Transcript #537

QAV 537 CLUB

Record­ed Tues­day, Sep 20, 2022

Cameron  00:00

Wel­come back to QAV, episode 537. We’re record­ing this on Tues­day the 20th of Sep­tem­ber, 2:15pm Bris­bane time. How are you this week, TK?

Tony  00:21

I’m good. I’m well. Back from Mel­bourne.

Cameron  00:24

Hap­py birth­day again to Alex, her birth­day was over the week­end. You went down? Did you take her to mini golf this time?

Tony  00:30

No, she took me to a funky bar in Fitzroy which was good fun.

Cameron  00:34

By the way, as peo­ple may know, Alex not only does the check­list for this week but tran­scribes the episodes, and I know — she told me when I saw her the oth­er day — that she finds it very uncom­fort­able hear­ing us talk about her on the show. So, I just want to say, Hap­py Birth­day Alex. You’re awe­some, we love you, we miss you, you’re the great­est, and I hope that’s made you blush a lot while you’re tran­scrib­ing this.

Tony  01:01

She will be.

Cameron  01:03

Well, that’s good. Glad you had a good trip. We got our big TV, final­ly, so the last four or five days for us has just been rewatch­ing the God­fa­ther, Star Wars, Mar­ket­ing the Mes­si­ah; first thing I always put on any TV when I have it. It’s like “oh, I won­der what that looks like on this.” See if the 4k holds up. You remem­ber Torsten made us spend all this mon­ey to film it in 4K?

Tony  01:24

Yeah, I do remem­ber that.

Cameron  01:26

I have a 4k TV, I thought, “oh, I won­der if there was any point in that.” Its alright.

Tony  01:31

So, have you heard from Torsten since Bit­coin’s now worth a quar­ter of what it was last year?

Cameron  01:36

Of course, he’s going dou­bled down. You know, “buy more, invest more. It’s gonna be huge.” For lis­ten­ers out there, Torsten was one of the pro­duc­ers on our film, and also pro­duced a cou­ple of films on cryp­to. He’s a big cryp­to guy. He’s been try­ing to tell us that we need to invest in cryp­to for the last few years, it’s all about cryp­to. But he’s Ger­man, so, you know, you have to for­give him. So, yeah, that’s been our week. Lots of TV. I want to shout out to Phil Mus­catel­lo. Poor Phil went to Cole’s to do a bit of shop­ping… Phil is from the Shares for Begin­ners pod­cast and the Aus­tralian Share­hold­ers Asso­ci­a­tion Pod­cast. Tony has been a guest on Phil’s show many times. He came out and his car had burnt down. His car had caught on fire and just totalled, his car’s just dis­in­te­grat­ed.

Tony  02:25

Spon­ta­neous­ly com­bust­ed?

Cameron  02:27

Appar­ent­ly. Yeah, it was a Sko­da.

Tony  02:30

Dar­ren McGavin was stand­ing in the back­ground wear­ing a rain­coat, was he?

Cameron  02:35

Dar­ren McGavin?

Tony  02:36

What the hell is The Night Stalk­er?

Tony  02:36

Remem­ber that? Used to be episodes about spon­ta­neous com­bus­tion on The Night Stalk­er.

Tony  02:41

Oh! It was the Fox and Scul­ly before Fox and Scul­ly.

Cameron  02:47

Real­ly? The pre X Files, X Files?

Tony  02:50

Yeah, yeah. So, Dar­ren McGavin played this New York reporter who would always, for some rea­son, hap­pen to come across para­nor­mal sto­ries and track them down. He’d always be just about to expose it and then the evi­dence would dis­ap­pear, or no one would believe him.

Cameron  03:06

Yeah, well, I’m glad I nev­er watched that, and I watched The X Files instead, because if I had watched that, my son would be called Dar­ren rather than Fox.

Tony  03:17

Dar­ren McGavin was the actor, his name was Kolchak. I think that was the name of the actu­al TV series: “Kolchak: The Night Stalk­er.”

Cameron  03:26

That’s not a bad name, Kolchak. I could go with that, it’s kind of badass.

Tony  03:30

I used to real­ly enjoy it, it was a good series.

Cameron  03:33

Alrighty then.

Tony  03:34

Like those TV shows in the 70s, had a great theme song. The start would always be him typ­ing alone by him­self at mid­night, and then he’d just almost fin­ish his sen­tence and the theme song would stop, and then there would just, like, be a mys­te­ri­ous noise in the back­ground or some­thing like that.

Cameron  03:51

I can’t believe I’ve nev­er heard of this. I got­ta check it out. Any­way, back to Phil Mus­catel­lo: glad no one was hurt, every­one was okay, and I’m sure his insur­ance will cov­er it. I hope his insur­ance will cov­er it. Any­way, good luck with that, Phil.

Tony  04:07

So, the car just burnt? So, some­one’s obvi­ous­ly torched it, have they?

Cameron  04:12

it’s one of the growth investors that he’s had on his show at some time, I think, that he’s made fun of. They’ve come and start­ed stalk­ing him, torched his car as pay back. Your cars bet­ter be under lock and key, Tony. They’re com­ing for you next.

Tony  04:32

Oh, I should­n’t laugh. That’s hor­ri­ble for Phil, very sor­ry for Phil. Mind you, he lives in Bal­main, so I’m sur­prised he needs a car, he could just pret­ty much walk every­where over there. A great part of Syd­ney. But that’s real­ly sad.

Cameron  04:44

Yeah, I hope he did­n’t lose any valu­able items in the car, any irre­place­able things. But no one was hurt, so that’s the most impor­tant thing always. I saw this arti­cle in the Fin the oth­er day, Tony, “The Small Cap Fundie Crash­ing the Bears’ Pic­nic”. I just got this quote out of it that I thought was inter­est­ing: “anoth­er key fac­tor in LSN’s process is invest­ing in founder led busi­ness­es, or com­pa­nies where man­age­ment is sig­nif­i­cant equi­ty stakes. About 60% of the fund pos­sess those attrib­ut­es. ‘When you have founders look­ing to grow their busi­ness and grow their share in the indus­try they oper­ate in, they respect their cap­i­tal base and they don’t look for growth for growth’s sake,’ Slay­ton says. Instead, they look to gen­er­ate a strong return on cap­i­tal, which allows a busi­ness to self-fund its future growth and return cap­i­tal via div­i­dends or buy­backs to share­hold­ers in due course.” Though that sounds famil­iar.

Cameron  04:46

Oh, def­i­nite­ly. I mean, it’s not an orig­i­nal con­cept for me by any means, but def­i­nite­ly con­cur with that. I mean, the more invest in the mar­kets, the more you know that there are com­pa­nies that man­age for the short term, and com­pa­nies that man­age for the long term, and it’s the ones who man­age for the long term that do bet­ter in the long term. And they tend to be run by the founders who have large enough stake in the com­pa­ny and the his­to­ry to be able to tell the ana­lysts and the fund man­agers and the indus­try to just take a hike. They’re gonna do things that are good for the long term.

Cameron  06:18

As opposed to a CEO for hire who’s in for eigh­teen months or two years and are just look­ing to get their bonus and their stock options.

Tony  06:26

Well, it’s not just that. That’s part of it, but it’s more of a polit­i­cal game for those peo­ple. If they put any of the fundies off­side and they’re a share­hold­er, they’re not going to stick around. They’re going to lose. It’s a house of cards, real­ly. I mean, it’s so polit­i­cal. To get into that role you’ve got to prove your­self, for sure, but that’s only one ele­ment of it. Then you’ve got to have the sup­port of the board, and the board tends to, you know, again, it’s polit­i­cal as well. You’ve got to just got to keep scratch­ing backs, right? If you’re haven’t grown up with the com­pa­ny, you’re behold­en when you get that job to oth­er peo­ple, whether it’s the stock­hold­ers which tend to be the large funds or whether it’s the board who gave you the job and then the board who gives you the pay rise every year. So, yeah, they do tend to have a short-term approach to things to just keep appeas­ing the peo­ple who put them there

Cameron  07:16

What was that Fem punk band in the 90s? Skunk Anan­sie, remem­ber Skunk Anan­sie?

Tony  07:24

I haven’t heard of them. Sid and Nan­cy?

Cameron  07:29

Yeah, well, I think it’s sort of a ref­er­ence on that. But they had a song, I think it’s called Yes, it’s Eff­ing Polit­i­cal. There were the lyrics for it: “Yes they’ve been polit­i­cal. Every­thing’s polit­i­cal.” I’ve always liked that. Peo­ple say, you know, “you’re get­ting polit­i­cal,” and every­thing’s polit­i­cal.

Tony  07:48

Yeah, I agree.

Cameron  07:49

It’s all about peo­ple, right? When you have more than one per­son, things are polit­i­cal. Good lyrics. Any­way, I I’ll get into trou­ble if I read those. I’m enough trou­ble. Thanks to Reg, QAV club mem­ber Reg, for giv­ing me a hard time con­stant­ly about the Roy­als on Face­book over the last week. He’s try­ing to get a rise out of me every day, telling me to go watch the roy­al funer­al. I took a lunch break today, I went to the kitchen, made some lunch, sat down in front of the big TV, thought I’ll see what’s on the ABC. Turned it straight off.

Tony  08:20

Yeah. I know. It’s ter­ri­ble.

Cameron  08:25

How long has it been? A week and a half. And still.

Tony  08:29

I know.

Cameron  08:30

Com­plete wall to wall cov­er­age. Are you kid­ding me?

Tony  08:32

Have you seen the Fin Review today?

Cameron  08:34

Yeah, yeah, I have.

Tony  08:36

I went to two news agents, because I walked into the first one and I thought to myself, “oh, they’ve sold out of Fin Reviews.” Then I go to the sec­ond one and I realised, no, that Fin Review with the big pic­ture of the Queen’s funer­al was actu­al­ly the Fin Review, not the Her­ald Sun.

Cameron  08:51

I’m just appalled. Any­way.

Tony  08:56

Just a last thing on that. So, I was watch­ing the ABC News this morn­ing, and they had a piece on how long the Queen’s funer­al went for and how ter­rif­ic it was the roy­al fam­i­ly had stayed on the job for ten or twelve hours straight. I was think­ing to myself, I mean, how many poor bug­gers do twelve hour shifts to make ends meet these days. As if the roy­al fam­i­ly deserves any extra kudos for sit­ting in a pro­ces­sion for twelve hours. Are they gonna ask for dou­ble time or some­thing? Give me a break. It’s the only time they’ve worked all year and that’s not real­ly work.

Cameron  09:32

Yeah. It’s a self­less ser­vice, Tony. It’s just all part of the self­less ser­vice they give. Back to stocks. I know I’ve asked you this ques­tion before, but I’m going to ask it again because it’s rel­e­vant and I could­n’t read­i­ly find the answer. Actu­al­ly, I start­ed to look for the answer and then end­ed up build­ing a whole new knowl­edge base page on the web­site to help me find answers like this in the future.

Tony  09:59

We’ve talked about these pro­cras­ti­na­tors before. The so-called “work­flow helps” that end up tak­ing longer to code than what they help.

Cameron  10:12

Well, I cod­ed it, I think it will be help­ful for me and every­one else. But any­way, the ques­tion is, when do we sell a stock that’s gone div­i­dend? If it’s still below water after the div­i­dend has been paid, do we do it on the pay­ment date or the day after the pay­ment date?

Tony  10:30

Good ques­tion. I do it the day after.

Cameron  10:32

Okay. Because YAL and SSG both have the pay­ment date today, and when I did my alerts this morn­ing, they were both okay. They were both above the fudged or fac­tored sell line if I includ­ed the div­i­dend, but the pay­ment date was today. So, if they don’t recov­er by, in YAL’s case, 52 cents by tomor­row, I’m gonna have to sell. I don’t know what the SSG one was. Big div­i­dend for YAL though.

Tony  11:01

It’s great.

Cameron  11:01

52 cents. Well, it was until the share price dropped by more than that. So, now it’s not so great, but any­way. We’ll see if it rebounds. So, just the next day after the pay­ment date.

Tony  11:14

Oh, look, that’s what I do. I mean, that’s just on the basis that the div­i­dend state­ment arrived today, but I don’t know if the cash has, and so I always check it the day after.

Cameron  11:25

Okay.

Tony  11:26

Give it twen­ty-four hours to cycle.

Cameron  11:28

Just a note for peo­ple, Brett Fish­er men­tioned in Face­book that he con­tact­ed Stock Doc­tor sup­port about why BSL, EVN, HLS, NCP, OMH and ZIM, or the alpha­bet stocks, still don’t have updat­ed results. Their response was the devel­op­ment team has placed a fix and is cur­rent­ly being test­ed, they have to release the update next week. I think that was maybe over the week­end, he post­ed that, or some­thing. So, if you’re hav­ing prob­lems with com­pa­nies not hav­ing updat­ed results in Stock Doc­tor, let’s stop doc to know. And let us know on Face­book too, because that was help­ful. Thanks, Brett for post­ing that. I think Chris Strat­ton added some more com­pa­nies to that list in the Face­book group as well.

Tony  12:13

Yeah. Stock Doc­tor can take a while to release num­bers in the report­ing sea­son, but it tends to be the small cap com­pa­nies, the real­ly small ones. So, if they’re not doing it for the larg­er ones that pos­si­bly is a patch they need to put in.

Cameron  12:25

Don’t get much larg­er than BSL.

Cameron  12:28

Okay. Get­ting to the update sec­tion. Most impor­tant update, Ralph Mac­chio is still six­ty. Still look­ing forty-five. Watched some more episodes of Cobra Kai and don’t know how he does it. Port­fo­lio’s doing OK. The DP. It’s still up a cou­ple of points. Not much has changed from last week despite the mar­ket hav­ing a hor­ri­ble week. Crashed again I think Wednes­day last week and did­n’t recov­er. Recov­ered maybe a bit today, I think, Tues­day. It’s been rough, but the port­fo­lio’s still hang­ing in there. A cou­ple points up for the finan­cial year. So, we’re only a cou­ple of months into that. The All Ords is way above it, or the ASX 200, but still we’re — I looked this morn­ing when I was doing the club newslet­ter — since incep­tion, the dum­my port­fo­lio’s per­form­ing 2.9 times bet­ter than the ASX 200 as our bench­mark, so look­ing good. Which is bet­ter than last week, it was two and a half times. Now it’s 2.9 times. It goes up and down, but you know, it’s doing good since incep­tion. Hold­ing our own.

Tony  12:28

Cor­rect.

Tony  13:20

Navexa sends me a week­ly report on our dum­my port­fo­lio, and it’s say­ing it’s up 0.95% for the week, which is good giv­en the All Ord’s went down, as you said. And the two biggest movers, one up one down: PWR was up 20% and Yan­coal, as you said, was down near­ly 12%.

Cameron  13:57

Which I assume is just the div­i­dend com­ing out?

Tony  14:00

Yeah, it would be.

Cameron  14:01

So, there you go. All right. What do you got on your things to talk about, Tony?

Tony  14:06

Yeah, a cou­ple of things. I mean, just on per­for­mance. It’s a real­ly strange thing, but every year around this time, I start to get a lit­tle ner­vous because Sep­tem­ber and Octo­ber — and par­tic­u­lar­ly Octo­ber — is kind of the witch­ing month for the mar­ket. Every major crash since the Great Depres­sion has hap­pened in Octo­ber, so I’m always a bit ner­vous going into this time of year when the mar­ket starts to go back­wards. But it does­n’t change any­thing, I still do what I do and don’t change the sys­tem, but it just is strange that this hap­pens. There’s a whole heap of the­o­ries about this, whether its peo­ple com­ing back off the north­ern hemi­sphere hol­i­days and going back into the office and work­ing a full week rather than being on sum­mer hol­i­days and start­ing to look at their port­fo­lios and read­just. There’s a thing in the US any­way where a lot of options cycle through month end and they get closed out and then rebought again the next day. That some­times hap­pens in Octo­ber. Some­one tried to say it was the midterm elec­tions which hap­pen every two years. I’m not sure what caus­es this, I guess, addi­tion­al risk in this time of year, but it just seems to be a thing. Noth­ing we can do about it. There’s some analy­sis to say that I’ve seen that Sep­tem­ber is the worst month, but you know, one of them has to be, so not going to say we should sell out in August and come back a bit lat­er. But Sep­tem­ber has been the worst per­form­ing month over time, and Octo­ber has been the month where most of the crash­es occur. But, you know, we’ve prob­a­bly only had four big crash­es in the last hun­dred years. So, if you’re out of the mar­ket in Octo­ber because you’re wor­ried about a crash, then you’re gonna miss out on the rest of the years where it has per­formed. So, not much more I can say or do about it, but I’m always a bit ner­vous going into Octo­ber. I guess on the oth­er side of things, what’s hap­pen­ing in the macro world is that’s also a lit­tle con­cern­ing, it looks to me less and less like we’re going to get any sort of soft land­ing. Yeah, get­ting back to the oth­er macro com­ments, the RBA Gov­er­nor strikes me as some­one under pres­sure, and he is under pres­sure. I’ve seen a cou­ple of YouTube videos now where he’s spo­ken recent­ly, and he’s almost growl­ing. He’s a bit like Gol­lum on Game of Thrones with his “pre­cious” inter­est rates, and he just looks like he’s under a tremen­dous amount of stress. And that could just be the stress that there’s a review of the RBA going on, there’s been peo­ple howl­ing for his res­ig­na­tion since he said inter­est rates would­n’t rise this year and they have a cou­ple of times already. Or it could just be the stress know­ing that putting inter­est rates up hurts the econ­o­my. But I think it’s a short­fall of the RBA, and I’m pret­ty sure this won’t be addressed by the review. But if your only lever is inter­est rates, to bring the econ­o­my back to the infla­tion range you want, then, you know, it’s like every prob­lem is a nail if you only have a ham­mer. And per­son­al­ly, I don’t think inter­est rates are gonna solve this one. I think when the Ukraine war is caus­ing ener­gy prices to increase; when sup­ply chain prob­lems are caus­ing house con­struc­tion costs, for exam­ple, to increase; when staff being away because of COVID rea­sons is caus­ing wages start to rise as peo­ple try and attract peo­ple to their busi­ness­es with sign on bonus­es, etc., because they can’t get all this stuff back; none of those are solved by inter­est rates. And so, inter­est rates I think just adds to the prob­lem even though putting up inter­est rates will inevitably cause infla­tion to come down because it will crash the econ­o­my. So, there’s a lot of imper­fect solu­tions going on, a lot of peo­ple in key posi­tions under pres­sure. I just don’t have any con­fi­dence that this is going to end. But again, that’s a pre­dic­tion and we don’t act on pre­dic­tions. I guess it’s just where my mind is at the moment. We’re in Sep­tem­ber head­ing into Octo­ber, often­times not great months for the share mar­ket. Inter­est rates are like­ly to go up in the States again this week and pos­si­bly here at the start of next month. And yeah, I just don’t know if that’s the answer. And I guess the oth­er issue that I’m grap­pling with is that, par­tic­u­lar­ly in the States, to alle­vi­ate pres­sure — and in the UK — to alle­vi­ate pres­sure on things like high ener­gy prices, the gov­ern­men­t’s pour­ing mon­ey, again, into peo­ple’s pock­ets. That caused the whole prob­lem in the first place with infla­tion as well, because, you know, hind­sight is a won­der­ful thing, but per­haps the inter­est rates were cut too low dur­ing the COVID pan­dem­ic and now they’re try­ing to scram­ble to get back on top of infla­tion. And as some­one point­ed out recent­ly, infla­tion is always caused by increas­ing mon­ey sup­ply in the econ­o­my, which is what we had a lot of dur­ing COVID. And now, you know, inter­est rates might be the way to solve that tra­di­tion­al­ly, but when infla­tion is a sup­ply prob­lem rather than a demand prob­lem, I don’t think it will. So, I’m not con­fi­dent about the econ­o­my going for­ward or where the share mar­ket is going to end up. But that’s all by the by, they’re just thoughts and pre­dic­tions. We’ll keep doing what we do. But I guess I will cau­tion peo­ple if they have any expo­sure to risk at the moment to wind that back, and by that, I mean mar­gin loans or any oth­er sort of bor­row­ing that they might have tak­en on when inter­est rates were good to invest in the mar­ket. Just be a bit care­ful.

Cameron  19:26

Well, but, you know, the MMT peo­ple told us this would­n’t hap­pen, Tony. It was fine. We can issue as much cash as we want. It’s all good. It’s mod­ern, Tony, mod­ern! This time it’s dif­fer­ent.

Tony  19:39

Yes. Well, and they’re now argu­ing it does­n’t work when infla­tion is hap­pen­ing, so that’s kind of like the get out of jail pass at the moment. But I agree with you, when we drilled down with those inter­views we did, I could nev­er get past how the Reserve Bank print mon­ey, and it does not affect the econ­o­my with­out spread­ing pix­ie dust on the print­ing press­es and no one could ever real­ly explain that to us.

Cameron  20:02

Well, maybe it was­n’t the print­ing of the mon­ey that caused the prob­lem, as you say, it’s all of these oth­er macro-eco­nom­ic fac­tors: wars, trades, COVID, all that kind of stuff that’s doing and not the mon­ey that they tipped into the buck­et.

Tony  20:16

Do you think you’re at a point yet where we can put word­ing in the Bible about Renko? Or do you want to wait a bit?

Tony  20:16

Yeah, pos­si­bly. But I think it’s all prob­a­bly in the con­coc­tion that’s caus­ing the prob­lem. But typ­i­cal­ly, that’s the way the econ­o­my is run. They pour mon­ey into the econ­o­my when we’re in what looked like it was going to be a reces­sion, like COVID, or the GFC, when that has tak­en hold, and they raise inter­est rates to bal­ance things back again. So, that’s the one-dimen­sion­al approach to the econ­o­my, but we’ve got a mul­ti-dimen­sion­al prob­lem now because of all the oth­er things that are going on, too. So any­way, not a great eco­nom­ic back­drop I don’t think at the moment, so I’ll just keep being dili­gent. A cou­ple of oth­er things to report. I know I was asked a ques­tion a month or so ago about ETFs and LICs and why they weren’t on the buy list, and we gave the answer then about ETF’s that the oper­at­ing cash flow real­ly reflect­ed the amount of funds being put into the ETFs or tak­en out rather than the under­ly­ing busi­ness that they were oper­at­ing. I was­n’t as strong on the LIC side of things because oper­at­ing cash flow does actu­al­ly reflect more div­i­dends paid, and when they sell things, their income from sales, that kind of thing. But I did do a bit more of a deep dive into LICs to see if we should add them back, and I don’t think we should. That’s on the basis that I did find some exam­ples where oper­at­ing cash flow was neg­a­tive, which meant that in the case of those LICs, that they had costs — and LIC’s typ­i­cal­ly have costs like bonus­es to the man­agers, and share trad­ing, etc.  — so, they’ve had neg­a­tive oper­at­ing cash flow where they haven’t had enough div­i­dends from the com­pa­nies that they’ve invest­ed in to, for exam­ple, pay a div­i­dend, and they’ve actu­al­ly oper­at­ed at a loss. Although oper­at­ing at a loss for a LIC does­n’t real­ly mean a whole heap, because if they’ve got the cash reserves to pay the div­i­dend and they’ve sold things at a loss or they haven’t received enough div­i­dends to cov­er that, they can still do that out of reserves and run at an oper­at­ing loss. How­ev­er, the port­fo­lio may have gained con­sid­er­ably on paper. So, the LIC might be in a very strong posi­tion, but it does record neg­a­tive oper­at­ing cash flow because, for exam­ple, they’ve paid fees to the man­ag­er and div­i­dends to their investors, and they haven’t received enough oper­at­ing prof­it from sales or div­i­dends to cov­er that. So, it’s again, it’s a bit of a strange exam­ple. I’m try­ing to use oper­at­ing cash flow to gauge the strength of the busi­ness, so I’m going to keep LICs off the buy list because of that. And then a few oth­er things. Renko charts I’ve been look­ing at quite a bit this week, they do seem help­ful in pre­dict­ing when some­thing that’s gone up a lot is turn­ing down, and they seem to be less volatile than try­ing to draw sharp­er or steep­er sell lines on our three-point trend line charts. So, that seems to be good, but I am still play­ing around with the charts in Stock Doc­tor. Brett from the Bret­te­la­tor point­ed out to me dur­ing the week that when you click on the pen­cil… So, if you go into the drop-down box to select what type of chart, whether it’s a line or a bar chart, or a Renko chart, there’s a lit­tle pen­cil. If you click on that, it allows you to select “auto” which draws the bricks in the Renko chart accord­ing to math­e­mat­ics, or you can put your own brick size in. And so, you need to select “auto” as the default. I’ve also found a cou­ple of oth­er things which are a bit puz­zling. I’ve adopt­ed a process so far of click­ing on the Renko chart, select­ing “auto”, doing the Renko chart for the longest time peri­od, and then doing it for five years. A cou­ple of times I’ve refreshed the Renko charts in Stock Doc­tor and had some strange results, so just be care­ful of that. Just make sure that if you’re doing it to dou­ble check, it and make sure it makes sense before you make any invest­ment deci­sions based on Renko charts in Stock Doc­tor.

Tony  24:13

No, I think I’m a long way off chang­ing the Bible. I think we need to do what I’m doing, which is to run a few things on paper in par­al­lel, and just see whether they per­form bet­ter than what we’re doing.

Cameron  24:22

Cool.

Tony  24:22

What else? I have been pick­ing up some more stock codes which aren’t in my mas­ter spread­sheet, so they need to be added to the man­u­al­ly entered data sheet. Three of those I picked up dur­ing the week are TLC, DRR and PLS, they need to be added. None of them made it to the buy list after I added them, but they are new large cap stocks that haven’t been around for a while. I did add them in case they become impor­tant lat­er on and qual­i­fy for the buy list. So, they’re now added.

Cameron  24:49

New IPOs, the large cap stocks?

Tony  24:53

Rel­a­tive­ly new, yeah. Prob­a­bly in the last six to twelve months. Okay.

Cameron  24:56

Okay. You know, Andrew Flit­man gave us a process for the users of the AF sheet which we’re sup­posed to do once a month or so, where we down­load all the new com­pa­nies. There’s a fil­ter in Stock Doc­tor that you run, and it gives you a list of all the com­pa­nies that have IPOd in the last, you know, what­ev­er time­frame you want to set, and then you just throw those into the sheet. And, yeah, it’s a good sys­tem.

Tony  25:24

That would cer­tain­ly help with mine, but there’s also the added com­pli­ca­tion that when I do a down­load, I’m just pulling com­pa­nies with pos­i­tive oper­at­ing cash flow. So, there can be some­thing which has been around for a while but then goes pos­i­tive for the first time, so that’s also some­thing that could mean that we’ll have a new com­pa­ny down­load which does­n’t have man­u­al­ly entered data.

Cameron  25:43

Yeah. The way his works is you update the man­u­al­ly entered data tab on the AF sheet with the new stock codes, and so then it’s got them there if they turn up in the check­list pos­i­tive cash flow, they are already in the man­u­al enter data sheet ready to go.

Tony  25:59

So, is it the com­plete down­load of all stock­’s codes?

Cameron  26:03

No, you run it, from mem­o­ry, I haven’t done this for a month or so. But you run it… Andrew made a lit­tle video for us which I have to watch every time I do it to remem­ber what he said. I’ve got a fil­ter set up that he tells us how to do in Stock Doc­tor, a sep­a­rate fil­ter that just grabs the stock codes for com­pa­nies that are new­ly list­ed in the last, you know, thir­ty days or six­ty days, what­ev­er. Then you just copy that and stick it into the man­u­al­ly entered data tab, I think, and it auto pop­u­lates the rest of the fields. It gets ready for you to enter man­u­al­ly entered data into the fields so when you do your down­load those stocks are auto­mat­i­cal­ly in the man­u­al tab ready for inputs, man­u­al inputs.

Tony  26:47

Yeah. Okay. So, I mean, Andrew is much bet­ter at Excel than I am. I guess he start­ed off doing a down­load of all stock codes and putting it in, and then just runs updates on a month­ly basis.

Cameron  26:57

Yes.

Tony  26:58

Okay. Because what I’m say­ing is, if he did­n’t, if he did it the way I did it which is just to start at the point of time with all the ones that we’ve down­loaded to have pos­i­tive oper­at­ing cash flow, if you just down­load the updates of new IPOS…

Cameron  27:12

Oh, I see what you mean. Yeah.

Tony  27:13

Some­thing could have been around for a while which has now got a pos­i­tive oper­at­ing cash flow, and you’ll miss it.

Cameron  27:19

So, it’s not near­ly list­ed but has­n’t turned up pre­vi­ous­ly. I see what you mean. Yeah, I don’t know. Andrew, if you’re lis­ten­ing to this, let me know if you did that.

Tony  27:28

I’m sure he has. Mine’s a bit more clunky, so I from time to time — like once every six months or after report­ing sea­son — just com­pare what’s been down­loaded from Stock Doc­tor with what’s in the man­u­al­ly entered data sheet.

Cameron  27:41

Well, you could just do a down­load of all of the stocks in the ASX and drop them into your man­u­al­ly entered data tab and they’d all be there, right?

Tony  27:49

Yeah. But then you’ve got to take the data that you’ve already added in the past and try and match it up. So, Andrew has writ­ten some kind of macro to do that, which I have not.

Cameron  27:56

Oh, yeah. Pain in the ass. Hate Excel.

Tony  28:06

Any­way, so I’ve just been doing it man­u­al­ly myself over the years. Those three just haven’t been part of my man­u­al­ly entered data sheet, so just added those.

Cameron  28:16

Actu­al­ly, I tell you what, I know a way to do this because I do this every week when I’m doing my trad­ing stuff. So, you cre­ate a tab in Excel, you down­load the com­plete list of all codes, you drop it into col­umn A, you grab all the stock codes out of your man­u­al­ly entered data sheet that already exists, and you copy and drop that into col­umn B. Then you do a find dupli­cate in there. You find dupli­cates, you colour the dupli­cates, you sort so it’ll show you in these two tabs all the ones that don’t already exist in your man­u­al­ly entered data tab. They won’t be the dupli­cates, they’ll be the uniques when you sort it. You just grab that, copy and paste those back into your man­u­al data tab. Boom, they’re the ones that don’t exist. Done, son. See, I’m becom­ing an Excel guru. Sign up to my new Excel course, Cameron Does Excel, you’re gonna love it.

Tony  29:14

Kung Fu Excel with Cameron.

Cameron  29:15

Yeah, and I’m doing it all in Ital­ian too, so.

Tony  29:19

I do some­thing sim­i­lar; I just don’t go to that find dupli­cate stage. I just drop the down­load, drop the stock code col­umn from the down­load, drop the stock code col­umn from the man­u­al­ly entered data, sort them both alpha­bet­i­cal­ly and just go through man­u­al­ly and look at the dif­fer­ences.

Cameron  29:33

But do you drop the mon­key, Tony?

Tony  29:36

No?

Cameron  29:37

Drop the pilot? What was it? Shock the Mon­key, Peter Gabriel.

Tony  29:45

That’s a dif­fer­ent dong. There’s Shock the Mon­key and then there’s Drop the Mon­key, that was Joan Arma­trad­ing, was­n’t it?

Cameron  29:51

No, Drop the Pilot was Joan Arma­trad­ing, Shock the Mon­key was Peter Gabriel. I was think­ing it was a “Drop the Mon­key” there but, you know, my brains join­ing dots that don’t exist. Alright, let’s get going.

Tony  30:04

So, I do that every now and then. And the last thing I’m about to talk about is, I just want any lis­ten­ers out there who are sat­is­fied with their bro­ker­age account, I want to con­vert the dum­my port­fo­lio into some­thing with real mon­ey. So, I’ve had some advice and feed­back from some­one in the indus­try, a fund man­ag­er, who said that run­ning a dum­my port­fo­lio with­out hav­ing mon­ey behind it isn’t respect­ed in the indus­try and that we should just put some mon­ey into a fund and then use that as a dum­my port­fo­lio. But we real­ly want to do it as a one stop shop so we’re not fid­dling with it. So, I need a rec­om­men­da­tion from some­one, whether it’s Comm­Sec or Etrade or some­thing sim­i­lar, on a ser­vice that also does the port­fo­lio report­ing, han­dles cash bal­ances — as you know, we go to cash from time to time and div­i­dends get paid, etc. — and, yeah, sat­is­fied with them and that works well. I’ll set up a dum­my port­fo­lio using real mon­ey.

Cameron  31:03

Cool.

Tony  31:04

Let us know.

Cameron  31:05

All right. Tony’s just gonna drop a lazy hun­dred grand in it. You know, just dig under the couch. Time for Q&A.

Tony  31:14

I’ve got a pulled pork to do.

Cameron  31:15

Oh, the pulled pork. Who are you doing for the pulled pork this week, TK?

Tony  31:20

Yeah, some­one asked whether I could do it on GNP. Yeah, GNP, Genus­Plus Group, who I had­n’t heard of. They’re not on the buy list but I thought I’d do it any­way. Inter­est­ing sit­u­a­tion, so worth­while explor­ing. I for­get, now, who asked the ques­tion. Phil, I think. The first thing to say is, Phil, if you own GMP, sell it. It’s failed it’s sen­ti­ment, it’s gone way past it’s sell line recent­ly, so get out. So, that’s the first thing to note. And the fact that it does­n’t have pos­i­tive sen­ti­ment means it’s not going to be on the buy list, or score well, because we give points for sen­ti­ment. But any­way, I’ll just run through this as an exam­ple of a com­pa­ny which may be on the buy list, I guess, at some stage in the future. It’s small, though, aver­age dai­ly trade of $24,000, so it’s not a big com­pa­ny. And I sus­pect it’s prob­a­bly grow­ing, and I’ll get to that dur­ing the num­bers. But any­way, this com­pa­ny is the provider of infra­struc­ture for both pow­er and the tel­co sec­tor. So, it’s run­ning cables, and a bit of elec­tri­cal engi­neer­ing, and it looks like it’s par­tic­u­lar­ly doing that to the min­ing sec­tor — so, the mines and min­ing sites. So, that’s what it does. Small engi­neer­ing firm list­ed now on the ASX called Genus­Plus. Analy­sis is done at a price of 97 cents, which is above our IV 1 but less than our IV 2, and also above book plus 30% which is 69 cents. So, it’s only scor­ing one point out of all those price met­rics. Does have a yield, but not big: 1.8%. So, it does­n’t score for that. It scores very well on the growth over PE; the con­sen­sus growth in earn­ings per share for this com­pa­ny is fore­cast to be at 56%, which is quite good, which means our growth over PE is 4.6 times, which is very good. Our cut-off is 1.5, so it scores dou­ble for that. What else can I say? The price is less than the con­sen­sus tar­get, so it scores for that. The inter­est­ing thing about this com­pa­ny is that 53% of the mar­ket cap is still held by direc­tors, so scores for that, and obvi­ous­ly as an own­er-founder com­pa­ny. There’s poten­tial­ly room for those peo­ple to sell down, too, if they ever need to do that to raise mon­ey, or to use those into the share indus­try, which is some­thing which can help com­pa­nies grow. The Pr/OpCaf, though, for this one is 15 times, so that’s a bit more than twice the thresh­old that we’re look­ing for. How­ev­er, it did cross my mind that if it’s grow­ing at more than 50%, that Pr/OpCaf could come down next year. So, it’s worth watch­ing. In terms of man­u­al­ly entered data, it does have a low PE — I think it’s only been list­ed for four halves — and it does have con­sis­tent­ly increas­ing equi­ty, which is a good sign, I think. The finan­cial health is sat­is­fac­to­ry in Stock Doc­tor, and steady, so it scores for those. Over­all, the qual­i­ty score for this com­pa­ny is 10/15, or 67%, but the QAV score is only 0.04. So, yeah, it does­n’t meet our cri­te­ria and does­n’t score well for us, par­tic­u­lar­ly on the basis of price to cash flow and sen­ti­ment, but I expect it will improve over time if it keeps being well man­aged, which it prob­a­bly will be giv­en the amount of share own­er­ship of the founders and the board. If the fore­cast EPS growth hap­pens, then oper­at­ing cash flow should prob­a­bly improve, per­haps enough to meet that met­ric for us. So, there are some things to like in this com­pa­ny. But I guess with com­pa­nies like this, all the upside is fac­tored into the share price and that’s pos­si­bly what’s hap­pened recent­ly; the mar­kets in a skit­tish sit­u­a­tion and does­n’t like pay­ing up for future earn­ings, and so the share price has dropped through its 3PTL sell line.

Cameron  35:29

Right. Well, thanks for that, Tony. Hope that helps, Phil. Q&A and state­ments of fact from some of our lis­ten­ers.

Tony  35:44

Sounds just like Q&A on the ABC, does­n’t it. It’s like, no ques­tions and answers, just just state­ments and opin­ions,

Cameron  35:50

State­ments of belief. Yeah. Tes­ti­mo­ny.

Tony  35:53

Maybe you should wear like, a, I’ll wear a hijab and you can do some black­face, and we’ll just be like a real Q&A episode on the ABC.

Cameron  36:00

Wow, get­ting us into some sticky sit­u­a­tions there, Tony. I already had to get Den­nis to beep out stuff in the last episode, I don’t want to make a habit of hav­ing to beep out stuff.

Tony  36:11

No, I mean, the ABC likes to have a very diverse Q&A ses­sion.

Cameron  36:16

They do. I can’t watch Q&A; it just makes me too angry. I just, you know, I end up yelling at the screen. It’s no good.

Tony  36:23

I just find it real­ly bor­ing these days. There’s noth­ing of infor­ma­tion val­ue at all in it, so I don’t watch it.

Cameron  36:29

Alright, first ques­tion from Chris, or state­ment from Chris, actu­al­ly. “Hi Cam. Thought I’d shoot off a quick answer to the ques­tion on NL com­pa­nies.” Last week we had an NL com­pa­ny, I think you thought it was from the Nether­lands?

Tony  36:41

Yeah.

Cameron  36:42

He says, “NL stands for no lia­bil­i­ty.”

Tony  36:45

Good enough answer, isn’t it? Quick, rapid-fire answer.

Cameron  36:48

Hot take. Tony’s hot take: Nether­lands. “These types of com­pa­nies can only be used where the prin­ci­pal activ­i­ty of the com­pa­ny is min­ing. The main dif­fer­ence with this type of com­pa­ny is that if the com­pa­ny issues part­ly paid shares, the share­hold­er has no oblig­a­tion to pay any calls for the unpaid cap­i­tal.” None of that makes any sense to me, but he sent a pret­ty link: “researchdata.edu.au, search up no lia­bil­i­ty com­pa­nies, you’ll find stuff there.” Thank you for that, Chris.

Tony  37:17

Yeah, thanks, Chris. You’re right. I vague­ly remem­ber NL com­pa­nies being no lia­bil­i­ty, but more fun to say they’re from the Nether­lands. But thanks for point­ing it out. It just goes to prove the hive mind is much smarter than this indi­vid­ual. I did go to that link and have a look, it’s a very strange, anachro­nis­tic sort of sit­u­a­tion. There’s appar­ent­ly a law on the books from 1881 about No Lia­bil­i­ties com­pa­nies; they have to be in the min­ing sec­tor, and they have to be based in New South Wales. So, it’s a strange one. I mean, maybe it was some kind of tax incen­tive back then to get min­ing com­pa­nies up and run­ning in New South Wales. But the No Lia­bil­i­ty side has prob­a­bly been super­seded by the nor­mal Pro­pri­etary Lim­it­ed com­pa­nies now, which have lim­it­ed lia­bil­i­ty for own­ers and direc­tors. The only dif­fer­ence is that it looks like in this no lia­bil­i­ty case, peo­ple can issue shares which require part pay­ment now and then part pay­ment in the future, and that peo­ple can­not cough up for the sec­ond leg and just lose their shares. So, I’m not sure that that’s wide­ly used today, and I haven’t heard of any exam­ples of it being used today.

Cameron  38:26

We did have a com­pa­ny that we talked about last week that’s an NL com­pa­ny.

Tony  38:29

Yeah, an NL com­pa­ny. So, it’d be inter­est­ing to know why that com­pa­ny chose that path to go down.

Cameron  38:34

Yeah, maybe they’ve been around since 1880. Clive Palmer was­n’t around in 1880, was he? Or an ances­tor of his?

Tony  38:42

I could­n’t say.

Cameron  38:46

Glenn says: “Hi, Cam. I thought that I would pri­vate­ly reply to the dis­cus­sion on this week’s pod­cast after my Face­book post.” Now Glenn for the last few weeks… What are you laugh­ing about?

Tony  38:59

He’s writ­ing into us, and also on the Face­book post, and now clar­i­fy­ing the Face­book post.

Cameron  39:05

Yeah, yeah, yeah. So, Glenn has been ham­mer­ing us over prof­it tak­ing, tak­ing prof­it off the table, with real­ly good ideas. He’s doing a lot of work on it; he’s think­ing about it deeply.

Tony  39:20

Yeah, thanks, Glenn. Sor­ry, I’m mak­ing light of your com­ments. They’re appre­ci­at­ed.

Cameron  39:25

He’s sent a cou­ple of stud­ies that he’s read that give evi­dence of the ben­e­fit of tak­ing prof­its. “It’s one of many approach­es that can be suc­cess­ful. There are many ways to skin a cat as long as it’s your cat.” That’s what I tried telling Chris­sy the last time I skinned — skunned? Can you skun a cat? Is that the past par­tici­ple of “to skin”?

Tony  39:50

Nan­cy and skunk skin the cat.

Cameron  39:56

That was anoth­er big hit. “Yes, it’s an eff­ing skinned cat, every­thing’s a skinned cat.” “Also, Lin­coln have back test­ed their star stocks using four dif­fer­ent buy and sell sys­tems, includ­ing tak­ing prof­its. The results are close and avail­able from Vic­tor. I found that the best approach is the one you own psy­cho­log­i­cal­ly. I think the most usable test­ing is, one; Lin­coln using SD Max using Mov­ing Aver­age band sell points, and SD 30 TSR using 30% draw­down sells. The long-term per­for­mance is on growth and qual­i­ty stocks, and per­for­mances is in the mid-teen’s per­cent. Two; the Stock Radar paper which is a Mel­bourne based ser­vice who cov­ers approx­i­mate­ly one hun­dred and six­ty-five larg­er cap ASX stocks using a prof­it tak­ing approach, usu­al­ly Max 15% draw­down, only sell lines which are ratch­eted upwards with price. Richard Lee, who’s the guy who runs the ser­vice, has done exten­sive test­ing over approx­i­mate­ly nine­teen years and runs port­fo­lios based on these test­ed sig­nals. He might be a good guest for the pod­cast. There are stock Doc­tor mem­bers who com­bine star growth stocks with Richard’s buy and sell sig­nals. Also, I know of two QAV mem­bers using his sig­nals, and the QAV buy list as a pop­u­la­tion where there are many com­mon codes. The com­pa­nies are agnos­tic to any fac­tor, ie. val­ue growth income. My under­stand­ing is that one of Richard’s long-term port­fo­lios has a long term CAGR approx­i­mate­ly the same as Tony’s. Cheers, Glenn.”

Tony  41:22

Thank you, Glenn. Well, let’s get Richard on the pro­gramme and talk to him about it, if he’s doing well as well.

Cameron  41:27

Have you giv­en any more thought to prof­it tak­ing?

Tony  41:31

No. The only thought I’ve got we spoke about: I’m tri­alling Renko charts, because they seem to take the volatil­i­ty out. That’s my biggest prob­lem with short term prof­it tak­ing, is whether it’s a 15% draw­down or a 30% draw­down, you know, the stock can go back up again. I guess you can rebuy, but then you’re churn­ing a lot. But yeah, it’s not how I’ve done things his­tor­i­cal­ly, and I’m loathed to quick­ly change the sys­tem on one met­ric because that may affect the whole return to the sys­tem. There could be unin­tend­ed con­se­quences any­way. But yeah, I’m always hap­py to evolve. So, let’s get Richard on to tell us how he does it.

Cameron  42:06

One of my ques­tions for Richard would be: he runs mul­ti­ple port­fo­lios, but only one of them has the same per­for­mance as yours. Is that one just lucky? I mean, if he’s using the same method­ol­o­gy across mul­ti­ple port­fo­lios, you would expect them to all have rough­ly sim­i­lar per­for­mance over the long term, right? Aver­aged.

Tony  42:28

Yeah, I would­n’t know with­out ask­ing him. Maybe he has a num­ber of dif­fer­ent met­rics in the port­fo­lios that he’s test­ing. So, I don’t know. I guess the oth­er point I’d make about this whole issue, and I appre­ci­ate Glen­n’s research, and, you know, if there are peo­ple out there who do it dif­fer­ent­ly and have good results, or the same as me, or bet­ter, we’d love to hear about it, because that will short cir­cuit the research that I need to do. But I’m always hes­i­tant to change things quick­ly, because at the moment, and since about mid-late last year, the share mar­ket and our port­fo­lios have been in decline. So, it’s pos­si­ble that that decline has been exac­er­bat­ed by us not tak­ing prof­its when we should have. But, you know, that’s only one phase of the share mar­ket, and there’s been oth­er phas­es where we could have tak­en a prof­it quick­er which would have hurt us. So, when the mar­ket is going up, or as they say, “climb­ing the wall of wor­ry” where it’s two steps for­ward, one steps back, you don’t want to take prof­its in those sit­u­a­tions too quick­ly. So yeah, it’s been a per­sis­tent ques­tion for the last six months about why did­n’t we take prof­its ear­li­er? But I think it’s also dri­ven by the phase of the share mar­ket we’re in. Not to say we can improve it, but I’m not going to be too quick to change things with­out prop­er research.

Cameron  43:42

But, you know, peo­ple should feel free to… What did Glenn say? “The best approach is the one you own psy­cho­log­i­cal­ly.” You want to come up with your own process and do it with your own mon­ey, then…

Tony  43:54

Absolute­ly.

Cameron  43:55

Then may King Charles bless you.

Tony  43:56

Or point to peo­ple who’ve done it them­selves as well. I’m always hap­py to learn and evolve, but I’m slow to do it.

Cameron  44:02

Well, that is all we have ques­tions-wise this week. Short week, which is good, because I have to get to kung fu, but we have to talk after hours…

Cameron  58:56

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