book. So they, they wrote her story about writing it and how she came to research it and write it. Um, it’s, it’s an okay movie, but it sort of caught my attention ’cause of, of its, um, uh, its bonds back to the book I read.

[01:23:52] Tony: It’s a great book, really is a good book. And.

[01:23:54] Cameron: What’s What’s it about?

[01:23:56] Tony: So the movie’s called Origin. It’s about the writing of the book called Cast. So Professor Wickerson,

[01:24:01] Cameron: What’s that

[01:24:02] Tony: okay, so Professor Wickerson is a Black, um, historian and, uh, she, uh, wrote a book about the great, um, Negro migration from the South during the slavery times and then she wrote Cast and her theory with Cast was that, um, racial, racial prejudice is a worldwide thing and she drew on the fact that the Nazis.

[01:24:28] Tony: in putting together the laws about racial segregation used laws that were in place in the U. S. in the South to base it on.

[01:24:38] Cameron: Mm hmm.

[01:24:39] Tony: And that’s one of the themes in the book. There’s also obviously the caste system in India she talks about as well. But the thing that really struck me was there’s one scene in the book where the Nazis realize if they’re going to get into power and outlaw the Jewish race, they’ve got to define it.

[01:24:58] Tony: Like, you know, because there’s lots of people who are mixed breeds and things. So they’re, they’re trying to work out how to, how to codify that in their laws. So they send some lawyers over to meet with the state legislators in the, in the South, in the US, and they come back and they say, They were just shocked.

[01:25:15] Tony: They said we couldn’t possibly put those laws in place here. So the Nazis thought that the U. S. states had gone beyond the pale. So for example, the U. S. states, I think I’ve got the maths right, if you were 132nd of Negro descent, And you were, you were outside the law for voting and all those kinds of things.

[01:25:38] Tony: Um, I think the Nazis put in something like a one 16th or a one quarter Jewish heritage

[01:25:45] Tony: to, to fall foul of their legislation. They just couldn’t bring themselves to adopt the US laws.

[01:25:51] Cameron: I remember when Ray and I did our series

[01:25:53] Cameron: on the bullshit filter on the history of the war on drugs, and this was years ago. We, because, you know, the war on drugs in the U. S. was primarily a racist, uh, campaign. It was Uh, conceived as, as a way of attacking Mexican immigrants and, uh, blues musicians and jazz musicians originally.

[01:26:12] Cameron: Because they were all using, smoking weed and it was a, when Prohibition was ending and, uh, the guy that was running the Prohibition task force for the Treasury Department looked like he was going to be out of a job. He looked around and said, okay, well, who else can we gang up on? And he hated jazz music.

[01:26:31] Cameron: And Billy Holiday and that kind of stuff. So he, he went after blacks and Mexicans basically, and thought weed was the easiest way to target them and make their lives difficult. But I remember us talking about it in places like Louisiana and a lot of the laws that they had, the racial laws that they were putting in place.

[01:26:49] Cameron: And I remember the Nazi stories and Ray and I, we were doing this whole bit about the, the, the Nazis going back, going, listen. We’re Nazis, like, honestly, we’re Nazis, but even we wouldn’t try and pull this shit, like, there’s there’s a line, there’s a line that even we won’t cross, but these, these American legislators in the, down the south, it was just unbelievable, when you read some of it, it was just crazy, like, really, really, people think the MAGA group are bad, you know, go back a hundred

[01:27:18] Tony: Oh yeah.

[01:27:19] Cameron: see how bad it was down there.

[01:27:22] Cameron: Interesting, I gotta read that book. Sounds

[01:27:24] Tony: yeah. It’s good. Oh, Caste is a great book. Yeah. Um, speaking of MAGA, there was a great quote, if I can find it, um, quickly. This is from a Rolling Stone article, which was fact checking Donald Trump. I mean, he could probably write a book on fact checking Donald Trump. But recently, this is a direct quote.

[01:27:46] Tony: During a rambling press conference at his golf club in Bedminster, New Jersey, Trump said of Harris, She co sponsored legislation to abolish very popular private health insurance. Which 150 million Americans rely on, dumping everyone on to inferior socialist government run healthcare systems with rationing and deadly wait times, while massively raising your taxes.

[01:28:07] Tony: She wants to take away your private healthcare. It’s the best healthcare in the world, he continued, adding. You’re all going to be thrown into a communist system. You’re all going to be

[01:28:17] Tony: thrown into a system where everybody gets healthcare.

[01:28:23] Cameron: Yeah, a lot of people have been making fun of that quote. Oh my god! Don’t throw me into the briar patch. Terrible.

[01:28:31] Tony: so hilarious. And the Rolling Stone guy goes on to say that Americans pay for more. for healthcare than the residents of other non high, other high income countries like Canada, the UK, France, Germany, Japan, South Korea, and Australia, and experience the worst health outcomes. Our life expectancy is lower, infant, maternal, and avoidable deaths are all higher.

[01:28:51] Tony: That’s Andrew Perez in the Rolling Stone. Yeah, just incredible. And then the last thing I wanted to mention was, um, been thinking a lot, I think it was probably the Conrad interview on, you know, using, uh, his own version of Metrix to invest. It got me thinking that really we’re kind of, you know, We’re kind of on the, maybe we are in the, um, a new trend or the customer trend that reminds me of back when I was, you know, starting to get experience and getting involved in personal computing and, and eventually internet stocks and things.

[01:29:29] Tony: But, um, you know, when I first started investing, I was still getting paper based information. Um, then it became floppy disks that were sent out with data on them and then Stock Doctor came along and, and, and now we’re really at the stage If you’re a, if you’re a sort of fund manager, you’re pretty much being disintermediated.

[01:29:52] Tony: Most, most people who have enough time to do it can do as good a job, if not better than fund managers. We don’t have the constraints they do, but we now have access to all the information. And it really reminds me of, you know, back in the day when Um, people, people like Steve Jobs were saying, you know, it’s the new age is going to launch where we have access to all the information we’ll ever need.

[01:30:17] Tony: And what it reminded me of, have you ever come across the Whole Earth Catalog back in the day? Yeah. It’s, it’s kind of that same sort of period in history. I’m, I think I bought one of the last. Last issues of the Whole

[01:30:31] Tony: Earth Catalog back in the late 80s or 90s or something, you know, before, yes,

[01:30:38] Cameron: Stuart Brand the guy behind that? Also one

[01:30:41] Cameron: of the early internet pioneers, like revered in the early internet industry, Stuart Brand

[01:30:48] Tony: absolutely, and, you know, um, I remember Steve Jobs calling the Whole Earth Catalog the, the, uh, Google before Google. to be like this sort of almanac or an encyclopedia of information about where to get things to do your own research and eventually it became where to get things to build your own computer and stuff like that.

[01:31:13] Tony: But yeah, it was an amazing resource and I kind of get the same feel. You know, we’re, we’re at that kind of cusp. But will we really have fund managers much longer? At least ones that are getting paid huge fees based on performance when they don’t perform. Um, and when we have all these tools available to the end users, I’m just going to read from, um, Wikipedia on the Whole Earth Catalog.

[01:31:38] Tony: The title Whole Earth Catalog came from a previous project by Stuart Brand. In 1966, he initiated a public campaign to have NASA release the then rumored satellite photo of the sphere of the Earth. And that’s what it used to have on the front cover was the blue marble. Um, and, uh, That was the first image of the Earth seen as the whole Earth.

[01:31:59] Tony: He thought the image might be a powerful symbol evoking a sense of shared destiny and adaptive strategies from people. The Stanford Educator brand with a biologist with strong artistic and social interests believed that there was a groundswell of commitment to thoroughly renovating American industrial society along ecologically and socially just lines whenever that they might prove, whatever they might prove to be.

[01:32:23] Tony: I think I’ve got jobs as quote here too. Uh, the American, the Amer, the magazine featured essays and articles, but was primarily focused on product reviews. The focus was on self-sufficient self-sufficiency, ecology, alternative education, and do it yourself and holism and feature the slow slogan, access to tools, and, um.

[01:32:47] Tony: Yeah, that’s, that’s how I get that same sort of vibe for personal investing now, whether it’s, um, you know, whatever, whatever style of investor you are, we’ve, we’re really

[01:32:59] Tony: getting to the stage where we’ve got the tools to, to do it ourselves.

[01:33:03] Cameron: Mm. Are you still reading Kurzweil’s book?

[01:33:06] Tony: Uh, I haven’t, I haven’t brought it down with me, so I’ve

[01:33:09] Tony: gotten into it, but I haven’t

[01:33:10] Tony: gotten that far into it yet.

[01:33:13] Cameron: Mm. Well, I, I spent a few hours, did a big deep dive on it, uh, last week, last weekend, I think, reading through it again, and, um, just, you know, it’s, it’s, I, I think the future that he’s predicting is one where what you just said is true about most people. Industries and things, AI, when you’ve got an expert in your pocket that’s an expert on every topic and every subject and can find out anything or do, almost do anything for you, um, how that’s going to disintermediate large swathes of everything.

[01:33:52] Cameron: That’s what he’s predicting this decade will happen.

[01:33:57] Tony: Yeah, and we’ve talked about that. Um, we can’t, I mean, the way I see it is we’ve got that now with Google. If you wanted to do your own research, you can pretty much find access to things. But then, you know, we, we, it’s a powerful tool and we don’t always use it wisely. Like Dr. Google is a good example of that.

[01:34:14] Tony: So, but I think Kurzweil is directionally right. The tools will be there, and they’ll get misused, and they’ll get corrupted, but eventually

[01:34:22] Tony: they’ll be better for humanity than what we currently have. So yeah,

[01:34:28] Cameron: He’s certainly optimistic, but he does say there’s going to be a tough

[01:34:31] Tony: right.

[01:34:32] Cameron: like there’s going to be a transitionary period when jobs are disappearing and we don’t have a universal basic income or anything like that to replace the income that’s being lost and it’s going to create a lot of turbulence.

[01:34:44] Cameron: And he says over and over that it’s going to depend on how good governments manage the transition process and they could do a great job or they could do a terrible job or somewhere in between and remains to be

[01:34:56] Tony: As we know, they’ll do a terrible job, but they’ll muddle through. Um, and they’ve got the ace up their sleeve where they can print money and create a

[01:35:04] Tony: UBI if they need to, but it’ll probably come too late. Yeah,

[01:35:10] Cameron: We’ll see what happens.

[01:35:11] Cameron: Um, well, listen, I’ve, I’ve had a lot of interesting, um, reading and watching and listening experiences. I mentioned to you before we started the show that I’ve been reading Andrew McGahn’s book, Last Drinks, about a sort of a fictional account of characters involved in the Fitzgerald Inquiry, but that then made me want to go and read more on the actual Fitzgerald Inquiry, so I picked up And Matthew Condon’s Three Crooked Kings again, which I started a year ago.

[01:35:38] Cameron: When Terry Lewis died, I started reading it and because I realized I didn’t really remember much from that period and what happened. I didn’t really, I never lived in Brisbane. You know, I went straight from Bundy to Melbourne in the beginning of 88. And so, uh, and I was, you know, a teenager, not really paying that much attention to anything outside of Who the lead singer of Van Halen was and, uh, which girls, which girls would let me put my arm around them.

[01:36:04] Cameron: Um, but, uh, yeah, so that’s been interesting, learning more about police corruption in Queensland in the 60s. That’s where Matthew Conlon’s book came from. Pretty much starts. And, um, and I said, as I said to you, I’ve been thinking about you and Dez and people that were in, living in Brisbane in the 70s and 80s

[01:36:26] Tony: different place.

[01:36:27] Cameron: a lot more of that than I

[01:36:30] Tony: Oh, yeah. Very different place. And an open lie, an open secret, basically, what was going on that we all laughed about, and Joe had the gerrymander, so he knew it wasn’t going to change any time soon. In fact, it was, looking back, it was amazing that Wayne Goss ever got elected. I mean, it had to take all that negative publicity from the Fitzgerald inquiry to dislodge somebody who only needed 27 percent of the vote to retain power.

[01:36:56] Tony: Yeah.

[01:36:58] Cameron: Hmm, Joe’s just come into the book actually, um, when Nicklin, I think Nicklin retired and then the guy who replaced Nicklin died of a heart attack, um, and he, Joe was sort of his deputy and he sort of got pushed into power, well he was like, uh, became Premier when the, his predecessor died, I think a couple of months into his term,

[01:37:25] Tony: Okay. That’s, um, that’s very fortunate for Joe.

[01:37:29] Cameron: Yes. Yeah. Yeah. How interesting. Um, I finally watched Bedazzled. You ever seen Bedazzled.

[01:37:38] Tony: The Peter Cook and Dudley Moore and Raquel Welsh Seven Deadly Sins

[01:37:41] Tony: story.

[01:37:43] Cameron: She’s only in it for a minute, but it’s a good minute. Yeah. Yeah. I love it. And I, you know, I’ve been a big fan of the song from it for years. Um, when, when Peter Cooke asked the devil to make him sort of a famous British singer. Popstar. And then he’s a famous pop star and he’s on TV and he’s doing this sort of Tom Jonesy sort of song in a, in a shiny jacket, trying to win the love of the waitress that he’s hot for.

[01:38:12] Cameron: And then he does the song and she’s going gaga. And then Peter Cook does a song and it’s, you know, He just speaks his lyrics and it’s like, I don’t need you, I don’t care, I’m very self contained. It’s this very cold, cool, almost Sparxy thing. But I’ve never seen it before and I’ve never seen the clip of it.

[01:38:38] Cameron: And he is dressed in what I can only describe as a Ziggy Stardust outfit. It’s a very wild, psychedelic sort of outfit. And, but the, the film was made in 67, you know, Ziggy didn’t come out until early 70s. So, I, I think Bowie, I googled this, I couldn’t find any mention of it, but I’m pretty sure Bowie looked at Peter

[01:39:02] Tony: Oh, really? Okay.

[01:39:04] Cameron: Oh, yeah, that’s what I’m going to do that.

[01:39:06] Cameron: That’s so cool.

[01:39:08] Tony: Glam would have been a thing though before Ziggy

[01:39:09] Cameron: Cook’s. Yes, in a way, but, you know, Ziggy had a particular sort of style to him, and if you see this, it’s in black and white, that section of it, because they’re on TV, but, anyway, great film, not a great film, but a good, fun film, if you love Peter Cook and Dudley Moore as I do, Peter Cook’s fantastic, they’re both great,

[01:39:34] Cameron: great

[01:39:35] Tony: Yeah, and great comedy. Like, everyone

[01:39:37] Tony: gets their wish granted, but they never actually benefit from it. Yeah.

[01:39:42] Cameron: the devils, and there’s a lot of religious rants in it. Now, Peter Cook goes on long rants about how God, you know, how boring it was just to worship God all the time. And, you know, how does it, you know, it’s just boring having to worship. I wanted a little bit of worship as well. Why can’t I get a little bit of love?

[01:40:01] Cameron: And then, then he goes on a rant about how God’s a pervert because he’s watching him everywhere, he’s in the bathroom and, um, he was changing his trousers and he was asking God just to bugger off and leave him alone for a minute so he could get changed in private and all this kind of stuff. Honestly, that would have been pretty, pretty racy, I think, for 1967 in England to be, uh, talking about religion like that.

[01:40:24] Cameron: Very Python esque.

[01:40:25] Tony: Yes, they were.

[01:40:28] Cameron: I’ve been listening to Anita Lane’s, uh, last

[01:40:31] Cameron: couple of albums, you ever gotten to Anita

[01:40:33] Tony: no,

[01:40:34] Cameron: You know of

[01:40:35] Tony: do not.

[01:40:37] Cameron: Girlfriend of Nick Cave, uh, for a few years, on and off, I think in like the 80s, she and Nick were a thing, and um, they did some music together, and wrote some stuff together, and then, um, he and Blixer, and um, Uh, the Bad Seeds produced music for her.

[01:41:00] Cameron: She died only last year, I think. She hadn’t been in good health for a while, but um, she put out a couple of albums, uh, in the 90s, 2000s, that are very sort of Bad Seezies, Bad Seedsy, if you know what I mean. Similar sort

[01:41:18] Tony: Yeah. Okay. I’ll have a listen. All right. Thanks.

[01:41:23] Cameron: Went to see Alien Romulus with my

[01:41:24] Tony: Yeah. And? Hasn’t really, Hasn’t really,

[01:41:28] Tony: caught my attention yet and

[01:41:32] Cameron: As I predicted, I didn’t want to go, but they, they forced me to go.

[01:41:35] Cameron: Um, you know, Alien films are just slasher movies

[01:41:39] Tony: are, aren’t

[01:41:40] Cameron: It’s just, I’ve seen it, I guess, I keep saying, I’ve seen it all before. You know, it’s,

[01:41:45] Cameron: it’s, you know, it’s nothing new, I’m not going to learn anything new. There’s a couple of interesting ideas in the film, which I won’t spoil for people who haven’t seen it, but there is a cam, a, A returned character, um, from an actor who’s dead, and they’ve recreated that actor in it, um, for quite a, quite a, no, but, uh, pick someone else.

[01:42:12] Tony: He’s just, he’s always been one of my favourite

[01:42:14] Tony: actors, John Hurt. Loved his acting.

[01:42:17] Cameron: Yeah, well, you’re in the right vicinity, but not him, yeah. Um, anyway, uh, uh, that was quite good, not, and weird, and you get a sense for what the future might. B, when we start using AI to recreate dead actors and put them in relatively significant roles, recreating roles, Looking as they looked in the late 70s, but in a new film.

[01:42:49] Tony: So who could that be? He could resurrect Ian Holm.

[01:42:52] Tony: He was the, okay. He was the, um,

[01:42:56] Cameron: okay. Well, I will spoil it for everybody now. Yeah. So

[01:42:59] Tony: Yeah. He

[01:43:01] Cameron: he’s, he’s back as the synthetic. Um,

[01:43:05] Cameron: and, uh,

[01:43:07] Tony: he is dead, I suppose, now, isn’t he? I haven’t really followed his career. Okay.

[01:43:13] Cameron: died a few years ago and they apparently got permission from his widow.

[01:43:17] Cameron: Um, and she said he would have loved it because she felt that Hollywood kind of abandoned him towards the end of his career. Apparently after the Lord of the Rings, whatever those Hobbit films that he was in, um, for me, he’s always Claudius.

[01:43:31] Tony: Yes.

[01:43:32] Cameron: from iClaudius being a Caesar buff. But, um, yeah, and, and he’s the synth from the first Alien film and they bring him back as a synth in this and, uh, he’s great. I mean, it’s, but it’s kind of that weird uncanny valley thing, like, oh, am I, I had to, had to think about it. I’m like, how comfortable am I

[01:43:55] Cameron: seeing a young Ian Holm in this thing?

[01:43:58] Cameron: Um, different, When Scorsese de ages Pacino and De Niro, because they’re actually performing it. Or they CG Mark Hamill’s face on Luke Skywalker for a thing, it’s slightly different. Um, although they de aged, um, uh, Princess Leia in one of those films too, in a dodgy fashion. But it’s weird when you see dead actors reincarnated on screen like that.

[01:44:29] Cameron: But anyway, um, and then the other thing I was going to mention is if you haven’t seen it is, uh, Tarantino is back on

[01:44:35] Tony: Oh, okay.

[01:44:36] Cameron: YouTube show for another couple of hours, and I know you love Tarantino as much as I do. Just seeing him and Bill Maher talk about deliverance, breaking down deliverance, and what was wrong with the third act of deliverance and stuff like that.

[01:44:51] Cameron: It’s, uh, it’s great. You know, I can, I can listen to Quentin talk about films till the cows come home.

[01:44:58] Tony: Yeah, great.

[01:44:59] Cameron: good. So check

[01:45:01] Tony: Yeah, thank you. I will.

[01:45:02] Tony: That’s a good one. And your boy was on TV. Taylor was on SBS

[01:45:06] Tony: Mm

[01:45:07] Cameron: Taylor was on

[01:45:08] Cameron: SBS as the boy who dropped out of

[01:45:11] Tony: hmm. Right.

[01:45:12] Cameron: And, uh, copped quite a bit of shit on the SBS Facebook page. Because there was no context to what he’s doing now. And I had to jump in and defend him a

[01:45:21] Tony: Oh,

[01:45:22] Cameron: like, Well, he

[01:45:26] Cameron: can’t defend himself.

[01:45:27] Cameron: That’s not kosher, but I said,

[01:45:30] Tony: did you log on as

[01:45:31] Cameron: people are like,

[01:45:32] Tony: dad? Mm

[01:45:35] Cameron: Cameron Riley.

[01:45:36] Cameron: I’m locked on

[01:45:36] Cameron: as myself. And I was like, listen, what they didn’t, what he didn’t get an opportunity to say was he dropped out of uni. He was doing a business course. And as he said on the show, he thought the business course was sort of a waste of time. Uh, he felt like he was learning 20th century business practices and not 21st century business practices.

[01:45:57] Cameron: He dropped out. He started a whole bunch of businesses and the one that he’s mostly running now is a talent agency that just, it’s done over a million dollars in turnover just recently. I think he’s done like 1. 2, 1. 3 million dollars in turnover. It’s doing very well. He’s very good at it. Um, and you know, he was right.

[01:46:18] Cameron: You know, he, Felt like he could probably get his head around 21st century business stuff more by going out and doing it than by learning theory at university. And so, you know, um, he, he didn’t say, and isn’t saying that nobody should go to university. Like, you know, it has value for lots of professions. He just felt that for what, He wanted to do it, wasn’t the right thing, you

[01:46:44] Tony: Yes. Excuse me. Um, he, he, we’ve talked about it and he admits that. If he had his time over again, he would have stayed on at university. He may have just, you know, phoned it in and gone off and done his own thing. But that’s what you can do at university is really just, it’s the side hustles almost as important as the main turning up to lectures.

[01:47:05] Tony: So, yeah, but, um, I agree he’s, he’s, he’s a very impressive young man and is doing well in business. So,

[01:47:13] Tony: um, I might

[01:47:14] Tony: jump onto SBS’s Facebook page and have a look at the comments.

[01:47:19] Cameron: and and he has said from the very beginning when he dropped out, look,

[01:47:23] Cameron: I could regret This This could be the biggest mistake I’ve ever made. This could be a huge disaster, but I just feel like I’ve got to give it a shot. You know, I gotta, I gotta take my shot while I can, and if I regret it, I regret it, but I’d rather do it and regret it.

[01:47:38] Cameron: I’d rather have a crack and fail. I can always go back to uni later on rather, or rather than not have a crack and then spend the rest of my life going, what if I’d had a crack at it?

[01:47:50] Tony: Absolutely.

[01:47:51] Cameron: you know, he’s got it. And, and they did that with having seen me, he and his brother both dropped out at the same time, having seen me try and fail at startup.

[01:48:00] Cameron: So they knew that running startups was no cakewalk. Then they had a lot of personal experience of my various failures over the last 20 years. So, um, yeah, anyway. So he was on

[01:48:14] Tony: Yeah, It’s good. Check it out, people.

[01:48:18] Cameron: Oh, and I did my fashion shoot for Tommy Hilfiger

[01:48:20] Cameron: on the weekend

[01:48:22] Tony: did that go?

[01:48:22] Cameron: with Hunter too. That was, that was

[01:48:25] Cameron: annoying.

[01:48:26] Tony: Annoying.

[01:48:28] Cameron: good.

[01:48:31] Tony: Was It like six hours of sitting around and then six minutes of photography?

[01:48:37] Cameron: No, it was constant photography and Hunter looking at the shots and going, no, it’s not good, let’s do it again, no, and then doing his hair and,

[01:48:45] Cameron: can you go back a bit, can you come forward a bit, yeah, and then, oh my god, the lighting’s all gone. Well, that’s because we’ve been standing here for two hours and,

[01:48:55] Tony: oh dear.

[01:48:56] Cameron: fun.

[01:48:57] Cameron: I

[01:48:57] Tony: And did, they

[01:48:58] Cameron: So

[01:48:58] Tony: didn’t shove a contract under your nose at all for

[01:49:01] Cameron: it was just Taylor shooting it. It’s not, uh, it

[01:49:04] Cameron: wasn’t a professional thing. It was just Taylor shooting it for Hunter’s Instagram and

[01:49:10] Cameron: TikTok and that stuff. But Tommy Hilfiger did send us a bunch of clothes for

[01:49:14] Tony: nice. Okay. Ah,

[01:49:16] Cameron: I’m going to go sell those for food later. Uh, sell them on eBay.

[01:49:23] Cameron: All right. Thank you, TK. Enjoy Cape

[01:49:25] Tony: Yeah. Uh, great to talk to you again. See you.