QAVUS 003 — Beware Greeks Bearing Ships

QAV US 3

Cameron: [00:00:00] Wel­come back to QAV, the US Edi­tion episode three. is cur­rent­ly the 29th of April, 2025. My name is Cameron Reil­ly with me com­ing from his pala­tial, uh, golf Hut in Vic­to­ria. Tony Kynas­ton. How are you? Tk.

TK: Oh, I am good, cam, how are you?

Cameron: Good. just did. Now talk­ing about the Aus­tralian mar­ket, now we’re gonna talk about the US mar­ket.

TK: far

Cameron: you say about the US mar­ket? Well, yeah, look, it’s uh, still crazy times. Um, bit cra­zier over there than it is here. You’ve been, uh, pay­ing a lit­tle bit of atten­tion in the last week. Do you have any insights on what’s going on in the US mar­ket? Tony?

TK: Well, I think we just sneaked this show out now ’cause the mar­ket was up [00:01:00] last night. Um.

Cameron: Yeah.

TK: before peo­ple lose their minds again, when it goes down again with, with some­thing going on over there. As I said before in the Aus­tralian show, we’re, we’re about to go to the polls here in an elec­tion and the mar­ket care less.

Cameron: Hmm.

TK: is intent­ly focused on read­ing the uh, white, the White House tea leaves in the US mar­ket

Cameron: Yeah.

TK: com­plete­ly

Cameron: mar­ket. Both the Dow Jones and the s and p 500 are sort of up, uh, this week, as is the Aus­tralian mar­ket for rea­sons that aren’t very clear. I mean, noth­ing has real­ly changed. I mean, the Trump admin­is­tra­tion seems to be pulling back a lit­tle bit on the tough tar­iff talk and claim­ing that the Chi­nese have reached out to them. Chi­nese are like, no, we haven’t.

TK: No, it was­n’t us.

Cameron: Yeah. Uh, but I don’t know. The mar­ket seems to be a lit­tle bit more opti­mistic over [00:02:00] there. It’s almost not quite back to where it was before the tar­iff announce­ments, but um, it’s cer­tain­ly get­ting back up to towards there. Yeah. Lib­er­a­tion day. But of course, as our long­time lis­ten­ers, uh, would know from the Aus­tralian side of things. We don’t real­ly pay that much atten­tion to what’s going on in the mar­kets. Uh, it does­n’t real­ly affect our invest­ing strat­e­gy much at all. It just means that some­times we sell more than oth­er times. uh, real­ly we’re just look­ing at indi­vid­ual com­pa­nies, either the stocks in our port­fo­lio and look­ing to see whether or not they breach one of our sell­ing trig­gers.

And if they do, we sell them and then we see what there is to buy based on our. Check­list, the frame­work that you’ve devel­oped over the last 30 odd years. And, uh, as a, as a, I guess, an indi­ca­tion of that I can talk about our [00:03:00] port­fo­lio. I. Because I did start a US port­fo­lio a lit­tle bit over a year ago, and uh, it’s doing okay.

It’s picked up a lit­tle bit all time, so. Uh, start­ed it in, uh, Sep­tem­ber, 2023. It’s, it, it’s cur­rent­ly track­ing it around 53% return over that time the s and p 500. About 24% over that time. At one point before the, uh, US pres­i­den­tial elec­tions, it was up around a hun­dred per­cent our port­fo­lio. So Trump has man­aged to halve. in what­ev­er that is, six months since the elec­tion. Good job. Hmm. But if I look at the last, uh, sort of month, I. [00:04:00] We’re down about 3% in the last 30 days. The s and p 500 is down about 1% over that same peri­od of time. So I’ve had to sell a few things. I’ve had, I’ve strug­gled buy­ing things over there.

Two recent­ly and, um, the, this week I bought some­thing and then sold it imme­di­ate­ly, uh, like a day lat­er. And I’ll tell you that sto­ry. When I get to do my pulled pork, my deep dive in a minute. Do you have any­thing you wan­na share before I get into my deep dive of the US mar­ket? Tony, do you wan­na talk about the, uh, analy­sis stuff?

TK: yeah,

I.

did. Um. The only thing I’ve got to share is the data dump you gave me on the week­end of the dif­fer­ences between us and stocks and the way that mar­ket works and the Aus­tralian stocks and the way our mar­ket works. And I thought it might be worth­while just rac­ing through a sum­ma­ry of that. Uh, it’ll prob­a­bly be of inter­est to the Aus­tralian lis­ten­ers [00:05:00] who will lis­ten to this, but it’s gonna be, I guess, illu­mi­nat­ing for the US lis­ten­ers to under­stand where we come from.

And that we’ve just tak­en the Aus­tralian check­list and used it on Amer­i­can stocks, and seems to be work­ing well, but we may mod­i­fy it over time once we get more expe­ri­ence invest­ing

I think

the, the, basic dif­fer­ence, um, that you high­light­ed was the account­ing stan­dards are slight­ly dif­fer­ent.

in Amer­i­ca, they fol­low the U‑S-G-A-A‑P stan­dard, the Gen­er­al Account­ing Rules stan­dard, and we fol­low the inter­na­tion­al called the IFRS stan­dards. And they’re they’re, they’re prob­a­bly fair­ly sim­i­lar. I mean, they all have bal­ance sheets and. P and l state­ments and cash flow state­ments. So at a, at a, you know, gen­er­al lev­el, they’re the same.

Some things which are dif­fer­ent are account how things are account­ed for, like research and devel­op­ment. [00:06:00] So, um, I. They’re treat­ed dif­fer­ent­ly under both account­ing stan­dards. Uh, US tends to cap­i­tal­ize or has to cap­i­tal­ize us. Com­pa­nies have to cap­i­tal­ize their research, sor­ry, has to expense their research.

Aus­tralians have the option of cap­i­tal­iz­ing it so that that’ll just mean that, uh, one’s, you know, Aus­tralian bal­ance sheets might have slight­ly more intan­gi­ble assets and US and loss­es might be deplet­ed by any research going on. Has­n’t real­ly been an issue in the Aus­tralian mar­ket because we don’t do a lot of research.

Um, pri­ma­ry research in Aus­tralia, we’re uh, finan­cial min­ing sec­tors, um, heavy in Aus­tralia, which again is a dif­fer­ence with the us. So, um, there are a few biotech stocks. Um. There’s one big one, CSL, which does some research too, so it affects them. But, uh, over­all it does­n’t, you know, how much a com­pa­ny spends on research and where it’s account­ed for does­n’t play a big [00:07:00] part in their invest­ment deci­sions in Aus­tralia.

Cameron: Par­tic­u­lar­ly for us val­ue invest­ing, the biotech stocks are either have no cash flow ’cause they’re just hype and research and we don’t go near them or they have found some­thing and they’re hyped. Hyped out of the stratos­phere and their price to oper­at­ing cash flow is ridicu­lous and we won’t even look at it.

So don’t real­ly end up on our buy list a lot.

TK: Yeah. so, so a lot of these dif­fer­ences are, I guess, are nuances. And you’re right, if it’s, um, I, I, if there is a dif­fer­ence, it may not appear on our check­list any­way because the, uh, you know, we are val­ue invest­ing and the com­pa­nies that this will apply to are in the tech space or the biotech space, and they have, high PE ratios.

Um, bit of a dif­fer­ence in the way you account for inven­to­ry in the US ver­sus Aus­tralia. Uh, again, there’ll be some dif­fer­ences, which I’m not going wor­ry too much about. Um, [00:08:00] they are dif­fer­ent. I don’t think there’ll be a big, uh, impact on the check­list. US com­pa­nies have to use first, in, first out to to, um, uh.

Val­ue their inven­to­ry. Aus­tralia has an option of doing that, but they often use last in first out, so there’ll be dif­fer­ences to asset val­u­a­tions and their p and ls because of that. Um, US has quar­ter­ly report­ing, which is a. Big dif­fer­ence to Aus­tralia where we have, uh, half year­ly report­ing, um, to make up for that, Aus­tralia has a con­tin­u­ous dis­clo­sure regime.

So if you think, if you’re a, a board of an Aus­tralian list­ed com­pa­ny and you think that some­thing’s hap­pened, which I. If it was known would mate­ri­al­ly affect the share price, you have to dis­close it. Now, that does­n’t apply in the US although there are sim­i­lar rules. But basi­cal­ly com­pa­nies, because they’re four times a year, will gen­er­al­ly wait for [00:09:00] a quar­ter­ly announce­ment and then up any sort of, um, mar­ket mov­ing state­ments with that.

Um, and there is also, of course, as we found out recent­ly. Our reg­u­la­tor, um, which is the com­pa­ny called the ASX, who runs the mar­ket here, um, has, I think, tak­en their eye off the ball a bit with con­tin­u­ous dis­clo­sure. So, um, there’ve been a, a cou­ple of sur­pris­es we would­n’t have expect­ed to see in the past that have come out dur­ing our half year­ly report­ing sea­sons.

Um, so there’s that dif­fer­ence. anoth­er dif­fer­ence in Aus­tralia is it’s, it’s a lit­tle bit more in, uh, indi­vid­ual share­hold­er friend­ly. So Amer­i­ca allows, um, dual stock hold­ings or dual class­es of shares. So you can have the Mur­dochs with pref­er­en­tial shares or the own­ers of Alpha­bet with pref­er­en­tial shares con­trol­ling, um.

The vot­ing in the com­pa­ny, even though they don’t con­trol by major­i­ty the num­ber of shares [00:10:00] in the com­pa­ny in Aus­tralia, that’s not allowed. So, you have one share, you have one vote. Uh. So that, that’s the dif­fer­ence. Um, what else? There’s a cou­ple of oth­er issues with re regards to share­hold­er activism.

I think it’s fair to say the US has a, um, um, a lega­cy or a his­to­ry of share­hold­er activism, which isn’t seen as much in Aus­tralia. are share­hold­er activists here, but, um, they don’t, uh, they tend to work behind the scenes a lot more, engage with the board or engage with large share­hold­ings. That I think, uh, that’s prob­a­bly, um, a lega­cy of, uh, of our super­an­nu­a­tion sys­tem where there’s a lot of large insti­tu­tion­al hold­ings which take, um, which take stakes in Aus­tralian com­pa­nies and there­fore you’ve got a kind of appeal for them if you’re an activist tak­ing a stake, um, to con­vince them that you should all band togeth­er the change man­age­ment.

And then gen­er­al­ly you try off and see man­age­ment and con­vince them make a change. ’cause you know you’ve got a [00:11:00] large, uh. Hold­ing in the com­pa­ny. Um, we still, we still do have class action law­suits here, which they do in the US as well. So that’s sim­i­lar. Um, we, I. Sep­a­rate the role of chair­man of the board com­pared to CEO.

And that’s a lit­tle bit dif­fer­ent in the US where you have, uh, a lot more exec­u­tive chair­mans than you do, um, in Aus­tralia. So you can do it in Aus­tralia, but, um, to be in small­er com­pa­nies, uh, just to kind of, um, save on costs, I guess, you know, employ a chair­man and the. Um, only a chief exec­u­tive offi­cer, but gen­er­al­ly the gov­er­nance prin­ci­ples in Aus­tralia is the board is meant to be over­see­ing the, the man­age­ment.

Um, and that that can be a lit­tle bit blurred in the US and then, you know, um, there are obvi­ous­ly dif­fer­ences in the liq­uid­i­ty and the size of the US mar­ket ver­sus the Aus­tralian mar­ket. So be inter­est­ing to see. Uh, how it goes for us as val­ue investors. A lot of the com­pa­nies we [00:12:00] look at in Aus­tralia don’t get much end­less cov­er­age because the mar­ket is, um, uh, focused on liq­uid­i­ty and focused on the top end of the Aus­tralian mar­ket, where­as in the US liq­uid­i­ty goes a lot deep­er.

Um, and so you can get cov­er­age all the way down to, to com­pa­nies and what, you know, what would be a medi­um cap com­pa­ny in Aus­tralia is prob­a­bly class as a small cap com­pa­ny in the US any­way. Uh, and, and there­fore gets, um, cov­er­age. So small caps get more cov­er­age in the US because they are larg­er than they are in Aus­tralia.

So all those things may be an issue for us, but it has­n’t affect­ed our dum­my port­fo­lio to date. So I’m not sure that will play out, um, in our invest­ing with the US stocks. Uh, but prob­a­bly one of the biggest dif­fer­ences between the US and Aus­tralia in terms of how the com­pa­nies. Oper­ate and how investors focus on them is Aus­tralia has the frank­ing cred­it sys­tem, [00:13:00] so div­i­dend impu­ta­tion, and if US lis­ten­ers don’t know what that is, ’cause you don’t have it in the us it’s a, it’s a dou­ble tax­a­tion regime.

So Aus­tralia, when a com­pa­ny pays their cor­po­rate tax on their prof­its then dis­trib­utes a div­i­dend, the. And recip­i­ent of that div­i­dend does­n’t then pay tax again on that div­i­dend. And I know you, there is a, um, a few rules about that in the US as well. So, um, some div­i­dends that get paid do get taxed pref­er­en­tial­ly, but in Aus­tralia, you get a, a either a rebate for the tax the com­pa­nies paid, or if you, if your tax, your per­son­al sit­u­a­tion is you don’t pay as much tax in a per­cent­age basis as the com­pa­ny does, then you get a.

Um, a, you get a, a rebate from the, the gov­ern­ment for the tax that’s already been paid, so you get mon­ey back in your account. So, um, that has meant over the years, cou­pled with our super­an­nu­a­tion indus­try, again, which is [00:14:00] dif­fer­ent to us. Um, if I can quick­ly sum­ma­rize, in Aus­tralia, um, by law, a salaried work­er or an employ­ee will get 11% tak­en out­ta there.

Earn­ings and put aside into com­pul­so­ry super­an­nu­a­tion funds. you can set up your own fund, um, and run it your­self and invest your­self. But I prob­a­bly, the vast major­i­ty of work­ers will use the super­an­nu­a­tion indus­try, which is either bro­ken up into, um, for-prof­it and not-for-prof­it sec­tors. but they, they then have large resources which are pooled towards the retire­ment incomes of, um.

Of com­pa­nies, it was set up, um, to, um, reduce wel­fare pay­ments to retirees. and, and by the way, of the pen­sion, Uh, so there are some good things about the sys­tem, but what it’s meant is that Aus­tralian com­pa­nies do pay a lot more div­i­dends than Amer­i­can com­pa­nies. [00:15:00] Um, again, to help retirees fund their, their retire­ments.

1. Um, via super­an­nu­a­tion, but also to take advan­tage of the frank­ing cred­its, which are, um, uh, payable in Aus­tralia, but not in the us. US com­pa­nies tend to do a lot more share buy­backs. So, um, sim­i­lar sort of think­ing, I guess is how do we return. Uh, prof­its. We don’t need to rein­vest in the com­pa­ny for growth.

we can either pay it off as a div­i­dend back to our share­hold­ers, or we can buy back the shares, which will mean per share goes up and there­fore that will ben­e­fit the, the share­hold­ers that remain, uh, in a sim­i­lar sort of way to pay­ing them a div­i­dend. are two skills of thought that says one’s bet­ter than the oth­er, but basi­cal­ly both share mar­kets have done the same sorts of returns.

you look at a hun­dred years. Sort of per­for­mance o of them. a sort of, both doing about 10% as kind of 1% dif­fer­ence. [00:16:00] I think the ASX has come out in front, and sug­gests that’s prob­a­bly because of the frank­ing cred­its, but real­ly I think it’s line ball over the years. Um, that’s in a nut­shell the dif­fer­ences between the a ASX and the um, US, uh, stock mar­kets.

Cameron: Out of that. On first glance, Tony, is there any­thing that you think we need to tweak in our check­list to accom­mo­date any of those dif­fer­ences?

TK: noth­ing

mind, and it reminds me of the times in Aus­tralia when the account­ing stan­dards have changed.

Cameron: mm-hmm.

TK: recent exam­ple was, uh, the treat­ment of leas­es. So again, they moved from one, style of account­ing for them to anoth­er style, which had an impact on bal­ance sheets and p and ls.

And every­one said, well, we, we had a ques­tion asked, should we change our check­list because of the effects oper­at­ing cash cash­flow? And it did­n’t real­ly [00:17:00] affect it. You know, it may have bumped some­thing up one point on the check­list or down one point on the check­list, but it was­n’t a, a big dif­fer­ence. And as you’ve out­lined with your port­fo­lio per­for­mance report, our invest­ing to date in the us, which has been going for how long?

12 months. 18 months.

Cameron: 18 months

TK: 18 months, yeah. I haven’t seen any­thing to adjust in the check­list so far.

Cameron: Mm All right, well thank you for that. Uh, we’ll keep an eye on it. And I guess one of the things about our check­list is it is flex­i­ble. We can mod­i­fy things as we need to, but so far it seems to be work­ing quite well as is, and we don’t want to mess with it. Unless we have to. So one of the things that we do on our episodes usu­al­ly is what we’ve, what we call a pulled pork.

It’s a deep dive. You know, if you haven’t, uh, come across our stuff before, gen­er­al­ly speak­ing, QAV as an invest­ing sys­tem [00:18:00] tends to avoid get­ting too deep into what a com­pa­ny does or what a sec­tor is involved in. The, one of the great things about the sys­tem, as Tony devel­oped it over the years is that we let the num­bers do the talk­ing.

We look at the fun­da­men­tals of the com­pa­ny, how much mon­ey they’re mak­ing, you know, whether or not they’re mak­ing more mon­ey more ca they’re gen­er­at­ing more cash flow year after year after year. Good. The qual­i­ty of man­age­ment, the qual­i­ty of the busi­ness, how well the busi­ness is per­form­ing. And then, so it’s the qual­i­ty side of it.

The val­ue side of it is, can we buy it, it as, as a, at, can we buy it at a dis­count to what we think a fair val­u­a­tion the com­pa­ny would be on a. Per share basis. it does­n’t real­ly require us to get too deeply ana­lyt­i­cal about a par­tic­u­lar busi­ness or a par­tic­u­lar com­pa­ny. That said, it is [00:19:00] fun to open up the doors of one of these com­pa­nies that we’re look­ing at and learn a lit­tle bit about them because. are curi­ous who are, who are these guys? What do they do? What kind of busi­ness is this? Not real­ly because it’s part of our stan­dard invest­ing method­ol­o­gy, but I like learn­ing about the busi­ness­es just when you do the Paul Pork in our Aus­tralian show each week, because it’s an oppor­tu­ni­ty to some­thing about.

A,

TK: Yeah.

Cameron: a, a sec­tor what, what peo­ple are doing and why busi­ness­es are doing well. So we tend to pick a busi­ness that’s on a buy list. Maybe we’ve added it to the port­fo­lio recent­ly, and we ask our­selves a ques­tion, who are these peo­ple and what do they do? So I was going to do SKM. as my pulled pork, which is SK tele­com tele­coms com­pa­ny in South Korea that hap­pens to be list­ed on the New York Stock Exchange. I added them to our US port­fo­lio over the week­end. I. Because, um, I did a buy list [00:20:00] on Fri­day, Sat­ur­day and was look­ing for stuff to add. was one of the stocks that looked good when I did the num­bers. How­ev­er, uh, when I went to do the pulled pork on them last night, I saw that the week­end, Mon­day in South Korea, before the mar­ket opened in the us they had come out and said. There had been a mas­sive data breach of their entire net­work and all 23 mil­lion of their cus­tomers details had been and their share price had fall­en 7% in the Kore­an stock exchange. But this is before the. US mar­kets had opened so I jumped in and I sold them before the US mar­ket opened, they did go down 8% today in when last time I looked in trad­ing in the New York Stock Exchange.

Now it’s one of our nor­mal sell trig­gers. they were at the same price as they were when I bought them. [00:21:00] So I was like, I’m out. I’m out­ta 5,000. And I got in and out and put in my cell order and got out. So before, before it went through. So backed that one out before it hap­pened basi­cal­ly.

TK: Well, that’s pre­scient because it has fall­en below. sell price for us to sell using the the, uh, ator.

Cameron: Real­ly? Yeah, I, I don’t think it was very high above it in the first place, uh, when I bought it.

TK: Yeah.

Cameron: But I know I dropped quite a bit today. I checked it just before we went to air. So the oth­er stock that I added is the one I’m gonna do. It’s DAC. DAC is D AOS Cor­po­ra­tion. It’s anoth­er ship­ping com­pa­ny. Um, on I think our first episode or sec­ond episode, we did Zim,

TK: Mm-hmm.

Cameron: Ship­ping Com­pa­ny.

Our US port­fo­lio has a lot of ship­ping com­pa­nies and finan­cial ser­vices com­pa­nies on it, and as we’ve explained in oth­er episodes, that’s not. Through a a design, but we [00:22:00] do find dif­fer­ent times that our port­fo­lios tend to be weight­ed in this sec­tor or that sec­tor just because those sec­tors tend to be under­val­ued for some par­tic­u­lar rea­son, we were in ship­ping pre-Trump. And his tar­iffs. Uh, there’s been a lot of obvi­ous, uh, prob­lems in glob­al sup­ply chains over the last few years. Covid, Ukraine, war, et cetera, et cetera, stuff hap­pen­ing in the Red Sea. Um, and there’s now more things hap­pen­ing with tar­iffs, throw­ing a span­ner into glob­al sup­ply chains and what the future of them holds. But again, we don’t fore­cast. Part of our sys­tem is we don’t fore­cast what the future holds. We look at the num­bers as they are today, and it’s a great quote. Can’t remem­ber which one of the great it might have been Peter Lynch, some­body like that said he who invests with the crys­tal ball [00:23:00] ends up eat­ing bro­ken glass or some­thing like that.

TK: Yeah.

Cameron: W we do not try and pre­dict the future. We just look at what, what seems to be val­ue today. And the way I’ve always under­stood it, if they’re a well run busi­ness, they’re prob­a­bly gonna do a pret­ty good job of nav­i­gat­ing the waters, the eco­nom­ic waters, as they move for­wards. We’re putting our faith in them if they’ve been run­ning the busi­ness well

TK: Cor­rect.

Cameron: recent. Years. Um, we only look at the last few years, but if they’ve been run­ning it well, they should. You know, have a good chance of run­ning it well into the future. So any­way, Dan aos, now, they own a bunch of con­tain­er ships. they’re based out­ta Greece, I should say. First of all, um, not Israel, this time Greece, but list­ed on the New York Stock Exchange. They own a bunch of con­tain­er ships and they sell long-term char­ters to their ves­sels, to a range of lin­er com­pa­nies. they’re [00:24:00] kind of the back end of ship trans­port. I guess. They, they buy them, they build them, they buy them, they oper­ate them, and then they lease them out. Long term char­ters most­ly.

There’s a few short terms in bare boats things, but it’s most­ly long terms. Accord­ing to their recent 20 F fil­ing, and for Aus­tralian lis­ten­ers, that is sort of the equiv­a­lent of an annu­al report for for­eign list­ed com­pa­nies in the US. They issue a 20 f. As of Feb­ru­ary 28th, 2025, anos had a fleet of 74 con­tain­er ships aggre­gat­ing four thou­sand four hun­dred and sev­en­ty one thou­sand four hun­dred and sev­en­ty sev­en tus and 15 under con­struc­tion con­tain­er ships. Aggre­gat­ing 128,220 [00:25:00] tus, which makes them one of the largest con­tain­er ship char­ter own­ers in the world based on total TEU capac­i­ty. Tell every­body what TEU stands for, Tony.

TK: I did know it. It’s used for unit, it’s basi­cal­ly the, basi­cal­ly the, um, the car­go box side size.

Cameron: The Ray knows by now, after work­ing with me for 15 years, that if there’s an acronym.

TK: Yep. I.

Cameron: If no, then if there’s an acronym that’s gonna be used in the show, be pre­pared.

TK: Yeah.

Cameron: I’m gonna throw it to him to see if he can Google it quick­er. stands for 20 foot equiv­a­lent unit. I had to look it up. I did­n’t know what it was.

20 foot equiv­a­lent unit. It’s a stan­dard unit of mea­sure­ment in ship­ping to describe the capac­i­ty of con­tain­er ships con­tain­er ter­mi­nals. One TEU is one stan­dard 20 foot long ship­ping con­tain­er. [00:26:00] A ship­ping con­tain­er in Impe­r­i­al is 20 feet by eight feet wide by eight and a half feet tall in met­ric that’s a lit­tle bit over six meters long, 2.43 meters wide and 2.59 meters tall. a 40 foot con­tain­er is two tus. So a con­tain­er ship fleet, like, uh, these guys con­tains about, as I said before, 74 con­tain­er ships all up. 53 con­tain­er ships are deployed on time char­ters, they have two con­tain­er ships deployed on Bare­boat Char­ter, and the rest are on short­er term. Leas­es a Bare­boat char­ter for peo­ple like me who dun­no.

What that is, is when you char­ter out a ship noth­ing on it, no crew, no [00:27:00] sup­plies, no main­te­nance, basi­cal­ly just an emp­ty ship. the char­ter­er is ful­ly respon­si­ble for every­thing. Hir­ing the crew, oper­at­ing the ves­sel, main­tain­ing it, ensur­ing it. Fuel­ing it, han­dling the paper­work, the whole kit­ten caboo­dle. So the com­pa­ny’s head­quar­ters are in Pere, Greece, the main har­bor of Athens. We’ve, you and I have been to Athens. Um. Sep­a­rate­ly, but, uh, you, you bowed out of our Euro­pean tour when I took a bunch of peo­ple to Athens, but, um, reus, I got, I got, uh, what you mugged, not mugged. I got, uh, pick­pock­et­ed in Athens. Must have been the most dis­ap­point­ing pick­pock­et­ing of their lives. Those guys, they spent half an hour pick­ing my pock­et to get like 70 euro or some­thing. Um. [00:28:00] The, uh, peu is the main port of Athens, and it has been since the fifth cen­tu­ry. BCEI talked about it a lot on my Alexan­der, the Great Series. peu played a big role in the var­i­ous rev­o­lu­tions that Athens had back in the day.

In the good old days, the com­pa­ny is named after eos, the Greek mytho­log­i­cal fig­ure who. Was the king of Libya in Greek mythol­o­gy. His iden­ti­cal twin broth­er was Aus, the king of Egypt. And if you remem­ber your Greek mythol­o­gy, Tony DEOs had 50 daugh­ters and Egypt had 50 sons. About half as good as Elon Musk sto­ries now are start­ing to emerge and say that Elon Musk has got a hun­dred chil­dren.

Have you seen those?

TK: No.

Cameron: Get­ting his, get­ting his sperm out there doing its job? Uh, ’cause he wants the world.[00:29:00]

TK: when he, when he walks back, his involve­ment with the US gov­ern­ment, do you think he’ll have time for Tes­la still or is he gonna go and say some more kids?

Cameron: Oh, I don’t think he’s per­son­al­ly involved in sir­ing the kids. Most times it’s, uh, mail order. I think uh, send­ing, send­ing his sperm out prob­a­bly a drone that lands on them. Um,

TK: drone

Cameron: any­way, uh, Egypt just want­ed to mar­ry his sons to S’S daugh­ters

TK: because he had

Cameron: daugh­ters.

TK: and Yeah, he had 50 and

Cameron: 50.

TK: Mm-hmm.

Cameron: Yeah. And you know, lit­tle bit of in, in breed­ing nev­er did any­one any harm. S’S daugh­ters did­n’t wan­na mar­ry the sons. So DEOs made the very first ship in his­to­ry. He invent­ed ship­ping DEOs accord­ing to Greek mythol­o­gy, and he and his daugh­ters all [00:30:00] escaped. But then. They fig­ured out there was gonna be a war. So they went back and the daugh­ters all mar­ried the men and then mur­dered all of them. Well, 49 of them mur­dered their hus­bands in the mid­dle of the night, chopped their heads off and buried them, one refused to because he was nice to her. And that’s a whole oth­er sto­ry.

But any­way,

Deo,

TK: What

Cameron: of that is DEOs built the very first ship.

TK: What was that first cruise ship call? That was­n’t the um, p and o Ori­ana, was it? With 50 50 daugh­ters on it.

Cameron: There’s a love boat. That’s what it was. Yeah. So any who, the com­pa­ny was found­ed by Dim­itri Tus in 1963 when he bought his first ship. And, uh, he ran it for a very long time. Just built and built and con­sol­i­dat­ed and built. And, uh, they float­ed, I [00:31:00] think in the eight­ies or some­thing like that. Uh, but the com­pa­ny’s doing very well, as I said before.

They’ve got, um. 73, 74 ships, all, of which are in fixed time char­ters, which might help their rev­enues. Uh, in the short term, depend­ing on how many of the com­pa­nies that have those wan­na rene­go­ti­ate or go out­ta busi­ness. Depend­ing on whether or not there even are any tar­iffs a month from now, who the hell knows whether there will be or won’t be, but. Break­ing it down. The sort of fac­tors that affect their rev­enues are num­ber of ves­sels in oper­a­tion in their fleet. Some are, obvi­ous­ly, they’re not all oper­a­tional all of the time. Some are out for main­te­nance and those sorts of things. The char­ter rates, how well they can sell them and keep them active­ly employed. The [00:32:00] uti­liza­tion of the fleet their expens­es, uh, keep­ing their expens­es down as much as pos­si­ble Now. They seem to run a pret­ty tight ship. How­ev­er, side note, when I was research­ing them about a year ago, one of their ships was banned from Aus­tralia for three months being unsea­wor­thy. I. A lit­tle bit before that, they had anoth­er ship, the Sew­ers Canal, that was sub­ject to a pro­longed deten­tion by the Aus­tralian Mar­itime Safe­ty Author­i­ty. This is in Jan­u­ary, 2004 for not being in good con­di­tion either. The sec­ond one that was banned was called Peace. And, uh, Mr. With­all, who is a rep­re­sen­ta­tive of the Mar­itime Safe­ty Author­i­ty here said state of peace was so poor, could have been talk­ing about, I don’t know, just the world right now was so poor that it rep­re­sent­ed a very [00:33:00] real and unac­cept­able risk to the safe­ty of sea­far­ers on board and Aus­trali­a’s marine envi­ron­ment.

Ships can­not be oper­at­ed in this unsea­wor­thy state. State, allow­ing a ship to fall into a state of dete­ri­o­ra­tion is com­plete­ly unac­cept­able. There are no excus­es for this lev­el of neglect. That is why we have tak­en the next step of ban­ning this ship from enter­ing an Aus­tralian port again for three months. Fur­ther action may be tak­en against the com­pa­ny itself. Should D or ship­ping con­tin­ue down this tra­jec­to­ry of oper­at­ing unsea­wor­thy ships. So he did not hold back Mr. With­all any­way, that was the only neg­a­tive news I could find about them in their unsea­wor­thy ships. Mr. With­all scathing.

TK: learnt, their les­son and they’re all

sea­wor­thy now.

Cameron: Now o obvi­ous­ly drilling down [00:34:00] into the, you know, I said we don’t, uh, pre­dict, we don’t project, but there obvi­ous­ly are a lot of things that, you know, with tar­iffs that could impact ship­ping busi­ness­es and con­tain­er busi­ness­es that, as I said ear­li­er, have already had sort of a rough run he had the first Trump trade war with Chi­na in his first admin­is­tra­tion. That sort of con­tin­ued to some degree dur­ing the Biden admin­is­tra­tion. We had the Ukraine War still going on. We had issues in Israel and the Red Sea and the Houthis, and there’s, been ten­sions affect­ing glob­al sup­ply issues. And of course. tar­iffs are gonna make import­ed goods into the US more expen­sive just be less of them if they, peo­ple just stop buy­ing it, um, into the com­pa­ny, which means con­tain­er ship­ping com­pa­nies are gonna be in the hot zone for that.

They’re [00:35:00] gonna have less busi­ness, or they’re, they’re peo­ple char­ter­ing their ships are gonna have less need for their ships. There could be flow on effects. For com­pa­nies like Dan aos, they do. have long-term con­tracts now, but every­thing is up for nego­ti­a­tion and peo­ple try and get out of con­tracts obvi­ous­ly when times get tough, uh, and all those com­pa­nies just go bel­ly up or go bank­rupt or what­ev­er, and that can affect their rev­enues. And, and then even if they don’t do that, it might mean if this tar­iff war and this decou­pling the West and Chi­na con­tin­ues, that when those long-term char­ters are up for rene­go­ti­a­tion, they may be at low­er rates. There may be few­er of them. I guess the oth­er dif­fi­cul­ty for this com­pa­ny might be that if it, it’s already got 15 ships con­struc­tion out of Chi­na.

I [00:36:00] believe, uh, you know, you can end up with too many ships. enough. Char­ter con­tracts, not enough car­go for the ships. Ships could get idled or scrapped. There’s a whole bunch of things and, and back in Trump’s first term glob­al con­tain­er ship­ping rates did fall. Com­pa­nies saw low­er rechar­ter­ing rates, reduced vol­umes, high­er idle fleet per­cent­ages, so be some heavy, heavy wins com­ing for these guys that said. I ignored all of that when I bought them the oth­er day because it might hap­pen. It might not hap­pen. Trump’s tar­iffs could all dis­ap­pear tomor­row. Who knows?

TK: All there’s that, but there’s also, um, you know, all that stuff’s baked into the share price. And we, track the sen­ti­ment and we have our, we’ve cal­cu­lat­ed our price to get

So if, if. Any or all of those [00:37:00] things come to pass, it’ll be reflect­ed in the share price and the share price will fall below our trig­ger and we’ll sell.

So

Cameron: Yeah, exact­ly.

TK: deal with pre­dic­tions. But I mean, you, it’s a good sum­ma­ry of what’s going on. I mean, we’re see­ing, as we we’ve said before, a decou­pling of inter­na­tion­al trade. So, um, that’s got. You would think affect these kinds of com­pa­nies, but giv­en that they’re on our val­ued buy list, it’s prob­a­bly fac­tored into the share price.

Cameron: Yeah. Yeah. And I, I, I think, you know, that’s one of the rea­sons we have a lot of ship­ping com­pa­nies on our buy list is they’re fac­ing some. Chal­lenges, and they’re not the sexy kids on the block, but that’s when we like them, right? They all, of par­tic­u­lar­ly if they’re mak­ing mon­ey,

TK: sexy kids are expen­sive.

Cameron: you should know.

TK: We’ll, we’ll, we’ll take the Greek kid down down the road.

Cameron: Why with the mono brow? Let’s get,[00:38:00]

TK: The ships.

Cameron: uh, so look, they’ve the busi­ness­es. Been doing quite well. If I look at the total rev­enue line, I’m in stock Edia now. Total rev­enue over the last five years. So from 2019, they did $447 mil­lion in rev­enue. up to 4 62 in 20 26 90 and 20 21, 9 93 in 2022. a lit­tle bit in 2023. 9 74. 9 74, 2024 went up over a bil­lion.

One, uh, and 14 mil­lion. pro­jec­tions for 2025 is around about 1,000,000,040 6 mil­lion, and then the pro­jec­tions for 2026 actu­al­ly dip a lit­tle bit, but they’ve had great growth over the last five years. They’ve more than dou­bled their rev­enue over five years, their oper­at­ing [00:39:00] prof­it. Has fol­lowed a sim­i­lar sort of tra­jec­to­ry, 201 mil­lion in 2019, up to 541 mil­lion in 2024. Uh, that’s their oper­at­ing prof­it. The net prof­it has gone from 131 mil­lion in 2019 to 505 mil­lion in 2024. Did go up over a bil­lion in 2021, which is insane from 131. To a bil­lion, but I assume, you know, there was a lot of ships that were being built at var­i­ous stages there.

TK: Well in

Cameron: uh

TK: So you rais­ing,

a good point.

you know, as we’ve said, as you said before, you know that the world would’ve been pulling its hair out dur­ing covid about what was gonna hap­pen to ship­ping com­pa­nies. But these guys who’ve seen it all before and been through down­turns in the indus­try, had been able to man­age their way through and sur­vive and prosper.[00:40:00]

And that’s one of the ben­e­fits of, of the qual­i­ty side of the QAV method­ol­o­gy. We’re try­ing to find who’ve been around a long time and have been through cycles and know how to man­age their way through down­turns if

Cameron: Right.

TK: Yeah.

Cameron: The earn­ings per share has also gone from about $8 in 2019, up to $26 in 2024. Again, like the net prof­it, as you would expect, it sort of spiked a lot high­er 20. 21 came down 20 22, 20 23. But, um, you know, it’s come a long way. In the last five years, their oper­at­ing mar­gins have, uh, gone up a lit­tle bit, 45%, 2019 to 53% today. The div­i­dend per share was noth­ing back in sort of the Covid era, but is now look­ing at. Last year it [00:41:00] was, uh, $3 25. The fore­cast for this year is $3 40. Cash on the bal­ance sheet has gone from 139 mil­lion in 2019, up to 514 mil­lion in 2024. Like every met­ric that I looked at, uh, ran through a check­list, looked pret­ty good.

I’ve got the, got the check­list here. I’ll go through the, the scor­ing. Um. a start, their aver­age dai­ly trade is lit­tle over eight and a half mil­lion. for the US that’s a small com­pa­ny For us here in Aus­tralia, that’s a very large,

TK: Yeah.

Cameron: aver­age dai­ly trade. Their qual­i­ty rank on stock, edia is 78. Which is pret­ty strong. I scored them a one for qual­i­ty rank. I scored them a one for their stock rank. I scored them a one for their F score, a neg­a­tive one [00:42:00] for their Zed score. Penal­ized them on the Zed score, but it did­n’t real­ly make much of a dif­fer­ence price.

TK: Zed score out­ta the check­list. Did­n’t we have

Cameron: I, I. Well, no, I decid­ed to penal­ize com­pa­nies if they had a bad Zed score, so they get a neg­a­tive one.

Sort of a slight tem­per­ing of finan­cial health. But, you know, if, if every­thing else is good, a neg­a­tive Zed score does­n’t real­ly seem to make much of a dif­fer­ence on the over­all score. Their price, uh, is um, below our first. Intrin­sic val­ue met­ric. It’s also below our sec­ond intrin­sic val­ue met­ric, our IV one and our IV two. It’s also below Book plus 30. They do have a pos­i­tive uptrend, so they got a score for that. Don’t have a new three point up turn. Growth over PE is not greater than 1.5, so I could­n’t score them for that. [00:43:00] But their book val­ue growth is pos­i­tive. Their PE isn’t less than the yield. The yield isn’t high­er than the bank debt. Um, their fore­cast IV is not great. Oh, is greater than twice the share price. So I scored them for that. Their price to oper­at­ing cash flow, obvi­ous­ly is less than sev­en, whether I use our num­ber or the Wikipedia num­ber. So they got a score for that. So they end­ed up get­ting a qual­i­ty score of 79%, which is pret­ty good.

And then their QAV score was 0.33. They weren’t at the top of the buy list how­ev­er, but um. I did a buy list on Fri­day, our time, I think it was, and then I sat down over the week­end to, I sat down like on Sat­ur­day to buy some stuff, to get ready for [00:44:00] when the mar­kets reopened. And um, a lot of stuff had dipped.

We were hav­ing down days on the Fri­day, the Mabb, a lot of stocks had had a hit. a lot of the stocks that were high­er than, than on the buy list, I could­n’t actu­al­ly buy. I had to go down, they were like num­ber 10 posi­tion on my buy list. I had to go down quite low to find some­thing that was still a buy after 24 hours had passed. But, uh, that’s Dan­ios Cor­po­ra­tion, Tony Greek ship­ping Mag­nates.

TK: Can I add a cou­ple of things? Just, um, I had a quick look at it when you said you were gonna talk about it today. Uh, do have an own­er founder, which you spoke about before. Um, or at least it’s the, it’s a rel­a­tive or the son of the founder, And I think I’ve pro­nounced that prop­er­ly. And the com­fort, the, the.

is still a 47% share­hold­er, so we would call them for a known [00:45:00] founder as well. cou­ple of oth­er things I noticed they are buy­ing back their shares and they’ve recent­ly announced they’re going to do that at a faster rate, so they’ve increased their buy­back. Which is not part of our check­list, but I would­n’t be sur­prised if putting buy­backs into our check­list becomes a thing some­time in our near future.

it, we have had this ques­tion raised on the QAB show in Aus­tralia before as. Uh, we use oper­at­ing cash flow. Why not free cash flow. So free cash flow for this com­pa­ny was neg­a­tive in this half and they, that was basi­cal­ly, as you said before, they’re build­ing lots of ships. So they have a big CapEx built this half.

But if you look at the trend of CapEx expen­di­ture in stock, edia, a one off exp expense. Expense. So, um. I, I tend to focus on oper­at­ing cash­flow for that rea­son. It’s, you know, whether they decide to use that cash­flow for build­ing [00:46:00] ships or doing buy­backs or what­ev­er else is up to them. um, you know, we’re trust­ing in their good man­age­ment.

They’ve been around a long time doing this. So, um, I’m not going to begrudge them, you know, a bit of CapEx spend this year. Um, and then the last thing I’ll say is they’re, they’re get­ting pret­ty close to their sell price, so should be aware of that. And, you know, obvi­ous­ly we’re not rec­om­mend­ing this com­pa­ny.

You have to go off and do your own research and have a look at it. But, um, you know, we look at, um, I. We look at, uh, sen­ti­ment and it’s get­ting pret­ty close to its, uh, sale price based on that. Um, stock price is about 1% above our sale price.

Cameron: Yeah, and it from mem­o­ry, I don’t have the chart open in front of me, but it was just above its byline as well, I think. Is that right?

TK: by price? No, it’s a fair, fair bit above the buy line. The by price is, um, in change and they, and they’re just under $80 now and the [00:47:00] sell price is 79 point 32. So they’re about 60 cents above their sell price. But, um,

Cameron: Oh, okay.

TK: by price.

Cameron: Let me just bring up my bread lat­er. Dak.

TK: So if for new US lis­ten­ers, um, when we refer to the Ator, it’s a tool we use to, uh, to chart sen­ti­ment, it gives us a buy price and a sell price that we use before we a pur­chase or make a sale. I.

Cameron: Right. Okay. So Okay. So they’ve just gone the price, just. Went up recent­ly and got it just above the cell line.

TK: Mm-hmm.

Cameron: that’s what I was think­ing. It’s, it’s, it’s a lit­tle bit above, went above its byline, looks like back at the begin­ning of the year, but it’s just, yeah, just above the cell line, which is why it’s a buy.

So it could go either way. If you keep going up [00:48:00] the cell, the cell line’s going up pret­ty steeply as well, but that’s gonna change. So it’s L one. July, 2020. So, uh, there’s anoth­er one there in Octo­ber. Yeah, it’s cell line’s gonna become a lot less steep, I think once we get through the next cou­ple of months, but that one in Octo­ber won’t change it dra­mat­i­cal­ly any­way. If it becomes a cell, it becomes a cell

TK: cor­rect.

Cameron: stay. Love. E. Any­way. Thank you for that addi­tion­al stuff, Dak Dan aos. Well, that’s all I’ve got for, uh, the show. Tony got any­thing else to talk about?

TK: I have not, no,

peo­ple can, I’m sure are glued to their Wall Street jour­nals and their [00:49:00] Fox News and CNN or what­ev­er, find­ing out what’s hap­pen­ing in the mar­ket. But, um, we just treat that as noise.

Cameron: Yeah, ignore the noise. Focus on what’s real, which is the num­bers, the cash.

TK: Cor­rect.

Cameron: uh, you have any ques­tions, if you’re a, a US lis­ten­er and you have any ques­tions, feel free to

TK: Mm.

Cameron: just CR at QAV pod­cast. Dot com au. maybe.com too. I think I own.com. Just QAV cr at QAV podcast.com should get to me. If you do send that and I nev­er reply, then maybe it did­n’t. But, uh, you can, you can also join our Face­book group. You can, uh. Get us there. If you have any ques­tions QAV or how it works or what what we’re doing in the US mar­ket, feel free to reach out and throw us a ques­tion that we can either answer on the show or pri­vate­ly.

It’s up to you and we will be back soon with anoth­er US show. [00:50:00] Thank you. Tk K‑M-Y-S‑E. Hap­py Mis­sy.

TK: Hap­pi­ness.

[00:51:00]