Transcript #445

QAV 445 Club

Cameron [00:00:00] Oh, we’re on. Hey, wel­come back to QAV. 

Cameron [00:00:12] Episode 445 — quat­tro­cen­to quar­an­ta cinque.

Tony [00:00:20] Si, va bene. 

Cameron [00:00:21] You’re back in Syd­ney, Tony. How are you doing? 

Tony [00:00:23] Good. Yeah. Had a nice break. Thank you. 

Cameron [00:00:25] Good. 

Tony [00:00:27] In won­der­ful Wag­ga Wag­ga.  I final­ly found the clay — Aus­tralian Clay Shoot­ing Cen­ter. 

Cameron [00:00:31] Did it look good? Did it look good? Did it look impres­sive? 

Tony [00:00:34]  It’s hard to see where they spent five mil­lion bucks, that’s for sure. It’s like a mown  foot­ball field with a shed at one end. 

Cameron [00:00:40] Mm-Hmm. 

Tony [00:00:41] That’s it. Yeah. 

Cameron [00:00:42] But did you go to their hous­es and see what they had  around? 

Tony [00:00:47] Yeah, could­n’t get close to their hous­es for the secu­ri­ty guards. 

Cameron [00:00:52] Yes. And the moat that they had built? Well, that’s good. Well, it’s been — it’s been a rocky week on the mar­kets while you’re away, Tony. You go away and the mar­kets go rocky. Our port­fo­lio — I just had a look at it before — dropped a cou­ple of points last week. Some of our stocks like ZGL took the brunt, a cou­ple of oth­ers. 

Tony [00:01:18] Saw that. 

Cameron [00:01:19] Yeah, but any­way, we’re still beat­ing the index by 50% so, you know. 

Tony [00:01:26] We’re beat­ing the index by 50% or we’re dou­ble index? 

Cameron [00:01:30] No, by 50%. I think the 200 was up five points for the finan­cial year and we’re up sev­en. So no, it’s about 40%. Yeah. 

Tony [00:01:43] Okay. 

Cameron [00:01:43] Bit of a rocky day today! 

Tony [00:01:45] I’m just look­ing at the top three stocks for the week — Perseus Min­ing, Bell Finan­cial Group and CVL. That’s Civmec, isn’t it? I think, yeah, CVL 

Cameron [00:01:56] What are those three again? 

Tony [00:01:56]  PRU, which is Perseus Min­ing, is up 3.91%. BFG — Bell Finan­cial up 3.04%. And CVL, which I think is Civmec. Civmec mechan­i­cal, is up 2.9%. 

Cameron [00:02:10]  Hmm. Well, they did­n’t help us against the oth­ers that were down eight, five, and five. But bet­ter than noth­ing.  

Tony [00:02:17] They did­n’t help us against what? Sor­ry. 

Cameron [00:02:19] Oh, the three that dropped that I — 

Tony [00:02:21] Yeah, right. 

Cameron [00:02:22] Sent out in the newslet­ter today that dropped eight, five and five from mem­o­ry. But I’ll tell you, just buy the buy. One of the qui­et cham­pi­ons of my port­fo­lio, which I don’t think we’ve real­ly talked about ever in any detail, is Shine Jus­tice — SHJ. They’re prob­a­bly too small for you. I imag­ine they’re a small cap. 

Tony [00:02:44] Yeah, yep. 

Cameron [00:02:45] But just recent­ly they’ve shot up. They’ve gone from $1.25 — $1.28 at the end of Octo­ber, up to $1.53. Dun­no why! They were truck­ing along. I bought them ages ago. They were truck­ing along. But back in August they were like a buck! Gone up 50 cents since August. So. 

Tony [00:03:04] Very nice. So there’s got to be some­thing — looks like there was an announce­ment about a High Court rul­ing on the 5th. Could that be it? 

Cameron [00:03:11] Why would that make their share price go up? I don’t know! 

Tony [00:03:13] Well, they’re a class action lawyer. 

Cameron [00:03:16] Yeah, but what do they get? Paid by the win..? 

Tony [00:03:21] That’s exact­ly what they get! 

Cameron [00:03:24] You just if you’re a lawyer, you just get your fee regard­less with a loose class action. You get -. 

Tony [00:03:29]   U.S. Style, This is no fee. Yeah, no win. No fee.

Cameron [00:03:34] Right. 

Tony [00:03:35] Yeah. 

Cameron [00:03:35] Well, good for them. But like a — I remem­ber when it popped up on my check­list when­ev­er I bought it six months ago, and I was like, “Real­ly? Law firm? Meh. It’s on the list. Got to buy it.” And yeah, it’s done well. And I had­n’t even real­ly noticed. I just hap­pened to look today and was like, “Oh, it’s up 50% since I bought it!” Which -. 

Tony [00:03:53] Wow, that’s nice! 

Cameron [00:03:54] Which leads me to some­thing I want to talk about. Which was — we had a we had a small Bris­bane din­ner here last week. Thank you to the guys that came along. Steven, Dave, Mark and Tim and Tay­lor was there and Tay­lor’s mate, Chris, who’s been invest­ing with QAV and myself. It was rel­a­tive­ly small. Don’t know what hap­pened to every­one else from our last — well, some of them said they could make it. But any­way, one of the main top­ics of dis­cus­sion was why you should­n’t inno­vate in QAV until you’re at least a black belt. 

Tony [00:04:24] At least — at least a Black Belt, ok! 

Cameron [00:04:29] At least a black belt. And you know, some of the guys that were there were say­ing, “Yeah, in the ear­ly 12 months, first year of QAV I was like, “Well, I’m not going to buy this, I’m not going to buy that, but I’ll buy this one and I’ll buy that one and I’ll try. And you know, I’ll ignore rule one here. I’ll ignore the 3PTL there, and I’ll tweak this and I’ll tweak that.” And I think you’re respon­si­ble for this, Tony, because you’re always say­ing, “Yeah, you know, inno­vate. Do it your way. Like, come up with new ideas. It’s all good. You know, you’re too hum­ble. You’re like, Yeah, I’m sure peo­ple can improve upon it, et cetera, et cetera.” But of course, what hap­pens is — it’s like, I’m going to make the choco­late cake. I’m just — well, I don’t want to put choco­late in it. I’ll put smoked salmon. Which is great, but it’s not going to look like a choco­late cake. Don’t come back to me and go “That did­n’t taste like a choco­late cake.” Well, it’s because you put smoked salmon in it! And these guys were say­ing, “Yeah, even­tu­al­ly we just went “Oh, we’ll just stop doing that and we’ll just fol­low the sys­tem. And it seems to work a lot bet­ter when you just fol­low the rules.” 

Tony [00:05:29] Yeah. Well, it’s — that’s right. I mean, I do encour­age peo­ple to try new things, but in a cham­pi­on chal­lenger set­ting so, you know, put a small amount of your port­fo­lio to the test, and if it works, then feed it back into the major part. But don’t give up. It’s like, I don’t know what the term is, but it’s like in chess, you don’t give up ground unless there’s a bet­ter ground to go to, right? So unless you’re sure that what you’re going to do is bet­ter than QAV, then you don’t you don’t give up QAV, 

Cameron [00:05:54] You a chess play­er, Tony? Why haven’t we ever have a game of  chess? 

Tony [00:05:57] No, not at all. 

Cameron [00:05:58] Well, what are you doing using chess analo­gies? That would be like me using a golf anal­o­gy or horse rac­ing anal­o­gy. It’s — in chess, yeah, actu­al­ly, you often give up ground, but you know. 

Tony [00:06:08] Do you? Okay. 

Cameron [00:06:09] Yeah, to be sneaky. Give up pieces, too! Tay­lor is good at that. Tay­lor’s — Tay­lor’s sort of very good at just sac­ri­fic­ing pieces to expose weak­ness­es in my posi­tion. And while he’s answer­ing text mes­sages on his phone and act­ing like he’s not even pay­ing atten­tion. Smart ass! 

Tony [00:06:25] He’s prob­a­bly googling the grand­mas­ters and their respons­es to your board set. Nah, you’re right. I’m not — I’m not a chess play­er, but that’s the — I mean — that’s the basic rule of life, and you don’t give up ground until you get bet­ter ground on offer, right? 

Cameron [00:06:37] Yeah, I guess. Yeah, so gen­er­al­ly, look, peo­ple can do what­ev­er they want, of course. But gen­er­al idea would be if you are going to inno­vate, don’t use your real port­fo­lio to do that, you know. Inno­vate on the site. 

Tony [00:06:50] Yeah. And there is a process.. 

Cameron [00:06:51] Test on the side. 

Tony [00:06:53] Do it on paper first. When you’re com­fort­able, do it with a small part of your port­fo­lio. If it works, roll it into the main port­fo­lio and let us all know! We can — we can look at it too! And that’s the way I do it. And that’s — I mean, that’s impor­tant because there are so many dif­fer­ent types of risks, and often­times it’s the unknown unknowns, right? Because you do it on paper — might look great. Maybe you hap­pen to pick the best peri­od to ana­lyze for that par­tic­u­lar strat­e­gy. And that’s a real clas­sic rook­ie mis­take that “Oh, I’ve noticed over the last six months that law firms list­ed on the ASX are doing real­ly well. I’m going to — I’m going to take all my mon­ey out of my port­fo­lio and put it in law firms, right?” What? That’s — okay six months of analy­sis you’re cor­rect. 

Cameron [00:07:37] Yeah. 

Tony [00:07:37] But run it live with a small part of the port­fo­lio for the next six months. 

Cameron [00:07:41] Yeah. 

Tony [00:07:41] And just see, because there’s also oper­a­tional risk. What hap­pens if that — in that six month peri­od when you’re run­ning the chal­lenger part of the port­fo­lio? Now you get sick and don’t pay atten­tion to the mar­ket or you get dis­tract­ed with work or what­ev­er, and you come back after a few months and go, “Oh shit, all these law firms have gone — they’ve gone well past my sell lines and well past rule one.” 

Cameron [00:08:02] Mm-Hmm. 

Tony [00:08:03] Yeah. So there’s oper­a­tional risk, there’s tim­ing. All those risks are out there. So yeah, real­ly, if you’re going to test and try some­thing, fol­low a process to do that on paper in a in a chal­lenger part of your port­fo­lio, no more than 10% and then roll it up into the main one if it sur­vives. 

Cameron [00:08:21] How long should you do that on paper to know that it’s prob­a­bly legit? 

Tony [00:08:26] I think 6 to 12 months. You want at least one, if not two, report­ing peri­ods in your analy­sis. 

Cameron [00:08:33] Right. 

Tony [00:08:33] So 12 months, I’d say 12 months. Because, look, things can be sea­son­al, you know, like with retail, if you’re test­ing a retail strat­e­gy and it’s over the Christ­mas peri­od, it’s going to look great! but you know, 60% of the retail sales are done in the sec­ond half of the year. And then you go live in the first half of the year and sud­den­ly you’re going, “Oh, this is not — it’s not work­ing too well. 

Cameron [00:08:52] Yeah. 

Tony [00:08:53] And plen­ty of oth­er indus­tries are like that, too. So yeah, at least 12 months 

Cameron [00:08:56] Or at least until you get your black belt! I will be man­u­fac­tur­ing QAV black belts. When we give you a black belt, then you can set up your own dojo and teach your style of Kynas­ton  Kung fu. You have the lit­tle, lit­tle black and white pho­to of Tony dressed in a robe up on the wall. Burn some incense when you come in every morn­ing.

Tony [00:09:20] Sip a dram. 

Cameron [00:09:22]  A lit­tle Negroni.  All right. What else did I want to talk about? PROPCAF?  Oh my god. So last week, when you and I were doing the check­list, we dis­cov­ered that I only had about — we’re not at the end of the process, but at the begin­ning of the process, I start­ed the check­list process with about 50% of the stocks you had. And when we were try­ing to fig­ure out why, we real­ized it’s because the first thing I’ve been doing before I do my man­u­al data updates is I fil­ter by PROPCAF — priced oper­at­ing cash flow less than sev­en. I just like weed all those out in the first place and then I do it. And you said to me, “Nah, nah, nah! You can’t do that! Because there’s some that may have priced oper­at­ing cash flow slight­ly high­er than sev­en but will still get a good QAV score, and we still want to invest in those. We don’t erad­i­cate them com­plete­ly if their PROPCAF is high­er than sev­en. 

Tony [00:10:19] Yeah, which is why I put all the shares into my watch list and then sold my priced oper­at­ing cash flow. And then, look, I tend to go down. I look at the QAV score after that for those who have a price to oper­at­ing cash flow greater than sev­en. I look at the QAV score and basi­cal­ly look­ing for ones which are about 0.04 or above. And they either haven’t scored or have a down­trend for sen­ti­ment because when you add the man­u­al­ly enetered data, the most you can get from doing that to add to the score is two points for sen­ti­ment, two points for price to oper­at­ing cash flow, one point for your 3PTL, and one point for increas­ing equi­ty. So you can add six points to the score. So there’s no point look­ing at any­thing that scores less than 0.04, but 0.04 and above you could actu­al­ly get them onto the buy list. 

Cameron [00:11:05] So this is for every­body who’s been using the Flit­man mod­el check­list, because when I wrote the instruc­tions for that some moons ago when it first came out, I said — I wrote down what I did, which is, right at the get go, fil­ter any­thing with a PROPCAF sev­en or below. And so I’ve changed that now in the instruc­tion that says eight and below. When you and I talked about it last week, you said, “Yeah, 8’s prob­a­bly — because if some­thing’s got a PROPCAF of high­er than eight, it’s prob­a­bly not going to score well enough to be high on our list, right? 

Tony [00:11:37] No, prob­a­bly! Let me just have a look, though, because it could. Just going to try and find one that is on that bor­der­line. 

Cameron [00:11:44] Or maybe just don’t fil­ter that at all. Just take that whole line out. 

Tony [00:11:48] Yeah, well, that’s what I do. I leave all the things which have pos­i­tive — my first down­load from Stock Doc­tors, every­thing with a pos­i­tive oper­at­ing cash flow. And that gives me, you know — well, my low­est down­load had 700 of our records in. It went to have it had 683 records in it. And then I saw the price to oper­at­ing cash flow, which you know, reduces it way down to maybe 180 or so. But I still leave the oth­er ones in. So if you look at — what’s a good com­pa­ny? Vir­tus  Health, VRT — where’s its price to oper­at­ing cash flow? Yeah, 7.14. It’s just that’s on the bor­der­line. But you said 8, did­n’t you?

Cameron [00:12:26] Yeah, you got any­thing over 8? 

Tony [00:12:28] I’m just look­ing now. 

Cameron [00:12:30] When you say you saw buy that, do you then check — do all the man­u­al data for all of the stocks with a PROPCAF high­er than sev­en every time? 

Tony [00:12:41] No. 

Cameron [00:12:42] So what’s? 

Tony [00:12:42] No. I look at — I look at man­u­al­ly, so I do man­u­al­ly enter data. If there’s some­thing in that 180-odd shares. So they have PROPCAF sev­en or less — I’ll go through and look at things which haven’t been checked for a while. So in my man­u­al­ly enter data sheet, I’ve got a date of when I last checked it. If it’s in the cur­rent month, I don’t both­er updat­ing it. I’ll look at in the last cou­ple of columns of my spread­sheet any­way, there’s an auto­mat­i­cal­ly gen­er­at­ed col­umn that gives me an auto­mat­ed sen­ti­ment check, which is based on Stock Doc­tor SD Max being an uptrend and the price change for the last six months being pos­i­tive, and the price change for the last five years being pos­i­tive. If that says uptrend and I’ve got a sen­ti­ment score of no again, I’ll go and check, those. So I’m kind of try­ing to fil­ter and save the work on that 180. 

Cameron [00:13:35] Yeah, so I’m doing that by fil­ter­ing out the ones with a PROPCAF high­er than sev­en because it nor­mal­ly leaves me with, I don’t know, 60 or 70 stocks rather than the full 180 that I have to go through. 

Tony [00:13:46] Well, hang on. So but my PROPCAF list of those sev­en or below is 180. How are you only get­ting a small­er list? Well, that’s more — at least that’s half of what I get.

Cameron [00:13:57] Well this week I did eight or below and I got about 180. The pre­vi­ous week, I did sev­en and below, and I end­ed up with, well, I don’t know. Maybe I think it was about 60 last week that I had. I don’t know what it would have been if l did­n’t.. 

Tony [00:14:13] Wow, that’s a big dif­fer­ence!

Cameron [00:14:14] Yeah, but at the end of the day, it does­n’t make a big dif­fer­ence to the buy list because at the end, you know, the ones that have a PROPCAF high­er than sev­en don’t get the two points, and they’re just unlike­ly that they’re going to rank very high. And par­tic­u­lar­ly, you know, when I start­ed doing it was for my — you know, we weren’t pub­lish­ing it so it was for my own buy list. 

Tony [00:14:37] Yeah. 

Cameron [00:14:37] I’m only look­ing for the top 20 stocks, right? So the ones with a high PROPCAF aren’t going to be on that list! 

Tony [00:14:43] Yeah. And I do an ADT fil­ter on mine too for large cap stocks, so I’m only ever get­ting 20 or 25 stocks on my list if I was doing it for myself. 

Cameron [00:14:53] Yeah. And so because a lot of the ADT stocks tend to have low QAV scores, they’re down 0.1/ 0.11/ 0.12 . 

Tony [00:15:03] Cor­rect. 

Cameron [00:15:04] You know, some of those that start with a very low score, the 0.4 /0.04/ 0.05. Might get up to that, but they’re not going to — it’s unlike­ly that they’re going to end up with a 0.35 or 0.27. So yeah, I don’t think it’s real­ly affect­ed me by doing that. But now that we’re pub­lish­ing, you know, a full list, it’s more impor­tant.

Tony [00:15:23] Are you -. 

Cameron [00:15:23] And if you’re invest­ing in high ADT stocks like you.

Tony [00:15:26] Yeah. Are you fil­ter­ing for any­thing else? Because if I do eight or below, I’m get­ting 257 stocks in my list. Are you fil­ter­ing for com­modi­ties first or..? 

Cameron [00:15:34] Yeah. 

Tony [00:15:35] Any­thing else? 

Cameron [00:15:36] Yeah. So I’ll fil­ter out things that I know have com­modi­ties in a sell thing. And because of that, I missed Zim­plats again this week. I had to put Zim­plats back in because plat­inum is back up again. I fil­ter out things with a qual­i­fied audit. I fil­ter out the PROPCAF. Yeah, that’s it. Before I start my analy­sis, usu­al­ly. 

Tony [00:15:57] Okay, so that would also explain a bit of a dif­fer­ence. 

Cameron [00:16:00] A lit­tle bit. 

Tony [00:16:00] Yeah. 

Cameron [00:16:01] Any­who! 

Tony [00:16:01] So I’m just look­ing at a stock like I think it’s BIS — Bisal­loy. 

Cameron [00:16:05] Yeah. 

Tony [00:16:06] So it’s on the buy­er list. It’s got a PROPCAF of 7.84. 

Cameron [00:16:11] Wow, that’s high! 

Tony [00:16:12] Yeah, and there’s anoth­er one. So one I was look­ing at which did­n’t make it on the buy list, but it came close — OFX, which we’ll have some new num­bers out soon, so it may come onto the buy list. Its PROPCAF cur­rent­ly is 8.05 and it’s QAV score is oh, it’s only 0.02. Okay, that won’t make it. 

Cameron [00:16:32] Right. 

Tony [00:16:33] What’s going on?  There’s anoth­er one down here. So I’m get­ting scores. I’ve got a 7.07 for Viva Leisure, so I’d prob­a­bly have a look at that and see if I can add the three points in man­u­al­ly enter date for that one. I’ve got a .08 for Bea­con Light­ing and it’s PROPCAF has blown out to 8.32. So, yeah, so there’s a cou­ple which poten­tial­ly can make it back onto the buy list, even in the eights. 

Cameron [00:17:01] Right. You know… 

Tony [00:17:03] And they’re worth check­ing. 

Cameron [00:17:04] Yeah, but again, those aren’t. If I was doing this for myself and just look­ing for the top 20. They’re not going to make it into the top 20. 

Tony [00:17:11] They won’t make it to the top 20. No, but some­thing like Bea­con Light­ing. I think it’s a large cap stock from mem­o­ry. So that would be some­thing I’m inter­est­ed in. 

Cameron [00:17:18] Yeah. So if peo­ple — par­tic­u­lar­ly this is impor­tant for peo­ple with a high ADT. 

Tony [00:17:22] Yeah, yeah. 

Cameron [00:17:24] …Bar­ri­er. OK, mov­ing right along. Let’s dis­cuss Andrew’s thread on the Face­book group about rule one — rule num­ber one. Get­ting back to, sort of -

Tony [00:17:37] You have to remind what that is! 

Cameron [00:17:38] So Andrew on the Face­book group post­ed “Rule num­ber one — don’t lose mon­ey. It’s been brought up a few times, and I’m still try­ing to work on a strat­e­gy per­son­al­ly about how far below my entry price I’m will­ing to wait for a stock to turn back upwards. I com­pared every­thing I’ve sold to its cur­rent share price as at the third of Novem­ber 21. Most of them haven’t real­ly kicked on to great highs, espe­cial­ly when you con­sid­er that some of these were sold up to 12 months ago. But near­ly all of them have come good, which just rein­forces to me the whole rea­son for buy­ing them in the first place. Good busi­ness­es are good prices. It also high­lights the impor­tance of watch­ing the under­ly­ing com­mod­i­ty sen­ti­ment is evi­dent with AIS, CIA and FMG are still sig­nif­i­cant­ly down. A great piece of info, TK! This list has­n’t tak­en into account the stocks I went on to buy with the pro­ceeds of sell­ing the above men­tioned stocks, but since I haven’t sold those, they’re near­ly all doing bet­ter than their pre­de­ces­sors. For­give me, Tony, for I have sinned and bought a non-QAV stock — JLG. In my defense, it could have been bit­coin!” And then there was a ton of com­men­tary on that from peo­ple. Let’s see! Doug said, “I’m 100% with you here. I strug­gle with this one, too. I’m going to do the same analy­sis. I’m also con­cerned we’re inter­pret­ing Buf­fet­t’s rule in an odd way. Effec­tive­ly, you don’t lose mon­ey until you do actu­al­ly sell. And hav­ing just read anoth­er book inter­pret­ing the rule num­ber one, they say you avoid los­ing mon­ey by buy­ing won­der­ful busi­ness­es at fair prices. Tech­ni­cal­ly, our QAV check­list finds these won­der­ful busi­ness­es, so we should be fine for a set and for­get strat­e­gy almost. I also won­der if you’d be bet­ter off buy­ing more of those posi­tions that are down know­ing that with QAV, they will come good over time. Food for thought.” Alice said, “I found it a pret­ty dif­fi­cult adjust­ment also to steer away from long term buy and hold. I did­n’t expect to be doing as much buy­ing and sell­ing and it got beyond my com­fort zone. Then I froze and just stopped doing any­thing.” Brett said, “We tend to use 10% as the rule num­ber one, but I’m not sure if there’s much behind this num­ber apart from it being what Tony was offered as an insur­ance pol­i­cy once. Have you mea­sured the max­i­mum draw­down per com­pa­ny? A good sam­ple size of these can help refine the 10% rule. Also, you make a real­ly good point about the pro­ceeds of what you sold. Our suc­ces­sors prof­it over time, so if you can min­i­mize the time in a down­turn, then it will boost suc­cess. Get your mon­ey work­ing where it’s appre­ci­at­ed.” Dun­can said, “This is an excel­lent and sim­ple analy­sis that has prompt­ed me to do some­thing sim­i­lar with my port­fo­lio. I too have start­ed to grow weary of dol­ing out cash to my bro­ker because of high churn and have now moved from [00:20:21]CommSec[0.0s] to Self-Wealth with a view to mit­i­gat­ing this. When I did the analy­sis, I was hor­ri­fied to see that I’d had appar­ent­ly sold out on some real­ly good per­form­ers.” Which reminds me of what you told me once — “Don’t check when you sell some­thing, don’t look at it.” “Some were ones I don’t expect. I did not refine it to exclude 3PTL sales, just all sale trans­ac­tions. Turns out that since about Feb­ru­ary, when I start­ed to apply QAV in earnest, I’ve sold about 52 stocks. I have repur­chased some of these — 44 of these sales were due to some vari­a­tion of rule one rather than oth­er rea­sons. 32 of those have risen since I sold, but only 17 by more than 10%. Only 5 have risen by more than 20%; 3 of those 5 were rule one deci­sions. But a sim­i­lar num­ber of greater than 20% loss has appeared on the list too. All of those were rule one too.” Inter­est­ing. So it spurred a lot of con­ver­sa­tions, so I thought it was worth bring­ing up and get­ting your thoughts on it. 

Tony [00:21:16] Well, my thoughts are the rules. So first of all, Buf­fet­t’s rule one isn’t sell at 10% of your pur­chase price. Rule one is just don’t lose mon­ey. We’ve just para­phrased that to apply to our stop loss. Yeah. So that’s a fair com­ment. Brett was right in his com­ments that I start­ed to think about this when I was offered insur­ance to pro­tect my port­fo­lio from falling more than 10%. So I said, “Well, I can do that for noth­ing by sell­ing things 10% below what I paid for them.” And that’s when I start­ed doing it. Again it’s one of these sta­tis­ti­cal things. Not every­thing you sell when it drops 10% per cent will keep going down. And won’t, you know, at some stage in the future, turn around and go up and make mon­ey for you. The way I approach it is that it’s — am I bet­ter off hold­ing onto some­thing and wait­ing for it to turn round and it’s got to improve by 10% and more over time? Or am I bet­ter off tak­ing 90% of the cash and putting it into some­thing which I think is more cer­tain to go up by 10% in the short term. So it’s an oppor­tu­ni­ty cost thing and my expe­ri­ences and I haven’t crunched the num­bers on this — my expe­ri­ence is it’s the lat­ter, right? If some­thing drops 10%, it’s prob­a­bly going to keep drop­ping. And sure, it’s prob­a­bly a good qual­i­ty com­pa­ny that will come around even­tu­al­ly. But in the mean­time, I could have made up my 10% by invest­ing in some­thing where the share price is clear­ly going up, scores well on the check­list and sen­ti­ments. Yeah, in its favor, 

Cameron [00:22:46] And you’re prob­a­bly pay­ing a lot more trans­ac­tion bro­ker­age than most of us. 

Tony [00:22:52] I am! I’m pay­ing — I’m pay­ing 40 bips, rough­ly. Depend­ing on the amount. 

Cameron [00:22:58] 40 bips? 

Tony [00:22:59] 0.4% 

Cameron [00:23:01] So like chick­ens? No, what? 

Tony [00:23:03] Basis points — it’s 40 basis points. So it’s less than one. It’s 40 points com­pared to 1%. 

Cameron [00:23:11] And your aver­age trans­ac­tion size is how much, Tony?.……

Tony [00:23:18] Haha­ha­ha­ha. 

Cameron [00:23:18] Dammit, so close! So close. 

Tony [00:23:24] Oh yeah, it’s over a mil­lion dol­lars, 

Cameron [00:23:28] Right. So what’s forty basis points of a mil­lion dol­lars? My brain can’t cal­cu­late any­thing in that fig­ure. 

Tony [00:23:35] Well, 1% to ten thou­sand. So 0.4 is $4,000 a trade. 

Cameron [00:23:40] Right. $4,000, let’s say, at least $4,000. 

Tony [00:23:44] Or more. 

Cameron [00:23:44] A trade.

Tony [00:23:45] Right, right. What, what are you laugh­ing at? 

Cameron [00:23:49] Because we live in dif­fer­ent worlds. We live in dif­fer­ent worlds, so… 

Tony [00:23:55] I’m not going to sit — I’m not going to sit on Self Wealth.… yay, $2000 bought — Wow got $500 of stock. Fan­tas­tic. I’m leav­ing it to the pros. 

Cameron [00:24:10] Come on, I thought you were, you know, con­ser­v­a­tive, fis­cal­ly con­ser­v­a­tive. 

Tony [00:24:14] I am! 

Cameron [00:24:14] You could be mak­ing — you could be sav­ing mon­ey, there by doing it in small parcels. 

Tony [00:24:19] Pos­si­bly could. And pos­si­bly I’d get enough expe­ri­ence over time to, you know, trade big num­bers on the stock mar­ket. But I’d rather leave it to the experts. 

Cameron [00:24:27] My cam­er­a’s lost focus, appar­ent­ly if I laugh too hard, it can’t focus. Yeah, OK. So $4,000 in bro­ker­age and you’re not fazed by that. 

Tony [00:24:39] No. 

Cameron [00:24:39] And you’re doing rule one sells because you’re like, “Yeah, you know, oh, I’ll make it back up. And then some.” 

Tony [00:24:44] Yes, it’s always the ques­tion of are you bet­ter off hold­ing or rede­ploy­ing the cash into some­thing which has got a bet­ter chance of improv­ing. 

Cameron [00:24:51] Right. 

Tony [00:24:52] If some­thing’s dropped 10%? Well, first of all, if it’s dropped 10% straight away, then you know, we got the idea wrong — we got the the­sis wrong. Some­thing hap­pened, we did­n’t see it, and it’s dropped quick­ly. So you’re bet­ter off get­ting out. Just to pro­tect your­self from the down­side. If you bought some­thing and over time, it’s — and you bought it and it was above the sell price? And over time, it sort of works back towards your buy price and get­ting out. It’s on a long, slow decline back towards its sell price. So again, it could turn up from there. I mean, things can drop below their sell line and turn around and improve again. It’s the same argu­ment. 

Cameron [00:25:28] Sure! 

Tony [00:25:28] It’s the same argu­ment where we’re just using, you know, we’re trust­ing sen­ti­ment. We’re trust­ing that the trend con­tin­ues. The trend is our friend and we just, you know, draw­ing in a posi­tion where we think that the trend is going to keep going — 10% buy price or three point sell line breach.  But the same argu­ment applies to both, right? We just said at the start of this pro­gram that my down­load orig­i­nal­ly had 180 stocks below price to oper­at­ing cash flow of sev­en. And our buy list has half that on it, right? So half the stocks are in neg­a­tive sen­ti­ment. If you think that because it’s a QAV stock and the half that we’ve knocked off for sen­ti­ment rea­sons could have real­ly good QAV scores. Would you buy those? If you buy those, you’re prob­a­bly going to hold them while they con­tin­ue to lose before they turn around and make mon­ey. It’s a sim­i­lar sort of thing. 

Cameron [00:26:24] Hmm. 

Tony [00:26:24] Yeah. I know from expe­ri­ence that’s not the way to invest. It can take six months. You can take anoth­er set of num­bers that come out before some­thing will turn around. 

Cameron [00:26:32] Mm-Hmm. 

Tony [00:26:32] It’s on the decline. It’s not worth wait­ing and tying your mon­ey up. 

Cameron [00:26:36] Yeah. So you’re still advo­cat­ing rule one makes sense. 

Tony [00:26:43] Cor­rect. 

Cameron [00:26:44] There you go. Let’s see what’s next. Stocks of the week, Tony. You want to do those now? 

Tony [00:26:50] Yeah, yeah. Sure, do you want me to go through my news things first before we do that. Well. 

Cameron [00:26:55] OK, well, then it’s no. You don’t want to do this first. Go through your news things. 

Tony [00:27:02] I got an the email from the Navexa say­ing our port­fo­lio was up 6.21% for the month of Octo­ber. 

Cameron [00:27:07] That’s pret­ty good. 

Tony [00:27:08] Yeah. Despite the down­turn you spoke about in the first week of Novem­ber. 

Cameron [00:27:12] Yes. 

Tony [00:27:13] I want­ed to plug our Char­i­ty Exchange raf­fle one more time. It’s the last week. I think there’s only about 700 tick­ets left, and that’s the one where we’re raf­fling off a full set of Call­away clubs and a bag for Char­i­ty Exchange, which is a busi­ness that your son and I’m in. And we’re hop­ing to sell out and raise a sub­stan­tial amount of mon­ey for Sport­ing Chance, a can­cer char­i­ty that helps kids. And, you know, par­tic­u­lar­ly try­ing to do a good job this time. It’s our first raf­fle with them, which is Mark Tay­lor’s char­i­ty for any­one who knows sports peo­ple or crick­et in our lis­ten­ing audi­ence. And if we can do a good job for them and, you know, prove the mod­el and, we hope to keep doing it for them and for oth­ers. So this is our kind of proof of con­cept. So if peo­ple can, I know we’ve got good sup­port from our lis­ten­ers before for it and I apol­o­gize for pitch­ing some­thing on our pod­cast, but it’s impor­tant to us and rais­ing mon­ey for char­i­ty. 

Cameron [00:28:08] It’s AHFraffles.org/golf. 

Tony [00:28:15] Yeah, thank you. That’s it. AHFraffles.org 

Cameron [00:28:18] /golf 

Tony [00:28:20] Right, because there’s been oth­er ones too. 

Cameron [00:28:23] Right. Alright! Go and sup­port that every­one! Par­tic­u­lar­ly you rich guys and girls. Let’s talk about Gas­coigne! 

Tony [00:28:34] Back to stocks Gas­coigne. So Gas­coigne has been dropped last week and… 

Cameron [00:28:41] Dropped? 

Tony [00:28:41] And West Gold… Yeah.

Cameron [00:28:42] What do you mean dropped? Dropped by whom?

Tony [00:28:45] Share price dropped.

Cameron [00:28:46]  Oh the share price dropped, right! Yes. 

Tony [00:28:49] Which of course it did, because it was our stock of the week. It was a while ago. 

Cameron [00:28:52] Yeah. 

Tony [00:28:53] Now it’s up today 3%. That’s good. So quick. Quick sum­ma­ry: Gas­coigne is enter­ing into a part­ner­ship with anoth­er com­pa­ny called Fire­fly, and then West Gold, a larg­er gold com­pa­ny, came in and lobbed a more attrac­tive bid as long as the merg­er with Fire­fly did­n’t go ahead. Gas­coigne found out that they were at such an advanced stage with via Fire­fly that they could­n’t get out of it, and it was approved by the Supreme Court on Mon­day, at which time — Mon­day last week, at which time Gas­coigne shares dropped because West Gold with­drew their offer because their con­di­tion was to take over Gas­coigne with­out Fire­fly So it’s been a bit of argy bar­gy all week. I think West Gold is going to the — to ASIC to see if they can appeal the merg­er, but they’re not hold­ing much hope. So that’s that’s the update on Gas­coigne. 

Cameron [00:29:49] Right. 

Tony [00:29:49] And prob­a­bly a good time to talk about West Gold! 

Cameron [00:29:52] Yes. 

Tony [00:29:53] Pulled pork stock of the week. 

Cameron [00:29:54] Right. 

Tony [00:29:55] OK, so West Gold code is WGX and West Gold has been ris­ing since the merg­er did­n’t go through. So obvi­ous­ly the share­hold­ers pre­fer West Gold to keep its pow­der dry. Although just today they came — West Gold came out with an announce­ment that they are start­ing work on a new mine of their own. So West Gold is a gold min­er  in WA.  It’s large­ly in the Meekathar­ra area, has three cur­rent gold mines: Fort­num, Meekathar­ra and Cue, and it has var­i­ous explo­rations, ten­e­ments around those mines. One of them, they decid­ed, was good enough to expand or to start anoth­er gold mine in the Cue area, and that’s seen favor­ably by the mar­ket. Shares are up 4.6% today. They were up on Fri­day as well, which I took to be because of the Gas­coigne deal falling through. But maybe there was a leak about the new mine going ahead. Either way — full dis­clo­sure I own this stuff. I bought it when it came onto our buy list. It’s a lar­gish ADT. It’s around $3 mil­lion ADT, which is — that makes it pret­ty big. It’s some­thing inter­est­ing. It’s got a female CEO, which is unusu­al in the min­ing space, Deb­o­rah Fuller­ton. And she took over from the — one of the — don’t know who’s the founder but he’d been around for a long time, Peter Cook, I think his name is and he’s now the chair of the com­pa­ny. He owned some­thing around about 4% of the com­pa­ny, but not enough to give us — us to give the com­pa­ny a score for own­er founder share­hold­ing in our check­list. Onto the num­bers. The share price for the num­bers I’m using was the share price yes­ter­day, which is $1.96, but the share price is up to $2.04 today, so the QAV score will be down a lit­tle bit — one or two points. The QAV score is 0.24 based on a$1.95/ $1.96 share price. I think it’s prob­a­bly going to be like 0.23 or 0.22 based on the share price today. But if the price keeps going up, it cer­tain­ly will have an effect on the QAV rank­ing. Qual­i­ty score is 80%, which is pret­ty good. The num­bers — So let’s have a look at the — when I did my analy­sis at $1.96, it was the share price was less than the Stock Doc­tor IVF $2.00 that I want­ed. It’s just gone above that, so it los­es a point. But it did have a point yes­ter­day. It’s still below the con­sen­sus tar­get share price. So that’s good. It’s a star growth stock. So it was added recent­ly. I think around the time that we put it on the buy list,  Stock Doc­tor also made it a star growth stock, which is always good to see. There’s been cas­es in the past where I’ve enjoyed a bit of an uplift from hav­ing some­thing come onto the buy list and then buy it and then soon after that Stock Doc­tor make it a star growth stock and it gets anoth­er leg up, which is real­ly good. It does­n’t have any div­i­dends, so there’s no yield. The finan­cial health is strong and steady for this one. Price to oper­at­ing cash flow was only three point three four times and the PE is ten point sev­en nine times. So a good val­ue play this one. IV2 is $3.91. So again, at $1.95, it would have been just above two times the share price. But at $2.04, it’s just below that. It’s a new three point uptrend just came onto the — onto the scan­ner in the last week or so. It does have good man­u­al­ly enter data, saw record lows, six PEs, con­sis­tent­ly increas­ing equi­ty and, as I said, a ABnew three point trend up line. And that’s prob­a­bly about it! Qual­i­ty score 80% and QAV 0.24. 

Cameron [00:33:51] Thanks, Tony. So that’s the large cap and the small cap stock of the week — ABA. 

Tony [00:33:58] ABA. 

Cameron [00:33:59] A bank — they used to be Wide Bay.  Head­quar­tered where, Tony? 

Tony [00:34:04] Yes, Wide Bay would have been in Rock­hamp­ton, I think from mem­o­ry. 

Cameron [00:34:08] Bund­aberg, Barolin Street, Bund­aberg. And there’s an extra point on the check­list because they’re based in my old home­town. 

Tony [00:34:17] Auswide bank.  Yeah. Inter­est­ing one — I mean all of these ones, when I first start­ed get­ting back, first start­ed get­ting into invest­ing a real­ly good play was to go and open a pass­book with all of the lit­tle cred­it unions and, no actu­al­ly per­ma­nent build­ing soci­eties back then as well, up and down the east coast of Queens­land. So there was Wide Bay, there was Makai, there was the Rock — there were three that I can remem­ber and then they all demu­tu­alised. Rock was the first to go and they demu­tu­alised and list­ed and the share price went up and it did for the oth­er ones, too. So there’s a his­to­ry here. What’s hap­pen­ing now is, from my under­stand­ing, is that a lot of these lit­tle banks are being tout­ed as takeover tar­gets, so I think, I could be wrong, I think Oswald was in dis­cus­sions with what’s it called now, My State, which is the Tas­man­ian bank about join­ing up. I think they fell through, but I think at some stage it’s like­ly that some of these small­er region­al banks will get gob­bled up by the larg­er ones. 

Cameron [00:35:25] Hmm. Well, for the record, I owned both ABA and WGX — our two stocks of the week, so they’ll no doubt crash over the next week as a result of us talk­ing about them. So that’s great. CLX is now a sell, Tony. 

Tony [00:35:41] Yeah, I just want­ed to high­light that. So it did fall below its sell line, even though it’s had a great run up. But I know a lot of peo­ple lis­ten­ers to the pod­cast had ben­e­fit­ed from it. Just have a look at its sen­ti­ment chart in the last cou­ple of days. 

Cameron [00:35:55] And Damstra  — your friend. 

Tony [00:35:58] So I want­ed to talk about  Damstra,  not because of the com­pa­ny, and we’ve had Johannes or Jan Ris­seeuw on the show, tak­ing you through how the process for float­ing a com­pa­ny. He’s not doing too well. Damstra, list­ed at 90 cents, went up quite a way above that, but is now down to around 60 cents, some­thing so he’s not doing too well. The rea­son why I want­ed to talk about today is not, not that I know the exec­u­tive chair­man, although I have any spe­cial insights into it because both Jan and I are quite scrupu­lous about not get­ting caught out, divulging any sort of insid­er trad­ing infor­ma­tion. But it came up on anoth­er invest­ing pod­cast and when I was dri­ving back from Wag­ga Wag­ga yes­ter­day, I had them play­ing in the car, just sort of scrolling through the next one on the list. And because I was Hands-Free, I did­n’t real­ly care what was com­ing up next. And this one came on and I thought I was lis­ten­ing to it and it was about Damstra, so I did­n’t sort of skip it. And this was four, I think, three or four — I guess they’re in their thir­ties kind of youngish investors talk­ing about Damstra. They also — one of them also talked about  Pro Medicus,  which is his pet stock, and he claims he’s made 50 times his mon­ey on it, which was real­ly good. But I’m lis­ten­ing to these guys talk, and first of all, I’m not. This is not a hatch­et job, you know, I think any invest­ing pod­cast that tries to edu­cate peo­ple on invest­ing is a good thing, but I was just lis­ten­ing to it think­ing, “Yeah, that’s a les­son. And that’s the les­son. That’s a les­son.” There were so many things that they were doing, which I think should be called out and high­light­ed as lessons, but they were just skip­ping over it that it’s worth­while dis­cussing. So what had hap­pened was Damstra — the share price fell since the results came out, so two things hap­pened. They lost a big cus­tomer, and I think the oth­er num­bers weren’t what every­one thought they’d be. Alright, sor­ry, they lost a big com­pa­ny, had lost a big cus­tomer and they acquired a com­pa­ny called Vault dur­ing the year and the CEO of Vault has now resigned, which is not a good look. So the share price has tanked. So there’s this chap who who’d owned Damstra and had been bull­ish on it and had been buy­ing into the soft­ware as a ser­vice com­pa­nies. I don’t know if that was indis­crim­i­nate, but it’s cer­tain­ly been a boost­er for them. He was faced with the sit­u­a­tion of the rule one sit­u­a­tion we spoke about before of “Ok I bought some­thing, the share price has dropped. What do I do?” And judg­ing by what he said and what the con­ver­sa­tion was like on the pod­cast, they had no idea. He had no idea. And that’s fine. If you’re a young investor and you haven’t, that has­n’t hap­pened to you before. That’s a learn­ing point. But the process is — well, if it hap­pened to me and it had­n’t hap­pened before — and that still hap­pens to me — you know, I either make a call and move on or I park it and do as much research as I can into that sit­u­a­tion. And then, you know, write it down, put it in my check­list, put it in my process for next time. So when it hap­pens again, I don’t have to think about it. I know what to do, but our process, if some­thing falls quick­ly, is to use rule one and sell it or to use the 3PTL and sell it. But this per­son did­n’t know what to do. What they end­ed up doing was the price dropped and they bought more, which is what some­one was say­ing before when we were read­ing out the thread from Face­book, “Ah, it’s a good qual­i­ty com­pa­ny. It’s now cheap­er. I’ll buy more.” Guess what hap­pened? The price went down again. So, you know, it’s fine if you’re young and you’re start­ing out and new things hap­pen to you in the mar­ket. What’s not fine is you don’t just make it up and wing it and use your gut to decide what to do. You think about it, you research it. You come up with a plan and a strat­e­gy. So when it hap­pens to you again, it’s writ­ten down and you know what to do, which is not what these guys were doing. And in the oth­er one, the flip side of that was the per­son who was the Pro Medicus  boost­er had writ­ten it all up, right up from sort of a dol­lar a share to what­ev­er it is now, $50 a share and was sell­ing. And one of the oth­er co-hosts said, “Oh yeah, why are you sell­ing?” “Oh, I just think it’s time to sell?” Like there was no clear rea­son for it, there was no artic­u­lat­ed rea­son for it. And again, we have in QAV, I have clear rules of when to sell some­thing. So you know, it might be that I don’t know the full sto­ry maybe he needs the mon­ey for some­thing. Who knows? Maybe he has a view that after it’s risen 50 times, it’s not going to rise anoth­er 50 times, I’m not sure. But it and to be fair, this was just three or four mates talk­ing about the shares they owned on the pod­cast. But real­ly, it’s fine to talk about it and work out what you’re going to do, but write it down, make it part of your frame­work. Research it if you have to. But don’t let the sur­prise fac­tor hit you twice. 

Cameron [00:40:51] Yeah, it’s like hav­ing a frame­work I think is the key thing there. You know, it’s — I know it took you a long time to devel­op your frame­work. And when I’ve been read­ing what works on Wall Street you know, he’s very adamant — if you can hear this, but it’s pour­ing rain out­side my house — in his book about you have to have a frame­work. You have to know — have to have a frame­work that tells you when to buy and when to sell, what to buy, when to buy, when to sell. And it’s, you know, if you’re just start­ing as an investor or even if you’ve been doing it for a while, it’s very hard to devel­op one of those. Oh, sor­ry. The oth­er thing he says, it has to be a frame­work that’s tried and test­ed. So if you’re start­ing and you’re devel­op­ing it your­self, it’s going to take a lot of time. And I know what you did was even­tu­al­ly go out there and study the frame­works of the most suc­cess­ful investors you could and devel­op your own as a result of your study. 

Tony [00:41:55] No, exact­ly. And that’s the oth­er thing about what we were talk­ing before about, you know, improv­ing the check­list. I think it can be improved. It’s not a per­fect check­list by any means. I think it’s right up there in terms of, you know, top quar­tile per­for­mance over a long peri­od of time. But it has evolved a lot over the time and things have been added only when they’re proven and some­times they’re coun­ter­in­tu­itive when they go in. So yeah, I mean, and I don’t fol­low exact­ly what War­ren Buf­fett says or Char­lie Munger or any — Ben Gra­ham or any of those peo­ple. It’s an evolved process for me. Yeah. And like I said, it prob­a­bly takes about 12 months before some­thing new comes onto the check­list after it’s being test­ed in tri­al. 

Cameron [00:42:38] Alright. 

Tony [00:42:40] Yeah, I just — so like I was sit­ting there lis­ten­ing this. I could­n’t believe it. Here are these, you know, three or four guys sit­ting around giv­ing gen­er­al finan­cial advice. And yeah, they just had­n’t sort of caught on to some of the basics of invest­ing. 

Cameron [00:42:52] Don’t know why and don’t know when to sell? And I don’t know why I’m sell­ing. 

Tony [00:42:59] Don’t know when to sell. Don’t know what to do when the share price drops. 

Cameron [00:43:02] Yeah, yeah. Or when it goes up. 

Tony [00:43:04] When it goes up. Yeah, yeah. So what else is there in invest­ing? 

Cameron [00:43:09] Pick­ing stocks. 

Tony [00:43:11] Pick­ing stocks yeah. 

Cameron [00:43:12] Time for Q&A? 

Tony [00:43:14] Yeah, sure. 

Cameron [00:43:15] Daniel asks, “Has insid­er activ­i­ty ever per­suad­ed T.K. to take a posi­tion at a stock fur­ther down the check­list? For exam­ple, one of Sand­fire Resources direc­tors recent­ly took a large posi­tion with the val­ue of $1.16 mil­lion. Or even a cer­tain fund he respects, such as WAM tak­ing a large posi­tion in a com­pa­ny. I know this will def­i­nite­ly come across his thought process before, but just hard to add it as a check­list item. Cheers, Daniel.” 

Tony [00:43:45] Yeah, I agree. It’s hard. Sor­ry. Sor­ry I’m inter­rupt­ing. I agree. It’s hard. No, look, I’ve looked at it. I’ve always looked at it. I still look at, you know, direc­tors buy­ing and sell­ing. But I haven’t been able to put it on the check­list for a cou­ple of rea­sons. One, because it’s so infre­quent. So Daniel’s men­tioned Sand­fire Resources, but I’m going back to maybe last year when we sold our Hawthorne, I think it was Hawthorne stock because I think it was Chris Cor­ri­g­an had 30% of the com­pa­ny sold. So, so it for me, it tends to be a bad news event rather than any par­tic­u­lar rule for the check­list for direc­tors buy­ing or sell­ing. And anoth­er rea­son is exact­ly what Daniel said there. The direc­tor who bought into Sand­fire has been burnt because Sand­fire came off our buy list this week. I sold it last week. It’s breached its 3PTL posi­tion, so the direc­tors don’t always get it right. And again, you know, maybe in the long term they’ll be fine, but I’d rather take the mon­ey and deploy it some­where else until Sand­fire comes back into hav­ing some pos­i­tive sen­ti­ment. 

Cameron [00:44:52] And what about Wil­son asset man­age­ment (WAM) buy­ing in? 

Tony [00:44:56] Yeah, well, same thing. Look, it makes me feel good if I own my shares when WAM took a stake in it. I don’t — did we need to add anoth­er item to the check­list before we bought mine? We already bought it. Well, you had already bought it. We already owned. I did­n’t own it. Sor­ry. 

Cameron [00:45:11] It did­n’t make me feel good when Jeff Wil­son sold it. 

Tony [00:45:14] Cor­rect. Cor­rect. Yeah, but. 

Cameron [00:45:17] Or a por­tion of it. 

Tony [00:45:19] But it has­n’t been the end of the world for mine either. I don’t know if you want to nec­es­sar­i­ly fol­low those trades. We don’t know what the rea­son for that sale was. He’s not dis­clos­ing what the rea­son for that sale was, and he still has some in the, you know, it’s a par­tic­u­lar­ly high share­hold­ing in the com­pa­ny. It’s just less than 5%. 

Cameron [00:45:37] Steven Mabb. 

Tony [00:45:40] No, I haven’t found the rule yet for it. For direc­tors trades. 

Cameron [00:45:45] Steven Mab was telling me at din­ner the oth­er night he attend­ed the AGM, the Myer AGM the oth­er day because it’s one of the com­pa­nies that he mon­i­tors, I think, for Aus­tralian Share­hold­ers Asso­ci­a­tion. 

Tony [00:45:56] Mm hmm. And they sur­vived. I remem­ber read­ing about them. There was some talk of a board spill, but yeah, one of the share­hold­ers… 

Cameron [00:46:05] No, the Rem  report got approved and all that sort of stuff. 

Tony [00:46:08] Yeah. The oth­er — sor­ry, the oth­er before I for­get the oth­er issue with direc­tors deeds is you don’t find out about them straight away. So sor­ry, if you want to say direc­tors deeds that’s what it’s called in the Eure­ka  Report. Once every two weeks, they pub­lish large buys and sells. But the big prob­lem with direc­tor trans­ac­tions is they — by the time you’ve prob­a­bly — it’s come across your radar, it’s too late. The share price may have moved already. 

Cameron [00:46:31] The direc­tors deeds are done dirt cheap, but by the time you find out about it, they’re expen­sive. Yeah. Lit­tle known fact that was the orig­i­nal ver­sion of the song that AC/DC put out because Bon Scott was a big investor. A lot of peo­ple did­n’t know that, but it did­n’t real­ly get  — did­n’t sur­vive mar­ket test­ing that song. They had to change it to dirty deeds. Gary asks, “Out of curios­i­ty, how are we draw­ing the sell line on CBA? Or is a case of rule one for inclines like this?” Yeah, the CBA… 

Tony [00:47:09] You can answer that. 

Cameron [00:47:11] In the CBA chart’s a weird one, and we talked about that this morn­ing in our pre meet­ing, did­n’t we?

Tony [00:47:18] Yeah. So and as a new ver­sion of the Bret­ta­la­tor com­ing out, par­tic­u­lar­ly for this kind of exam­ple. So I think it’s in the Bible, but cer­tain­ly it’s always been a rule that I’ve applied. If you’re draw­ing up a sell line, for exam­ple, with a com­pa­ny like CBA and there were oth­er exam­ples of these com­pa­nies com­ing out of the COVID cough, Nick Scali was one — super cheap. What’s it called? Super­group. Super, used to be old super cheap auto is anoth­er where they’re com­ing out of the COVID cough they’re going up at a nice angle, but they do zig zag back and for­wards. And if you draw a sell line, the share price can drop below that sell line, even though it’s still over­all trend­ing upwards. And so the rule is if you draw your sell line the way you would nor­mal­ly, low­est point and the next low­est point to the right, but there is still a trough to the right of that then you need to use that trough as L2. And redraw the line so you don’t want to see any low points to the right of the sell line when you draw and Bret­t’s kind­ly cod­ed that into the Bret­ta­la­tor. And you and I’ve been test­ing it, although I think it’s just me — me test­ing it and it should be good to go now. 

Cameron [00:48:33] Right. And for peo­ple who don’t have the graph in front of them, the prob­lem with the CBA graph is it’s been going expo­nen­tial­ly up, almost going up in a straight line since around the COVID cough, I guess. But the prob­lem here, Tony, is I have for you is buy line fol­lows the sell line. So if I start with an L1 in Sep 20 and then draw through, say, L2 of Feb 21, and it also seems to go through April 21, it gives me a sell around about July 21, even though the share price has been going straight up in that peri­od of time. And I con­tin­ue to go up after that. So I sort of strug­gle to draw a sell line for this and then I’d strug­gle to a new buy line. After that, I’d have to get a buy line to come after the breach of the sell line in July 21. 

Tony [00:49:32] Yes, it’s a good point. So unless you draw the sell line using that trough out to the right, which is now Octo­ber 21…

Cameron [00:49:44] Yeah, that’s the cur­rent sell line. But it had a pre­vi­ous sell line, cor­rect? 

Tony [00:49:48] It had. So just like me, you would have sold it back then like I did. 

Cameron [00:49:52] You would have sold it. You sold it in July. I think I did too, actu­al­ly, but that’s crazy. It was going up and we sold it. 

Tony [00:49:59] Yeah. But if you look at July, if you look at it from May through until August, it was going side­ways. 

Cameron [00:50:07] Yeah, went side­ways, but then it went up. 

Tony [00:50:08] And that’s cor­rect. So again it’s a clas­sic case of do you want to hold a stock that’s going side­ways or do you want to sell it, take a prof­it and rede­ploy the cash? 

Cameron [00:50:17] Right? It’s gone up. 

Tony [00:50:19] Look, I’m not mak­ing apolo­gies for these. These are unusu­al cir­cum­stances. I can’t think of anoth­er time where we’ve seen stocks rise like this from the COVID cough or some­thing sim­i­lar. But yeah, I think we’re going to buy and sell along the way on these, and I have been buy­ing and sell­ing on the way on these. 

Cameron [00:50:35] Okay. But the sec­ond part of my ques­tion is, OK, so if we draw the sell line, it looks bizarre, goes straight up and we sold in July. Where’s the new buy line then? 

Tony [00:50:45] Well, if you draw the new sell line, it’s not — the share price is always above the sell line, so it’s the old buy price. The old buy line, which is H1 Jan­u­ary 2020 H2 Jan­u­ary 2021. So it’s a buy in Feb­ru­ary 2021. So it’s been just a buy again now. It’s back on the buy list. Back on the buy list, baby. 

Cameron [00:51:11] But the buy line has to fol­low the sell line time  and we had a sell event. 

Tony [00:51:18] Yeah. Mm hmm. Yeah, we did. 

Cameron [00:51:21] So it does­n’t H2 need to come after the sell event? 

Tony [00:51:25] Yeah, but we’ve redrawn the sell line. So at the time — going back in time when we sold it back in July. 

Cameron [00:51:33] August. 

Tony [00:51:34] Yeah, we could­n’t draw a buy line after the sell line. So we’re out of it, out of the mar­ket. 

Cameron [00:51:41] Yeah. 

Tony [00:51:41] Then now time’s moved on. We move L2 to Octo­ber 2021. The share price is above the sell line, and the old buy price is back in -. 

Cameron [00:51:52] Real­ly? You can do that? 

Tony [00:51:56] Yeah. 

Cameron [00:51:56] That’s — that seems like a lit­tle bit of jig­gery pok­ery to me, Tony. 

Tony [00:52:00] Okay, good. 

Cameron [00:52:04] I did­n’t know you could just like rewrite his­to­ry here. What are you, Scott Mor­ri­son? You can’t just go, “Oh, it did­n’t hap­pen that way. I sent him a text mes­sage five min­utes before I can­celed the deal. He should have read it. It’s not my fault if he did­n’t read it.” And the sell line was the sell line. And we have to, we have to now — don’t we have to get a new H2 after the sell event? 

Tony [00:52:24] No. 

Cameron [00:52:26] Oh okay. I’m going to — I’m going to have to think about that. 

Tony [00:52:33] Okay. Have a look at the new ver­sion of the Bret­ta­la­tor. It’ll say the same thing. It was a sell. It’s come back on to the buy line with the orig­i­nal buy price. 

Cameron [00:52:45] Yeah, but you’re not the one who’s going to get 50 emails from peo­ple going, “Oh, wait a sec­ond. It says in the Bible that this buy line fol­lows the sell line.” You’ve just said, “Well, that sell line does­n’t exist any­more. Those are the new sell lines. The old buy line is back where it was.” And then how the hell do I explain that to peo­ple? 

Tony [00:53:04] Just out­source the help line to Pak­istan. 

Cameron [00:53:08] OK, I’m out­sourc­ing it to your daugh­ter, so be care­ful she’ll have to deal with that. Just talk to Alex. Not my prob­lem. 

Tony [00:53:18] Yeah, I’ll have to tell her. Call Cam, not me! 

Cameron [00:53:26] She’ll out­source it to her boyfriend and then. Yeah. 

Tony [00:53:29] Well, I think, yes, you’re right. There could be a clash of the rules here. How­ev­er, I think they’re all con­sis­tent. I think the Bible still says and always has said if there’s a trough to the right of a sell line, redraw the sell line with that is L2. 

Cameron [00:53:42] That’s — but that’s the new sell line. I did­n’t know that negat­ed the old sell line. I thought we had series of buy line, sell line, buy line, sell line, buy line, sell line so on. 

Tony [00:53:54] Yeah. 

Cameron [00:53:54] But in this case, you go “Well that sell line. Let’s pre­tend it nev­er hap­pened.” 

Tony [00:54:00] No, I’m not nec­es­sar­i­ly say­ing that. 

Cameron [00:54:01] This is your ver­sion of Ter­ra Nul­lius. You’re going ter­ra nul­lius on the sell line. “Well, no-one lived there. What are you talk­ing about? It was emp­ty!”. 

Tony [00:54:09]  No. Sor­ry, I just spit up my tea then. 

Cameron [00:54:16] Oh, that’s going on YouTube. 

Tony [00:54:21] Cameron made me laugh.

Cameron [00:54:26] Did it come out your nose? 

Tony [00:54:27] Well, if the rules aren’t spec­i­fied cor­rect­ly, this is how I’m doing it. So the rules will have to keep up. 

Cameron [00:54:34] Lis­ten­ers, if I’m the only one who’s con­fused by this, let me know. But I’m hop­ing every­one else is as con­fused as I am. Okay. That’s why I’m always learn­ing. Dave.. 

Tony [00:54:44] I think we all are. Like I say, I haven’t seen this sit­u­a­tion before, where the line keeps going up like this. And so we’re in a buy line. Sor­ry? 

Cameron [00:54:53] I’m try­ing to think of the title of this episode is either “The trend is your friend” or. 

Tony [00:54:58] Swal­low your tea. 

Cameron [00:55:02] So far…Dave says, “Hi, Cameron! Ques­tion: I was for­tu­nate to pick up made a group MAD in ear­ly July when it was hov­er­ing around the bot­tom of the list. My ques­tion is about the share own­er­ship struc­ture. Stock Doc­tor reports 200 mil­lion ful­ly paid ordi­nary shares yet equi­ty share cap­i­tal of $2000. The annu­al report Page 62, con­firms these num­bers are Note 19 says “ful­ly paid ordi­nary shares car­ry one vote per share and enti­tle the hold­ers to par­tic­i­pate in div­i­dends and the pro­ceeds on the wind­ing up of a com­pa­ny in pro­por­tion to the num­ber of and amounts paid on the shares held. The ful­ly paid ordi­nary shares have no par val­ue and the com­pa­ny does not have a lim­it on the amount of autho­rized cap­i­tal.” From what I can tell at IPO for $1 a share, in the short while I’ve been traips­ing around the invest­ing block, I’ve not seen some­thing like this. I don’t under­stand how 200 mil­lion shares at $1 equals $2000 share cap­i­tal. Is Tony able to help? Thanks, Dave from Newy.” 

Tony [00:56:02] Dave from Newey. Well, first of all, the beers are on Dave from Newy because I look at the share price graph for MAD, it’s like, I think it was on the buy list back when it was around a dol­lar a share. It’s now $2.37 in the space of a cou­ple of months. 

Cameron [00:56:16] Oh, good work, Dave! 

Tony [00:56:18] Well done, Dave! And it’s up 7.7% today as well. So some­thing’s lit a fire under it. Unfor­tu­nate­ly, it’s well off the buy list now because of share price appre­ci­a­tion. Dave, I had a quick look at the num­bers this morn­ing and I think they’re wrong is my only com­ment. Might be worth if you want to email Stock Doc­tor and ask them. They’ll prob­a­bly go back to Reuters and ask them. But the con­cepts that you’re talk­ing about, I think you’ve got spot on. So the equi­ty share cap­i­tal should be well, reflects what­ev­er pro­ceeds were made when shares were sold and the mon­ey went to the com­pa­ny. So that should have been dur­ing the IPO process. And as you say, the IPO shares for a dol­lar and there’s 200,000 shares on issue. So maybe no sor­ry, 200 mil­lion shares on issue. Maybe not all those 200 mil­lion went out dur­ing the IPO. Maybe there was some oth­er cap­i­tal rais­ings in the past, but cer­tain­ly the aver­age of all those share sales would­n’t be $2000 of paid up equi­ty share cap­i­tal. So I think there’s prob­a­bly a few zeros miss­ing off that num­ber. So per­haps they’ve got the units wrong or some­thing, some­thing sim­i­lar, but just to give. 

Cameron [00:57:27] But he said he checked it in the annu­al report and con­firmed the num­bers. 

Tony [00:57:31] Yeah, I can’t explain it, Cam. It does­n’t make any sense to me. So that line in the bal­ance sheet should be the pro­ceeds of sell­ing shares where the mon­ey went to the com­pa­ny. Some­times it’s called things like ful­ly, ful­ly paid up equi­ty cap­i­tal, which dis­tin­guish­es it from, you know, options and things like that which haven’t been paid for yet. But yeah, it should reflect share sales where the mon­ey went to the com­pa­ny, and as Dave said, there was an IPO of a dol­lar a share and there’s a cou­ple of hun­dred mil­lion dol­lars a mil­lion shares out­stand­ing. So this should be a large, much larg­er num­ber in that line in the bal­ance sheet. I can’t explain it. And just to give peo­ple some idea, the mar­ket cap for this com­pa­ny is $440 mil­lion and equi­ty is $60 mil­lion. So you know, the ful­ly paid share — what’s it? Ful­ly paid equi­ty share cap­i­tal won’t be either of those two num­bers because the mar­ket price has gone up or the share price has gone up since the IPO. But with $60 mil­lion worth of equi­ty. You know, unless they spent all the mon­ey from the IPO. I’m guess­ing they should be some­thing like, oh, you know, $20 mil­lion maybe? In that num­ber, I’m not sure. I can only be guess­ing, but it looks wrong to me as it does to Dave. 

Cameron [00:58:50] Page 62 just check­ing to see what it says. Not that I don’t believe you, Dave. No. Shares 200 mil­lion. Issued cap­i­tal 2000. 

Tony [00:59:04] It does­n’t make any sense, does it? 

Cameron [00:59:07] I think they screwed up the annu­al report. 

Tony [00:59:09] Well, unless they issue the shares for like $0.001 per share or some­thing, which is pos­si­ble, but I think they screwed it up. 

Cameron [00:59:16] Yeah. Inter­est­ing. All right. 

Tony [00:59:18] It’s pos­si­ble. I mean, this is like, so you know, $2,000 paid up share Cap­i­tal is a very small com­pa­ny usu­al­ly. It’s like some­thing we’d set up to run QAV or some­thing like that, where you be issue 10 shares at $100 each or some­thing to start a com­pa­ny or 10 shares at $10 each to start a com­pa­ny. And then those shares have been trad­ed a cou­ple of times. And so you get up to $2,000 per share, maybe. But yeah, it does­n’t look right for the com­pa­ny. 

Cameron [00:59:46] Well, you’re a share­hold­er, Dave. Reach out to them. Reach out to their share­hold­er infor­ma­tion ser­vices and ask them to explain it. Yeah. Jol­ly good. Let us know what hap­pens, Dave. Andrew, “Hi, Cam, TK. You gents are doing such a great job. This real­ly should be taught in school.” Thank you, Andrew. 

Tony [01:00:04] We’d be good school teach­ers, would­n’t we? 

Cameron [01:00:06] Oh, fan­tas­tic. Oh, I have so much tol­er­ance for kids. Ques­tion for this week. 

Tony [01:00:15] Who wants to know who’s going to win the Mel­bourne Cup? Right? Kids get the form guide out. 

Cameron [01:00:21] Yeah, that’d be your side of the class. Mine would be like if you want to learn some­thing about invest­ing, we need to go back to Ancient Greece. Alexan­der the Great. 

Tony [01:00:30] We use the Socrat­ic method. I’ll ask ques­tions. I’ll ask the ques­tions. 

Cameron [01:00:35] Yeah, I can’t talk about Alexan­der the Great with­out talk­ing about his father, Philip the Great. So let’s go back to Philip the Great. When he was a child.. Any­way, he says, “Ques­tion for the show. Slight­ly dif­fer­ent to the usu­al. My son turned 18 this year and as a present, my wife and I want­ed to get him into the mar­ket. He’s not at the QAV stage yet, so I bought him an ETF, IHVV S&P 500 hedged, very much set and for­get, add to it from time to time, rein­vest the div­i­dends and let com­pound inter­est work its mag­ic, etc. What I don’t quite under­stand is the return the cap­i­tal gains since I bought it for him on the 25th of March, this year’s — 1.98%, but at one point it was ‑18% or there­abouts. If you look at its graph, the share price fell off the cliff in July, which is when the div­i­dend was paid. Con­verse­ly, the div­i­dend is 19.99%, giv­ing an annu­al return of 18.01%. Although he’s delight­ed, I’m try­ing to think for­ward. If he were on a seri­ous salary, it would be a tax prob­lem giv­en the income. And if you’re a retiree, I guess you’d be doing cart­wheels. Does Tony have any obser­va­tions as to why such a big div­i­dend? Is it typ­i­cal for an ETF to pay a large div­i­dend?” 

Tony [01:01:47] It’s not typ­i­cal, no, but this is a spe­cial ETF. I just did a quick bit of research before the show, so IHVV it’s in the name. It’s a hedged share fund. So I do look at their annu­al report, which is actu­al­ly a bit hard to do for some of these Black­Rock ETFs, because I guess the save mon­ey they pool half a dozen of them togeth­er into the same ETF. So you’ve got to sort of real­ly weed through find­ing the details for the par­tic­u­lar ETF you’re after. But IHVV has a num­ber of assets, one of which is IVV so anoth­er Black­Rock S&P 500 index fund. And then it also has is that IVV also has his assets US dol­lars, Aus­tralian dol­lars and futures con­tracts on both because it’s hedg­ing. So that’s that’s the dif­fer­ence between IVV, which is the under­ly­ing ETF and IHPV. And what I think has hap­pened is there’s been a hedge prof­it in the six months and they dis­trib­ute that as a div­i­dend. So I don’t know if if the hedg­ing prof­it between the Aus­tralian dol­lar and the US dol­lar is quite 20%. But it’ll be a com­po­nent of that, so they can’t hold onto the mon­ey. They they give it to their share­hold­ers. I did do some googling and Mot­ley Fool reck­on that the div­i­dend is due to rebal­anc­ing of the port­fo­lio. So every six months they sell their out­sized posi­tions. And I would have thought I’m a bit skep­ti­cal. I would have thought they would have rein­vest­ed the, you know, the out­sized posi­tions into the under­per­form­ing posi­tions and it should all even out. But Mot­ley Fool reck­on that they give back the sur­plus cash as a div­i­dend, so it’s prob­a­bly a bit of both of those. Prob­a­bly, I think def­i­nite­ly the hedg­ing prof­its because I know the US dol­lar has fall­en and pos­si­bly also due to rebal­anc­ing. So you can’t bank on it being 20% going for­ward. 

Cameron [01:03:53] And as with all these hedged funds, you know, what I would say is if there is a bus­tle in your hedgerow, don’t be alarmed now. It’s just a spring clean for the May Queen. 

Tony [01:04:08] That’s all great to me. 

Cameron [01:04:10] Yes, there are two paths you can go by, but in the long run, there’s still time to change the road you’re on. 

Tony [01:04:16]  Is this Robert Frost? 

Cameron [01:04:18] Close, Robert Plant. “If there’s a bus­tle in your hedgerow. Don’t be alarmed now. It’s just the spring clean for the May Queen.” 

Tony [01:04:29] I must admit, I’ve always found it hard to under­stand Robert Plan­t’s lyrics. 

Cameron [01:04:33] No one under­stands Robert Plant, includ­ing Robert Plant. It’s 50th anniver­sary of Stair­way to Heav­en this week, I believe. 

Tony [01:04:42] Andrew Den­ton should release the mon­ey or the box cov­er set. 

Cameron [01:04:48] Yes. Yes. Released 8th of Novem­ber 1971. 50 years ago today. I read an arti­cle about it this morn­ing. Plant was say­ing that they were sit­ting in a house that they were using as a stu­dio, and he said for some rea­son he does­n’t remem­ber why, but he was just real­ly angry and he was sit­ting in front of the fire­place one night. He had a pen, and a pad, and he wrote down. There’s a lady who sure all that glit­ters as gold and she’s buy­ing a stair­way to heav­en. And then he went. He said he looked at it went, “Oh my God, what’s that all about? Where did that come from?” He had no idea where the lyric, what the lyrics meant, where they came from. I told Chris and she goes, “Yeah, well, no one knows what those lyrics ever mean.” Like includ­ing Robert Plant appar­ent­ly. 

Tony [01:05:31] Yeah, weren’t they sued for steal­ing the melody from their sup­port act or some­thing. 

Cameron [01:05:38] No, no. From anoth­er band called Tau­rus, I think. Yeah, I’m not sure if that case won. The band was called Spir­it. The song was called Tau­rus. 

Tony [01:05:50] Right. No, I think they lost. I think Spir­it lost. 

Cameron [01:05:53] Oh, did, they? 

Tony [01:05:54] I think so. 

Cameron [01:05:56] The case? Yeah, right. Oh, there you go. I remem­ber going back and lis­ten­ing to it. It does sound very sim­i­lar — the open­ing to it. But yeah, they — Led Zep­pelin pre­vailed in a long stand­ing copy­right bat­tle over their sig­na­ture song Stair­way to Heav­en. 

Tony [01:06:12] I remem­ber, you know, like being at uni and every time you go to a pub and some­one would pick up a gui­tar and play Stair­way to Heav­en, we’d just used to cov­er our ears. It was just — ugh. You could tell if some­one.. 

Cameron [01:06:25] Well, it’s like that famous scene in Wayne’s World, right, where Mike Myers does that. 

Tony [01:06:30] I don’t recall it. Sor­ry. 

Cameron [01:06:32] Oh, he’s in it. Goes into a music shop and he picks up a gui­tar and starts play­ing stair­way in. An employ­ee comes over and taps him on the shoul­der, and points to a sign on the wall that says “No Stair­way to Heav­en.” 

Tony [01:06:46] Yeah. 

Cameron [01:06:46] And that movie came out 30 years ago. Well, 29 years ago, I think ’92. So that was a joke about the song 30 years ago.  

Tony [01:06:58] Yeah, it’s the hater..

Cameron [01:07:01] Yeah. Well, I went down the LED Zep­pelin rab­bit hole this morn­ing while I was doing com­par­isons and check lists and stuff. It was good. Good times! 

Tony [01:07:10] Did I tell you I saw Robert Plant? 

Cameron [01:07:12] No. 

Tony [01:07:13] Not Robert Plant. No, who’s the gui­tarist? 

Cameron [01:07:15] Jim­my Page. 

Tony [01:07:15] Jim­my Page. I saw Jim­my Page. Did you hear my Jim­my Page sto­ry? 

Cameron [01:07:18] No. 

Tony [01:07:19] We went to the clos­ing cer­e­mo­ny of the Bei­jing Olympics. We’re in the Bird’s Nest in Bei­jing, and at the end of the cer­e­mo­ny they do all the pageantry. It was fan­tas­tic. Chi­nese acro­bats fly­ing through the air, stream­ers, all that kind of stuff, fire­works. And then the very last thing they do is they hand over the Olympic flame or torch to the next coun­try, which is going to be the Olympics in Lon­don, right? So a dou­ble deck­er bus comes out into the sta­di­um and Jim­my Page is on top of it with a loud — much like the scene the entry of Doc­tor Who when — 

Cameron [01:07:49] Yeah, Peter Capal­di comes in. 

Tony [01:07:51] Yeah, yeah, yeah, right. So he’s play­ing the gui­tar and it’s all of the love, and it’s just the whole sta­di­ums. 

Cameron [01:07:58] Wow! 

Tony [01:08:01] It was just fan­tas­tic.

Cameron [01:08:02] Oh wow. 

Tony [01:08:04] And then halfway around, David Beck­ham pops up on the roof of the bus and starts kick­ing foot­balls into the crowd as well. Amaz­ing see­ing that.

Cameron [01:08:12] Except the audi­ence would have been singing a whole rot of rove,  but prob­a­bly can’t say that any­more, so edit that out. 

Tony [01:08:23] That was such a sur­prise, and so, so wel­come. It was great. 

Cameron [01:08:27] That was what 2008? 

Tony [01:08:28] Yeah. Yeah, sounds right, right? I think so. Yeah. 

Cameron [01:08:31] Wow. Good. Good times?

Tony [01:08:33] Oh, great times! I mean, well, you know, it was a great trip. We walked the Great Wall of Chi­na. And what else did we do? Went drink­ing in some of the bars. Yes, good time. What did we see? We saw.. Ah, anoth­er great high­light for us was there was an Aus­tralian pole vaulter who won a gold medal. And so we’re in the again the Bei­jing Sta­di­um. I think we’re, you know, maybe a dozen Aus­tralians there and or at least in our area in the stands. And the Aus­tralian gets his medal. And we stand up and, you know, sing the Aus­tralian nation­al anthem at full gus­to and then we sit down and these four Ital­ian guys in front of us turn around and give us a clap, you know, like “Mag­nifi­co,” you know, “Fan­tas­ti­co! Bra­vo.” And then a bit lat­er that night, an Ital­ian wins a medal and they get up and they are like, I don’t know who they were. They was like the three tenors. It was Pavarot­ti, and they sang the Ital­ian nation­al anthem. And that was so good. We just felt so embar­rassed the rest of the night after that. 

Cameron [01:09:40] Yeah, that’s great. All right, Jere­my, “If you were hold­ing MQG, would you take up the SPP com­ing up soon? I’ve held MQG for decades. It’s my longest held stock and it’s done very well. I feel some­what over­weight on MQG though, and since tak­ing up QAV, I’m look­ing to dis­pose when I get the appro­pri­ate sell sig­nal rather than hold for­ev­er, as I have done so far. Per­haps the ques­tion about SPP in gen­er­al from a QAV per­spec­tive? Thanks.” 

Tony [01:10:14] Yeah. So that’s -

Cameron [01:10:15] You do hold MQG, I think?

Tony [01:10:16] I bought it again last week. Maybe, maybe when I sold Sand­fire. I think I sold two stocks last week — Ing­hams and Sand­fire and I bought Mac­quar­ie and Super Retail, SUL. So, yeah, I’m prob­a­bly mak­ing that deci­sion myself, Jere­my. A bit sur­prised you’ve had it for a long time because I bought MQG and then sold it again. I think it was a sell ear­li­er this year or last year. Again one of those regret­ful ones because it kept on going up after I sold it. But any­way, that’s the way it goes. I got back into it now with the new fig­ures. So Mac­quar­ie is one of those banks that reports Sep­tem­ber end of year, so the num­bers have just hit Stock Doc­tor in the last week. So I guess do your­self a favor and update your spread­sheets if you haven’t. They’ve come back on the buy list. SPP short for share pur­chase plan. So a lot of acronyms going around MQG, SPP. So the shares have gone ex-div­i­dend today and they’ve also announced the share pur­chase plan. So they’re giv­ing retail share­hold­ers the right to buy up to $30,000 worth of shares direct from the com­pa­ny. So no bro­ker­age is involved. And the deal is that you can buy them for the low­er of $190.20 or 2% under the weight­ed aver­age price five days before the SPX clos­es, which is, I think, 25th of Novem­ber. So the share price last time I had a look was just a lit­tle over $200, about $202, so it’s a no brain­er to take it up. Hav­ing said that, $30,000 is, you know, not mate­r­i­al in my port­fo­lio. And often­times with these kinds of SPPs you prob­a­bly will get scale back so you’ll get less than the full $30,000. So just bear that in mind, if $30,000 is mean­ing­ful to you, it will be tied up for at least prob­a­bly a month, usu­al­ly while they process every­thing work out. How much they’re going to scale peo­ple back by and put the mon­ey back into your account. So you know you might apply for 30 and get 15, but you’ve had the oth­er 15 tied up for maybe a cou­ple of months or up to a cou­ple of months. So just bear that in mind if you need it for some­thing else. But yeah, at the moment it’s a good deal, right? It’s — what’s that 5% also below the cur­rent share price? 

Cameron [01:12:37] And off the top of your head, where does it score in our check­list today, $200 a share? It’s gone through the roof. 

Tony [01:12:44] Yeah, it would­n’t be high up. I don’t think. Let me just have a — oh, maybe it is. Hang on!  Look­ing at it now. It’s 0.17 on the check­list. 

Cameron [01:12:53] Right. Hmm. Well, it’s been a good one. 

Tony [01:12:56] Again, a large a very large ADT stock. 

Cameron [01:12:58] Yeah. Well, good on you, Jere­my. Done well out of that, no doubt over the years. Brett, “Hi Cam! Work­ing my way through past episodes and in sea­son 3, episode 16, Tony said for a long while, he used a trad­ing strat­e­gy where he would buy LICs that were dis­count­ed to the assets they had. I’m curi­ous what his returns were like and why did he stop?” 

Tony [01:13:25] Sor­ry, I’m jok­ing. That remind­ed me of — I once heard.. Who was the guy? Robert Har­ris, the author. He wrote the book about the UK being tak­en over by the Nazis as an alter­na­tive his­to­ry, and also that Pom­peii. 

Cameron [01:13:38] Yeah, I inter­viewed him. He’s been on “Life of Cae­sar Show.” 

Tony [01:13:41] Maybe I heard it there any­way. He tells a sto­ry about how he was at some lit­er­ary fes­ti­val and some­one stands up and goes “On page 436 of the nov­el writ­ten twen­ty years ago, you said you’re in Berlin and it’s an over­cast day. I checked the records. It was not over­cast.” Bret­t’s pre­am­ble remind­ed me of that. “Sea­son 3, episode 16 I said some­thing.” Any­way, I digress. LICs, why did I stop doing it? First of all, I nev­er went through and cal­cu­lat­ed my long term returns for that strat­e­gy, so I’m not sure if it’s bet­ter or worse than QAV. I sus­pect it’s good, but not as good as QAV. But the main rea­son is that the oppor­tu­ni­ties are very lumpy. So it’s a good thing to do dur­ing the COVID cough when the mar­kets are down or after the GFC, when the mar­kets are down and every­one’s won­der­ing whether the LICs, the val­ue of their mark to mar­ket shares are going to go down fur­ther and they’re not trust­ing and say, you know, you could buy WAM Cap­i­tal at the 30% dis­count to its NTA, and it would have been some­thing sim­i­lar like that dur­ing the GFC. Would have been some­thing sim­i­lar like that dur­ing the COVID cough. But the prob­lem is the major­i­ty of the time LICs trade around their NTAs, you can down­load all this now and you can get them from Morn­ingstar. They put out a report every month. And I think the ASX might as well. Any­way, I’ve used the Morn­ingstar one. It’s free. It’ll tell you all the LICs on the mar­ket, and their most recent NTAs and their share price dis­count or pre­mi­um to their NTAs. It’s a good thing to have a look at. There will always be LICs on that, which is trad­ing at a dis­count. But some of them, you know, if you look at their share price, for exam­ple, they’re falling knife, so you would­n’t want to invest in those. So I can’t give any more defin­i­tive answers than that because I nev­er tracked the num­bers. It was more of an oppor­tunis­tic play for me when some of the good qual­i­ty ones that are out there and you know, you can pret­ty much work that out quick­ly by just look­ing at the Morn­ingstar report also has their mar­ket cap size you want big ones. Yeah. And if you look at it, they gen­er­al­ly trade with­in a 10% range of their NTA, some­times with­in the 1–2% range of their NTAS. Often­times above their NTA right because in the case of, say, the Wil­son Asset Man­age­ment LICs, peo­ple are buy­ing them because they’re yield­ing 7%, so they’re hap­py to over­pay for the shares. Yeah, which might be a short term pain for them, but in the long term, they’re get­ting the ben­e­fits of div­i­dends for their retire­ments. But yeah, but there have been times when you can buy Wil­son Asset Man­age­ment for $0.70, and it’s just a very lumpy way to invest that. 

Cameron [01:16:35] Right. Okay, thank you. Last ques­tion for the day! Mark, “Hi, Cam! If an indi­vid­ual has prop­er­ty in his or her invest­ment port­fo­lio, would it be best to not buy any real estate or prop­er­ty relat­ed stocks in the QAV port­fo­lio?” 

Tony [01:16:53] Well, I don’t care about sec­tor con­cen­tra­tion. If prop­er­ty’s the thing, then I want more in prop­er­ty rather than less in prop­er­ty. No, I don’t wor­ry about sec­tor invest­ments or how much they’ve got in one par­tic­u­lar sec­tor or anoth­er. I like to fish where the fish are. So if it just hap­pens to be the sec­tor, which was unloved but is now turn­ing like it has been for iron ore in the past, like it has been for gold in the past, like it has been for air­line stocks in the past, et cetera, et cetera. And you find out these things after the fact, but I don’t go top down. Then you know you want to invest. You can go on in that sec­tor if you have enough oppor­tu­ni­ties in that sec­tor. So I would­n’t be wor­ried about it. I think you’ll find I can’t think of any prop­er­ty stocks that are on our buy list. Per­haps Sun­land Wars, which is a prop­er­ty devel­op­er. You could count the retail banks as being involved in the prop­er­ty sec­tor because they’re big mort­gage lenders. So that’s poten­tial­ly in the prop­er­ty sec­tor as well. But again, yeah, I don’t wor­ry about my sec­tor allo­ca­tions. I’m hap­py buy­ing stocks on the QAV buy list accord­ing to nor­mal process­es. That’s why I always feel it’s fun­ny like, you know, if you go into the Navexa or I’m not pick­ing on them, Sharestar or any of the port­fo­lio track­ing soft­ware com­pa­nies, one of the things I’ll show you is a pie chart with you’ve got this much in indus­tri­als and this much in resources, etc., etc. It’s mean­ing­less. Does­n’t mean any­thing.

Cameron [01:18:21] Yeah. Well, but you know, the con­ven­tion­al wis­dom out there is that you diver­si­fy and spread your risk across dif­fer­ent sec­tors and dif­fer­ent invest­ment cat­e­gories and all that kind of stuff, right? So they’re just, you know, they have to do that because that’s what most peo­ple are told they should pay atten­tion to. 

Tony [01:18:37] Yeah, but it’s wrong. I guess it’s not wrong if you’re a set and for­get per­son, if you, you know, put your mon­ey into an index fund or some­thing and you don’t pay atten­tion to it. But for some­one who’s active in the mar­ket like we are with QAV, then it’s the wrong thing to do. 

Cameron [01:18:55] You know, for pas­sive investors, it prob­a­bly makes sense. 

Tony [01:18:58] Yeah. Well, it makes sense in that if you do go over­weight in one sec­tor and you don’t sell when the trend turns then yeah, you’ll get burnt. 

Cameron [01:19:06] Yeah. Jol­ly good. Well, that’s a full lid for this week air and a half. It’s hot. We’re tired. Tony still has­n’t been able to get a hair­cut by the looks of it. 

Tony [01:19:18] No, I have one. 

Cameron [01:19:20] Did you? 

Tony [01:19:22] No, I washed it this morn­ing. So my hair’s all frizzy in the humid weath­er. No, I have. Well, I think I can’t work out — like it has been so busy and dif­fi­cult to get hair­cuts. I can’t work out whether my hair­dress­er was just try­ing to get me out of a seat quick­ly, which he goes, “Oh, looks great. I’ll just give it a trim.” 

Cameron [01:19:38] Yeah. Yeah, yeah, 70 bucks. Thanks very much. 

Tony [01:19:42] Yeah, exact­ly. 

Cameron [01:19:43] Jen­ny, does­n’t cut your hair? 

Tony [01:19:44] No. 

Cameron [01:19:45] Chris­sy cuts my hair usu­al­ly. You should get Jen­ny to cut your hair for you. 

Tony [01:19:50] No. How much do you pay Chris­sy? 

Cameron [01:19:57] I pay her in kind. Okay. After hours, watched any­thing good? 

Tony [01:20:07] Oh, I don’t think so. Still watch­ing Suc­ces­sion each week, which is lots of fun. Still watch­ing Shet­land, which is good fun, but most­ly watch­ing the horse races over the last week with Rud­dy. 

Cameron [01:20:16] Was that fun? 

Tony [01:20:17] Great. It was! It was huge fun. Great. We were both doing our dough and then Mark’s, the depart­ed moth­er, whose name is Eve­lyn, cropped up in con­ver­sa­tion and there was a horse called Fly­ing Eve­lyn in the last race on Cup Day. And of course, it won at twen­ty to one and we had the tri­fec­ta. So it made us whole, which was great. Yeah. 

Cameron [01:20:36] That’s good. Nice! 

Tony [01:20:38] Yeah, it’s good fun. Yeah. Oh, how about you? 

Cameron [01:20:42] Yeah, suc­ces­sion. You know, Kevin can f him­self, what we do in the shad­ows. Just the usu­al things. I don’t think we’ve watched much.. Oh we took Fox to the cin­e­ma the oth­er night to see an ani­mat­ed film. Ron’s Gone Wrong, set in the high tech future where kids have these lit­tle pet, sort of toy robots that do every­thing for them. And this poor kid, his par­ents can’t afford one, but they get one that’s lit­er­al­ly fill at the back of a truck and it’s not work­ing prop­er­ly, and it’s voiced by Zach Gal­i­fi­anakis doing this faulty robot com­pan­ion, which he did a great job. Fox liked it too. It was a good film. Chris­sy and I though this week are going to see the Many Saints of Newark. Not with very high expec­ta­tions based on the reviews, but just out of a sense of Sopra­nos loy­al­ty we’ve got to go see it. I want to see a young Olivia Sopra­no go, “Oh poor you!” And a young Paulie Wal­nuts and that kind ..

Tony [01:21:38] And it’s Gan­dolfini’s son is play­ing the young Gan­dolfi­ni in it, too. 

Cameron [01:21:42] Yeah, I know. I don’t think he’s got a very big role. I don’t think Tony’s a big role in it. From what I’ve heard, it’s more about Dick­ie Molti­san­ti. 

Tony [01:21:49] Okay. And of course, Molti­san­ti means many saints. That’s why it’s called the Many saints of Newark.

Cameron [01:21:55] Yeah, Molti­san­ti. Very good. Yeah, yeah. So, yeah, so that’s about it. Yeah. 

Tony [01:22:03] Oh, let me know how it goes. I’d like to see it as well, but I might wait until it gets to a stream­ing ser­vice. 

Cameron [01:22:08] Yeah, yeah. All right. Well, good luck. Every­body have a good week, Tony, and we’ll be back next time.

Tony [01:22:15] Thanks, Mate! See you!

Cameron [01:22:17] QAV pod­cast is a pro­duc­tion of Space Craft Pub­lish­ing Pro­pri­etary Lim­it­ed autho­rized rep­re­sen­ta­tive of FSL 520442 AFC Rep­re­sen­ta­tive No. 0012927718. 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.