Transcript QAV 438

QAV 438 Club

Cameron  00:15

Wel­come back to a lit­tle radio show. Isn’t that what– That’s what’s his face says, Late Night Live old ABC guy been around for­ev­er. Back, dear lis­ten­ers to our lit­tle radio show, Philip Adams.

Tony  00:30

Yes. He’s– I love lis­ten­ing to Philip Adams that syrupy late night voice.

Cameron  00:35

Yes, I’ve always thought of myself as the Philip Adams of pod­cast­ing, except for the intel­li­gence and the syrupy late night voice.

Tony  00:44

I was going to say , that’s fun­ny. I’ve nev­er thought of you of the Philip Adams.

Cameron  00:46

A lit­tle bit of Philip Adams, a lit­tle bit of Roy and HG, lit­tle bit of– I don’t know– Some idiots. How are you TK? You’re– I mean, basi­cal­ly Syd­ney’s out of lock­down now from what I hear, it’s all guns blaz­ing.

Tony  01:02

Oh, it’s a pic­nic here at the moment here. It’s great.

Cameron  01:04

Lit­er­al­ly, you had a pic­nic yes­ter­day.

Tony  01:06

I had a pic­nic yes­ter­day caught up with my sis­ter who I haven’t seen for over three months. It was good.

Cameron  01:11

That must be a big relief.

Tony  01:14

But it was good.

Cameron  01:15

Yes. Oh, good. Well, it’s been a rough stretch for you guys. I’m glad– Things– I’ve just hope the med­ical sys­tem han­dles it OK, and [Inaudi­ble 00:01:26].

Tony  01:26

That’s the test, isn’t it?

Cameron  01:27

Yes.

Tony  01:28

Yes. I’d rather– They had that as the thresh­old for loos­en­ing up rather than say­ing, OK, you’re all at 70% first jab, now go and have a pic­nic. I’d rather them say OK, the ICU is not turn­ing away ambu­lances, now go and have a pic­nic.

Cameron  01:44

I’ve read an arti­cle before about some guy in some­where in the US who got turned away from– Before he had heart trou­ble, rushed to hos­pi­tal. 43 hos­pi­tals could­n’t take him and he died. They were just over­loaded with COVID. They could­n’t get him into 43 hos­pi­tals.

Tony  02:01

Real­ly.

Cameron  02:01

Hope­ful­ly it does­n’t get that bad here.

Tony  02:03

Plus, he had bad cred­it prob­a­bly too.

Cameron  02:06

Could have been.

Tony  02:07

Have you seen that movie, Sicko?

Cameron  02:09

Yes.

Tony  02:10

[Inaudi­ble 00:02:11].

Cameron  02:11

Yes, I have that film, par­tial­ly to thank for Chris­sy. She saw that film before she met me and decid­ed she was mov­ing out of the Unit­ed States and then she met me a cou­ple of weeks lat­er and thought he’ll do, free health care in Aus­tralia. Let’s go.

Tony  02:27

You’ll do. Yes. Grab your coat, grab your hat. You’ve scored. Let’s go.

Cameron  02:32

Hey, I’ll take it. What­ev­er it takes to get me out of here.

Tony  02:37

What did you say? Who? Me? What? Oh, OK.

Cameron  02:42

No, I said grab your things. I’ve come to res­cue you. Come with me if you want to live in a coun­try with health­care. A lit­tle bit of Russ­ian there. Well, we’re going to have a guest com­ing up on the show today. Tony, James Williamson from Went­worth Williamson.

Tony  03:00

Sound like Kevin Bridges there.

Cameron  03:03

OK.

Tony  03:03

Do you know the Scot­tish Come­di­an? I’ve been watch­ing heaps of Kevin Bridges.

Cameron  03:06

No I don’t

Tony  03:07

Because he speaks with a Scot­tish accent. He slows it down and the famous one is like, I hired a per­son­al train­er. He asked me what I ate? I could­n’t tell him I had chick­en pat­ties so I wrote down avo­ca­do. I don’t know what an avo­ca­do is.

Cameron  03:32

Any­way, James Williamson. Well, I read an arti­cle an inter­view with him in the Fin a few months ago and invit­ed him on the show. He’s a val­ue investor. It’d be good to chat to him.

Mean­time, the big news for this week, Tony. It was actu­al­ly last week but we did­n’t get to talk about it, is the new theme for the pod­cast. That’s what every­one wants to know about. AKA Tony’s theme that you did. You men­tioned it in after hours at the end and then you sent it to me and I worked it in.

Tony  03:59

You did.

Cameron  04:00

I liked it.

Tony  04:01

Yes.

Cameron  04:01

I liked it.

Tony  04:03

I liked the way you went around my vocals. That’s a big improve­ment.

Cameron  04:08

I did­n’t want to scare peo­ple too much.

Tony  04:10

No. Fair enough.

Cameron  04:11

Yes.

Tony  04:13

You know what the record­ing ses­sion was like? Who’s going to sing on this? It’s like take one step for­ward, every­one else took two steps back.

Cameron  04:21

Right and here’s your– You’re the birth­day boy. Right?

Tony  04:23

Yes.

Cameron  04:23

You had to step up in here. That’s good but seri­ous­ly, the big news for us this week is some­thing we soft launched in beta yes­ter­day which is the Bret­ta­la­tor, I think I’m going to call it. We need a name for it. Brett Fis­ch­er, QAV club mem­ber, long term QAV club mem­ber from West­ern Aus­tralia and IT Wiz has been work­ing with you and by him­self over quite a few months to devel­op.

Tony  04:52

Are you sure Bret­t’s from WA?

Cameron  04:57

I was until you said that.

Tony  04:59

I’ve got a feel­ing I met him at a Mel­bourne din­ner but I could have it con­fused.

Cameron  05:03

Well, maybe he came to Mel­bourne.

Tony  05:05

Maybe.

Cameron  05:05

Hang­ing out. Oh, God damn it. Now, we have to look this up.

Tony  05:11

Because I think the Mel­bourne QAV group have been using it to test it as well before Brett showed me.

Cameron  05:17

God dammit. OK, Brett from Vic­to­ria. Well, I’ll get back to what I said, he’s going to come on the show next week or this week or some­thing for chat. I said to him in the email, That’s east­ern time, think­ing he was in WA. Brett from Vic­to­ria. I’ve prob­a­bly met Brett at a din­ner down there too. Sor­ry, Brett. So many peo­ple, so many names to remem­ber.

Any­way, back to that. Brett and you have been work­ing togeth­er. Brett doing the work, you doing the–

Tony  05:47

Super­vis­ing.

Cameron  05:48

Yes, devel­op­ing a three-point trend line. [Crossover 00:05:52].

Yes.

Tony  05:55

Now, just write my name on the bot­tom.

Cameron  06:00

Oh, God. I’m going to get this sto­ry out soon­er or lat­er.

Brett devel­oped a three-point trend Auto­mat­ic cal­cu­la­tor. All you have to do is open up the sheet– Google Sheet, plug in the code of the stock that you want to graph for and it draws the graph for you, tells you what the buy price is, tells you what the sell price is, tells you if it’s a Josephine, plots the graph, shows you the graph does it all for you 100% per­fect­ly accu­rate every time. Except for the times it does­n’t because there’s a few issues most­ly to do with Google Finance, not to do with Bret­t’s cod­ing but we’ll talk through some of those but that’s the first step because we know that three-point trend line draw­ing has tra­di­tion­al­ly been prob­a­bly the biggest chal­lenge that new QAV club mem­bers have had and good on Brett for us. [Crossover 00:07:07].

Tony  07:07

I mean, it’s real­ly good prod­uct and he’s been work­ing tire­less­ly on it. We’ve just been iter­at­ing a bit on the rules and I– When I’ve been doing my down­loads, I’ve been com­par­ing them to Bret­t’s graph and then going back and say­ing, hey, what about this? What about that? And it’s been real­ly help­ful because it’s also helped– Just like work­ing with Dylan’s has also helped nail down some of the three-point trend line rules. That’s been good but yes, as you say, I mean, we’ll get Brett on to talk about it. Please treat this as a beta ver­sion and before you buy some­thing, check out your own graphs in Stock Doc­tor or Yahoo Finance or what­ev­er you use because I mean– First of all, it’s a Google Sheet. When you get a copy, you save it to your own area because it’s a read only ver­sion and the one that we’re releas­ing but if you save as to your own file, it’ll become usable. That’s the first step.

Sec­ond step is it does­n’t han­dle small stocks very well. When– I mean, when I say small stocks, I mean stocks that have a dec­i­mal point in their shares, like if it’s 10.5 cents or 40.25 cents or what­ev­er. The Google feed for the stock price does­n’t han­dle the dec­i­mal place so it rounds so that could be a prob­lem and what else? Bret­t’s just cod­ed to receive month end prices. If there’s a sen­ti­ments bro­ken dur­ing the month, it may not pick it up, prob­a­bly won’t pick it up but that’s anoth­er issue and yes, it uses yes­ter­day’s clos­ing price. If you jump on today and want to see if some­thing’s reversed or gone ahead, you just need to be aware that it’s not going to pick up to those price.

They’re the ones that come to top of mind but yes, please treat it as a beta feed­back, com­ments on any issues you have or improve­ments that could be made and yes, we’ll take it from there but well done, Brett. It’s fan­tas­tic. I was blown away and it’s been real­ly help­ful for me dur­ing com­pa­ny report­ing sea­son. It’s a real good prod­uct.

Cameron  09:01

Yes, and at the very least like when you’re using the sheet when it gen­er­ates the graph, have a look at the chart and see if it makes sense to you and then you might want to open up Stock Doc­tor and com­pare it there too.

One of the oth­er things that we picked up when we were doing the check­list this week– This morn­ing, is that it also– it does pick up Josephine’s as was a recent thing that Brett added but he’s only look­ing at the end of last mon­th’s price and the end of yes­ter­day’s price and if the lat­ter is low­er than the for­mer, it will flag it as a Josephine.

How­ev­er, in some cas­es we were look­ing at this morn­ing, the share price yes­ter­day may be the same as the end of last mon­th’s share price. It does­n’t pick it up. It just sees it as a flat­line but I think we were look­ing at RVR this morn­ing and it was quite obvi­ous­ly a falling knife. The price had been falling con­sis­tent­ly since Jan­u­ary. In some cas­es, like that, it’s not going to be 100% accu­rate pick­ing up Josephine’s and falling knives if the down­ward trend, it goes back fur­ther than the end of last month.

Cameron

Keep an eye on that but yes, and we’ve been talk­ing– Well, ever since we start­ed this thing about one day, being able to turn a lot of the stuff into code and the work that you’ve been doing with Dylan and the work with Brett and  the work that Andrew Flit­man’s done, is all help­ing us start to fig­ure out how to code this stuff and we’re going to try and hire a team of peo­ple to take this and progress it, come up with more and more sophis­ti­cat­ed tools to make it just eas­i­er for us and the folks lis­ten­ing to get to a score­card as quick­ly and as pain­less­ly as pos­si­ble.

Tony

Yes, whole team. We’re going to hire legions of coders to do it.

Cameron

OK, we’re look­ing for one guy or girl who’s pre­pared to work [Crossover 00:11:02]. Work for likes or clap­ping, some­thing. I did­n’t want to be that trans­par­ent. I want­ed to make it sound like we were tak­ing this seri­ous­ly but now that you’ve gone and done that, I guess.

Tony  11:17

We are tak­ing it seri­ous­ly.

Cameron  11:20

And the oth­er thing I want to point out is we get to dis­con­tin­ue the shared man­u­al data sheet now that we’re putting out the score­card, and your scor­ing behind the score­card each week. We’re going to dis­con­tin­ue the man­u­al, the shared man­u­al data sheet if for no oth­er rea­son than pret­ty much nobody was adding to it too far from you, me, and I think Gary, maybe one or two oth­er peo­ple but yes, don’t go look­ing for that any­more. I’ll take it down off the club mem­ber resources page because you’ve now got spread­sheets again to look at each week.

If you want to see the qual­i­fied audits which is the thing that I most­ly use it for, you can go and check Tony’s spread­sheet to see if he’s been able to find one or not when you’re doing your own man­u­al data.

Mov­ing on, Gary– Speak­ing of Gary Mae­stro now. He post­ed his port­fo­lio per­for­mance the oth­er day, his paper port­fo­lio I think as it’s track­ing in Straw­man, thank you and he’s killing it. 68.6% over 12 months. That’s pret­ty good, Gary.

Tony  12:22

That’s very good. Well done, Gary. Well done for send­ing it up on straw­man and well done for hav­ing such an impres­sive results. It’s good.

Cameron  12:29

And he was still hold­ing FMG when he post­ed that as well and still had that results.

Tony  12:33

Have you seen what hap­pened to FMG today?

Cameron  12:35

Not today. No. What hap­pened?

Tony  12:37

Last time I had look, it was down to like $14.50.

Cameron  12:41

Wow, I did read that. A lot of their execs leav­ing.

Tony  12:45

Oh, real­ly? Had­n’t seen that.

Cameron  12:46

Yes, they’ve had a bunch of execs leav­ing. Some­thing to do with bonus­es get­ting cut or some­thing like that. They just post­ed a $14 bil­lion prof­it. I don’t know why that would be. Yes, the price has dropped from 18 bucks down to just below 15. It got low­er but yes.

Tony  13:04

Yes, $14.63. I’m see­ing Stock Doc­tor at the moment.

Cameron  13:07

Yes, 68 I’ve got. Yes. Wow.

Tony  13:11

You got to add the div­i­dend back to take it up to 16.50 or 16.60 or so but still. Right. I hope every­one got out clean.

Cameron  13:19

Yes. Well, you did give every­one a warn­ing a few weeks ago when we got out. That was a good call.

Tony  13:27

Yes.

Cameron  13:27

What else? MYE had mine fatal­i­ty last week and the share price took a big hit.

Tony  13:34

I mean, it’s always dif­fi­cult to talk about some­thing like that because of all the per­son­al impacts it has on the peo­ple involved. The share price took a hit but it seems to have flat stopped going down. In fact, I think it was up today too in a light­ing mar­ket. I men­tioned there’s some buy­ing com­ing back. I don’t know much about mas­ter­mind oth­er than what I read and it’s a min­ing oper­a­tor, a con­tract min­ing oper­a­tor and a con­tract min­ing ser­vices provider.

 

Basi­cal­ly, pro­vid­ing con­tract to con­sult­ed mines and pro­vide labor to mines but it has moved into run­ning mines com­plete­ly for in this case, I get it’s an over­seas hold­er. They had a fatal­i­ty so they’ll obvi­ous­ly be reper­cus­sions from that pret­ty hard to know what the impacts will be. There’s a cou­ple of things sprung to mind when I had a look.

The first one is that they’re buy­ing anoth­er com­pa­ny. I think it’s called Rybar, R‑Y-B-A‑R, which is anoth­er con­sul­tant– Mine con­tract­ing com­pa­ny and they’re going to– I think they’re either issu­ing shares or rais­ing shares to– Rais­ing mon­ey through a share issue. Either way, that’s going to be impact­ed by the price being 10% low­er or what­ev­er it is to what it was like before the inci­dent at the mine. That might be a risk.

Anoth­er risk is that they’ve got two of these whole of mine con­tracts, pos­si­bly a third com­ing on but yes, it may be dif­fi­cult for them depend­ing on what caused the acci­dent may be com­plete­ly out­side of their con­trol but it may be– It may impact their work, the abil­i­ty to tend to going for­ward or when ten­ders going for­ward. In the absence of any­thing else, there’s been no announce­ment since the ini­tial announce­ment about the inci­dent, no addi­tion­al updates from the com­pa­ny. It’s pret­ty hard to know what’s going on and, of course, the news has moved on after the ini­tial inci­dent. In the absence of any­thing else, we have to be guid­ed by sen­ti­ment and the sen­ti­ments stop going down. There’s slight­ly turn­ing up. I don’t own the stock. I think if I did, I’d be hold­ing on to see what hap­pens.

Cameron  15:31

Yes, I guess the ques­tion I had for you which I think you’ve answered is whether or not it was a bad news sell. I guess it’s a dif­fer­ent bad news.

Tony  15:40

Yes, it is. It’s [Crossover 00:15:43].

Cameron  15:43

Sor­ry, I was going to say it’s well above its sell line.

Tony  15:45

Yes.

Cameron  15:46

But it’s not like the CFO sud­den­ly resigned or the CEO sud­den­ly resigned.

Tony  15:53

It’s also not like from day one, peo­ple came out like the min­ing union came out and said, let’s look at all their fault. I’ve got a his­to­ry of bad man­age­ment. They were cut­ting cor­ners. They were work­ing peo­ple too hard. No one said any­thing like that yet. It could just be an acci­dent. Yes, we just don’t know.

Cameron  16:10

It was one of the bet­ter per­for­mance in my port­fo­lio up until it plum­met­ed last week. It was up like 20, 30%.

Tony  16:15

All right.

Cameron  16:16

Then it dropped. It’s back up above water but any­way, yes, it’s very sad for the fam­i­lies involved.

ZGL price update, Tony. We very brave­ly put ZGL up as a first stock of the week back on the sev­enth of Sep­tem­ber when it was at 12 cents. It’s now 10 cents. What do you want to say for your­self?

Tony  16:40

It was­n’t our first stock of the week. It was our first stock of the week that we start­ed using after we had the– Got the AFSL license– AFS license, yes. Well, we’ve got to say for myself, noth­ing to see here.

Cameron  16:54

Right, move along.

Tony  16:55

Move along. Yes. Look, it’s down two cents a share. It’s in a small stock. It’s very illiq­uid like dropped and then it stopped. Noth­ing’s trad­ed for a while. That’s the way these stocks work. The thing, I think it looked like that it may have dropped that those two cents which admit­ted­ly, it was about 15% based on the share price, I think it was like 11 and a half or 12 cents when it dropped. It’s a big drop per­cent­age wise but not much in terms of sense but we rec­om­mend– I in ret­ro­spect, should­n’t have rec­om­mend­ed that before it released its annu­al results which came out like a cou­ple of days after I rec­om­mend­ed it but that’s how I do it.

Often­times, if they’re good on the QAV check­list, the results come out and the share price goes up, right? Did­n’t in this case because the com­pa­ny had a loss, went from a prof­it to a loss. How­ev­er, drilling into it, the oper­at­ing cash flow gen­er­at­ed by the com­pa­ny is still very strong. In fact, I think it’s even the record half for it which is why it’s scored very well and still does score very well, from a QAV point of view but they repaid a whole heap of debt about $17 mil­lion, I think from mem­o­ry which is why they declare the loss. They basi­cal­ly use their record oper­at­ing cash flow to pay down a whole heap of debt. I’ll give it a leave pass on that one. Even though it’s a loss, I can under­stand why.

Cameron  18:23

OK.

Tony  18:25

We’ll hold. We’ll see what hap­pens with it share price.

Cameron  18:28

1. CVW. We were talk­ing about CVW. I think it was your pulled pork recent­ly and then Mur­ray on Face­book point­ed out who I can con­fi­dent­ly say is in WA.

Tony  18:44

Yes.

Cameron  18:45

Mur­ray point­ed out that the fig­ures in Stock Doc­tor were incor­rect. You’ve looked into it a lit­tle bit?

Tony  18:53

Yes, looked into a lit­tle bit and also spoke to Stock Doc­tor and Mur­ray’s right to the point that I think it affects the P&L part of Stock Doc­tor. What Stock Doc­tor told me is that because it’s an insur­ance com­pa­ny which is a bit dif­fer­ent to most oth­er com­pa­nies that some oth­er­wise got cross load­ing the p&l items into from the data provider into Stock Doc­tor. I’ll fix that but they have advised that may take one to two weeks but look­ing at to rec­on­cile that myself that cash flow report still rec­on­ciles prop­er­ly. Those fig­ures are good. I don’t think our QAV score will change very much once the fig­ures are actu­al­ly right­ed by the data provider to Stock Doc­tor but yes, it does look a bit fun­ny at the moment. PE looks wrong. The score may bounce around a lit­tle bit but the price oper­at­ing cash flow won’t change which is the big dri­ver for the QAV score espe­cial­ly in stock like this.

Cameron  19:49

OK, well, good pick up on that one any­way.

Tony  19:51

Yes, thank you, Mur­ray.

Cameron  19:53

Dun­can sent us an email with a bunch of graphs to check. This is before the Bret­ta­la­tor came out and–

Tony  20:05

You want a buy line, talk to me the Bret­ta­la­tor. That’s Mad Max, sor­ry.

Cameron  20:15

About three miles from here, I saw a rig that’ll pull that thing. Ya wan­na get out­ta here, you talk to me. What a great line.

Dun­can sent us an email with a bunch of graphs and I reviewed them and agreed with his call on some or dis­agreed with oth­ers but then I sent it to you and you shot me down on some of them.

Tony  20:41

[Inaudi­ble 00:20:41].

Cameron  20:41

It was in your own nice way but it was a real edu­ca­tion that I still have a lot to learn about doing three-point trend line graphs. Now have the Bret­ta­la­tor, yes, that’s one prob­lem solved but can we talk about a cou­ple of these? Because I just want to see your think­ing on this. First, let’s have a look at KPT. KPT baby. You know me.

Tony  21:07

Kan­ga­roo Island Tim­ber, from mem­o­ry.

Cameron  21:09

Yes. Now this one is one of these weird look­ing charts from mem­o­ry and I think we’ve talked about it before on the show. It’s basi­cal­ly had a flat­line basi­cal­ly, since what? March 2017.

Tony  21:27

Yes.

Cameron  21:27

It was trad­ing at $245 and then it dropped to a nice round like $2.36 and it stayed there ever since now. I mean, why the hell you would buy that? I don’t know but you said some­thing hap­pened and we have to look at a short­er time­frame. Right?

Tony  21:51

Yes, I don’t know what hap­pened but some­thing hap­pened. It may even have just been some kind of share split. I know, in my research for the com­pa­ny. Cer­tain­ly it was­n’t as far back as 2017 but this is a this is Kan­ga­roo Island plan­ta­tion tim­bers. It’s obvi­ous­ly a tim­ber farm and sawmill and that was wiped out in the bush­fires, what? 18 months ago now.

It has basi­cal­ly– I was going to say, sprung from the ash­es but that’s a bad pun. It’s piv­ot­ed, they’re not going to try and replant the plan­ta­tion tim­ber. I imag­ine that would be a– Would take them many decades to get that back, they’re going to piv­ot to an agri­cul­tur­al com­pa­ny. I don’t know if it was some­thing like that, that caused the big sell off in 2017. That would have been before the bush­fires but per­haps there was some­thing else that hap­pened back then of a sim­i­lar nature but any­way, the share price was either restruc­tured or there was a big sell off and then again in–

Since then, there’s been the issue of the bush­fires. It’s if you look at it on a five-year graph, all you see is a flat­line as you said, but if you go back and look at it on a three-year graph which is an option in Stock Doc­tor, it starts to make sense and you can see that, again, it dropped down in Sep­tem­ber– The high point was Sep­tem­ber 2019, low point was June 2020. I men­tioned it was a big drop from around Feb­ru­ary 2020. That would have been the bush­fires, I guess wip­ing out the plan­ta­tion but since then, they’ve done a fair bit to try and piv­ot the com­pa­ny to being an agri­cul­tur­al com­pa­ny and it’s the share price is start­ing to increase from there. The low was at eight cents. Is it? Yes, 0.8 cents of a share and it’s now back up to– Is that point– No, it’s 80 cents a share and it’s now back up to $17.

Cameron  23:39

The les­son here for me is if I see some­thing that looks weird like the KPT anom­aly, the big flat­line, instead of just going, I should stop and think why does it look like that? And do some more work.

Tony  23:59

Yes, I mean, just from my expe­ri­ence, if you see that kind of graph, go to a three year one and see if there’s a bet­ter graph to work with because some­thing’s hap­pened in the longer term.

Cameron  24:08

And that’s allow­able under QAV’s to look at a short­er time frame.

Tony  24:12

Yes, well, three years is still a long time frame. We’re still using a month­ly graph and it makes the whole thing much clear­er and bet­ter reflects the sit­u­a­tion for this par­tic­u­lar com­pa­ny.

Cameron  24:23

Yes, some­thing dra­mat­ic hap­pened and the com­pa­ny is a dif­fer­ent com­pa­ny today to what it was before the piv­ot.

Tony  24:31

Piv­ot. Yes.

Cameron  24:33

1. See, always learn­ing, Tony. I’m always learn­ing. I’m slow but I get there.

Tony  24:40

Slow. You’re a ter­mi­na­tor mate.

Cameron  24:46

Yes, well, that’s it. I’m the slow ter­mi­na­tor. I’m not like the T100. That’s just– The T1000 was just– I’m just the slow ver­sion like Arnie now as the Ter­mi­na­tor like I’m in a wheel­chair Ter­mi­na­tor, slow­ly mak­ing progress. There’s a cou­ple of oth­ers here that was inter­est­ing. RVR, we’ve already talked about in a way but WMC. This is anoth­er one where you want­ed to unflat­ten the prices and I know we talked about this on the show just last week. Steve asked about it. We thought it was West­ern Min­ing Cor­po­ra­tion and it was.

Tony  25:24

Yes.

Cameron  25:25

Yes, again it’s a sim­i­lar thing.

Tony  25:26

I think it’s a case where you need to use the three year to unflat­ten the graph or to make it more use­ful.

Cameron  25:33

Yes.

Tony  25:33

Yes, it’s been on a long, steep decline for quite a while.

Cameron  25:39

Yes.

Tony  25:40

And Yes, actu­al­ly, in this case, still use the high point from five years ago like I think I did with Kan­ga­roo Island too but Yes, if you just look at the five-year graph, you can’t see any­thing to put to anchor as h2. I dropped back to a three year and you can see that, again, the around the low point was May 2019 and that was at 70 cents and it’s now back up to $1.02. There has been some growth since then and you can see–

Cameron  26:13

What are you–

Tony  26:13

[Crossover 00:26:15] through the line.

Cameron  26:16

What are you using? Is h2 here?

Tony  26:18

Yes. This is a case of the buy line fol­low­ing the sell line. It would have been a sell. The l1 is May 2019. L– The first time l2 would have been used whether being March 2020 which would have made the sell around Feb­ru­ary or maybe even Jan­u­ary or Feb­ru­ary 21 but I can get a sell line– Sor­ry, a buy line after that using the July 2021 peak is the h2 Peak.

Cameron  26:48

And where’s the Bret­ta­la­tor Put this.

Tony  26:52

I don’t know.

Cameron  26:53

I’m just bring­ing it up.

Tony  26:54

Bret­t’s got a buy line much ear­li­er than me but he sits in a buy sit­u­a­tion accord­ing to him, I think, what’s he got? Yes, he’s got a sell price of 95 cents and it’s cur­rent­ly $2 and a half.

Cameron  27:07

Again, the les­son is to just think, drill down.

Tony  27:16

Yes, it’s just expe­ri­ence real­ly, the les­son is just you’ll notice after a while that you’ll see these stock graphs that fall off a cliff four years ago so use the three-year graph to see how it’s going.

Cameron  27:28

Yes, right. OK. Cool. That’s right. That’s good. Yes. Let’s move right along. You want to talk about cor­po­rate tax? We’ve got about prob­a­bly five min­utes before James is due to join us.

Tony  27:43

OK, let’s just run through a few things in. Cor­po­rate tax. We were talk­ing before about the Buf­fet Ratio and how say­ing that it should be viewed these days between through the lens of low inter­est rates and cor­po­rate tax rates because cor­po­rate tax­es were low­ered under the Trump admin­is­tra­tion.

There is now a bill before the Con­gress in the US which is a $3 tril­lion on infra­struc­ture bill but it also con­tains a cor­po­rate tax rate hike which isn’t receiv­ing as much price over here as the $3 tril­lion infra­struc­ture spend is. I guess the upshot is, I think Gold­man Sachs came out and said that if the bill got passed, they think it would decrease cor­po­rate earn­ings by 5% next year, that’s going to be a hit to the mar­ket. Obvi­ous­ly, if earn­ings go down and the PE ratio does­n’t go down, then what does­n’t change, then the share price will drop. Just want­ed to men­tion that that might be anoth­er fac­tor to take into con­sid­er­a­tion when we’re think­ing about the future that cor­po­rate earn­ings are prob­a­bly going to drop in the US regard­less of how well they do.

The oth­er thing that came out in the last week or so was US infla­tion num­bers which were north of 5% and expec­ta­tions of infla­tion which is anoth­er sur­vey that they do have of con­sumers is expect­ing that to get worse in the next 12 months. There’s a big debate going on around whether or not infla­tion is tem­po­rary or whether it’s entrenched, cer­tain­ly the con­sumer thinks it’s entrenched and some­times these things are just per­cep­tion. Also, after the con­sumer thinks infla­tion is com­ing, they may well try and save more and spend less, they may bring spend­ing for­ward to try and buy things now before they go up in price which means that they’re short of cash in the future.

There’s a few things going on here which are point­ing towards a bright future. I don’t think any­way nec­es­sar­i­ly going for­ward for the share mar­ket but one of the har­bin­ger of doom but these things are going on in the back­ground that we should be aware of.

A cou­ple of oth­er things that hap­pened dur­ing the week. We spoke about coal and ura­ni­um last week and how their three-point trend lines are going up which they are. One of the com­modi­ties stocks I did­n’t talk about last week which had been on the buy list up until a lit­tle while ago. I think per­haps even up until its last results which caused the share price to improve is South 32. S32 is the code which does have coal mines in its port­fo­lio but it also has– It also mines– They call it alu­minum but I guess it’s baux­ite and lead and zinc and all four of those are going up at the moment. It’s off the buy list. Now it’s got a QAV score of 0.07 the last time I had a look but peo­ple might want to and I own that too.

Don’t nec­es­sar­i­ly take that as a rec­om­men­da­tion but if there is a bit of a peri­od in the mar­ket where it does down­turn a lit­tle bit, this one might come back on the buy list.

What else do I want to say? I did want to talk again about Apol­lo tourism and leisure not con­tin­ue to poke the pig but I did­n’t men­tion when I was talk­ing about Apol­lo tourism last week that it has a share­hold­ing in a com­pa­ny called Cam­pli­fy which list­ed on the ASX and has done very well since list­ing and I think Apol­lo tourism owns about 17% of that. That will cer­tain­ly help their share price going for­ward too. That’s just apro­pos of our gen­er­al dis­cus­sion about Apol­lo last week.

What else in the com­pa­ny round up? Myer is prof­itable again but the num­bers aren’t in Stock Doc­tor yet. It’ll be inter­est­ing to see what hap­pens to their QAV score when that– When those num­bers get loaded. Mid­way, MWY has been out our buy list. I actu­al­ly removed it dur­ing the down­load over the week­end and mid­way for peo­ple who don’t know, it is a rel­a­tive­ly small wood pulp­ing com­pa­ny in Vic­to­ria. I’m not exact­ly sure whether it has a plan­ta­tion but it cer­tain­ly takes logs and pulps them and sells the pulp to paper mills. It seems like what– When I did a bit of research into the com­pa­ny because I did recall read­ing some arti­cles about lum­ber prices in the US drop­ping dra­mat­i­cal­ly. They had been going up quite strong­ly but now they’ve dropped back. It turns out that there is a lum­ber graph in Stock Doc­tor. I’ll just call up and get its code and also–

Cameron  31:55

Hard wood graph.

Tony  31:56

Sor­ry?

Cameron  31:57

The hard­wood graph.

Tony  31:59

Hard wood is it? OK. Do you have a code for it?

Cameron  32:02

No, but we were look­ing at it.

Tony  32:03

Yes, I’ll just call it some­thing [Crossover 00:32:05].

Cameron  32:05

Hard­wood and soft­wood.

Tony  32:06

Well, that’s an index Mun­di. Index Mun­di has in their sawn logs for hard­wood and soft­wood and their five year graphs are all sells at the moment but there is also if you’re going to Stock Doc­tor and just as we would for oth­er com­modi­ties, we can look up. Yes, there’s a lum­ber futures. LB# is the code and if we use that, that’s also– It’s gone past it’s sell line but it has turned upside so it may still prob­a­bly 100 points away from its buy but it’s below its buy price at the moment.

I’ve tak­en off Mid­way, I’ve said it’s an under­ly­ing com­mod­i­ty sell based on the lum­ber futures con­tract but there’s also anoth­er four of those ver­sions of that index Mon­day but they’re all in sell sit­u­a­tions but we’ll have to mon­i­tor that one going for­ward.

A cou­ple of oth­er quick updates. SRG breached its sell line for any­one who is inter­est­ed in SRG and then there’s one of the com­pa­nies on our buy list is min­er­al resources and I’ve put a ques­tion mark onto the buy list. It’s a min­er­al resource is part iron ore and like I said last week, I don’t real­ly have expe­ri­ence with these diver­si­fied min­ers and whether we should take them off.

Oh, that’s right. The thing with min­er­al com­modi­ties is it’s also a min­ing ser­vices com­pa­ny and pro­vides crush­ing ser­vices to oth­er com­pa­nies, from mem­o­ry. It’s not just in the com­modi­ties game but Yes, most of the prof­it in the last year has come from com­modi­ties, some­thing like about maybe three quar­ters, even two thirds, three quar­ters and if I have a look at the com­modi­ties, it’s gold and lithi­um, as well as iron ore. There’s a cou­ple of those which are not in the sell cat­e­go­ry, even though the iron ore is. I call it out. I’m not going to sell it yet as a three-point sell but the price has retreat­ed. Maybe I should be tak­ing these diver­si­fied min­ers and sell­ing them based on the iron ore price.

If– I know we’ve got some peo­ple in WA with min­ing expe­ri­ence, I’d be inter­est­ed to know what they think on these diver­si­fied min­ers and the last thing I want to talk about– Cam, I know it’s prob­a­bly get­ting close to the time when our guests arrives but my– I just want­ed to men­tion my per­son­al returns because I know that we always talk about a 19.5% return over 25 years. Well, prob­a­bly about 27 years now prob­a­bly since we start­ed doing the pod­cast. Any­way, my returns have dropped back to 19%. I just want­ed to high­light that for trans­paren­cy, part­ly because of the hit that a large part of my port­fo­lio took when iron ore stock start­ed to decrease before we sold them so they– I think Fortes­cue dropped from like 25 or $26 back to I sold it $20.50 or there­abouts and that was a large part of my port­fo­lio as was cham­pi­on Iron was in there as well.

And plus, I’m liv­ing off the div­i­dends and I’m not rein­vest­ing them the way I was now that my both Jen­ny and I aren’t work­ing. I just want­ed to call that out by point­ing out a cou­ple of things. I did­n’t call out last year when that was above 19.5% but I did want to call it out now and sec­ond­ly, over that same time peri­od, which is a long time, the All Ords accu­mu­la­tion index was 7%. It’s near­ly triple. I know we talked about dou­ble mar­ket but in this case, it’s still even though it’s fall­en slight­ly back com­modi­ties route, it’s still near­ly doing triple the awards.

Cameron  35:34

OK, good. Well, thanks for the trans­paren­cy update. I’m not sure it makes much dif­fer­ence for most of us between 19 and 19 and a half per­cent but as long as you feel good about get­ting that off your chest.

Well, wel­come to our guest this week. James Williamson from Went­worth Williamson man­age­ment. I’ve got you from LinkedIn, James, list­ed as founder, Exec­u­tive Direc­tor and Chief Invest­ment Offi­cer. On your web­site, it just says fund man­ag­er. You’re obvi­ous­ly very hum­ble when it comes to how you present your­self on the web­site. I read an inter­view with you in the Finan­cial Review. I think back in June that I real­ly enjoyed. I thought, Oh, here’s what– He’s one of us. We need to get this guy on to talk about val­ue invest­ing. Wel­come to the show and thanks for tak­ing the time to join us. Where are you based James?

James Williamson  36:26

We’re in Syd­ney. They’re a rel­a­tive­ly small team. We like to stay in that lit­tle hub of Syd­ney in a good lit­tle square.

Cameron  36:32

Are you enjoy­ing your new free­doms in Syd­ney? Are you get­ting out and hav­ing pic­nics and stuff like Tony did yes­ter­day?

James  36:39

Yes, I’m lucky. I’m liv­ing in Man­ly. I tried to get out and have a swim each day and I get into the ocean and you’re on your own out there. It’s fab­u­lous. Def­i­nite­ly, I think look­ing at Man­ly and just look­ing out­side too, you can see a lit­tle bit of– You can see peo­ple’s faces, they can– They look a lit­tle bit bet­ter. There was a time there, a month or so ago, peo­ple looked a bit down in the dumps.

Tony  37:01

You’re not sup­posed to see their face. They have to be wear­ing masks but any­way.

James  37:04

Yes, well, Tony [Inaudi­ble 00:37:09]. There’s so many oth­er peo­ple walk­ing around with­out the masks.

Cameron  37:13

Yes. Let’s start with a lit­tle bit of your back­ground. James, judg­ing from the accent, you’re not from around these parts.

James  37:21

Yes, that’s right. I was born and did my under­stud­ies in South Africa and I went to Lon­don where I met my wife and I arrived here in the late 90s and I worked for a group called mer­can­tile mutu­al invest­ment man­age­ment, you may remem­ber them.

Tony  37:37

I do, yes.

James  37:38

There’s a well known fig­ures there, David Par­adise, Peter Mal­let, John­ny Mor­gan, Greg Matthews [Sysco 00:37:45], a bunch of guys all went and did dif­fer­ent things after­wards. It was a nice les­son. The late 90s is a lit­tle bit like I see things now and they ran a growth process– Growth at a rea­son­able price and when you’re a big fund, you’ve got to have a process when you pre­tend to every­body that is always going to spit out the right answers and of course, it does­n’t in dif­fer­ent envi­ron­ments. It cer­tain­ly did­n’t when things changed. It was a very nice les­son for me.

There was a gen­tle­man there who taught me a lot, the late brain [Sysco 00:38:16] and the Lubin­sky [Sysco 00:38:16] and knew what I was and what I’m not and that’s half the bat­tle here and my career went on from there but I moved to oth­er coun­tries for quite some time. Before com­ing back here.

Cameron  38:28

In the Fin inter­view, I read a great line from you. You said, in the late 1990s I was watch­ing the late Simon Marais, I think it was in  Allan Gray­when they lost all their clients, bar won and I was think­ing, man, I want to do that. I want every­one to dis­like me and then be right. Is that what it takes to be a val­ue investor, James?

James  38:51

Some­times I’m too hon­est and I just got it, but there was those days because when I moved back from Aus­tralia to South Africa, I moved from the buy side to the sell side and of course, all this played out. You remem­ber, we had the Asian cri­sis here which impact­ed Aus­tralia and then with the y2k and the tech bust but I saw these guys back then and they were going bank­rupt and all their clients were leav­ing them but I also see them stick­ing to their guns what was sen­si­ble and I have to say, as a young ana­lyst, as the stocks were declin­ing, I would use a dif­fer­ent method­ol­o­gy.

I would say, Oh, I used to pre­tend to myself I could do a 10 year plus DCF back in the day and then I was doing PEs and then I was doing– Even­tu­al­ly I was doing price to book for a retail­er, pulling out all the tricks out of my tool­box to explain the price and the sell side ana­lysts do this. I don’t blame them because they’re oth­er pres­sures but I did it too. When it starts to go back up, then you find a rea­son to explain that price and the cir­cus con­tin­ues but I did a bit of this but I did see these guys and I quite admire them and I saw it all through in quite an extra­or­di­nary time and I was like, no this is– I know what I am, I can’t do this and I was made and although I stayed on the sell side for quite some time and in South Africa, I start­ed to cov­er lux­u­ry goods over­seas, Richemont, and LVMH, and then I start­ed cov­er­ing glob­al bev­er­ages and the next minute I was in Lon­don, run­ning glob­al bev­er­ages because the head of research was a French guy. He said, there’s no way, it’s prob­a­bly right. The South African can cov­er lux­u­ry goods is I think he’s total­ly right.

 

I stuck to a very val­ue based approach which means try­ing to look after the– Look ahead over the next half, for the next year’s earn­ings. I real­ly was try­ing to think, who’s bet­ter posi­tioned over the next three to five years. It is quite rare, we’ve been pushed into be more and more short term focused. I would say now more than ever was, but it was def­i­nite­ly preva­lent back then and the sells teams dic­tat­ing with the mon­ey goes, you can see why that hap­pens but that def­i­nite­ly shaped me. As I said, the late Simon Marais actu­al­ly end­ed up work­ing for him and he was, quite unre­lent­ing in what he believed was right and what was wrong and that also brings you down as a val­ue investor.

Some­times you have to stand up, uncom­fort­ably. Nobody likes con­flict but some­times you have to stand up and say, this is wrong. I find that’s also been lack­ing this last while, so I learnt a lot from him but I’ve got my own busi­ness. Now, actu­al­ly, his son works for me which is a nice touch they’re con­tin­u­ing on and of course, I feel a lit­tle bit like they did in the late 90s because we’re there and I think this is the late 90s but on steroids, real­ly, because we haven’t just had this growth bias which has been quite extra­or­di­nary. I mean, you just run through some of those com­pa­nies and they are a long way from mak­ing prop­er cash flow and also you’ve had this huge preva­lence of index funds which is mon­ey and its mon­ey pour­ing in and of course, it’s a lot of retail mon­ey, too.

We know that’s his­to­ry too but that’s also pour­ing in. I can move around quite a bit but I find that slith­er the mar­ket that’s just out­side the index has­n’t seen that. Give  you an exam­ple, like a Serv­corp which I think isn’t– He’s good– I think Alf, what­ev­er you might think of him because he’s quite col­or­ful char­ac­ter. He’s built an extra­or­di­nary busi­ness that’s incred­i­bly resilient and prob­a­bly best in class in the world in what he plays in but it’s not caught up in US index flows.

I think if you look there, there’s a cou­ple of rea­sons why it’s not in index. One is because you’re on so much the stock and there’s pros and cons on that but I think there’s a slith­er that’s still val­ue. I say myself, it’s not easy out there. You have to real­ly nit­pick because a lot of it looks a lit­tle bit heat­ed, espe­cial­ly if you want to go nor­mal, mul­ti­ple nor­mal mar­gin, just a plus sim­ple thing. It’s hard because mul­ti­ples have gone up and some mar­gins out there look like they ele­vat­ed rel­a­tive to his­to­ry. If you apply some sim­ple val­ue invest­ing prin­ci­ples, it does make it quite dif­fi­cult.

Cameron  43:03

But this time, it’s dif­fer­ent, James.

James  43:07

Yes, I have been told that.

Tony  43:09

We print­ed that in our cof­fee mugs, James.

James  43:13

Yes.

Tony  43:14

No it’s not.

James  43:15

Yes. Look, what the big– The thing is, just con­cerns me, nobody likes a cred­it crunch because that is very seri­ous and we had ele­ments of that in ear­ly 2020. Right? The begin­ning part felt like a bit of a cred­it crunch could be on its way and every­body los­es. I think the best sce­nario for us is some of the heat comes out of these over­heat­ed areas or just flat and in real terms, you don’t do a hell of a lot for for quite some time and I think that’s going to come a shock to some peo­ple because they’ve done so well, just doing fol­low­ing the nor­mal trends or spine big­ger stocks, it’s been seem­ing­ly easy but if you go back in time, there’s– You can lose a decade.

I think we’re prob­a­bly head­ing some­where there. I actu­al­ly feel that inflec­tion point was prob­a­bly late, the set is almost at the last quar­ter of last cal­en­dar year. It does­n’t feel like it because you had these swirling winds all the time but I think if you look back that could have been a bit of an inflec­tion point but time will tell the rea­son was men­tioned the cred­it crunch of course, is because I– There’s so much data out there, it’s fright­en­ing and even­tu­al­ly this– You got to pay it back or you accept much high­er infla­tion. That’s the two things you’re going to have to face.

Tony  44:27

And poten­tial­ly high­er inter­est rates as well.

James  44:29

Well that would fol­low lat­er. 100%. Can you imag­ine?

Tony  44:34

Oh, I don’t have to imag­ine. I’d been through it.

James  44:37

Yes.

Tony  44:38

It’s not pret­ty.

James  44:39

It’s not pret­ty.

Tony  44:40

First house I bought was on a mort­gage with 15.75% inter­est on it. That was the low­est in the mar­ket.

James  44:48

If you say that to young peo­ple today and the pres­sure for them or the FOMO to go get their first mort­gage is so extreme and what they say­ing is, no, I’ll be OK but what if it goes up 1% and you’re not OK and I said, I’m going to be OK. Got more and more mon­ey. I’m going to have bonus­es. I’m going to do this. They don’t know there is no safe­ty net built into the bud­get team, right? If there is bud­get­ing going on.

Tony  45:11

Right. Yes.

James  45:12

I doubt.

Tony  45:13

Yes. What hap­pens if the wife has a baby and there’s one income com­ing in?

James  45:17

Some­body gets sick. In those days, inter­ests were high­er and remem­ber in South Africa to do a dou­ble dig­it, my first house was also the same on those rates and they used to bud­get prop­er­ly because used to move around, too. It seems to have gone out the win­dow a lit­tle bit.

Tony  45:35

Yes, I noticed when I was read­ing your bios and the arti­cles you’ve print­ed, not only is your style val­ue focus, but it’s also con­trary and maybe you could tell us a bit about why con­trary and what’s an exam­ple of that?

James  45:46

Well, we are real­ly quite a rare breed aren’t we? So Con­trar­i­an is we– I’m always inter­est­ed in some­thing that’s hat­ed and this flies direct­ly in the slice of this last cou­ple of years of what we’ve seen. The more it’s loved, the more I’m like, I don’t want to look at it because it might go up a lot from now but the chances of it being good val­ue have prob­a­bly pret­ty slim and these guys are good at pop­ping on and hop­ping off and all that that’s fine but real val­ue, it’s prob­a­bly slim but if it’s real­ly hat­ed, some­times, not often, but some­times there might be some­thing inter­est­ing there left when it’s a frac­tion of what it nor­mal­ly be almost and I’ve got some exam­ples, things that are in the ASX 300.

At one point, they were those stocks that I see today, in there today and there was­n’t real­ly much of a busi­ness mod­el in there, they cer­tain­ly weren’t gen­er­at­ing cash flow but there was some hype and years lat­er when they’ve fall­en to tiny mar­ket caps, when they’ve final­ly start­ed to sort them­selves out and they actu­al­ly eat some­thing, they start to make a lit­tle bit of mon­ey or very close to then that is, nobody’s inter­est­ed and you almost got to relaunch your­self in some respects to get your­self going but if there’s some­thing, a good RP in there or good peo­ple in there. It’s nor­mal­ly a jour­ney, these things, then the Phoenix can rise again but it’s tough that one, but we def­i­nite­ly have a look and I look at it in reverse.

I remem­ber chat­ting to some finan­cial advi­sors there, some­times they run their own stocks and they go get all the bro­kers say, buy. Just sev­en out of sev­en of the bro­kers com­ing to stock say, it’s a buy, must be a buy the stock. I think that’s a ter­ri­ble way to invest. Actu­al­ly look at it in reverse. Actu­al­ly, if they all sells and they all think it’s the end of the world and I go back to my his­to­ry and now ana­lysts think, well, if they’re all sells and they’ve slashed the price process and that will every­body’s embar­rassed and they’ve done so bad­ly and the sells peo­ple are giv­ing them a hard time. Go look there. It’s– You should prob­a­bly hunt around there, you got a bet­ter chance, you just don’t invest for the short term thing. I think three years, just in case some­times they run faster than you think but some­times it’s three years just say get your psy­chol­o­gy of your brain, right?

Tony  48:06

How do you approach the psy­chol­o­gy of buy­ing a stock in that sit­u­a­tion but then it goes down low­er  or it takes two years out of those three years to come good again?

James  48:15

I think that’s it comes down to back­ing your due dili­gence or your research that you’ve done. The com­plete oppo­site to what I’m say­ing is yet from a mate in the pub and the stock goes down, you don’t like the guy any­more and you sell your stock and a lot you don’t know work and that should real­ly both­er you.

Me doing work and under­stand­ing the fun­da­men­tals go down typ­i­cal­ly up are more. It’s a hor­ri­ble feel­ing that if after three years you think you’ve made a mis­take, that’s dif­fer­ent and hope­ful­ly make few­er of those but I have made mis­takes but most times, if you’ve done your work your home­work prop­er­ly, you’re going to be OK. Some­times, and I hope there’s also rare, some­times you have to do more work in it than what you expect­ed. Like real work, put peo­ple on the board, get a lit­tle bit more involved but that also means that you’ve mis­judged some­thing but it’s fix­able and the worst case is you’ve just made a total mis­take and that’s not nice but I would say by far the major­i­ty of the time these things turn and all of a sud­den end up being mar­ket dar­lings your­self and you’re like I can’t make good mon­ey is going up 100% again, and you can’t under­stand it. The sen­ti­ment seems to shift quick­er than you think and quick­ly.

Tony  49:22

What would be a good exam­ple of that kind of turn­around that you’ve been through?

James  49:25

Oh, well, there would be plen­ty. I mean, I remem­ber I was buy­ing Wal­ly at one stage at $3. I mean, that was a dar­ling then it got– It was total­ly sold down. Then it went back up again and now it’s time to have anoth­er look would be at an exam­ple of that one that if you’ve run through the port­fo­lio now, one of our big­ger hold­ings now. Fleet­wood would be one. Used to be an ASX 300, used to be a $12 stock.

That Searip­ple, it’s got three divi­sions in there but Searip­ple if you look through its his­to­ry trades, it’s got 35% occu­pan­cy rates here. If you go back to 2012, much high­er occu­pan­cy lev­els. 80% used to gen­er­ate $15 mil­lion. Today gen­er­ates $10 mil­lion. Even there is– Should have held it when it was $12 run­ning a deficit of oth­er earn­ing occu­pan­cy lev­els? No. Should you be look­ing at it now when it’s low occu­pan­cy lev­els? Def­i­nite­ly Yes.

That would be a bread and but­ter invest­ment for us. It’s got $16 mil­lion net cash which is rough­ly 28% of its mar­ket cap. It’s got 24% of its mar­ket cap in frank­ing cred­its, three sol­id divi­sions in there or mak­ing mon­ey trad­ing on 12 times earn­ings and can grow espe­cial­ly with the mod­u­lar build­ing busi­ness and sim­ple sites and of course, I’m watch­ing this Scar­bor­ough FID on the Wood­side very close­ly because that’s impor­tant for that. I also own Wood­side. It could be a bit longer.

Well, and of course, I owned MRM off­shore which has also been a jour­ney. I mean, that was a bil­lion-dol­lar com­pa­ny at one point in time, also very much loved. It was trad­ing on high earn­ings mul­ti­ples on peak mar­gins in a very cycli­cal ener­gy indus­try, did a huge acqui­si­tion at the peak and took lots of debt. It’s almost like com­mit­ting harakiri but today it’s the com­plete reverse. Its mar­gins have been as low as you’ve ever seen in this indus­try ever, trad­ing on a third of its tan­gi­ble assets which have been writ­ten down about the newest fleet in the world and looks like there’s a cou­ple of FIDs in our region­al oil and gas but of course, you got this wind projects com­ing up to you which is just as good.

Off­shore winds huge the­mat­ic and that needs to be ser­viced too. Again, you’ve had these com­pa­nies that were stars at one point in time, very preva­lent in port­fo­lios and got sold often for­got­ten about com­plete­ly out of the index, clear­ly. I’m hop­ing they will rise again and get back in and attract those kind of peo­ple again, and then I’m hap­py to say good­bye. The oppor­tu­ni­ties are there. I just think in this envi­ron­ment, you’re just forced to go deep­er, oth­er than oil which I think Wood­side is a gen­uine oppor­tu­ni­ty in the large cap space. I think and some of the oil guys, you I think you just have to go deep­er, it’s just the way it is.

Tony  52:05

Well, what met­rics do you use to do eval­u­a­tions? That sounds like it’s a whole suite of them rather than just price to book or dis­count­ed cash flow?

James  52:13

One thing we’re not gen­er­al­ly is– I can do this job for hope­ful­ly for quite a long time but at my com­pa­nies, my cash flow in that time. Some of these enti­ties I see out there, I think you’re just dream­ing, and every­thing has to go beau­ti­ful­ly to reach these val­u­a­tions and val­ue guys are not that you can square away a lot of the mar­ket just by say­ing that. I’m going to say use the word nor­mal­ized earn­ings because a lot of these com­pa­nies have his­to­ries and on a nor­mal­ized earn­ings mar­gin for what they do. I want to be paid about 12 times earn­ings. 10, 11, 12, 13, I want those are my num­bers I’m com­fort­able with. I don’t want to be pay­ing 25, 30 times, these kind of num­bers because a val­ue guy looks for cash today.

He plays less focus on cash that’s in 10 years, 12 years because we know and can see you’ve around long enough to know that stuff hap­pens in between now and then and one cash today, I do have a good look at the bal­ance sheet and for var­i­ous rea­sons, one is, I’m a lit­tle bit scared of too much debt. When­ev­er I’ve been com­plete­ly carved out. It’s because there’s of debt. I’m care­ful and if there’s a good tan­gi­ble asset back­ing, I’m thrilled. Does­n’t always be like that because depends on the busi­ness but if there is, it just makes me feel hap­pi­er. That’s not to say I look at that and say, well, if it all goes pear shaped, that’s fine, you still lose mon­ey but you have some sort of say safe­ty net at least but yes, I would say that a typ­i­cal val­ue guy does­n’t want to pay much– Too much today. He would pace quite a bit of empha­sis on the bal­ance sheet and some of us, the tra­di­tion­al­ists pre­fer low­er gear­ing lev­els, some tan­gi­ble asset back­ing depend­ing on the indus­try.

And the way I ratio­nal­ize it and I think many of us do, is that our ratio­nale is our down­side also low­er if we get it wrong which from time to time hap­pens. Your real down­side where you actu­al­ly have to win us made that point about/ Some­times I’ve made a mis­take that’s real risk. We’re actu­al­ly crys­tal­lize a real loss.

Tony  54:26

What hap­pens to all of us not even buffer gets more than six out of 10, right? It’s going to hap­pen.

James  54:31

I agree. More than per­cent­age. I think if you get six or sev­en out of 10, right, I think you’re doing well. Dur­ing this time as a val­ue guy clear­ly obvi­ous­ly has not been easy time, espe­cial­ly in that area, we have to go hunt­ing the most because I start­ed look­ing there very active­ly 16, 17 because you could see the flows, a lot of my peers went bank­rupt that it’s just car­ried on for sev­er­al years.

Tony  54:52

How impor­tant is man­age­ment to you? Do you inter­view man­age­ment, you sit down with them, try and judge them some­how, look at their plans. What do you do there?

James  54:59

As I Get­ting all the you real­ize how impor­tant it is but it’s hard, I don’t need to tell you that. I had this one CEO I backed did very well, backed the same CEO in a dif­fer­ent cir­cum­stance. Did ter­ri­bly. It’s some­times hard to go back through some­one’s his­to­ry and say how much was luck? How much was bad luck? How much did they gen­er­al­ly good? There is that but yes, it makes a huge dif­fer­ence to find that right per­son and I’ve expe­ri­enced some excel­lent man­agers, but equal­ly, there’s been times where I’ve thought, Oh, my good­ness, how did this hap­pen? And also, you look at the board and some­times, just to make sure because this board going to things go awry. They’re strong enough too but I’ve been sur­prised there too but it’s a cru­cial thing to look at and yes, we inter­view them. 100%.

Tony  55:42

In terms of val­ue place, would you ever look at a growth com­pa­ny that was depressed? Like, the bot­tom of the COVID Out­break– Com­pa­nies like After­pay were down to 20 bucks a share or what­ev­er? Would you ever look at buy­ing some­thing like that or are you just strict­ly look­ing at cash flow?

James  55:58

The answer would be yes, I would look at it, After­pay, they have done a bril­liant job. Full cred­it to them. I nev­er got those any­where near those val­u­a­tions. I think a lot had to go right and I think that to some extent being bailed out yeah?

I don’t want to talk about After­pay any­more. You have to assume a per­fect sce­nario for like 15 years to get to those num­bers but yes, there was– I mean, I’ve got a posi­tion in our fund that oth­er busi­ness that, in my mind is clear­ly a growth stock and it was backe­door list­ed. Had all the hype with ASX 300, chem­i­cals, Fire retar­dant for the US Marines there were nowhere near there back then. Absolute­ly not. Now, it’s a tiny lit­tle busi­ness. I went and had a good look. I sent a con­sul­tant to the US to have a look at him. By that stage, they’d move the chem­i­cals into the bed­ding indus­try and who does that? It was a 50 mil­lion mar­ket cap com­pa­ny and I send some­body there for two weeks but I man­aged to ver­i­fy it. They’ve had real IP and phase change mate­r­i­al and fire retar­dant.

Phase change mate­r­i­al was their first rev­enues which means a cool­ing chem­i­cals. In some big retail­ers, in fact the biggest in in the US in on the bed­ding indus­try, first of all, and it looks like now after two and a half years of hard slog. Got recap­i­tal­ized that busi­ness and put some peo­ple on the board and as we said today, they’re mov­ing into dif­fer­ent ver­ti­cals, with dif­fer­ent play­ers tak­ing that coolant to bal­lis­tic vests and into head­ing into sports­wear and now looks like in the bed­ding indus­try, the oth­er sock on the bed read­ing with fire retar­dant and also work­ing on var­i­ous tex­tiles fire retar­dant.

There was noth­ing in that busi­ness when it was an ASX 300 stock, lit­er­al­ly, because I went back and had a look at some of those things that were said at the time and I’m like, my God, how did that hap­pen? But I looked down where it is right now and I’m say­ing, OK, and you start doing the right thing, you get a prop­er board, you’ve got prop­er rev­enues, prob­a­bly not going to be talk­ing about a quar­ter, prob­a­bly mak­ing mon­ey, some nice con­tracts sit­ting there which are immi­nent and that’s a prop­er thing and it’s got prop­er IP into two very big cat­e­gories and top­i­cal cat­e­gories and also mov­ing on the eco  side tak­ing from oth­er hard earth chem­i­cals which is going to get leg­is­lat­ed but oth­er than some rats and mice fluff­ing around, it’s just– It’s a lit­tle bit lost but that’s fine.

As soon as you start, you need to con­sis­tent­ly kick your goals and you’ll be found and off you go again but I’ve played quite a big role there and some­times I won­der, was it worth it? I’ll tell you in five years’ time.

It’s been a lot of work.

Tony  58:42

Which com­pa­ny is that called?

James  58:44

It’s a com­pa­ny called Alex­i­um Inter­na­tion­al and real­ly they’re– It’s about 20 odd chemists sci­en­tists that sits in Korea and South Car­oli­na. It’s list­ed here. It’s a com­plete anom­aly. I think for the aver­age guy to go ver­i­fy all of that is next to impos­si­ble and real­ly, if you’ve done all that dam­ag­ing thing in the past even though it’s real new site now peo­ple don’t tend to believe you but they’re start­ing to work out some decent sells that were very recent­ly start­ing to come through so I think that counts and I think that they’re start­ing to get noticed again but they just got to keep on deliv­er­ing on the num­bers then I actu­al­ly don’t real­ly care. Just keep on doing that.

It’s a strange thing. I don’t real­ly want it just to run up high­er than what it is. Do you have this ginor­mous thing I– Actu­al­ly, there’s a part of me that just want­ed to be. The share price to move sen­si­bly in build­ing up as they earn the right– Have the right share price, that would be my pref­er­ence. If it spikes up and get stu­pid, I have to sell it and make a big prof­it. That is a part of me, I think so. This is your [Crossover 00:59:47].

Tony  59:48

I know that you’ve tak­en posi­tions in ura­ni­um, which is some­thing that we’ve talked about on this show recent­ly because it’s start­ing to spike up. Is there a risk in being too ear­ly with an area like that?

James  59:58

Pos­si­bly. I don’t think we’re too ear­ly. We put our posi­tion. We sold out by the way.

Tony  1:00:03

OK.

James  1:00:03

We brought our posi­tions in 2019. We just thought it was dead point. That sounds crazy now because these things are on Red­dit and mean stocks like these, it’s attract­ing all this hype now.

Tony  1:00:15

Yes.

James  1:00:16

And I’ll explain after­wards why we sold out but back then there was none of that. I was almost embar­rassed to say that we’re in ura­ni­um. It was like just this val­ue guy game. Val­ue is almost a dirty word for not per­form­ing. Val­ue guy buy­ing ura­ni­um, why are you buy­ing ura­ni­um? Every­body’s buy­ing this. Why are you buy­ing some­thing nobody wants, in our mind, in our fun­da­men­tal mind, it was just a mat­ter of time before some of these guys were going to get con­tract­ed. In my mind, that was a five-year play. Hon­est­ly, these things take longer than you think.

Luck­i­ly, with ura­ni­um, there’s quite a bit of data out there. I was pret­ty con­fi­dent that they had to start to reen­gage in in a rea­son­able peri­od of time, which is my mind five years and I’ve been a bit– The mar­ket always antic­i­pates a lit­tle bit ear­li­er. That was also in my mind. We start to build posi­tions. Now, a man­date which I need to look at is, I need to invest in Aus­tralia, New Zealand, which is quite prob­lem­at­ic when you want to go to ura­ni­um because you’re buy­ing juniors. Some guys haven’t even got it all set up to be min­ers yet, they still got to jump some hoops. You’re buy­ing the stuff in the ground, it’s not even get­ting mined.

Pal­adin was prob­a­bly the best out of it because the his­to­ry but there’s some good guys there, boss and femi and so forth but I mean, there’s a lot to do. Let’s make no mis­take and I decid­ed that all five of these things and I expect­ed cap­i­tal rais­es which they were and you take small posi­tion or them as they come you go, you pre­pare your­self for this jour­ney. What I real­ly want­ed was Chemi­co. Real­ly the low cost min­er and there’s two low cost guys like Kozaks and Chemi­co in Cana­da. I real­ly want­ed Chemi­co and I would have got a lot big­ger. I bought this up to 5% in our fund but real­ly, if I could have got Chemi­co, I would have got big­ger because I saw them as much low­er. They were low on the cost curve and prop­er­ly estab­lish mine mak­ing cash flow strong bal­ance sheet but I had to do with what I had in front of me and our tar­get prices were on con­tract prices which we thought were pos­si­ble and putting a rea­son­able guessti­mate on a DCF on there, there was no way around it.

That’s how you try to come to your– And I’m telling you now, these prices are nowhere near what I think are rea­son­able con­tract prices but I’ll look out for those guys, I’m wrong but I don’t know what peo­ple are tap­ping into their mod­els. You have to put in pret­ty hot prices in there to get to these oth­er prices. It’s clear­ly become a trend and it’s such a the­mat­ic.

Tony  1:02:47

Yes, it has. I mean.

James  1:02:48

And when you when you fit­ting peo­ple’s the­mat­ic on how they see the world, it can go any­way.

Tony  1:02:53

The ETFs which are pop­ping up to buy ura­ni­um and hold ura­ni­um is doing that to a large extent. Yes, and I just won­der because like as you say, how­ev­er many years ago when you first start­ed buy­ing ura­ni­um, no one was talk­ing about ura­ni­um.

Cameron  1:03:06

Tony wants to know if you watched the rug­by on Sat­ur­day night?

James  1:03:08

I did and my wife and my chil­dren are Aussies but it’s very hard for me to not sup­port the Spring­boks, I was the Spring­boks sup­port­er but I’m fit torn, I real­ly liked the Spring­boks because I want to hap­pen in with this change in the side and some of those guys where they’ve come from and what they did to get in that side but at the same time, I think Aus­tralia needs a wheeze once, I’m not real­ly fussed. It was a good guy.

Tony  1:03:08

Thank you.

Cameron  1:03:49

Tony agrees. All right. Well, lis­ten, just before you go, James, I’d like to ask two ques­tions. Num­ber one, if you had one piece of advice for peo­ple who are learn­ing to become val­ue investors, what would it be?

And then sec­ond­ly, I’ll get you to just tell peo­ple, if they want to check out your fund, what they should do?

James  1:03:57

I guess the most impor­tant thing I would tell peo­ple is do your own home­work and trust your instincts. I think as a val­ue investor, you must under­stand human psy­chol­o­gy and there is this thing with humans say, we– You feel more com­fort­able in a crowd and that’s just how we’ve been made. You got to resist that and just do your own home­work and see if it stacks up. That’s my advice to young val­ue investor would be.

In terms of us, our web­site’s wentworthwilliamson.com.au. We’ve got our deep val­ue fund there and we’ve also got a cred­it fund which we lend mon­ey to doc­tors and den­tists because they’re a great cred­it. You’ll find our val­ue fund on there and we’ve got our quar­ter­lies on and insight pieces and so forth on there.

Cameron  1:04:46

Is there a min­i­mum invest­ment that you were look­ing for?

James  1:04:49

Yes, every whole­sale. It’s 100 on both. 100 count both.

Cameron  1:04:54

Right.

James  1:04:54

Thank you.

Cameron  1:04:54

All right. Well, thanks again for tak­ing the time to chat. Con­grat­u­la­tions on the fund and stay safe in Syd­ney.

James  1:05:01

Thank you. Thanks, Cameron and Tony, thank you so much for your time.

Cameron  1:05:05

Well, that was nice. Nice fel­la. Let’s quick­ly try and get some of the ques­tions done. This first one is from Dun­can. He post­ed on Face­book on the 14th of Sep­tem­ber. It was last week but does any­one have any idea why BLX fell near­ly 7% today? You’re famil­iar with BLX, Tony?

Tony  1:05:27

Yes, Bea­con Light­ing. Yes, I’m not sure either but it did go ex-div­i­dend on the night. That could have led to some of the sell­ing.

Cameron  1:05:34

Right.

Tony  1:05:35

But Yes, I don’t know. Sor­ry.

Cameron  1:05:36

This is part of this thing you’ve been talk­ing about recent­ly, where we have to fac­tor in div­i­dends going ex.

Tony  1:05:43

Cor­rect. Yes, and not just the div­i­dend itself but I think as I said before, some­times they just keep on sell­ing because if they were hold­ing it for div­i­dend rea­sons, not cap­i­tal growth rea­sons, they pre­pared to sell and move on to the next div­i­dend com­pa­ny.

Cameron  1:05:57

Yes, div­i­dend har­vest­ing. I think you call it.

Tony  1:06:00

Yes.

Cameron  1:06:02

Yes, I looked at BLX. I think at the time, I’m just going to try and find this post. Yes, I did pick up the div­i­dend at the time. The div­i­dend was 4.6 cents and the x date was the 10th of Sep­tem­ber.

Tony  1:06:22

I’m just look­ing at the share price now and in Bret­t’s spread­sheet and it’s almost back to what it was at the end of August. It’s one cent shy. That’s it. What­ev­er hap­pened. It’s right­ed itself again.

Cameron  1:06:32

Right. Again, just the les­son for all of us is keep an eye on those div­i­dend dates.

Tony  1:06:39

Yes and fac­tor in the– If you’re a share­hold­er, you’re receiv­ing that div­i­dend even though it has­n’t hit your bank account yet. Fac­tor that into your cal­cu­la­tions.

Cameron  1:06:47

It would be real­ly nice if Stock Doc­tor could throw those on the chart so we can see what is going on.

Tony  1:06:55

We could ask Brett but I think he’s done enough work for us this week.

Cameron  1:06:57

All right. It’s a good one. Leo on Face­book — bought CDM and then on the 12th of the night then on the 13th of the 9th, he went ouch 10% down today. I’m going to wait and see if it bounces back tomor­row. Hard to decide on rule num­ber one when just bought sell line is still hold­ing on any thoughts?

Tony  1:07:18

Yes. Again, this is a Cadence Cap­i­tal which is an LIC, I actu­al­ly have been tak­ing it out of my down­loads because it’s an LIC but just dig­ging into it a bit. I don’t think it pays a div­i­dend. I’ll just have a quick look for it on Stock Doc­tor. It may not be div­i­dend relat­ed in this case.

The first thing I always look at is when it went ex-div­i­dend. Oh sor­ry, this one does pay a div­i­dend but it has­n’t been paid yet. 18th of Octo­ber is an ex div­i­dend so I don’t think it’s div­i­dend relat­ed but I did notice in some quick research I did today is Cadence has some­thing like 18% of its port­fo­lio invest­ed in a NASDAQ com­pa­ny. TMC is the code which list­ed on the NASDAQ and I noticed that it’s been quite volatile and did drop did go up and that was the birth dropped down again. That could be behind the move­ment and Cadence’s share price.

Cameron  1:08:08

Well, I guess he bought it. I don’t know when he bought it because it looks like the 12th was the week­end, I think yes. 13th was Mon­day. Closed on the 13th. Around about $20. It’s cur­rent­ly at a $16. I did just notice that on the home­page of CDM on Stock Doc­tor does have this next declared ex div date thing in the box num­ber two there under star income cri­te­ria. Is that nor­mal? They tell you the div­i­dend is there. Is that when you find it?

Tony  1:08:41

Yes, that’s where it says the next div­i­dend date. In this case, it’s help­ful because it’s com­ing out but if we look at a stock that has declared a div­i­dend, it’ll have the date be March next year. If you want the day that went ex-div­i­dend, you need to go into the finan­cial state­ments and then go down to the income sec­tion and you get the ex-div­i­dend date there.

Cameron  1:09:02

Right. No easy way to find that?

Tony  1:09:06

No.

Cameron  1:09:07

And one thing that you point­ed out to me this morn­ing is with these licks, tak­ing them out is that you actu­al­ly take them out of your spread­sheet when you iden­ti­fy a LIC so it does­n’t show up.

Tony  1:09:18

I take them out of man­u­al­ly– I take the ETFs and licks out of man­u­al­ly entered data so that when I do a down­load, Cadence cap­i­tal, for exam­ple, comes up with errors when it tries to find it in the man­u­al­ly entered data sheet and I just know straight away then it’s an ETF or a LIC and I just delete it.

Cameron  1:09:34

Right. What I did with this morn­ing for anoth­er one is I just cod­ed it and col­or cod­ed it red. The next time it’ll show up as that and I’ll know that there’s some­thing fishy about it.

Tony  1:09:46

Yes, and look, to be fair, def­i­nite­ly with the ETFs. After I had looked at those, their oper­at­ing cash flow was dri­ven just almost sole­ly by buy­ing and sell­ing and the ETF itself. LIC’s are a lit­tle bit dif­fer­ent. I ay want to get some time. I’ll try and do some more research and just decide whether we should add them back in as oper­at­ing com­pa­nies or whether we just keep put them in the ETF bun­dle and leave them out.

Cameron  1:10:09

Yes. OK. Thanks. Daryl on Face­book asked about EHL. He said it seems to have reestab­lished its uptrend and over QAV score of 0.24 but it’s not on the lat­est QAV score card at all. Not sure if that was one of the ones that we looked at this year.

Tony  1:10:28

Yes. It’s a Josephine and so is ABA. The oth­er one he asked about.

Cameron  1:10:31

Right.

Tony  1:10:32

That’s why they were delet­ed from the buy list but have a look, I think you’re putting out a more detailed ver­sion of the buy list. The sum­ma­ry one has the Josephine’s tak­en out.

Cameron  1:10:40

Yes.

Tony  1:10:41

You’re also putting out the more detailed one, aren’t you?

Cameron  1:10:43

Yes, well, it’s in the same sheet. There’s– The first tab is just the short buy list.  Well, that’s not so short. When you do it. It’s like 36 stocks, I think this morn­ing. The sec­ond tab is the unfil­tered list where it has all of the scores and whether or not it’s a Josephine, etc. If peo­ple are won­der­ing about that stuff, go to the sec­ond tab and you can find out.

Tony  1:11:04

Right. Yes, Eme­co and ABA will be in the sec­ond tab then but I just had down­turns recent­ly which is why they’re off the buy list.

Cameron  1:11:10

OK, thanks, Daryl. Ange — since Tony already uses an SMSF, self-man­aged super fund.

Tony  1:11:18

Avo­ca­do.

Cameron  1:11:18

Sor­ry what?

Tony  1:11:19

Avo­ca­do.

Cameron  1:11:20

Avo­ca­do

Tony  1:11:22

Avo­ca­do. SMSF.

Cameron  1:11:25

Can he impart any knowl­edge on how to ensure there’s no issues with the trust deed for invest­ing QAV style, any traps trick or thoughts on hav­ing an indi­vid­ual a cor­po­rate trustee? How long he would spend him­self beside accounts, etc. and ensur­ing every­thing is done by the book? And what their process is for him month­ly and/or annu­al­ly?

Tony  1:11:46

Yes, good ques­tion Ange. I think the first thing to note is in our SMSF, we only invest in shares. We’re either hold­ing a lit­tle bit of cash or ful­ly invest­ed in Aus­tralian shares. That might be dif­fer­ent to your SMSF. This is gen­er­al advice and not spe­cif­ic but our SMSF is rel­a­tive­ly sim­ple because it’s just hold­ing shares but I guess one of the impor­tant doc­u­ments you’ll need to address is the strat­e­gy plan. If you’re the trustee of your SMSF, you need to lodge a strat­e­gy for that, how you’re plan­ning to invest the funds and in my case, it his­tor­i­cal­ly it’s been a very sim­ple strat­e­gy. It’s just say­ing, some­where, the fund will hold some­where between nought and 100% in Aus­tralian shares, and nought and 90% in cash.

I think I did get a ques­tion last year. I think the ATO does­n’t like that. I think I’ve now had to say nought  to 90% in shares and nought  to 90% in cash. Any­way, your accoun­tant can help you with that or your audi­tor can help you with that. I don’t know what’s in your SMSF, you may already have some oth­er assets in there, they may be shares, they may be prop­er­ty, you just need to take all of that into account when you’re doc­u­ment­ing your invest­ment strat­e­gy. That’s the first thing to be aware of.

The sec­ond thing is you asked about whether we have a cor­po­rate trustee and we do so it does add an extra lay­er of cost because you have to because it’s a cor­po­ra­tion, you have to reg­is­ter it with ASIC and then do the return every year which is very sim­ple. They send you an email and say give us 450 bucks, and we’ll have noth­ing else has changed. We’ll just keep your reg­is­tra­tion going for anoth­er year. That’s a cost but in cor­po­rate trustees ver­sus per­son­al trustees, and I’ve been both, there’s not much dif­fer­ence in them. Cor­po­rate trustee gives you a bit of flex­i­bil­i­ty. If you want to add new mem­bers or delete mem­bers, it’s easy to do it with a cor­po­rate trustee, that’s got some­thing from mem­o­ry to do with the way the assets are reg­is­tered. If you’re a per­son­al trustee for a Super­fund the assets are held in your name, I think from mem­o­ry in trust for the Super­fund, where­as if it’s a cor­po­ra­tion, they’re held by their own by the Cor­po­ra­tion in trust for the Super­fund and that just means again, if you’re a per­son­al trustee and then want to change the trustee ship, give it to a spouse or some­body else to be trustee for you, there’s a bit of– A bit more admin in terms of reor­ga­niz­ing the own­er­ship of the shares or the assets in the fund.

A cor­po­rate trustee helps from that point of view. What else can I say? In terms of extra work­load, no addi­tion­al work­load, it’s anoth­er tax return. Again, there’s a bit of a cost there. Obvi­ous­ly, you have to audit the Super­fund which is anoth­er cost and then I’ll send you the paper­work to file but that’s about it. So no, no addi­tion­al ongo­ing work. For me, I don’t do any­thing dif­fer­ent­ly in terms of invest­ing for the Super­fund com­pared to my fam­i­ly trust or per­son­al names. No addi­tion­al admin there.

That’s the thing you can’t for­get, there are rules around you, if you already own the asset, you can’t– It’s got to be trans­ferred in at the right val­ue. Pret­ty easy to do with shares if you want to trans­fer them in because you get a trans­fer price on the day, dif­fi­cult to do for works or even prop­er­ty some­times.

And also to the third thing I want to say is there are the con­tri­bu­tion rules. If you do trans­fer shares that are held, say in your own name into the Super­fund, you’ve got to make sure that they fall with­in the con­tri­bu­tion lim­its because you’ll be taxed along the way and poten­tial­ly find if you’ve done if you’ve gone over the con­tri­bu­tion lim­its for super funds and I know I think from mem­o­ry in your case, Angela may not be an issue but if you’re an employ­ee of a com­pa­ny they may already be mak­ing or they will already be mak­ing con­tri­bu­tions to your super fund for you. Yes, trans­fer­ring shares in may be an issue for you but again, you talk to your accoun­tant, they’ll work it out for you but I think they’re prob­a­bly all the only issues. There is a whole heap of issues which we haven’t encoun­tered yet, which is the retire­ment side of things. Once you get to a retire­ment age and the super­an­nu­a­tion rules flip­ping that there are rules around pay­ing your­self a pen­sion and how much you have to dis­trib­ute from the fund every year but until then, it’s pret­ty straight­for­ward.

And what else can I say? There are ben­e­fits to it. Tax ben­e­fits on the way in pay­ing much less tax­es as the on both on div­i­dends and cap­i­tal gains tax com­pared to any oth­er struc­ture that’s avail­able and then of course, once you reach retire­ment, you’re pay­ing no tax on those assets which might be good for you as well. Ben­e­fit then.

On the down­side, once the mon­ey is in that you can’t get it out. You can’t decide to you know, sell a share and then gone buy a piece of prop­er­ty in your own name or some­thing like that or pay off the mort­gage for your house. You just can’t do it. It stays in the Super­fund. Just be aware of that too.

I would say, if you’re not famil­iar with being a Super­fund trustee or in run­ning your own Super­fund, there’s cer­tain­ly some­how to guides which are out there again, I got one from my account and when we set up the SMSF. I think the ATO has a guide, is a few rules you need to be aware of, they gen­er­al­ly don’t come into play. A cou­ple of ones that springs to mind. We went over­seas and if you’re an over­seas res­i­dent, you can’t be a trustee for a self-man­aged super refund or you can’t con­trol the self-man­aged Super­fund. It has to be con­trolled by an Aus­tralian res­i­dent and I think there’s time lim­its on that. We did a bit of find­ing a dif­fer­ent trustee for the fund in that cir­cum­stance, which, again, it’s not that dif­fi­cult with the paper­work your accoun­tant can fill out for you.

 

There are some oth­er rules you need to be aware of. Prob­a­bly the most promi­nent ones are relat­ed par­ty trans­ac­tions. You can’t, for exam­ple, buy an art­work in your super fund and then go and hang it on the wall. Can invest in art under cer­tain cir­cum­stances but it’s got to be on a com­mer­cial basis and it’s got to be then rent­ed out some­where else will or hung some­where else oth­er than your own per­son­al house or your own com­mer­cial premis­es.

Cameron  1:15:42

In my house.

Tony  1:15:43

And you could do it in your house. Yes.

Cameron  1:15:44

OK, if any­one–

Tony  1:15:45

Ide­al­ly, you should pay a rent for it and that way, it becomes an asset that’s pro­vid­ing an income for the Super­fund but Yes–

Cameron  1:17:10

I’ll pay $1.

Haven’t you been retired for like 20 years?

Tony  1:17:46

You can, under some cir­cum­stances, write to the ATO and say, Look, I’ve been retired for 20 years and as long as you nev­er have employ­ment again, you can get access to your Super­fund yes, or if you’ve been– If you’re been dis­abled or some­thing like that apply to have it released ear­ly but it’s pret­ty rare.

Cameron  1:18:03

But you. I’m talk­ing about you. You said you haven’t dealt with that yet because you haven’t hit retire­ment. You’ve been retired for 20 years. What’s retire­ment look like for you?

Tony  1:18:11

Yes, I could have. I did think about writ­ing to the ATO but now–

Cameron  1:18:15

You’ve been. Well, I’ve been work­ing hard­er than you’ve ever worked well for 20 years.

Tony  1:18:20

Three months. Cor­rect.

Cameron  1:18:22

All right. Thank you Ange. Thank you, Tony. Max. He says he sur­prised you increase your posi­tion in NAB recent­ly con­sid­er­ing it was so close to such a steep sell line. I know we can­not fore­cast for such a steep sell line would real­ly put the odds against NAB stay­ing above it.

Tony  1:18:38

Yes, what can I say? I’m a thrill seek­er.

Cameron  1:18:41

Buy­ing it. This was very vague.

Tony  1:18:42

I think the hard thing for me in the last lit­tle while is just find­ing com­pa­nies big enough on the buy list for me to buy.

Cameron  1:18:49

Right.

Tony  1:18:50

Yes, Max may be right but now it may well process buy line any day now if it has­n’t already today because the mar­ket’s down but Yes, I bought it because I have pret­ty much the only oth­er option for me to buy.

Cameron  1:19:00

Right. You’re lim­it­ed in what you can buy.

Cameron  1:19:04

Yes. Mark on Face­book ask, does any­one know why WAF is drop­ping? Can’t see any bad news. No div­i­dend either. I’m con­sid­er­ing dump­ing it as rule num­ber one. It’s WAF.

Tony  1:19:04

Yes.

Yes, I own West African resources too and I think the clue is in the name. There was a coup in Guinea, and which is in West Africa and the West African mines that we’re talk­ing about here that belong to WAF are in a neigh­bor­ing coun­try called Burk­i­na Faso. They’re not actu­al­ly they haven’t been affect­ed by the coup but I think just peo­ple have con­flat­ed West Africa and too and go on let’s get out of over­seas min­ing. The down­turn in WAF occurred the day after the court start­ed the day after the coup [Sysco 01:19:48]. I think that’s a lot behind it but the gold price has been declin­ing slight­ly to over the last month or so which is also dri­ving it and Yes, like Luke or like Mark– Sor­ry, I’m also– It’s also get­ting tired– Get­ting close to a rule one sell for me, although the com­pa­ny’s well above its buy– Sell line, just gen­er­al­ly.

Cameron  1:20:05

Right. Yes. Now it seems to be way above it. I just had a quick look.

Tony  1:20:09

Yes.

Cameron  1:20:10

OK.

Tony  1:20:10

Yes, I think it’s more like­ly the gold price will be a sell before. WAF is a sell but who knows what will hap­pen with the gold price?

Cameron  1:20:17

Right. Well, I’ve got a ques­tion here from next from Luke about what about the sell line for Zim­Plats but now that we have the Bret­ta­la­tor, every­one should be able to answer sell lines for them­selves now, right?

Tony  1:20:31

Yes. Although I think what Luke’s allud­ing to is the fact that it’s a com­mod­i­ty and why would I do a fudge because the sell line for Zim­Plats is rea­son­ably flat and a long way off, where the share price is now. I’ll just quick­ly give those I’ll use the what he called the breath­a­lyz­er– The bread-a-lat­er. Sounds like a cof­fee per­cu­la­tor

Cameron  1:20:49

Not a breath­a­lyz­er. The Bret­ta­la­tor.

Tony  1:20:51

The Bret­ta­la­tor. I’m get­ting 31st of Octo­ber 2017 as our one I should­n’t say I am, Brett is, and then 30th of Sep­tem­ber 2020 at 8.99 as l2, they’re the sell lines for ZIM and that gives us a sell price of $10.74 when the share price is cur­rent­ly $20.49. It’s a long way off. I think what the ques­tion is ask­ing is does I want to fudge it and start with l2 as it is and go up?

Cameron  1:21:21

Right.

Tony  1:21:21

But I don’t and I’ll tell you why because Luke needs to have a look in Stock Doc­tor, there’s a mod­el the share price for plat­inum, which I’ll just call up and ZIM is obvi­ous­ly a plat­inum min­er, I guess I don’t know. Do you mine Plat­inum or do you refine it? I’m not sure. Any­way, XPT_ is the phys­i­cal Plat­inum graph in Stock Doc­tor and it’s a three-point trend line sell, in fact it crossed it a month or so ago.

Cameron  1:21:50

Right.

Tony  1:21:51

Crossed it about some time. Yes, towards the end of August. Luke, regard­less of what the sell line is for Zim­Plats, the under­ly­ing com­modi­ties or sell. If I owned it, I’d be sell­ing.

Cameron  1:22:01

One of the com­mod­i­ty sells.

Tony  1:22:04

Cor­rect. Yes.

Cameron  1:22:05

James on Face­book said I see cop­per futures TR# prices head­ing in the right direc­tion and increas­es my inter­est in C6C and oth­er cop­per min­ers, got any thoughts on where cop­per is at this week?

Tony  1:22:19

Yes, I’ve been watch­ing it almost week­ly, if not dai­ly, in some cas­es, because the futures have been trend­ing up the buy. I use cop­per phys­i­cal to base deci­sions, the futures that are good trend for us as to what might hap­pen but in every oth­er com­mod­i­ty case, we use the phys­i­cal. I’m going to use phys­i­cal for cop­per. It’s just touch­ing its buy line. If it goes up fur­ther from here, I think it’s going to be a rebuy. We did sell stocks off a lit­tle while ago when they became–

Cameron  1:22:46

C6C. Yes.

Tony  1:22:49

Yes, but if you have a look at I did­n’t go back and look at C6C and sand­fire was the oth­er one that I sold. Per­son­al­ly, they’re still declin­ing. I know that I’d feel uncom­fort­able buy­ing C6C for exam­ple, even if the cop­per price does turn up if the share price graph or C6C is still going down. Unless you’re going to do like an aver­age down or some­thing as we were talk­ing about with James before, you might be get­ting in a lit­tle bit too ear­ly. I would expect to see the share price graphs turn up once the cop­per break­out hap­pens into the by going up but if you look at C6C, for exam­ple, it’s still well and tru­ly into its buy ter­ri­to­ry but the it’s a Josephine. It’s a falling knife at the moment. I want to see it turn up a lit­tle bit before I bought.

Cameron  1:23:31

Right. I’m just look­ing now at XCU_, the cop­per phys­i­cal. Now you’re draw­ing the buy line for this one because we had it as a sell. If I do the– Just recent­ly, obvi­ous­ly, if I do the buy line fol­lows the sell line.

Tony  1:23:51

Yes, the sell I’ve got cross­es 31st of August 2021.

Cameron  1:23:57

Yep.

Tony  1:23:57

Yep. Then the buy line I go back to May 2021 for h1 and then July 2021 for h2.

Cameron  1:24:05

Right.

Tony  1:24:06

And if I draw, it’s just around the cur­rent price. It’s just almost touch­ing.

Cameron  1:24:11

Yes. OK.

Tony  1:24:13

It has­n’t crossed up yet but it may give the way the futures prices going.

Cameron  1:24:17

Yes, but it’s still below the sell line. It’d be a Schro­ding­er.

Tony  1:24:21

Sell price was 9388. I see what you’re say­ing is buy, whether sell line extends. Yes, it would be a Schro­ding­er. You’re right.

Cameron  1:24:28

Does the han­dle com­modi­ties?

Tony  1:24:32

It does­n’t unfor­tu­nate­ly, no.

Cameron  1:24:34

Yes. OK.

Tony  1:24:35

It– I think for mem­o­ry, han­dles three dig­it. It might han­dle more than three dig­it ones three alphanu­mer­ic codes, but it does­n’t han­dle these com­mod­i­ty ones.

Cameron  1:24:44

OK, cop­per would need to pick up and get above that sell line for us to start rebuy­ing things like C6C.

Tony  1:24:53

And also too I think the under­ly­ing the C6C share price would need to turn up as well.

Cameron  1:24:58

Yes, right. Well, that’s all the ques­tions that we have done for this week after hours. You’ve been watch­ing more Hap & Leonard?

Tony  1:25:05

I love Hap & Leonard  man, that was a great dis­cov­ery. Jen­ny loves it too. Sea­son one is real­ly vio­lent but and sort of in a Taran­ti­no style, I guess a bit car­toony but is very vio­lent. I’ll warn peo­ple but sea­son three god that’s good. That’s a great show.

Cameron  1:25:19

Good. I have to check it out and you’ve been read­ing some Stephen King you said?

Tony  1:25:24

Yes, I have a New Book from Stephen King called Bil­ly sum­mers which is good but it does­n’t fit the mold in terms of the hor­ror genre. It’s a tale about a hit­man elud­ing the mob which is quite inter­est­ing and well writ­ten.

Cameron  1:25:36

Oh, wow.

Tony  1:25:37

He’s a great writer.

Cameron  1:25:38

Wow. Yes. Well, for my end, I’ve most­ly been watch­ing Norm Mac­don­ald YouTube’s for the last week since he passed away, Chris­sy and I’ve been doing deep dives on Norm Mac­don­ald every night after we fin­ish our Ital­ian and we’ve got half an hour to turn our brains off. I was been a big fan of norm for decades and final­ly I had been watch­ing a lot of his clips before he died on fol­low a cou­ple of Tick Tock chan­nels where they just post Norm Mac­don­ald clip. I’ve been real­ly enjoy­ing him. That was shock and sad to see him go so young.

Tony  1:26:09

Yes, def­i­nite­ly.

Cameron  1:26:12

And in terms of read­ing, I’ve been reread­ing Shan­taram. You ever read Shan­taram?

Tony  1:26:17

Oh, no. I’ve got a copy but I just haven’t got­ten around to it.

Cameron  1:26:20

It’s been sit­ting on your desk down at Cape Schanck, I saw it down there.

Tony  1:26:25

Yes.

Cameron  1:26:26

I think this is my sec­ond or third time read­ing it. I just want­ed to get into some deep poet­ic sto­ry out­side of all the oth­er his­to­ry and polit­i­cal stuff that I read. Yes, been enjoy­ing that. It’s good stuff.

Tony  1:26:41

Good. Yes. Remem­ber your record rec­om­mend­ing it to me. I think when we first met.

Cameron  1:26:45

Yes, prob­a­bly.

Tony  1:26:47

I must have made i get i get daunt­ed by the book. It’s a bit of a tome.

Cameron  1:26:50

It is a tome. Yes and then he’s got the sequel that came out a cou­ple of years ago, which is anoth­er tome on top of it but

Tony  1:26:57

Right.

Cameron  1:26:57

Yes, like I prob­a­bly remem­bered I picked that book up the first one in a sec­ond hand, being at St. Vin­nies or some­thing lit­er­al­ly the day, I was jump­ing on a plane to fly to Cor­si­ca to do the Napoleon event with Markham 13 years ago and it was this– I read it on the plane, it was my plane read­ing and I was halfway through it by the time I got there and it’s this great roman­tic sto­ry of an Aussie who escaped from prison is loose­ly based on the author’s real life. He escaped from pen­tridge, I think it was rid when on the lamb and ends up in India, where he meets, among oth­er things, he gets involved in the drug trade and he works in a slum as a doc­tor and he has this incred­i­ble sto­ry. He ends up meet­ing this exot­ic woman but think she’s an Amer­i­can and she becomes his crazy love of his life kind of thing and I was read­ing that now. I met Chris­sy this Amer­i­can Girl and Ajac­cio when I was­n’t scal­ing from pen­tridge. Maybe it’s escap­ing from a mar­riage that no close, maybe.

Any­way, I gave her the book. Then after I fin­ished it while I was in Ajac­cio, I gave her, I said, you’ve got to read this which she did. It has a big– Played a big role in our sto­ry as well. It’s always nice to go back and reread it. All right, well, that’s the show. Big long one. Thank you for hang­ing in there, Tk. Have a great week, every­body. Tony, stay safe. Enjoy your new­found free­doms. When you get to go play golf?

Tony  1:28:32

I’m hop­ing in about a mon­th’s time. The golf cours­es are open, you can go the ones which are 5K’s from home which is not the one I’m on a mem­ber of. There’s to be new sup­port cours­es with­in 5Ks and they’re both always com­plete­ly booked out. I don’t think I’ll be play­ing golf until I can get to my own club just in hope­ful­ly a month.

Cameron  1:28:49

Just stand out on your deck and hit some balls over the fence. On your deck.

Tony  1:28:54

Yes, it’s pret­ty qui­et. I won’t hit any­one.

Cameron  1:28:56

Full. 36 sto­ries down and land­ing Kings Cross some­where.

Tony  1:29:01

Yes, just use [Inaudi­ble 01:29:04].

Cameron  1:29:04

The QAV golf balls, just knock them over and do a bit of adver­tis­ing.

Tony  1:29:10

Yes, I think I’ve used one of those like since you got locked.

Cameron  1:29:16

Tony. All right. Take care, man any­way,

Tony  1:29:19

All right. Thank you. Bye.

Cameron  1:29:38

QAV Pod­cast is a pro­duc­tion of space craft pub­lish­ing pro­pri­etary lim­it­ed autho­rized rep­re­sen­ta­tive of AFSL 520442 HFS rep­re­sen­ta­tive num­ber 001292718. Please don’t make any invest­ment deci­sions based sole­ly on lis­ten­ing to this pod­cast. This is pre­sent­ed as gen­er­al advice only. Not per­son­al finan­cial advice. We don’t know your per­son­al finan­cial cir­cum­stances. Please see a finan­cial plan­ner before mak­ing any invest­ing deci­sions.