Hi QAVVERS,

I’m lis­ten­ing to Sakamo­to’s last album, “12″, as I write this, which evokes an appro­pri­ate sense of mono no aware for this newslet­ter.

AUSTRALIAN MARKET UPDATE

The All Ordi­nar­ies was trad­ing around 9,279 on Fri­day morn­ing, close to where it start­ed the week, after a mid-week ral­ly fad­ed on a hot­ter-than-expect­ed infla­tion print:

• The dom­i­nant mar­ket event of the week was July CPI: head­line infla­tion rose 3.5% year-on-year, above con­sen­sus around 3.3%, with the month­ly CPI increase com­ing in at 1.0% against fore­casts of about 0.8%.

• The July infla­tion data forced three of the four major bank econ­o­mists to revise their inter­est rate fore­casts high­er, with CBA’s Belin­da Allen now pre­dict­ing a Novem­ber rate hike.

• Sen­ti­ment on Fri­day was par­tial­ly sup­port­ed by a surge in US futures after Nvidi­a’s blowout earn­ings (see below), with tech­nol­o­gy stocks the top per­former in Aus­tralia on Fri­day, led by Xero, WiseTech and Zip.

US MARKET UPDATE

The S&P 500 gained rough­ly 0.7% week-to-date through Thurs­day to close in on the 7,730 lev­el, with the week not yet com­plete head­ing into Fed Chair Warsh’s Jack­son Hole speech on Fri­day (mean­while Wall Street is appar­ent­ly los­ing faith in Warsh and Bessent):

• Nvidia report­ed $96.2bn in rev­enue and guid­ed to $108bn for the next quar­ter, exclud­ing any data-cen­ter com­pute rev­enue from Chi­na, send­ing the stock up rough­ly 8.5% on Thurs­day and adding approx­i­mate­ly $435bn in mar­ket val­ue.

• The Jack­son Hole Eco­nom­ic Pol­i­cy Sym­po­sium this week marks the first under new Fed­er­al Reserve Chair Kevin Warsh, who took over from Jerome Pow­ell in May 2026, with Trea­sury yields still ele­vat­ed by sticky infla­tion and fis­cal deficit con­cerns putting pres­sure on him to give clear­er guid­ance on the Fed’s path for the rest of the year.

• The core per­son­al con­sump­tion expen­di­tures price index, the Fed’s pre­ferred infla­tion mea­sure, came in line with expec­ta­tions for July, ris­ing 0.2% month over month and 3.3% year over year.

• Pres­i­dent Trump announced the US will increase tar­iffs on imports of all cars, trucks, auto­mo­tive parts, and steel from Cana­da to 50%, effec­tive Jan­u­ary 1, 2027, adding to a week of macro pres­sure on equi­ties.

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 Myth: Success in Investing is about Picking Winners.

Anoth­er one of Mor­gan House­l’s “100 Lit­tle Ideas ” leaped out at me this week.

Inver­sion: Avoid­ing prob­lems can be more impor­tant than scor­ing wins.

Invest­ing, I’ve come to learn, is more about avoid­ing prob­lems than it is about being some kind of genius.

On the show this week, TK and I had a chat about bad apples.

Me:

“the index is made up of a whole bunch of com­pa­nies, good com­pa­nies, bad com­pa­nies, aver­age com­pa­nies. If you take out the bad ones, what’s left should do bet­ter than the index. … If you take out the bad apples, what’s left must be not nec­es­sar­i­ly 100% good apples, but you’d expect to have a high­er per­cent­age of good apples than you would from the entire mar­ket, and it should out­per­form.”

TK:

“It’s basic retail­ing, isn’t it? As the green­gro­cer beside the super­mar­ket said, ‘How do you charge more? Well, you take out all the bad apples, and you can charge more for the rest.’ ”

I think one of the keys to QAV’s suc­cess as an invest­ing sys­tem is that we don’t try to pick win­ners — we try to elim­i­nate the losers. And then we buy what’s left.

Tony’s often told the sto­ry about Dr Merv Lin­coln, the co-founder of Stock Doc­tor, who did a PhD on pre­dict­ing insol­ven­cy and how he start­ed with the gen­er­al idea of look­ing at the his­to­ry of the ASX and the com­pa­nies that failed, that went bank­rupt, or had been delist­ed, and then he looked at their finan­cial met­rics, and went look­ing for a com­mon set that always occur when a com­pa­ny goes bad. Then he said, well, if com­pa­nies score well on these met­rics, they’re less like­ly to go bank­rupt. And that’s the gen­e­sis of Stock Doc­tor’s finan­cial health rat­ing.

It’s a pret­ty sim­ple idea. Study fail­ure and invert it to learn what suc­cess looks like.

Tony’s said before that he did­n’t delib­er­ate­ly think of things that way (inver­sion) as he was build­ing the check­list — but it hap­pened any­way. The check­list is made up of indi­ca­tors that a com­pa­ny (prob­a­bly) isn’t going to fail, and (prob­a­bly) isn’t over­val­ued. I say (prob­a­bly) because it’s not 100% accu­rate, 100% of the time. There are too many hid­den vari­ables. But it’s a heat map. It’s a pirate trea­sure map. It’ll get you close to the trea­sure. You might need to dig a few holes until you find the trea­sure chest.

By the way, Dr Lin­col­n’s the­sis is online. You can go read it. It’s called “An Empir­i­cal Study of the Use­ful­ness of Account­ing Ratios to Describe Lev­els of Insol­ven­cy Risk”.

One of the most inter­est­ing find­ings in his report, in my opin­ion, is that by look­ing at the accounts, he could pre­dict fail­ure of the busi­ness sev­er­al years in advance.

“The func­tion was derived from Year 4 data and pre­dict­ed with a con­sis­tent­ly high lev­el of accu­ra­cy for all years. This con­firmed the pre­vi­ous­ly stat­ed hypoth­e­sis that if the mod­el could be derived from data which pre­dict­ed well some years out from fail­ure, then it could be a bet­ter mod­el than that derived from data at the year before fail­ure.”

And this:

“One find­ing of this study has been that lenders con­tin­ue to make addi­tion­al funds avail­able to most fail­ing firms. … It is impor­tant for lenders to realise that the mere pro­vi­sion of addi­tion­al finance does not solve the prob­lems of a firm which is in the fail­ure zone.”

You can’t spend your way out of a bad busi­ness mod­el. Or bad man­age­ment.

Get­ting back to bad apples. Invest­ing can also learn from ten­nis.

**Charles D. Ellis wrote “The Loser’s Game” in 1975. It won the 1975 Gra­ham and Dodd Award.

“In expert ten­nis, about 80 per cent of the points are won; in ama­teur ten­nis, about 80 per cent of the points are lost. In oth­er words, pro­fes­sion­al ten­nis is a Win­ner’s Game — the final out­come is deter­mined by the activ­i­ties of the win­ner — and ama­teur ten­nis is a Loser’s Game — the final out­come is deter­mined by the activ­i­ties of the los­er. The two games are, in their fun­da­men­tal char­ac­ter­is­tic, not at all the same. They are oppo­sites.”

“After exten­sive sci­en­tif­ic and sta­tis­ti­cal analy­sis, Dr. Ramo summed it up this way: Pro­fes­sion­als win points; ama­teurs lose points.”

“The ama­teur duf­fer sel­dom beats his oppo­nent, but he beats him­self all the time.”

He’s writ­ing to insti­tu­tion­al fund man­agers, and his argu­ment is about the com­pet­i­tive field, not about buy­ing as an activ­i­ty. His point is that insti­tu­tions had become the mar­ket, so the aver­age man­ag­er is trad­ing against oth­er man­agers and can­not beat the aver­age he con­sti­tutes, minus fees.

“… con­cen­trate on your defens­es. Almost all of the infor­ma­tion in the invest­ment man­age­ment busi­ness is ori­ent­ed toward pur­chase deci­sions. The com­pe­ti­tion in mak­ing pur­chase deci­sions is too good. It’s too hard to out­per­form the oth­er fel­low in buy­ing. Con­cen­trate on sell­ing instead. In a Win­ner’s Game, 90 per cent of all research effort should be spent on mak­ing pur­chase deci­sions; in a Loser’s Game, most researchers should spend most of their time mak­ing sell deci­sions.”

As some­one who has played chess for 50 years, I can con­firm that most games I lose are due to my stu­pid mis­takes, not the skill of my oppo­nent (unless it’s their skill not to make as many mis­takes).

QAV helps with both the buy­ing side of invest­ing as well as the sell­ing side. It stops us from buy­ing bad apples, but it also tells us when to sell the apples we bought that, sad­ly, went bad any­way. And that is some­times the hard­est part. Know­ing when to get out of some­thing. I’ve found that to be true in invest­ing, in mar­riages, in busi­ness part­ner­ships. Unfor­tu­nate­ly, the last two don’t usu­al­ly come with a check­list. QAV wins at buy­ing because its buy­ing is made of exclu­sions. The check­list tells us what NOT to buy.

Of course I can’t end an arti­cle about inver­sion with­out quot­ing the late, great, Char­lie Munger. Tony would nev­er for­give me.

Char­lie Munger’s, com­mence­ment address, Har­vard School, Los Ange­les, 13 June 1986. (tak­en from my copy of ‘Poor Char­lie’s Almanack — The Wit and Wis­dom of Charles T Munger’.)

He said that to pre­pare for his speech he thought about all of the best grad­u­a­tion speech­es he had heard, and one of them was by John­ny Car­son.

“What Car­son said was that he could­n’t tell the grad­u­at­ing class how to be hap­py, but he could tell them from per­son­al expe­ri­ence how to guar­an­tee mis­ery. Car­son­’s pre­scrip­tion for sure mis­ery includ­ed:

1. Ingest­ing chem­i­cals in an effort to alter mood or per­cep­tion;
2. Envy; and
3. Resent­ment.”

Much lat­er in the speech he gets to the famous inver­sion pas­sage:

“What Car­son did was to approach the study of how to cre­ate X by turn­ing the ques­tion back­ward, that is, by study­ing how to cre­ate non‑X. The great alge­braist, Jaco­bi, had exact­ly the same approach as Car­son and was known for his con­stant rep­e­ti­tion of one phrase: ‘Invert, always invert.’ It is in the nature of things, as Jaco­bi knew, that many hard prob­lems are best solved only when they are addressed back­ward.”

And he fin­ished with this toast:

“It is fit­ting now that a back­ward sort of speech end with a back­ward sort of toast… To the class of 1986: Gen­tle­men, may each of you rise high by spend­ing each day of a long life aim­ing low.”

Howard Marks, in his Oak­tree 2023 memo “Few­er Losers, or More Win­ners?”, not sur­pris­ing­ly men­tions both Ellis and Munger.

“War­ren Buf­fett – arguably the investor with the best long-term record (and cer­tain­ly the longest long-term record) – is wide­ly described as hav­ing had only twelve great win­ners in his career. His part­ner Char­lie Munger told me the vast major­i­ty of his own wealth came not from twelve win­ners, but only four. I believe the ingre­di­ents of Warren’s and Charlie’s great per­for­mance are sim­ple: (a) a lot of invest­ments in which they did decent­ly, (b) a rel­a­tive­ly small num­ber of big win­ners that they invest­ed in heav­i­ly and held for decades, and © rel­a­tive­ly few big losers. No one should expect to have – or expect their mon­ey man­agers to have – all big win­ners and no losers.”

Mark­s’s con­clu­sion:

“The prop­er choice between the two approach­es – few­er losers or more win­ners – depends on each investor’s skill, return aspi­ra­tion, and risk tol­er­ance. As with many of the things I dis­cuss, there’s no right answer here. Just a choice.”

So there you have it, folks. Aim low. Invest in hot meme stocks. Take tips from your Uber dri­ver. Ignore evi­dence and log­ic. And, what­ev­er you do, give up if you make some mis­takes and screw up.

Wait a minute. Strike that, reverse it.

Do the exact oppo­site.

“Noth­ing’s ever worked out for me with tuna on toast.”

STOCK ANALYSIS OF THE WEEK

Aus­tralian Mem­bers can check out the stocks we trad­ed in QAV Aus­tralian Light port­fo­lios this week.

Amer­i­can Mem­bers can check out the stocks we trad­ed in QAV Amer­i­can Light port­fo­lios this week.

Tony did a Pulled Pork on Gen­e­sis Ener­gy (GNE), a New Zealand elec­tric­i­ty com­pa­ny work­ing through its Gen35 strat­e­gy to go green­er. Find the full deep dive in the pod­cast link below.

On the Amer­i­can pod­cast this week, I did a pulled pork on CRGY. The pod­cast link is down below if you want the full analy­sis.

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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.

AUSTRALIAN BUY LIST

QAV Val­ue Invest­ing Buy List (AU) 2026-08-22

U.S. BUY LIST

QAV Val­ue Invest­ing Buy List 2026-08-24

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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.

August 2026 per­for­mance snap­shot.

Aus­tralian Mod­el Port­fo­lio: No trades this week.

Amer­i­can Mod­el Port­fo­lio: 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: Some­one already cleared the way.

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

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Add QAV America — US stocks, the same QAV method

Already a QAV mem­ber? You can add QAV Amer­i­ca as your sec­ond mem­ber­ship at 50% off — US-list­ed stocks, the same QAV approach, billed in AUD through this site (just one pay­ment to keep an eye on). Add QAV Amer­i­ca →

Not a QAV mem­ber yet? Join QAV first, then you can add QAV Amer­i­ca at the 50% mem­ber rate.

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THIS WEEK’S EPISODES

Dou­ble the Mar­ket, Half the Dra­ma: QAV AU #944

Show Me the Incen­tive: KKR, Cres­cent Ener­gy, and the Art of the Roll-Up: QAV Amer­i­ca #67

STOCK NEWS AND UPDATES

COMMODITIES

This week the big changes to com­modi­ties were the fol­low­ing:

Com­mod­i­ty	Sta­tus
Coal (cok­ing)	BUY
Steel	BUY
LNG	JOSEPHINE
WTI Crude	BUY

DISCLOSURE

Please review our trad­ing and dis­clo­sure pol­i­cy.

SIGNING OFF

SSDD!

• Cam

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That’s it for the week!

QAV A GOOD SHAREMARKET!

Got a ques­tion? [email protected]