DAVE’S FIVE-YEAR QAV JOURNEY

As you may have heard on this week’s episode (#909), one of our mem­bers, Dave, just cel­e­brat­ed his five year anniver­sary as a QAV Club mem­ber and was kind enough to share his expe­ri­ence with us. I thought it would be instruc­tion­al in this week’s newslet­ter to spend some more time break­ing down the lessons from Dav­e’s email. He’s had more suc­cess than the major­i­ty of investors and it’s worth stop­ping to think about why.

Let’s start with his report­ed returns.

![[DAVE’S FIVE-YEAR QAV JOURNEY.png]]

His com­par­i­son bench­mark, is, he says, the “AXJT on finance.yahoo.com which I under­stand to be the S&P/ASX 200 Gross Total Return index.” That checks out.

He says he is “using a Time Weight­ed Rate of Return (TWRR) as I have inject­ed cap­i­tal via 2 tranch­es, the sec­ond larg­er than the first.”

Pret­ty great results.

You can com­pare Dav­e’s per­for­mance to the top-per­form­ing Super Funds in Aus­tralia.

An ama­teur active investor (who has a sys­tem to fol­low) is out-per­form­ing most of the “pro­fes­sion­als”.

Here are Dav­e’s key obser­va­tions of his QAV jour­ney so far:

• I am def­i­nite­ly the val­ue end of QAV. If I have a choice, I near­ly always take a cheap option when it’s avail­able, espe­cial­ly rel­a­tive to cash flow, NTA, and if the com­pa­ny is doing a gen­uine buy back.

• I am reg­u­lar­ly review­ing and some­times buy­ing off the watch list — I don’t always wait for momen­tum (3PTL buy). I’ll buy it because it has a high QAV score and is super cheap and I will patient­ly wait for oth­ers to notice.

• Some­times if a stock goes rule 1 sell I’ll give it an extra long fudge if it’s real­ly cheap.

• I exper­i­ment­ed with the 20% rule 1 sell but was burned big more than once when stuff dropped through the 20% very quick­ly. Was­n’t a fan so I’ve gone back to 10%.

• I enjoy the micro end of the mar­ket. But it got hard­er stay­ing in micro and even small as the port­fo­lio grew. Recent­ly I’ve been exper­i­ment­ing with a change where­by if I have cap­i­tal for a posi­tion and don’t like any of the big­ger mar­ket cap stocks I’ll take up posi­tions in 2 or 3 small­er cap stocks and if one or two become a rule 1 sell I’ll then sell those and put the cap­i­tal into the one or two of the orig­i­nal three that are win­ning. The aver­age dai­ly trade of small­er stocks grows as they get more pro­file, so I fig­ure I’m man­ag­ing the risk of rush­ing to the exits by tak­ing big­ger posi­tions as the mar­ket cap and aver­age dai­ly trade grows and as the win­ners self-iden­ti­fy.

• I also vary the posi­tion siz­ing of the 15–20 stocks in the port­fo­lio a lit­tle to get into small­er cap stocks. I don’t real­ly have any sci­ence to this and I’m sure it will have an impact of some sort in the long run.

Some highlights/lowlights:

• My biggest realised gain was MRM (MMA Off­shore) — 680% in ~2.5 years. I bought it from the watch­list and sold it on a takeover off the ASX (unfor­tu­nate­ly, it looked like it might go high­er).

• My biggest win­ner still held is MAD (Mad­er Group). Was briefly my first ever 10 bag­ger but has pulled back to about 9 bags full. A heady mix­ture of a growth com­pa­ny briefly avail­able at val­ue prices when I bought it off the bot­tom of the buy list in mid-2021. This is a CLASSIC exam­ple of why we should­n’t take prof­its for the sake of it. I would have sold this thing a few times if I had some sort of pull­back from a peak rule (and if I lis­tened to my wife) but even­tu­al­ly it swings and starts a new run. Based on the 3PTL as of today I’m sit­ting on a 642% gain. My guess is I would def­i­nite­ly have set­tled for less than that if I sold on its first pull­back.

• The 3PTL spi­ral (through 2022 and 2023 from mem­o­ry?) was harsh. I got close at one point to los­ing all my gains and get­ting back to my start­ing cap­i­tal. Those were test­ing times. But it was worth it because the port­fo­lio went bananas in cal­en­dar year 2025.

• My two biggest losers were 48% and 55%. Near­ly all my fault for ignor­ing rules, but also because they took huge steps down in very short spaces of time. Both were in the first 18 months. Les­son learned.

The val­ue I still get from being a mem­ber:

• Get­ting con­stant­ly remind­ed of the rules and the process and why it’s all impor­tant in the con­text of all of the options out there for invest­ing your hard earned. As Buf­fett or Munger or both said, beyond some basics of a rea­son­able IQ, some cap­i­tal, and com­pe­ten­cy with sim­ple math, invest­ing is all behav­iour­al. I tune in every week because Tony and you con­stant­ly remind me to stick to the plan. This is espe­cial­ly impor­tant dur­ing any hic­cups the mar­ket has had. It mat­tered a lot dur­ing the 3PTL spi­ral.

• The book, arti­cle and author rec­om­men­da­tions and the guests you get on all form part of this con­tin­u­ous loop of rein­force­ment that in the long run this shit works bet­ter than any oth­er shit out there.

• I think as I look back I realise I’ve made a lot of mis­takes, espe­cial­ly at the start. It was all behav­iour­al (includ­ing get­ting way too attached to the stocks and con­stant­ly try­ing to out think the process). This has set­tled a lot for me, which again is where I get my val­ue as a mem­ber — the rein­force­ment week-in-week out to just take all the emo­tion out of it (highs and lows), be as black and white in the deci­sion mak­ing as pos­si­ble, and just trust the process and that the math will work in the long run. And then the con­fi­dence that comes from see­ing all that actu­al­ly hap­pen and work over a five year peri­od even with me in there try­ing to screw it up once in a while.

• I don’t run my own buy list any­more. Life is busier than ever so I lazi­ly just take yours and pick over it (and the watch list). And the 3PTL sell tab, and com­mod­i­ty prices, and most of the stuff in the file you pub­lish week­ly. I think this alone is worth the sub­scrip­tion price.

• The Bret­ta­la­tor — just bril­liant.

Any­way that’s enough waf­fle. Sor­ry it’s so long, was inspired by the recent episode where some­one sug­gest­ed you start a sur­vey to get input from mem­bers as to their lessons and appli­ca­tion of the process.

Much grat­i­tude to you and Tony and every­thing QAV.

Dave From Newy

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Thanks again for shar­ing your insights, Dave. Great stuff and TK and I are very pleased for you.

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QAV Myth Killers is a week­ly col­umn in the QAV newslet­ter, tak­ing apart a piece of
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