Cameron [00:00:10] Welcome back to QAV, TK. This is episode 442. We’re recording this on the 18th of October, 2021. How are you, my friend?
Tony [00:00:24] Good. Really good. Beautiful day in Sydney. Lots of people walking around without their masks on. [inaudible]
Cameron [00:00:31] She’s still staying. Oh, OK. You’re not staying completely sequestered?
Tony [00:00:35] No.
Cameron [00:00:36] We’d like to offer our official QAV congratulations to your new premier for the imminent birth of his seventh child.
Tony [00:00:45] Really? I hadn’t heard that!
Cameron [00:00:45] He’s announced today, his wife is pregnant with their seventh child. I would say I’m sure the Pope’s very happy, but I think he’s one of these ones that probably doesn’t recognize the Pope. I think he’s a pre-Vatican ii. Most of the Catholics with lots and lots of children, in my experience, are pre-Vatican ii Catholics, and they tend not to recognize the Pope. Everything after Vatican ii in the sixties — not legit. That’s why my grandfather left the church. You know that my grandfather, when they changed the mass from Latin to English, he was like, “Well, if you can change that, you can change anything. It’s all bullshit, obviously.” And he just left.
Tony [00:01:21] I don’t know what to say. I mean, it’s like, I haven’t been following it. Christ. Welcome back to the history of the Catholic church, everyone. Seven kids, though. I mean, that’s a…Wow! What a broodmare. That’s incredible.
Cameron [00:01:36] Anyhoo!
Tony [00:01:37] There are Catholics out there, who don’t recognize the Pope.
Cameron [00:01:40] Yes. Yeah, they — I do think it’s sort of splintered after Vatican ii in the 60s. Anyway, let’s not get into that! Let’s talk about the AIS, Tony! It’s always nice, isn’t it, when one of our stocks starts to get some love from the analysts? Stock Doctor make AIS’ star growth stock this week.
Tony [00:01:59] It did, and it’s always nice when we get ahead of it and we identify a stock and it becomes a star stock, because that’s — A) it’s validation. But B) it generally encourages the Stock Doctor subscribers to have a look and some of them will buy it, which will knock the price up a little bit. Yeah, yeah, it’s good. We got in first. And I just wanted to also declare that last week I said, AIS was an iron or gold miner, but it’s not. It’s of course, a copper. It went off the buy list, because copper had a bit of a conniption and became a sell there for a month or two. Now it’s back on, because copper is ticked up again into a buying situation.
Cameron [00:02:35] Well, I sold my AIS shares, I think, a few weeks ago! So…
Tony [00:02:39] You can buy back in!
Cameron [00:02:41] Maybe, we’ll see!
Tony [00:02:43] Maybe, ok.
Cameron [00:02:44] See how they look in my buy list this week. What else? Let’s look at the COG chart again, Tony. COG, I know we talked about this recently. Last week, maybe, even!
Tony [00:02:56] We did. I’m not sure we talked about it on the show. We might have talked about it during one of our catch ups, on putting up the buy list. But anyway, yeah,
Cameron [00:03:03] Tell me, when you look at the COG chart, it’s a tricky one. I’m not sure if we have a name for this kind of chart yet, but the way I read it, it’s sort of been going through a nice little spiky period since May of 2020, peaked in August, has come back, so it’ll be a Josephine. I wouldn’t be buying it right now, but in terms of drawing the buy line, kind of have to go back. But I don’t know how to go back with this one, because I get the sell line. I get a sell sort of around about September 2020, I think. And I’m not sure I can find a peak, a second peak after September 2020.
Tony [00:03:38] Second trough?
Cameron [00:03:39] No, peak to put after the sell. When I’m drawing the sell line, I’ve got L1 as May 2020. I’m doing L2 as July 2020. You would have a different L2 now, but that would have been the L2 and then it would have breached in sort of late August/September 2020. And I can’t find a second peak to draw a second buy line through since then, but it’s been going basically straight up since then, more or less. That’s why I can’t find a second peak until August 2021, which seems ridiculous. I would say it’s — I could draw it through that, but then it’s below it’s buy line, when it’s been going consistently up, until recently,
Tony [00:04:18] Except for when it fell back from that peak. So, it’s not a bad peak to use. But yeah, this is one of the ones that we’ve — or that I’ve been struggling with. All the ones that came out of the COVID cough, and they’ve gone up at like a 45 degree angle. There’s sometimes, you know, cut back through this sell line and gone back above it, all that kind of stuff. So, you’d be drawing buy and sell lines consistently. But I agree with you on how you would have drawn that first sell line. But then you would have drawn the buyline after that, using January 17 and probably H2 February 2020. Then you would have had to cross the graph around about or sometime during November 2021. Right?
Cameron [00:04:55] Yeah. But then H2 is…sorry, go on!
Tony [00:04:58] And then you would have had to have redraw the sell line, but that buy comes after it and I would have used — left L1 the same, used Oct 2020 as L2, which means funny thing happens in December 2020, it just sneaks below the graph, just sneaks below the sell line. So that’s the sell. The next buyline is where the current graph is drawn with H2 at August 2021.
Cameron [00:05:22] But isn’t that process to make H2, after the last sell?
Tony [00:05:27] Correct.
Cameron [00:05:28] Okay. So, we have L2 as July 2020. It breaches in August. The H2 of February 2020 is not right, right? We need another H2 that comes after August 2020.
Tony [00:05:41] Yeah, and the next peak is August 2021.
Cameron [00:05:45] Yeah. So that…if you’re using February 2020 as H2 and then it has a buy in October, that’s no good because it’s already had a sell before that.
Tony [00:05:53] Yeah, that’s right.
Cameron [00:05:54] So, it’s nullified. So, then we just need to look at August 2021, which means that it’s below its buy line.
Tony [00:05:59] Correct.
Cameron [00:06:00] Which means, sorry, it means if we were looking at this in October 2020, a year ago, it’s gone from $0.65 up to $1.48 and now back to a $1.38 — so, a hundred-something percent. We wouldn’t have been able to buy in, because we wouldn’t have been able to find an H2.
Tony [00:06:19] Yeah, we were boarding just around that time, and it would have sold again straight away in December 2020. We would’ve been out of the market since then and missed out on the last upgrade. So, I agree with you — it’s an anomaly. So you’ve got two things you can do: you can apply the rules and sit it out, or you can fudge the sell line and stick with that buy that uses H2 at February 2020 and stay in.
Cameron [00:06:45] Right. Funny thing is, I did buy it back in July 2021, and I’ve got no idea how I [inaudible 06:49] at the time. I own it. And it’s basically, you know, sort of back to what I paid for it now. But -
Tony [00:07:00] Right.
Cameron [00:07:01] Yeah, I dunno. I don’t know how I do the byline back then, but I did somehow!
Tony [00:07:05] I’m guessing you probably used December 2020 as the L2. So it’s — if you use that it hasn’t been a sell all the way during that upgrade, during the upturn in the share price.
Cameron [00:07:16] Yeah, but December 2020 is not a valid.…Well, hold on L2? Okay, possibly. Yeah, I may have done that. Right. Hmm. Okay. So, it’s a tricky one!
Tony [00:07:27] Yeah, it’s a tricky one. Yeah. And I’d be inclined to let it slide. I’d be inclined to use December 2020 as L2 and buying it. You’re buying it, getting a lot of upside, but I just wouldn’t be buying it now. It’s a bit of a Josephine at the moment.
Cameron [00:07:40] Yeah, of course. You know, I bought it at the peak. So, you’re welcome people! I hope people are paying attention to what Cameron buys.
Tony [00:07:50] People should look at our declaration pages, they can work out what to sell.
Cameron [00:07:56] Yes. By the way, yeah, we did do an update to our trading policy on our disclosure page on our website today. So, not much of an update, but just for people if they’re wondering…To avoid any sense of us pumping and dumping stocks that are our stock tips of the week, we’ve put some careful wording up there. So, go and have a read. We, obviously, want to make sure that no one thinks that’s what we’re doing. So, we’re going to lengths to be as clear and transparent about when we will and won’t buy and sell, so there can’t be any accusations of that at any point in the future. Speaking of our stock tips — they’re looking pretty good, Tony! The stock tips so far.
Tony [00:08:37] Yeah, I saw that! They are. They’re bouncing back. It’s — I think I’ve got an average return of about 3.5%. And it’s only been — stock recommendations have only been going for a month or two. So, it’s not too bad. I think it will improve as we get sort of 15 stocks in there, because when you’re just having only one or two, or a small number of stocks, that can be very volatile and the total return can bounce around. But as we’ve added more recommendations, I think it’s starting to settle down now. Overall, do the right thing and head upwards.
Cameron [00:09:10] AIS is up 11% today. God dammit, why do I follow the rules?
Tony [00:09:15] Thanks for selling.
Cameron [00:09:17] Yeah, yeah, you’re welcome! Charlie’s speaking at Hearts and Minds, Tony, you’re going to go?
Tony [00:09:22] Oh, well, you can’t go. It’s going to be a virtual conference. But I was thinking.
Cameron [00:09:25] Oh yeah, he’s virtual.
Tony [00:09:25] It’s $500.
Cameron [00:09:27] Charlie Munger that is — for people wondering, who Charlie is. Charlie Munger, Warren Buffett’s business partner for a hundred and fifty years, is live streaming a talk to the Hearts and Minds conference in a couple of months.
Tony [00:09:40] People don’t know about Hearts and Minds, SOHN Hearts and Minds is an investment company, a LIC, which has been very successful at basically holding a conference every year, getting top fund managers to give one stock tip each and then putting it into a fund. They do also have a few fund managers, who add a few other stocks into the mix, so it’s not going to be too volatile. But I think the majority of the picks are from the convention, the Hearts and Minds convention. So after Charlie talks, they’ll have their stock specialists come on and make their pitch, and then they’ll read or sell all the stocks in the listed investment company or most of the stocks on the LIC. And then they’ll buy the ones that are recommended, and they donate some of their profits, if not all their profits to the — I think what they do is actually donate the fund manager fee. So, instead of charging — having fund managers, who charge a fee, the fees get donated to.…principally the.…I think it’s the Victor Chang Cardiac Institute for Memory. But anyway, medical research.
Cameron [00:10:38] Right.
Tony [00:10:39] So yeah, so they have a conference that’s coming up. It will be — it’ll surely be covered on the front page of the Fin Review. So for the last couple of years, they’ve had some really big international investors on. But it hasn’t been worth paying the five thousand dollars to go along, because the Fin Review pretty much reports what’s said. And you can save the money and just read it there.
Cameron [00:11:00] Right.
Tony [00:11:00] Yeah.
Cameron [00:11:01] Any predictions on what Charlie Munger’s going to say?
Tony [00:11:04] No, I don’t know what he’s going to say. I’m interested, really interested, so I might pay the 500 bucks. It’s a virtual conference this year. So, it’s a tenth of what the price normally used to go. And, you know, to be fair to them, they donate the proceeds from the conference to charity as well. So, it does go to a good cause.
Cameron [00:11:20] Worth going just to see if he calls bitcoin rat poison and what kind of response he gets from the audience. Yeah, rat poison’s good.
Tony [00:11:28] Yeah, well, hopefully he takes some questions. I like Charlie, he’s a really smart guy and he’s no nonsense. He’s no — he just cuts through the bullshit. I mean, it’s possible that he’s interviewed and just gives one word answers too, because I’ve seen Charlie do that. He might toy with the interviewer. I don’t know who’s going to — I think that one of the fund managers in Australia is the interviewer, and apparently they catch up every week on some kind of super investors conference call. So, he must know Charlie well enough to know what questions to ask. Get a good response.
Cameron [00:11:59] Right? Well, they should just get Becky to interview him.
Tony [00:12:02] The blonde from CNN, who does it?
Cameron [00:12:03] Yeah, Becky Quick. Yeah, just get a blonde. I think that’s the secret to doing an interview with Charlie and Warren,.
Tony [00:12:11] Right.
Cameron [00:12:11] Let’s talk about SXL if you can.
Tony [00:12:15] What about it?
Cameron [00:12:16] Well, have a look at the SXL chart. Tell me what you think of the SXL chart — Southern Cross Media Group.
Tony [00:12:22] Oh yeah.
Cameron [00:12:23] I’m not sure if we’ve talked about this recently, but I wasn’t sure when I was looking at it this morning what to do with it. According to my notes…
Tony [00:12:33] It’s jumped a lot. Yeah.
Cameron [00:12:34] Well, yeah, it’s plummeted a lot. So, Southern Cross Media Group, you know, is trading up around $13.50 in July 2019. By the COVID cough, it had dropped down to $1.30, and now it’s up around $2.20. I’m not sure what the history of this is, but that’s a long flat period for a media company. I’m assuming something’s gone on there.
Tony [00:12:58] Yeah. So again, not that familiar with this one from memory, it’s… Southern Cross — I’d have to go and have a look. Let me just do a quick look because it’s the old Macquarie Network, isn’t it?
Cameron [00:13:11] I’m not sure, but it owns MMM, the Hit Network — those sorts of products. Some sort of commercial radio, AMF and digital.…I think this is probably the podcast effect, that I’ve been predicting for 17 years, is finally kicking in here.
Tony [00:13:26] Possibly, but I think it’s more likely to be that — I’m really testing my memory here — I think it may have lost a regional television license or something like that.
Cameron [00:13:34] Right.
Tony [00:13:35] Might have even restructured, but the restructuring should have been taken up in the — sorry when I say, restructuring, I mean, consolidating its shares — but that should have been taken up. So…
Cameron [00:13:45] Right.
Tony [00:13:45] I’m not sure, I’m not that familiar with it to talk authoritatively. It’s the old Austereo Network. That’s what it is.
Cameron [00:13:51] Austereo, right?
Tony [00:13:53] Yeah. So it’s rebranded. I’d have to go back and do some research, Cam. I’m sorry.
Cameron [00:13:58] That’s alright. Have you looked at its chart recently? What would you do, when you’re looking at the chart? Would you say “I have to go do more research”?
Tony [00:14:05] Yeah. But I’d also look at.. The first thing I do is use a three year chart, when it looks like this where there’s been a big drop. Looking at the three year chart, you can certainly draw a buyline. There’s a high price in July 19 $13.40, and then you got $12.35 September 19, so you can draw a line along there, which will give you a buy price sometime in around early 2021. And then for the sell price, we got L1 either at April 2020 or September 2020, depending on whether they’re 8% difference. Just looking at that $1.40/$1.50. So, I think that’s going to make L1 September 2020. And then, L2 is going to be probably May 2021, so I think it’s a buy — based on this.
Cameron [00:14:56] Well, I gave it a positive sentiment, but I got a score of 0.9, so it didn’t hit my list, but…
Tony [00:15:04] Right. Okay.
Cameron [00:15:05] I just wanted to know if you would actually look at this three year chart or not. That’s what I did this morning. What did you use as H1 and H2? I’ve got H1 as September 19, and H2 was in January 2020.
Tony [00:15:20] Yeah, that looks fine. So you’re saying that September 2019 is within 8% of July?
Cameron [00:15:25] Yeah, it is. Yeah. So I saw that one. Just take it straight down. Yeah. OK. So you would look at a three year chart on that one?
Tony [00:15:33] Yep.
Cameron [00:15:34] Okay.
Tony [00:15:35] Yeah. When I see those big drops I try, and I don’t want to go to a one year chart or you don’t get an option for two year chart at Stock Doctor. You get an option for a one year chart, but that’s quite a small trend. You could use it if you wanted, like if it was scoring really well and you just have a look at the one year chart. Yeah, it’s probably not a buy on the one year chart. Yeah, it would be, because you got a flat top.
Cameron [00:15:55] Yeah. Well, I’ll just…
Tony [00:15:56] I would use the three.
Cameron [00:15:58] I started to go back and look at their announcements going back to around that time of their big plummets of early 2020. I can’t really.…There was a pause in trading in March 2020. A trading halt that dropped by 32%. Which was COVID cough.…Well, that was COVID cough, right? Everyone sort of did that. Then it did a voluntary suspension in March 2020. Capital restructure and operational initiatives, it announced in April 2020. Everyone was doing that — right — raising money? It just did — in April 2020, it announced a completion of institutional offer, and its share price dropped another 30%.
Tony [00:16:41] Yeah, right. So, I don’t think…We have to probably go to the ASX. I don’t think the announcements are going back far enough to help.
Cameron [00:16:48] Oh, they are. You have to just go to the date range in Stock Doctor and say last five years.
Tony [00:16:53] Oh, got you. [inaudible 16:54] So we really want to know what…find out what happened around the end of 2019, don’t we?
Cameron [00:17:02] Well, I’m not sure if it’s then, or sort of early 2020, but interesting — they had to send a notice to the Stock Exchange about what’s going on with their share price in May 2020. Oh no, okay, so it went up dramatically for a bit from 14.5 cents to 25.5 cents. They had to do a “please explain” to the ASX and they said “no, we had no idea what’s going on.” But, I’m wondering why it plummeted and never came back. I mean, most of these guys came back after they plummeted after the COVID cough?
Tony [00:17:32] Yeah, right? Yeah. So there was a trading update in October 19, which was received poorly.
Cameron [00:17:37] Right? Well, that would have been around about the time we launched this podcast. I think that’s probably what happened there. October 2019 trading update and earnings guidance, they dropped by 18%. Yeah, ok. Revenues were down well. Radio’s screwed. I think that’s what definitely the lesson is here, isn’t it?
Tony [00:17:57] But why?
Cameron [00:18:00] Let’s not spend too much time on it. It doesn’t matter.
Tony [00:18:03] Yeah, I do vaguely recall Austereo restructuring, but I can’t recall what was the kick off for it. But that’s what’s caused the problem.
Cameron [00:18:10] Yeah. Well, that was Covid cough, I’m assuming. They’d already had bad results and then the COVID cough happened and looks like they haven’t recovered share price wise anyway.
Tony [00:18:18] Yeah.
Cameron [00:18:19] Thanks for walking me through that. Did you see Steven’s email to us this morning about the ASX 200 price to cash flow averages?
Tony [00:18:27] No, I haven’t. Sorry.
Cameron [00:18:28] Let me read it to you.
Tony [00:18:29] I know he’s very busy prepping for the show.
Cameron [00:18:32] Let me read it to you and you can wing it. “Hey, guys, thought you might find this interesting. It’s the price to cash flow averages for the ASX 200 going back five years — as high as 13.5 in 2017 and as low as 6, at the bottom of the COVID cough. I was interested in it to validate what a minimum of seven in QAV represented versus the average. Right now, we’re buying stocks at least at a 30% discount to the market on this metric and sometimes closer to a 50% discount. And, obviously, when an individual stock is even lower than 7, it’s even more discounted. Very interesting to see what kind of a margin of safety we’re building in versus the overall market, I thought.”
Tony [00:19:13] Aha!
Cameron [00:19:14] Thoughts on that?
Tony [00:19:17] Well, yes, I guess the research would have to be done to see if we, rather than use a hard number like 7, whether we should be raising it or lowering it depending on what the market does. So, like, you know, I guess the implied question there is that when the market’s high, do we like, do we always look to buy something which is in the bottom quartile? So, it’s like if the cut off rises and falls with the market, so it’s always maybe 30% below, but I haven’t tested that. I don’t know. It’s a thought. It’s good musing. The reason why I haven’t tested it though is we always have stuff to buy, when the market’s up or down. There’s always, you know, 50–100 stocks on the list so…That has worked. I’m not saying that making it a ratio of the market average wouldn’t work better, but I just haven’t tested it.
Cameron [00:20:01] Oh, that’s an interesting one. Thank you, Steven! Lumber, Tony, is back. Lumber’s back!
Tony [00:20:08] Yeah. Lumber’s back to being a buy, which means that MWY (which was taken off the buy list) — MWY is now back on and…I guess a couple of points here — I’m not really sure if lumber is the right commodity for MWY, which is more of a — it’s basically a pulp mill business. So, it’s plantation timber and then the logs are filled and put through the mill. Then pulp is exported overseas, I guess, usually for making paper out of cardboard. So, lumber was the only wooden timber product I could find. But I think we took MWY off, when the the lumber commodity went into a sell, and now it’s bounced back into a buy. I think MWY’s been going up the whole time so… There isn’t the kind of normal correlation I see, between the stock and a commodity with this one, which makes me think that lumber might not be the right commodity for MWY.
Cameron [00:21:01] Right? Is there a toilet paper commodity index?
Tony [00:21:06] But either way, it’s back on. It did well during COVID. Yeah, sales went up. No, there isn’t.
Cameron [00:21:12] Tell me about your changes to the owner/founder check in the spreadsheet.
Tony [00:21:17] Yeah. So, I can’t remember the stock a couple of weeks ago, but I remember going through comparing our buy list. I had one that wasn’t on the list, and it was because the CEO and Board owned 10% of the stock and the check in the spreadsheet was looking for greater than 10%.
Cameron [00:21:33] Right.
Tony [00:21:34] So, I just made it greater or equal to 10%. Taking into account that 10% is a good enough ownership to qualify for that QAV metric score.
Cameron [00:21:44] I should check the AF sheet.
Tony [00:21:47] Yeah. So, it’s column CG if people want to adjust that themselves. That’s in the the down-low part of tab of my spreadsheet. I’m not sure what’s in the Flitman model.
Cameron [00:21:57] I’m looking at his global parameters. It’s five%.
Tony [00:22:02] Wow.
Cameron [00:22:03] When did it..
Tony [00:22:04] Greater than 10. Well, here lies the problem of having different models. This is going to happen.
Cameron [00:22:10] Well, I think when Andrew built his, it was based on yours. So, did you change yours or some such?
Tony [00:22:17] No, it’s always been 10. As far as I can remember!
Cameron [00:22:20] You know, just check and see what it says in the Bible. Maybe that’s where the mistake is.
Tony [00:22:27] I don’t think there’s a mistake, it’s just there’s a difference. I think I’ve referred to it as being 5–10% in the past, when we’ve spoken about it. But it’s hardcoded 10% in the checklist.
Cameron [00:22:37] The Bible says 5.
Tony [00:22:38] Really?
Cameron [00:22:40] Yeah, 5 or greater.
Tony [00:22:42] Ok.
Cameron [00:22:43] So I should change that to 10?
Tony [00:22:45] Well, let’s just talk about it. If the Board only holds 5%, is that enough to give it a score? I think it probably should be 10, myself. It’s what I’ve got in my model.
Cameron [00:22:55] Yeah?
Tony [00:22:56] Yeah. I think 10 at least 10. So, greater or equal to 10.
Cameron [00:23:01] Well, OK. Note, people using the flipman sheet — you should go into the “Global Parameters” tab right at the top, where there’s a little section called “Hurdles” and Row 10. It is “Owner/Founder/ Shareholder Percentage”, change that 5 to a 10. And that should do the job. It’ll just flow through the rest of the sheet.
Tony [00:23:25] And maybe have a look to see, if Andrew’s doing greater than or equal to 10 as well.
Cameron [00:23:30] If holding of all Directors is greater than score. Yeah, okay. So we want to change it in QAV score tab, column AE. I might just get Andrew to check that. Make sure that I’m not doing something wrong. Andrew, if you’re listening, can you just check that code and tell me if that should be changed? Thank you, Andrew! I’ll email you, as well. All right, copper!
Tony [00:23:59] Yeah, copper’s a buy again!
Cameron [00:24:01] Really?
Tony [00:24:02] Yeah, it became a sell, and then it’s spiked up again. I guess people are getting bullish from the opening after COVID, which was the initial reason why copper went up an ounce. Then it came down when that winter struck the northern hemisphere and COVID came back, and now it’s going back up again — it’s a buy again. Anyway, that brings C6C and Sandfire Resources back onto our top scorers list.
Cameron [00:24:25] Yeah, gotta update my C6C — good stuff! Do we still have them in our portfolio?
Tony [00:24:31] No, they were sold, when copper became a sell.
Cameron [00:24:32] It was sold. Yeah, right! That was a corker one for us, wasn’t it?
Tony [00:24:38] Yeah.
Cameron [00:24:39] OK, so SFR, is that one of your stocks of the week, or your stock of the week?
Tony [00:24:44] It is the only one. Yeah, my stock of the week. You want to go through it now?
Cameron [00:24:47] Yeah. Tell me what you got.
Tony [00:24:49] So, Sandfire Resources (SFR) has been on the buy list for a long time. It came off when copper was a sell. It’s back on now. Copper is a buy. A little bit of background to it — it would be close to the largest copper miner in Australia already, but it’s just undertaken a big acquisition overseas, which will pretty much double the size of the company. So, if it wasn’t before the acquisition, it certainly will be after the acquisition the biggest copper miner listed on the ASX. And probably one of the biggest ones in the world, I would think. So it’s been around for a while and it has a copper mine in Australia called DeGrussa. And it’s always been cheap to buy as a stock — SFR — for a long time, because everyone had known that DeGrussa has a limited mine life. I think it’s only got about a year left, before it becomes economical to keep mining copper from it. So there’s been a lot of exploration in the area around that DeGrussa mine to look for ways to extend it, but unfortunately that hasn’t come to fruition. And so Sandfire Resource Management has taken the decision to invest in overseas copper mines instead. So, they bought into one in — they’ve bought into three now overseas — one in the US. They don’t completely own 100%, I think they’ve got about 87% of the mine called Blackbutt in the US. They bought into one earlier this year in the Kalahari in Botswana called the Motheo (M‑O-T-H-E‑O), and they’ve really bet the farm on a deal with a Spanish company to buy a mine called MATSA (M‑A-T-S‑A) in Spain. They know that they can’t expand in Australia through DeGrussa, so they’ve been expanding overseas. They did a big capital raise for the MATSA purchase and that depressed the share price, because as we know the capital raises dilute the current shareholders and the share price has to be discounted to take that into account. And so the share price dropped $1, $1.50, maybe even $2 from whenthere’s that. It’s turned up and the share price is increasing again now. So either people have time to digest the MATSA acquisition and are happy with it, or they’re just following our sort of thinking, which is that copper is now an increasing commodity again. And basically Sandfire’s going to, you know, pretty much double its exposure to copper at a time when it’s increasing. It’s not a bad bet from a commodity play. But let me go through the numbers, the QAV numbers, anyway. These are based on results, which hit Stock Doctor during the week or maybe the week before, but are very recent and they don’t include the capital raising or the numbers that come from the MATSA acquisition. I just want to stress that this is the the current company, and I’m going to do my analysis based on that, because we don’t have others to look at. In six months time we will have combined numbers, or people if they want to do their own work and they really want to get into the nuts and bolts, they can go and look at the announcements and adjust the figures based on what we call the pro forma numbers that Sandfire have released about how the acquisition will perform and how it will affect Sandfire as a company going forward. But I’m using the current numbers. First thing to note, is that Sandfire is a large ADT company and its average daily trade is $6.5 million dollars, so it would suit all sorts of investors. The yield is high, so it’s currently yielding 5.28%. Again, it would suit people who are looking for income, either to service a mortgage or to live off or to obtain the franking credits. So that gets a tick on our checklist. It’s a very cheap price to operating cash flow of 2.44 and a low p of 6.7 at the share price of $6.02, which it was this morning when I did the analysis. But, again, bear in mind that this may change with the MATSA numbers. I haven’t done the pro forma analysis, but the current ones are certainly very cheap. The current price is below consensus target and Stock Doctor IV. So it scores well there. It’s a borderline star stock, so it scores 0.5 on your checklist for that, and it has strong financial health and steady financial health, which is good. IV2 for my calculation is $14.28. So the current share price is less than half of that, so it scores a point for that for us. It’s also less than the Book Plus 30, which is $6.20 and the current share price as of this morning was $6.02 — another point. It doesn’t score on the growth metrics, because the forecast growth was down 3%. And that kind of makes sense because we know that the DeGrussa mine is starting to get to the end of its life. However, that number will change when the MATSA numbers get incorporated into the forecast numbers, so we’re a bit early on that call yet, but currently it doesn’t score. Directors only own 2% of the stock, so it doesn’t score for “Owner/Founder”. It does have a record low p for the last 6 halves and consistently increasing equity. So I get a quality score of 89% and QAV score of 0.37, which puts this large cap stock larger ADT stock right up there on the buy list at the moment. So that’s why I’m calling it our stock of the week. I guess with the caveat that once we have MATSA numbers, that might change. But certainly on the current numbers, it’s worth investigating.
Cameron [00:30:24] And is this a stock either of us own, Tony?
Tony [00:30:28] No, I have owned it in the past, but I don’t own it currently. But it would be up there for me to buy next. It would be — I haven’t looked at it today, but it would be in the top two or three large cap stocks on the buy list, that doesn’t have an underlying commodity sell.
Cameron [00:30:42] I don’t own it. I don’t own it either, for the record.
Tony [00:30:47] OK.
Cameron [00:30:48] Thought we should disclose that, seeing as it’s the stock of the week. Yeah. Or maybe just disclose it if we do own it. But yeah.
Tony [00:30:54] And we do disclose our shareholdings on the website too, if people want to have a look at that.
Cameron [00:31:00] Yeah. Before we move on, I forgot before to talk about our portfolio update, Tony.
Tony [00:31:04] Yeah, you did. Oh, sorry, I talked about the stock tips. Sorry, go ahead.
Cameron [00:31:09] For the financial year, our portfolio is up 7.75%, according to the NVAX metrics.
Tony [00:31:18] Oh baby!
Cameron [00:31:18] Versus the SPDR 200, which is up 3.63% at the moment.
Tony [00:31:23] Mm-Hmm.
Cameron [00:31:24] It’s had a good week. It was down at 0.86 last week, so it’s had a huge week. Now this week’s been pretty good as well, but we’re running roughly double the 200.
Tony [00:31:36] Spot on.
Cameron [00:31:36] That’s nice. Yeah, spot on!
Tony [00:31:39] Spot on. That is nice. It’s been a good week for my portfolio as well, though I think there’s been a couple of things going on, like the rotation out of, you know, the iron ore stocks has gone on. But also to — I think the dividend season is being very choppy this half, for some reason. Again, I think possibly because of those iron ore stocks, you know, had huge dividends. But the share price was falling. They seem — but yeah, a lot of the stocks that we have, that I have bought into, have dropped by much more than their dividend. And it seems like the dividends, the only thing that happened around the time they dropped. So I’m not sure what’s going on, but in the last week or so, I think whatever has happened, shake has shaken out. People have received their payments and life’s going on as usual.
Cameron [00:32:22] Mm-Hmm. Despite all of the hubble bubble with lockdowns and inflationary fears.
Tony [00:32:29] Yeah. Well, look, I could be wrong.
Cameron [00:32:31] Energy fears.
Tony [00:32:31] It’s quite possibly not dividends driving this. It could be the fact that New South Wales is opening up. Victoria is promising to opening up open up, so people are just committing more to the market in the belief that the economy will get a bit of a bounce because of the opening up. And it’s not a bad theory. I mean, there’s a lot of money been sitting on the sidelines during COVID. There’s been a few articles in the Fin and other places saying that, you know, household assets are at an all time high. People have been not spending on overseas trips or even interstate trips, and they’ve been just banking the money. So, bank accounts are fat and now they’re going to start to spend again.
Cameron [00:33:04] I thought they were spending it all on high rise apartments, Tony!
Tony [00:33:08] Hope so! Certainly been spending it on property, market’s been going gangbusters, yeah.
Cameron [00:33:13] Property and The Reject Shop buying stuff at The Reject Shop. What’s going on with platinum?
Tony [00:33:20] I just did a quick run through the commodity stocks recently and platinum, last time I had a look, was pretty close to a buy. So, let me just go and check it again. I checked it last week.
Cameron [00:33:29] Oh, Zimplats could be back, huh?
Tony [00:33:33] Correct. Yeah. So let me go and have a look. The interwebs is running slow today. I wasn’t sure if we’re going to be able to do the show today because Stock Doctor was down for about five minutes when I was trying to use it before.
Cameron [00:33:45] I found it very slow and crunchy this morning.
Tony [00:33:48] Yeah, I actually had an error, which I, error something or other that said come back in a few minutes. But it came back and it works — I don’t know what’s going on? Yeah, I actually have. In fact, I’m looking at XPT_, which is platinum physical. And I’ve got a H1 May 2021 — there’s a bit of a flat top going on there, and it just depends where I.… There’s no second peak there — that’s the problem. But the price has ticked up again and it looks like it’s getting.. It’s about to cross above its sell line again, which means the last buy price will come into play. So I have the COVID cough as the old one, I have October 2020 as L2 and I’ve got a sell price that’s going to be around $1,063 for the metal, for platinum, and the metal price today was $1,055. So, it’s really close to going above its sell.
Cameron [00:34:40] Hmm. Fantastic. Keep an eye on Zimplats then.
Tony [00:34:44] Yeah.
Cameron [00:34:45] I dunno if I’ve got that blocked off in my sheet as a sell. Let me see. I might have it — whoops — color coded out.
Tony [00:34:53] What’s the — let me just check what the -
Cameron [00:34:55] I do.
Tony [00:34:56] Score is on Zimplants? Yeah, I have it platinum as a sell. And I’m just going to look at what the — no, Zimplats, I think, is on the buy list once it crosses into a buy territory again. Yeah, so if anyone’s interested in Zimplats, just keep an eye on the platinum price. I’m suggesting it’ll be a buy sometime soon.
Cameron [00:35:16] You bought yourself some bank recently, Tony?
Tony [00:35:19] Yeah. So we spoke about — did we speak before about Helios or was that we were comparing buy list anyway? We certainly talked about it today. So I sold out of HLS, Helios, and I bought some NAB, which that happened last week and I was holding on to HLS for dear life, trying to add back to the dividend and all sorts of things waiting for it to turn up. But it never did. So I decided to sell it and at that stage was the highest thing I could buy on my buy list that I didn’t already own. Although SFR has come in today, so I bought NAB last week anyway.
Cameron [00:35:52] Right.
Tony [00:35:53] National Australia Bank.
Cameron [00:35:54] Speaking of banks, you have a new bank director in the family.
Tony [00:35:58] I do! So my wonderful wife, who is so impressive, has become a Director of Bank of Queensland. I guess I’ll declare that as full disclosure if we ever talk about Bank of Queensland on the show.
Cameron [00:36:09] And when are you moving up here?
Tony [00:36:11] Well, funnily enough, don’t know what the split is, but a lot of Bank of Queensland Directors and Executives actually live in Sydney, not Queensland. Anyway,.
Cameron [00:36:23] That makes absolutely no sense!
Tony [00:36:23] Like I said, it’s going to be close to the financial markets anyway.
Cameron [00:36:26] Oh, right.
Tony [00:36:28] Because they have the big pipe of digital stops at the border with Queensland.
Cameron [00:36:33] Yeah, yeah,.
Tony [00:36:34] Yeah, anyway.
Cameron [00:36:34] So that’s the reason.
Tony [00:36:36] It’s great. She’s become a Director. It was a lot of work involved in terms of passing all the probity checks. They had to get back and get police checks done in Canada and things like that. So that took a while. And then she had to meet with all the Directors and be interviewed and meet with all the Executives to be interviewed. So it’s been a long process, but she’s there.
Cameron [00:36:54] They didn’t have to check her husband’s podcast business partner’s police records, did they?
Tony [00:36:58] No. No, they could have.
Cameron [00:36:59] That’s good. [inaudible 37:01] Thank God for that!
Tony [00:37:05] Yeah. Yeah, she’s doing really well. She took a long time to decide whether she wanted to do it because, not Bank of Queensland in particular, but whether she wanted to go down the non-executive director route. So she finished up with her last sort of paid role at the start of last year and then took some time off and then thought about whether she wanted to do boards or do a start-up or do both. And she’s pretty stopped doing both. So she’s been working hard on the start-up and she’s now a Director. She’s also a Director of the National Breast Cancer Foundation charity. So she’s an impressive lady, Cam.
Cameron [00:37:37] She is, indeed. She balances you out.
Tony [00:37:41] Yeah, I have to make appointments to see her.
Cameron [00:37:47] So, when is she coming on the show to talk about Bank of Queensland?
Tony [00:37:51] Well, that’s the thing — she probably can’t talk about Bank of Queensland.
Cameron [00:37:56] I’ve offered — I’ve invited her onto the show a number of times and she’s always like, “No, it’s never going to happen.” So…
Tony [00:38:02] Did she say that, did she?
Cameron [00:38:04] Yeah, at our last Sydney dinner.
Tony [00:38:07] Ah right!
Cameron [00:38:07] “When are you going to come on the show, Jenny?” “Not going to happen.” Talk to me about WGX, Tony!
Tony [00:38:14] Yeah. So, we spoke about Westgold last week because it’s in a it’s made a bid for one of the companies on the buy list and WGX is the code. I’m just looking at it now.
Cameron [00:38:27] I’ve got a QAV score of 0.22 for them this morning.
Tony [00:38:30] Have you? I’ve got 0.1.
Cameron [00:38:32] I’ve got record low PE new three point upturn and consistently increasing equity.
Tony [00:38:39] Let me just have a look. It’s 0.13. I think the problem is I haven’t updated my manually entered data. Give me those ones again, sorry.
Cameron [00:38:45] You don’t want to check me?
Tony [00:38:48] Yeah, I can check you. Alright, hang on.
Cameron [00:38:50] Record low PE. It gets a yes for everything, basically, in the manual data.
Tony [00:38:54] I will check you.
Cameron [00:38:56] You should!
Tony [00:38:59] Ok, so current p is 10.87, but June 21 is lower at 9.77. So one, two, three, four, five, six. So I guess it’s back 5 halves. Yeah, it’s the lowest I agree. And then look at the balance sheet, equity. [4.11, 4.43, 4.52, 5.21, 5.77, 6. — so they’re both good. I’ll have a look at the chart in the Brettalator just to speed things up. Maybe it won’t speed it up. It’s running slow, as well.
Cameron [00:39:29] Yeah, the share price is — I don’t know what is it? I don’t know. I don’t have it here.
Tony [00:39:33] $1.97
Cameron [00:39:35] Oh okay, it should be good in the Brettalator. Yeah, yeah,
Tony [00:39:38] Yeah, it’s good. But yeah, it looks like just visually, it looks like it’s just touching the buy price. But Bret’s figures say buy price, 1.95, current price 1.97. So that’s fine. So it’s just come back on.
Cameron [00:39:52] Yay for gold.
Tony [00:39:53] Yeah, so gold’s funny at the moment. It’s getting close to its sell but goes for a little runs, which knock the — increase the price of the miners. But I am watching it because it is sort of going sideways and getting closer and closer to the sell one.
Cameron [00:40:07] What is MED and why was TPS added to it?
Tony [00:40:11] MED is the manually entered data tag. Yeah. So MED and TPS, let me have a look at TPS, actually, I don’t think it should be added to it. Let me just have a look.
Cameron [00:40:21] Threat Protect Australia.
Tony [00:40:23] Yeah, so let me just see, I think it just came up as an error when I do a download because it wasn’t on the manually enter data. So I put it into the manually entered data sheet. It’s quite a strange chart. I’m just going to have to do it in Stock Doctor because I think it’s — I’ve got a small. The price is too small to be handled by Google Finance correctly, because its share price is currently only $0.005, which is half a cent, isn’t it?
Cameron [00:40:48] Don’t ask me!
Tony [00:40:48] It’s been dropp — it looks like it’s been dropping for a long time. Yeah, no, it’s not a buy at all.
Cameron [00:40:53] Did somebody file it in triplicate?
Tony [00:40:56] Forgive me. I’m not sure why I called that out, but I just had to add it to the manually entered data spreadsheet to remove the error. I think we’ll probably find that it’s got a price to cash flow, which we like. So it’s gone on the watch list, but it doesn’t get a tick for sentiment. I’m just..
Cameron [00:41:11] Are you just going to leave my triplicate line hanging out there, you’re not going to acknowledge it?
Tony [00:41:16] Sorry, what was your triplicate line?
Cameron [00:41:18] I’m looking for it. Hold on. I’ve got it somewhere.
Tony [00:41:21] File it in triplicate. File what?
Cameron [00:41:23] TPS reports.
Tony [00:41:25] T — what’s a TPS report?
Cameron [00:41:26] It’s a line from a great Mike Judge film “Office Space”. “Yeah. Peter, if you could just go and file your TPS reports in triplicate, that would be great.”.
Tony [00:41:39] I haven’t seen that one.
Cameron [00:41:40] You’ve never see “Office Space”? Oh man, here we go. Let’s see if I can play this live to the thing.
Tony [00:41:47] I’ll add it to the list.
Cameron [00:41:47] Yeah. Oh, classic. You like Mike Judge? Mike Judge is great.
Tony [00:41:52] I don’t know who Mike Judge is — sorry!
Cameron [00:41:57] Ugh. Created “Beavis and Butthead”, “Silicon Valley” TV series.…
Tony [00:42:00] Okay. Yeah.
Cameron [00:42:02] “Idiocracy”
Tony [00:42:02] I do like [inaudible].
Cameron [00:42:06] “King of the Hill”. You know, here’s the clip.
Speaker 3 [00:42:10] Hello, Peter, what’s happening?
Speaker 4 [00:42:13] We have sort of a problem here. Yeah, you apparently didn’t put one of the new cover sheets on your TPS reports.
Speaker 3 [00:42:21] Oh yeah. I’m sorry about that. I — I forgot.
Speaker 4 [00:42:25] Yeah. You see, we’re putting the cover sheets on all TPS reports now before they go out.
Cameron [00:42:31] It’s about how this guy working in an office basically makes him want to kill himself. It’s based on Mike Judge’s real life story. I think he worked for like Hewlett Packard or something, before he started animation.
Tony [00:42:43] Right? OK, I’ll check it out.
Cameron [00:42:44] It made him want to kill himself. Good film. All right. What’s next? IKW.
Tony [00:42:51] Yeah. So IKW, for some reason, took a long time for the results to get into Stock Doctor. But they are there now and the operating cash flow was negative, so it’s dropped off the buy list. It was always a very, very small stock to buy, but just calling it out if anyone wants to have a look. Dropping off the buy list isn’t necessarily a bad thing, but they might want to just pay attention to the three point sell lines and suchlike and decide when to sell it.
Cameron [00:43:14] All right. Well, I think that’s news for the week. I’m ready to get into Q&A if you are.
Tony [00:43:20] Absolutely.
Cameron [00:43:21] Let’s do it. All right. So the first question comes from Doug. Well, it’s not a question. Well, it is a question. He sent us a link to a tweet, a comment by some guy called David Hunter. Doug said, “You can literally say anything when you’re forecasting, but I do like these numbers. Can T.K. discuss on the show?” Then David Hunter wrote “Both precious metals and industrial mills are poised for sharply higher prices in the weeks and months ahead. Gold, silver, copper and even steel stocks are all beginning what will be big rallies. Gold to $2,500, silver to $50, copper to $6, GDX to 60, GDXJ to 100. SIL to 75, and SILJ to 35.” I could kind of guess what you’re going to say, but what are you going to say?
Tony [00:44:05] Well, David Hunter must have crystal balls to make those kinds of predictions, but it’s
Cameron [00:44:10] Some kind of balls!
Tony [00:44:10] Some kind of balls. I mean, who knows? I mean, first of all, you know what my thoughts are on predictions, right? It’s a fool’s game. And he’s made a prediction across the whole waterfront in terms of commodity prices. At least metals anyway. And to do that accurately, you’d have to have all these kinds of positions on things like what’s COVID going to do, what’s China going to do, what’s China and the US going to do, what’s China and Taiwan going to do, what’s going to happen in Afghanistan when it’s run by al Qaeda and ISIS, what’s going to happen with inflation, is a debt ceiling going to be lifted, what’s going to happen with interest rates, what’s going to happen with currency? It’s like, OK, it’s a good call, but that’s why I’d rather just use the 3PTL, so I don’t disagree with him. I mean, like most of these commodities are in buy situations, which means they’re rallying. So if he’s just following the trend, then I kind of agree with him. But it’d be hard to put a number on those things, like he has. And the other thing which jumped out to me is that, historically, when all of the other things have rallied like steel and copper and silver, they basically supporting — they’re basically happening because the world economic world GDP is growing — economic growth for the planet, for all at least developed countries, which is a reasonable assumption if we’re coming out of a pandemic. But if that all happens, it’s more than likely that gold will go down. They do tend to work inversely, so people will buy gold when they’re worried about the pandemic and they’re worried about what’s happening to their wealth because they see gold as being a store of value, as it’s called. Rather than putting in money in the bank, you put it in gold bricks, which you can then won’t be infected as much by inflation and pandemics and all that kind of stuff and will be worth a lot, if not more, in the future. But I would think the most difficult prediction there is on gold. I think it’s getting close to a sell, but again, I’m not making a predict. We’ll just follow it. But yeah, who knows is my response to that.
Cameron [00:46:07] It’s not the only prediction this David Hunter guy — by the way, his Twitter profile says he’s a contrarian macro strategist with 40+ years on Wall Street. His — he posted this thing about gold, steel etc. on October 15th; on October 16th, he posted a link to an interview that he’s done where he’s predicting Wall Street’s going to have an 80% crash — it’s going to fall by 80%..
Tony [00:46:30] So how does that happen, if now all the commodities are rising?
Cameron [00:46:33] Well, I guess people are taking their money out and putting it in gold, silver and copper.
Tony [00:46:39] Yeah, again.
Cameron [00:46:39] Put under the beds.
Tony [00:46:40] It’s possible. But generally, the commodities rising will drive Wall Street because all the miners are making money and all the supports for the commodities are making money. The commodities are rising because builders are building more, et cetera. So it’s kind of like having an each way bet isn’t it? Wall Street will drop by 80% but all of the commodities will go up… anyway.
Cameron [00:46:58] It’s going to be one of those days.
Tony [00:46:58] The one interesting thing though is…
Cameron [00:46:59] I said, he’s going to be right one way or the other.
Tony [00:47:02] So that’s like the old con, right? Where you mail out 10,000 newsletters to people saying 5,000 say the market will rise tomorrow and 5,000 say the market will drop tomorrow. Then the next week whichever one you got right, you go to those 5,000 people and to 2,500 you say the market will rise tomorrow, and to 2,500 say the market will drop tomorrow. And for the group that got that right, you go to those 2,500 people and you write, say, 1,250 and say the market will go up and you keep doing this until you down to like 500 people or a couple of hundred people. And then you write to them, you say, “Look, I’ve be right for the last eight weeks. I know exactly what’s happening in the share market. Please subscribe to my newsletter for $10,000 a year.” And you get a few takers and you just shut down and go to a new city and do it again.
Cameron [00:47:47] Well, I know what I’m doing this week. That’s my — that’s my task list for this week. All sorted!
Tony [00:47:54] Yeah, so.
Cameron [00:47:55] Why didn’t I think of that before?
Tony [00:47:57] That, this kind of strikes me as being that — on a positive side, and I don’t want to demean David Hunter. He may be right. On the positive side, the thing which I hadn’t looked at before was steel as a commodity and I couldn’t find grass. The one and the couldn’t find grass on Stock Doctor, the ones in indexmundi weren’t working, so I don’t know if that’s been fixed or what. I did a general Google search and found one for rebar. So rebar is the steel that goes into concrete for construction, so that’s not a bad proxy. It’s definitely in a buy situation which supports one of the stocks on the buy list called BIS — Bisalloy.That might be something that, again, people want to have a look at. It will certainly play into the the opening up of economies. There’ll be construction which will use steel. And the trick with steel, though and I know this from past experience, is that there’s all different types of steel. There’s rebar we just spoke about, there’s generally it breaks down into flat steel and rolled steel, and they get used for different things. So rolled steel will get used for things like rebar’ll get used for — I don’t know — wiring, maybe? Probably not steel. It does have different uses to flat steel which generally gets made into girders and roofs and things like that. So generally they do keep lockstep with each other, but they can be different. So I’m not sure what kind of steel Biz alloway produces. But if anyone wants to have a look. The first thing I’d look at is to see what kind of steel it uses and then go and look at the commodity price for that particular type of steel, if you can find it.
Cameron [00:49:21] Cool. OK, well, let’s go on to a question from Calv. Calv’s said: “Good afternoon Cameron.” Hi, Calv. “Just a question for this week’s show. Has T.K. done any regression testing on the new rules he has introduced into his QAV process and how much of an impact that it has had on his returns during that period? Pre-Check list to post check lists, pre-3PTL to post-3PTL etc.” And I checked in with Calv — this was on Facebook — and I said, “What do you mean by the new rules?” Because I thought he might have been talking about some of the musings you’ve had recently, like the 20% above H2, below H2, 20% above SL — whatever. But he was like, “No, no, I mean, like the the new rules being the ones that you implemented after the GFC in 2008.”
Tony [00:50:13] The new old rules.
Cameron [00:50:15] I think Calv might be like Mel Brooks. He’s the 2000 year old man. For him, anything in the last 20 years is new.
Tony [00:50:22] Yeah.
Cameron [00:50:22] It’s like…That’s how I feel about rock music. Anything that came out after 1980. Really, I don’t have time for — new fangled music. So, yes, he’s really talking about the introduction of the checklist in the 3PTL.
Tony [00:50:35] Yeah, short answer is I don’t, and it’s a little difficult because things will happen at different time periods. So the 3PTL came in after the GFC as a way of trying to prevent my portfolio from taking that kind of hit again, and checklist came a bit later. I think I’ve be doing a checklist formally for about seven years now, maybe eight years. Came out after — I started using it after the book about checklists — “The Checklist Manifesto” was published and then price to operating cash flow got elevated in its prominence, you know, at a different time. So it’s pretty hard to work out. I haven’t kept a date when all those things happen, but all I did do to try and answer this question was I went and looked at performance pre-GFC and post-GFC. And even that’s not going to be a good test because they’re different time periods. So pre-GFC. I had been investing for about eight years and the GFC lasted for a couple of years. And then what’s it about? It’s been about 14 years, 13, 14 years since the GFC, so they’re not the same time period. And but interestingly enough, if I use the pre-GFC/post-GFC analysis, The All Ords had similar returns during those those two time periods. So pre-GFC for the time I was investing those eight years, the All Ords returned 8.6%, post-GFC 8.3%. So I’m not including the GFC years in that analysis, so it’s pre-GFC/post-GFC.
Cameron [00:52:05] What’s post-GFC? When does that start?
Tony [00:52:08] It would be starting in 2008? Probably. I think from memory.
Cameron [00:52:12] That’s when the GFC started.
Tony [00:52:13] GFC, started GFC started late 2007, went through 2008. And so it was March 2009 when everything started to take off. So yeah, I back a little bit before that, which was kind of rock bottom for me. And that’s part of this analysis. The start that you use is really important, right? Because if you use a low base, it looks better. If you use a higher base, it looks worse. But anyway, as much as I can, I can sort of dissect this with a sledgehammer. Pre-GFC, I was getting about 16% per annum post-GFC 24% per annum. Oh, but again, that’s from the lows of the GFC. When I saw those numbers, my first thought was “Okay, well, if you use the GFC post-GFC — everything’s been recovering, including the share market. But if I looked at the all ords, it was pretty similar in its return, both pre-GFC and post-GFC.” I think there’s enough there to say it’s improved. Those numbers can be manipulated. I think a couple of things to say about that analysis in the pre-GFC days. I mean, for the really early years, in the pre-GFC days they would look nothing like QAV does now. So it was in the first year or so it was just, you know, taking stock tips and making all the mistakes. Then it became a value. I became a value investor. But, you know, I didn’t really systematize things. I was basically, you know, looking at what was then called Huntleys’ Newsletters and now called Your Money Weekly. So the Morningstar Newsletter, I was looking at the stocks that will be reported each month as being as part of the Wilson Asset Management portfolios, looking at star stocks in Stock Doctor. And sort of picking stocks out of those that look like they might be on the cheap, undervalued basis, using probably more p than anything, but some of the things in there and then making investments. So it was really early days in the value investing January’s post-GFC a lot more systematic than pre-GFC. And that sort of thinking and systematizing of things led to priced operating cash flow being important. The check was being important, 3PTL being important. So it kind of evolved in that time.
Cameron [00:54:15] So when we quote your performance of your investing period career in 25, whatever years and we say 19.5%, that’s including the years when you didn’t know what you were doing, and it’s including the GFC crash when you didn’t have 3PTL sells as a stop loss to get you out.
Tony [00:54:36] Yep.
Cameron [00:54:36] So I just twigged that we’re kind of marketing that as almost like that’s the result that QAV has returned you over twenty eight years, whatever. But if you’d actually been doing QAV as it is now, over that twenty eight years, it would probably be a lot higher.
Tony [00:54:52] Yeah. So I just did the post-GFC number of 24% there, but that doesn’t include the GFC, which would lower it. So I’m kind of happy with 19.5% / 20%.
Cameron [00:55:01] Yeah. But if you had your 3PTL rules in place during the GFC, you would have got out a lot earlier and got back in and so would have been a lot better. Oh man, yeah, we’re underselling this thing.
Tony [00:55:15] Well, yeah, yeah, possibly. But.
Cameron [00:55:18] No, we should break that down. Like, I think that’s important. Like nineteen and a half over twenty five plus years is a nice thing to say, but I think we should break it down. If you have the opportunity to go well, you know this was your return up to this point. Then you introduced the checklist and the 3PTL and this kind of stuff. This has been your return since doing that, and we can break it down into two different time periods. So I think that’s a more accurate reflection of the QAV sorts of returns.
Tony [00:55:47] Yeah, it is. But you know, it’s also during a period when the market’s been going up. So there’s also that to take into account, but we can go back to the All Ords. I did go when we started this two years ago. I did go back and look at 10 years worth of data and it came out at around at 19.5%. So again, that’s different to post-GFC, which is, you know, 12, 14 years worth of data. And I also for that analysis I just read out there used didn’t use my overall performance because there’s lots of ins and outs, particularly in the last two years, but also in the very early days when I was just basically using my bank account, which was also being used to pay bills from and all that kind of stuff as well. So that’s…
Cameron [00:56:26] That’s hard to track.
Tony [00:56:26] I used — it’s hard to track. But it’s also the superannuation fund is a better.
Cameron [00:56:30] Yeah.
Tony [00:56:31] Portfolio to analyze, which is what I just did with those.
Cameron [00:56:34] Yeah,.
Tony [00:56:34] Yeah. And what I did with that 10 year analysis before we launch, which came out around that 19–20% mark as well,.
Cameron [00:56:41] Right?
Tony [00:56:41] But I haven’t gone back and done it. And the other thing about the superannuation fund is it’s independently audited. So it’s not me saying, here’s the result it’s it’s actually signed off by an auditor because it’s a self-managed super fund.
Cameron [00:56:52] Right?
Tony [00:56:53] Yeah,.
Cameron [00:56:53] Yeah.
Tony [00:56:54] So look, we could be underselling it a little bit, but. I’m comfortable saying 19.5%.
Cameron [00:56:58] Well, I’m not, because if we can get over 20, you’re better than Buffett and then we can go into the…
Cameron [00:57:04] We can pick periods of Buffett’s reign when he was doing better than 20% too. We’re better off saying 19.5% for 25 years. I think that’s a pretty good track record.
Cameron [00:57:13] Alright.
Cameron [00:57:13] Yeah.
Cameron [00:57:14] Thank you for the question, Calv. James, “Hi all!” He posted this to Facebook. “How do you go about finding a sell line for a stock that doesn’t have five years of price history? When do 3PTL become useful? Is there a minimum number of inflection points before the trend is valid? I know you need at least two peaks and two troughs for there to be both a buy and sell line. But when is there enough price history? Consider an example where you received a new stock from corp action that has less than six months of price history.” I know we’ve looked at DSK before, and I think this came up on the Facebook thread as well. Newly listed companies are tricky.
Tony [00:57:48] Yeah, they are. Look, I — though, frankly, I think you can start to make a trend with two points, you know, especially for something it’s just listed and it’s going up very steeply, which was the case with DSK. But that’s not strictly using the 3PTL analysis, but I have invested in stocks based on simple things like that. But if you look at DSK now, there’s certainly enough peaks and troughs to be able to work out the buy line. So generally I would think 6–12 months worth of data will give it to you. But yeah, you really want. First of all, I think it’s fine if you look at the graph and it’s only over a short time period because it’s newly listed and you can see it’s going up or it’s going down. He can make a call just based on that, but you’ll have to watch it because it might reverse. But yeah, I think James has answered his own question. You want four points, basically four — two peaks and two troughs.
Cameron [00:58:34] Ideally. But if you don’t have that, use common sense.
Tony [00:58:37] Yeah, follow the trend.
Cameron [00:58:38] Yeah, I’m just looking at how DSK pulls up in the Brettalator.
Tony [00:58:43] Yeah. So it’s…
Cameron [00:58:44] It’s a buy.
Tony [00:58:45] It’s a buy.
Cameron [00:58:46] Just crossed it’s buy line.
Tony [00:58:47] Yeah.
Cameron [00:58:48] Very good.
Tony [00:58:49] What — DSK was on the buy list. Is it still there?
Cameron [00:58:52] I didn’t see it in my analysis this morning.
Tony [00:58:55] No, because I’ve got it as a negative sentiment.
Cameron [00:58:57] I’ve got it as a positive. Yeah, I’ve got it as positive sentiment. Why didn’t it — or maybe it did come up! I just didn’t notice it.
Tony [00:59:04] What’s it’s QAV score? Yeah, 14.14. So that should be good.
Cameron [00:59:07] I haven’t looked at its manual data for a while, though.
Tony [00:59:10] I looked at it when it reported on the 5th of September and got a ‑1, so that was a high P, record high p. Wasn’t the recent upturn and I got a 0 for equity, but I did have the sentiment. It has oscillated quite wildly for sentiment because of the fact that we haven’t been able to draw up a proper graph yet until very recently,
Cameron [00:59:31] It would have a new three point upturn today.
Tony [00:59:34] Would you? Right? So it would improve the score? Good, good thinking.
Cameron [00:59:36] Well, no, I still only get 0.14 for it. Did you say ‑1 for record low PE?
Tony [00:59:41] Yeah, and I’ve got 0.14, as well.
Cameron [00:59:44] Shouldn’t be a blank for a PE, it can’t have had much of a PE history.
Tony [00:59:49] Let’s have a look. So DSK we have, here we have 2, 3. Okay, lasted for a while since December 2020.
Cameron [00:59:57] Well, 2. 2 in the current.…
Tony [00:59:59] Correct, yeah.
Cameron [01:00:00] Okay, so that’s enough to establish a trend. And Dec 20 was the lowest. Yeah. So it’s the highest. OK, what else we got? Last question — No. Two more. Sam. Samuel — Bonjour, Samuel! Bon soir. Bonne afternoon — Whatever that is. “Cameron, if I may — you may — I would like to ask if Tony could explain the process of price sitting on the ASX prior to the opening time. Do they average the offers in bids on the table and settle the lot at one price? How come some prices do change after the market closes and they show a transaction time after 4pm? Just being curious about that.” I’ve asked you that same question before.
Tony [01:00:39] Yeah, look, I don’t have a definitive answer. My understanding is that when the market closes, they start sweeping the transactions and settling them. And they get, I think, from memory at six o’clock at night. This the the settlement part of the ASX kicks in and records all the transactions and processes the settlement. But I could have that wrong. It’s testing my memory there and there’s certainly off market trades that happen all the time, so you can. There is a form I don’t myself. You can actually submit a form saying I want to transfer a stock from, say, my super fund account to my family trust account. And if you do that, you gotta be careful of the super fund rules. So let’s let’s pick two other things. Let’s say, family trust to my personal name, and you can do that as a process which will then feed into the the pricing that happens after the close. Generally, that’s done at the market close price anyway. But there are also block trades, which happen after the market closes so regularly. What happens is, when the institutions will wait for the market to close and they’ll jump on their phones and ring their clients and say, “Hey, this Director wants to sell out of this company, and they’re offering, you know, a stake of 2% of the company at a 5% discount to the price.” And the other institutions get on the phone and say, “Yeah, we’ll take that.” And that happens as well. So all that stuff is going on, even though the market isn’t open and they will affect the the trades, which will therefore affect the opening price in the morning. But really, that’s a top level answer that’s what I understand. It’s probably one I can, you know, feed to a broker and ask them for a more detailed response.
Cameron [01:02:14] All right. Maybe, the next time we get Alex Hay on. We can ask him that.
Tony [01:02:18] I’ll send him an email and ask him the question.
Cameron [01:02:21] All right. Thanks, Samuel. Tim asks listening to last week’s episode, “T.K. spoke about the 3PTL sell and changing when to opt out based on a percentage. Is this the same method that Stock Doctor based their sells on? At what point do you use this method or the current sell when it hits the 3PTL over rule one?” Don’t lose money. When does Stock Doctor tell you to sell stuff?
Tony [01:02:52] Yeah, so the Stock Doctor SD max uses the moving average. So short term moving average over a long term moving average. I think the long term is two years. I forget what the short term is, probably like 6 or 12 weeks or something. Yeah. And we’ve talked about moving averages as an alternative way of doing trend line checking rather than 3PTLs, but not necessarily. It — generally, it works, but it’s because it’s a moving average. It can be lags in the buys and sells, which can affect you, but, overall, it’s not too bad. So that’s how Stock Doctor do it. They also, I guess, have an implicit recommendation that if something stops being a star stock, you should sell it. Now that they have an implicit recommendation that when something goes on as a star stock, that its recommendation for you to consider buying it. So, I think that would be the two sell recommendations from Stock Doctor. I don’t know if Tim’s getting a bit confused with the musing I spoke about last week, but certainly I haven’t done enough work on the 20% above the L2 is a buy and a 20% below the H2 is a sell trigger points yet to to seriously consider them. But in terms of when we sell, yeah, if if the it’s a bit of a firm sell, if if a stock price goes below its 3PTL, we should sell it. And or if it falls below 10% of the purchase price, we should sell it. And I guess the only time we don’t do that is, if it’s going ex-dividend and we haven’t received a dividend yet. We add that back into the calculation. Hope that helps, Tim. I’m not sure if I confused you last week by my musings.
Cameron [01:04:22] All right. Thank you, Tim. Thank you, Tony. That’s a wrap for this week, except after hours. New season of “Succession” starts today, I think.
Tony [01:04:31] Yeah, I’ll have to check that out.
Cameron [01:04:33] Yeah, I’ve been watching “Squid Game”. I think I’ve watched two episodes of “Squid Game”. Pretty interesting. Got into that, yet?
Tony [01:04:41] Is it? Yeah, I’ve watched half of the first episode and yeah, I didn’t get into it. But I’ll persevere.
Cameron [01:04:48] Right? What else you been doing, watching, listening to — anything? Eating, cooking?
Tony [01:04:53] Cooking yep. I’ll do a veggie bake tonight, which will be nice.
Cameron [01:04:58] Good.
Tony [01:04:58] Yeah. Think nothing, really? It’s been same old, same old for me. Watched a couple of crap movies, I can tell you that!
Cameron [01:05:05] What were they?
Tony [01:05:08] “Free guy”.
Cameron [01:05:08] Oh God. Yeah.
Tony [01:05:09] Came — became free on Apple Plus during the week. And well, as we know, you get what you pay for. It was a total waste of time.
Cameron [01:05:19] Yeah,.
Tony [01:05:20] What’s the other one I watched? It’s so bad. I can’t even recall. I watched “The way, way back” — that was good. It’s an old one.
Cameron [01:05:28] “The way, way back”
Tony [01:05:29] Yeah. I saw that one on the weekend
Cameron [01:05:31] Who’s in that?
Tony [01:05:33] Well, I watched it because Toni Collette and Allison Janney are in it. Steve Carell’s in it. But it’s probably about — must be at least five years old now, but it’s good. Yeah, I really enjoyed it.
Cameron [01:05:43] The 2013 -.
Tony [01:05:44] Coming of age story. Sorry?
Cameron [01:05:45] Yeah. The 2013 film. Oh!
Tony [01:05:48] Yeah.
Cameron [01:05:48] With.
Tony [01:05:48] Sam Rockwell.
Cameron [01:05:49] Sam Rockwell. I saw this! We saw this at the cinema. Where he’s the swim — the pool guy. Great film — I loved it. Yeah, love Sam Rockwell in everything! He’s awesome.
Tony [01:05:59] Yeah, very cool.
Cameron [01:06:00] Yes.
Tony [01:06:02] Yeah, that was really good. So I’ve been meaning to watch it for a while and just popped up on my list on whatever it was, Netflix or something. So I watched that. Yeah.
Cameron [01:06:09] Great cast Maya Rudolph, Rob Corddry, Allison Janney, as you said. Yeah, good film. Yeah, very sweet film. I remember like a nice, heartwarming, sort of a coming of age, sort of story.
Tony [01:06:21] Yeah, it was good.
Cameron [01:06:22] Yeah, good. What’s — what you’ve been listening to?
Tony [01:06:26] Funnily enough, I’ve been listening to the soundtrack for “The Mission”. For some reason, it got stuck in my head and I mean -.
Cameron [01:06:31] Great soundtrack.
Tony [01:06:32] It’s really good, isn’t it?
Cameron [01:06:33] Oh, it’s been one of my go-tos for decades. Yeah, I used — it used to be like my Sunday morning music. Coffee in a Sunday morning, you put that on, and all the coral stuff that comes up — it’s great.
Tony [01:06:45] It is really good and it’s been great to work to it over the last week or so. That’s what I’ve been mainly doing.
Cameron [01:06:51] Yeah.
Tony [01:06:51] But yeah, really good.
Cameron [01:06:53] Who composed that? Do you know?
Tony [01:06:54] It’s Moriconi, isn’t it? Moroconi.
Cameron [01:06:57] It is, yes. Moriconi, the legend.
Tony [01:07:01] Yes. He is, isn’t he? I think I always look forward to him and Carter Burwell whenever they are releasing new soundtracks, they are just so good.
Cameron [01:07:10] Who’s the second guy — Carter who?
Tony [01:07:13] Carter Burwell. Miller’s crossing.
Cameron [01:07:14] Oh God,.
Tony [01:07:17] My other go-to soundtrack?
Cameron [01:07:18] Yeah. I didn’t know the name, but I love — I love that soundtrack, and it’s one of my top films. Top 10 — Miller’s Crossing would be a top 10 film for me. Fantastic film!
Tony [01:07:27] I agree.
Cameron [01:07:29] Just so good. Yeah, good stuff. Right? Well, that’s it for after hours. That’s it for the show this week. Thank you, T.K, for sharing your wisdom with us. Once again, thank you to the to the people who are sending questions. Have a great week. Enjoy the end of lockdown, Sydney, Melbourne. Enjoy your last week of lockdown, Melbourne folks. You know, get get ready.
Tony [01:07:53] Yeah, yeah. It was what two thousand cases a day still happening in Melbourne.
Cameron [01:07:58] That’s nothing. It’s fine.
Tony [01:08:00] That’s ballsy. That’s — that’s — that’s out there!
Cameron [01:08:03] And the premier got fined last week for walking around journalists without a mask on.
Tony [01:08:07] Yeah, I saw that.
Cameron [01:08:08] It’s always good. Leading from the front.
Tony [01:08:10] I’m surprised the premier in New South Wales didn’t, because on the Freedom Day he had a beer with four or five of his other cabinet ministers in the bar, and they were not 1.5 meters apart which they should have been. So, but anyway, he’s the premier.
Cameron [01:08:22] Meanwhile, in Queensland and Southeast Queensland, we haven’t had a single community case for over a week. We’re still wearing masks everywhere. Everyone’s masked up. Everyone’s, you know, doing the right thing.
Tony [01:08:34] That’s good!
Cameron [01:08:35] It’s everyone’s hardcore here. You know, we’re like yeah. Whatever it takes.
Tony [01:08:41] That’s good. I mean, I had I had tickets to the Everest’s race on Saturday at Randwick. I didn’t go in the end. I thought, and Jenny and I talked about it because if I go and I catch it, then she gets — she catches it. We just thought, let’s just see what happens. There’ll be a COVID outbreak somewhere, I would think in Sydney in the next week or so after Freedom Day. And sure enough, I was watching the races and you look at the people there — they’re all you, no one was socially distancing. They’re all clapping each other on the back and hugging and all the rest. And yeah, you know, the crowd was four or five deep along the rails at the finish line. So everyone there was supposed to be double back. So we’ll see what happens.
Cameron [01:09:16] Well, look, we know enough now to know that being double vaxxed doesn’t mean you won’t get it. Doesn’t mean that if you get it, you won’t end up really, really sick and in hospital and die. Your chances of those things happening are extremely reduced, but it’s still going to happen to some people. I don’t want it to happen to you.
Tony [01:09:36] Thank you. I don’t won’t it to happen to me, either. Well, even if — even if it’s only a bad case of the flu. You still lied up for a couple of weeks. Who wants that? I’ve got lots of things to do.
Tony [01:09:46] But, you know, you can’t stay locked inside your Crystal Palace forever, either.
Cameron [01:09:52] No. And I’ve been going out for walks and stuff and we’ll gradually, you know, Jenny went into the into town today for a business meeting, so we’ll gradually release. But I think it’ll be interesting to see what happens this next week. You know, whether there is a COVID outbreak in Sydney and Melbourne when it opens up again, and what happens. We’ll let someone else be the canary in the coal mine.
Cameron [01:10:10] Good luck with that. Stay safe. I’ll talk to you next Monday.
Tony [01:10:13] Thanks, Cam. You too!
Cameron [01:10:14] Thanks, Tony. Bye!
Tony [01:10:20] The QAV podcast is a production of spacecraft publishing proprietary limited, authorized representative of AFSL 520442 AFS 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.