Hi folks,

The All Ordi­nar­ies expe­ri­enced sig­nif­i­cant volatil­i­ty over the past five days, amid spik­ing oil prices, dra­mat­ic swings were pri­mar­i­ly dri­ven by esca­lat­ing ten­sions in the Mid­dle East, though the mar­ket found some relief toward the end of the peri­od on hopes for a poten­tial cease­fire and soft­er infla­tion data that reduced expec­ta­tions for fur­ther RBA rate hikes. It seems to be up today as Trump TACO’d yet again.

US mar­kets also endured a volatile week, with the S&P 500 slid­ing from around 7,500 to a low near 7,250 mid-week before recov­er­ing to close at approx­i­mate­ly 7,394 yes­ter­day. The mar­ket’s recov­ery was dri­ven by AI stocks swing­ing back upward, help­ing Wall Street claw back some of the week’s ear­li­er loss­es.

So, let’s get into my week­ly updates and see where we are at.

All the Best,
Cam

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QAV MYTH KILLERS

The Fast and the Strong

“Don’t fight the tape.”
“Make the trend your friend.”
“Cut your loss­es and let your win­ners run.”

All these Wall Street max­ims mean the same thing — bet on price momen­tum. Of all the beliefs on Wall Street, price momen­tum makes effi­cient mar­ket the­o­rists howl the loud­est. The defin­ing prin­ci­ple of their the­o­ry is that you can­not use past prices to pre­dict future prices. A stock may triple in a year, but accord­ing to effi­cient mar­ket the­o­ry, that will not affect next year.… Con­verse­ly, anoth­er school of thought says you should buy stocks that have been most bat­tered by the mar­ket. This is the argu­ment of Wall Street’s bot­tom fish­ers, who use absolute price change as their guide, buy­ing issues after they’ve done poor­ly. Let’s see who is right.

I’m quot­ing from Chap­ter 15 of “WHAT WORKS ON WALL STREET” by James O’Shaugh­nessy.

He did some analy­sis on the 50 stocks with the best and the worst 1‑year price changes from both the All Stocks and the Large Stocks uni­vers­es to see which cohort per­formed the best in the fol­low­ing year, using Decem­ber 31, 1951 as the start­ing date — and hold­ing them until the end of 1994. That’s a very long, 43-year game of “buy and hold”.

So what hap­pened?

The stocks from the “best” list per­formed pret­ty well — a com­pound return of 14.45 per­cent a year. They were, how­ev­er, high­ly volatile, and he warns that not many investors would have the stom­ach for that kind of wild ride.

How about the stocks from the “worst” list? Well they had a com­pound return of… 2.54 per­cent a year.

His con­clu­sion?

“Run­y­on’s quote is apt. Win­ners con­tin­ue to win and losers con­tin­ue to lose.”

The same $10,000, over the same 43 years, became $3,310,255 in the win­ners and $29,351 in the losers.

And while, yes, this ver­sion of this book uses 1951–1994 US data, lat­er edi­tions and mod­ern momen­tum research con­firm the pat­tern still holds.

Runyon Who?

If you aren’t too sure who “Run­y­on” was — Damon Run­y­on was the Amer­i­can short-sto­ry writer best known for the Broad­way tales that became the musi­cal Guys and Dolls. He wrote sto­ries cel­e­brat­ing the world of Broad­way in New York City that grew out of the Pro­hi­bi­tion era — gam­blers, hus­tlers and show­girls, who spoke dis­tinc­tive wise­crack­ing slang where gang­sters had colour­ful names like “Nathan Detroit”, “Har­ry the Horse”, “Good Time Charley”.

The line O’Shaugh­nessy uses is Run­y­on’s most quot­ed: “It may be that the race is not always to the swift, nor the bat­tle to the strong, but that’s the way to bet.”
It’s itself a riff on Eccle­si­astes (“the race is not to the swift, nor the bat­tle to the strong…”). Run­y­on’s twist is the punch­line: sure, upsets hap­pen, but if you’re bet­ting, he would back the fast and the strong. So do we. We just refuse to pay full price for them.

Isn’t this like the DOGS of the DOW?

Long-time lis­ten­ers might recall us dis­cussing the “Dogs of the Dow” con­cept over the years. It’s the same same but dif­fer­ent. The Dogs of the Dow is an invest­ment strat­e­gy pop­u­larised by Michael B. O’Hig­gins in a 1991 book which pro­pos­es that an investor annu­al­ly select for invest­ment the ten stocks list­ed on the Dow Jones Indus­tri­al Aver­age whose div­i­dend is the high­est frac­tion of their price, i.e. stocks with the high­est div­i­dend yield. So they tend to be high-yield­ing stocks whose share price has been bat­tered over the last twelve months. This is the big dis­tinc­tion with the O’Shaugh­nessy exper­i­ment, which did­n’t take into account div­i­dend yield (he looks at that in a dif­fer­ent chap­ter).

Sim­i­lar Dogs exper­i­ments have been done annu­al­ly in Aus­tralia. The strat­e­gy tends to per­form okay — over­all it beats the index, which is bet­ter than most active fund man­agers — but it does­n’t per­form as well as QAV over the long-term.

From the results pro­vid­ed by the annu­al updates from Hugh Dive (Atlas Funds Man­age­ment) over the 11 years 2014–2024:

The ASX200 returned 7.5% p.a. and the Dogs returned 10.3% Com­pound (CAGR). So it out­per­formed but nowhere near the dou­ble mar­ket out­per­for­mance we strive for.

As a bet­ter direct com­par­i­son to QAV:
For the cal­en­dar years 2020 — 2025, the Dogs returned 10.5% ver­sus the ASX200 8.2% CAGR.

The QAV Dum­my Port­fo­lio returned 16.8%.

How does this apply to the QAV strategy?

We like invest­ing in win­ners of a par­tic­u­lar vari­ety — cheap win­ners. We try to invest in com­pa­nies that have a his­to­ry of gen­er­at­ing cold, hard cash, which we take as a sig­nal of a healthy busi­ness and strong man­age­ment. But, of course, we only invest in those com­pa­nies when we can buy the stock at a dis­count to their intrin­sic val­u­a­tion. Why? Because valu­ing a stock is a bit of a dark art. There are lots of vari­ables that we can’t be com­plete­ly aware of, mar­ket nuances that aren’t obvi­ous, indus­try trends that we don’t appre­ci­ate, things like that. So we try to build in a moat around our invest­ments, which means that even if we get things a bit wrong, we should still come out on top — most of the time. It’s a secu­ri­ty mea­sure.

So the Dogs aren’t “buy losers.” They’re “buy qual­i­ty at a tem­po­rary dis­count.” That’s a val­ue strat­e­gy wear­ing a con­trar­i­an cos­tume — and it’s exact­ly why O’Shaugh­nessy’s own work shows high div­i­dend yield works among large stocks while worst price per­form­ers fail across all stocks. No con­tra­dic­tion. The two find­ings are best friends.

We don’t buy losers hop­ing they bounce, and don’t chase win­ners blind­ly off a cliff. Buy qual­i­ty busi­ness­es that are win­ning and still cheap.

Here’s the twist. O’Shaugh­nessy is watch­ing share prices. We’re watch­ing busi­ness­es. We don’t buy a stock because its price is climb­ing — we buy a cheap, qual­i­ty com­pa­ny and then let our rules do the sort­ing. The sell dis­ci­pline cuts the losers before they become falling knives, and lets the win­ners run until the trend breaks. We end up hold­ing win­ners and dump­ing losers — the exact pat­tern O’Shaugh­nessy rewards — but we get there through rules, not by chas­ing a chart. No tree grows to the sky, as Tony says. We just let our sys­tem tell us when it’s stopped grow­ing.

STOCK ANALYSIS OF THE WEEK

I added a cou­ple of stocks to the Light port­fo­lios this week and you can see my Light posts here.

I also added some­thing to the U.S. Light port­fo­lio this week. U.S. Light and Club mem­bers can read about it here.

On the full Aus­tralian pod­cast this week, we did an inter­view with Tobias Carlisle, so there was­n’t a pulled pork.

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BUY LIST

Each week, we pro­duce a buy list based on our val­ue invest­ing sys­tem that we share with our QAV Club mem­bers. The intend­ed pri­ma­ry pur­pose of this buy list is for club mem­bers to use as a ref­er­ence for com­par­ing their own buy list. In the­o­ry, all of our buy lists should look pret­ty sim­i­lar each week.

QAV Val­ue Invest­ing Buy List (AU) 2026-06-05

Below is a link to the US list for this week (avail­able exclu­sive­ly to our U.S. Club mem­bers):

QAV Val­ue Invest­ing Buy List 2026-06-07

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PORTFOLIO PERFORMANCE

We com­pare our per­for­mance to what we think is the most rel­e­vant bench­mark (SPDR 200 in Aus­tralia, S&P500 in the USA), but if you’re new to invest­ing, these com­par­isons might not mean much. Instead, you can com­pare our per­for­mance to the top-per­form­ing Super Funds in Aus­tralia and see why an ama­teur active investor (who has a sys­tem to fol­low) can out-per­form most of the “pro­fes­sion­als”.

We pub­lish a fresh per­for­mance snap­shot once a month. Week­ly noise does­n’t tell you much in a val­ue-invest­ing sys­tem — what mat­ters is the trend.

June 2026 per­for­mance snap­shot.

Trades this week

Aus­tralian port­fo­lios: No trades this week.

Amer­i­can port­fo­lios: No trades this week.

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Become a QAV Light Member today and start your investing on the right track

If you want to find out what we’re trad­ing in QAV Light each week, sign up to become a mem­ber. You’ll get an email from me every Mon­day let­ting you know what we’re buy­ing and sell­ing in that port­fo­lio. You can choose to copy our trades or not. It’s the eas­i­est way to start your rules-based invest­ing career… and you don’t even need to know the rules. I’ll fol­low the rules for you. It’s a good first step to even­tu­al­ly becom­ing a QAV Club mem­ber and learn­ing how to run the sys­tem by your­self.

QAV LIGHT: Same des­ti­na­tion. You choose where you sit.

(Note: Amer­i­cans inter­est­ed in join­ing QAV Light or Club please go here instead.)

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THIS WEEK’S EPISODES

Tobias Carlisle Sol­dier of For­tune: QAV AU #923

Tobias Carlisle, Sol­dier Of For­tune: QAV Amer­i­ca #56

STOCK NEWS AND UPDATES

COMMODITIES

This week the big changes to com­modi­ties were the fol­low­ing:

Com­mod­i­ty	Sta­tus
Iron Ore	JOSEPHINE
Crude Oil	SELL
Cop­per	JOSEPHINE
Alu­mini­um	JOSEPHINE
Mag­ne­sium	JOSEPHINE
Nick­el	JOSEPHINE
Lithi­um	JOSEPHINE

DISCLOSURE

Please review our trad­ing and dis­clo­sure pol­i­cy.

SIGNING OFF

That’s a wrap on anoth­er week of QAV. Remem­ber to ignore the noise and focus on main­tain­ing your own dis­ci­pline. Eat healthy, get some exer­cise, remem­ber to touch grass, and don’t let the bas­tards get you down.

SSDD!
(Stay Safe, Don’t Die)

• Cam

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That’s it for the week!

QAV A GOOD SHAREMARKET!

Got a ques­tion? [email protected]