Transcript QAV 211

Episode: QAV 211 Club

File Length: 01:05:03

Tony Kynaston [00:11]: Morning.


Cameron Reilly [00:12]: Good morning, TK.


Tony Kynaston [00:14]: How are you?


Cameron Reilly [00:15]: How are you feeling on this fine Monday morning, the 16th of March, 2020?


Tony Kynaston [00:21]: Well, it’s raining down here, but yeah, otherwise it’s good. No, I’m fine.


Cameron Reilly [00:26]: You’re good. You’re feeling healthy. Yes.


Tony Kynaston [00:30]: I’m self-isolating. No one’s allowed up to Level 38.


Cameron Reilly [00:33]: Oh, right. Does that include me?


Tony Kynaston [00:37]: Yeah. Well, it doesn’t. No, you can come. But what about the movie tomorrow night? We’re going to make people sit in alternate seats?


Cameron Reilly [00:45]: In alternate seats. What do you mean?


Tony Kynaston [00:47]: Yeah. Well, you know, keep a distance of six feet between people.


Cameron Reilly [00:52]: I don’t think the cinema is big enough for that. Not big enough to be on the banned list though, either. So yeah, because far as I know, our screenings are going ahead this week, but who the hell knows?


Tony Kynaston [01:08]: Yeah. That’s right. I’ve got a quote I want to play. Hang on. I’ll just pull my earphones out so you can hear it.


Cameron Reilly [01:14]: Okay.


Snippet [01:15]: Or you could accept the fact that this city is headed for a disaster of biblical proportion. What do you mean biblical? What he means is Old Testament, Mr. Mayor. Real wrath of God type stuff. Exactly. Fire and brimstone coming down from the sky. Rivers and seas boiling. Forty years of darkness, earthquakes, volcano. The dead rising from the grave. Human sacrifice. Dogs and cats living together. Mass hysteria. Enough! I get the point.


Cameron Reilly [01:40]: Sounds familiar. What’s that from?


Tony Kynaston [01:43]: Ghostbusters. Bill Murray.


Cameron Reilly [01:43]: Oh yeah. Good.

Tony Kynaston [01:45]: Dogs and cats living together.


Cameron Reilly [01:49]: Yeah.

Tony Kynaston [01:49]: I was just scanning the newspaper headlines and I thought of that. It reminded me of it. Oh man, I’ll read through what’s on the front cover or the front page of the AFR this morning. So this didn’t make the papers as recent. ASX to plunge. Central banks take War footing.


Cameron Reilly [02:11]: War footing.


Tony Kynaston [02:12]: War footing. Fed slashes interest rates to near zero. Returns to QE. What else have we got? Victorian state of emergency declared suburbs could be quarantined. Airlines will go bust because of quarantine rules says the Flight Center CEO. Dogs and cats living together.


Cameron Reilly [02:33]: Well, yes overnight, the Fed did drop their rates to near zero is what I’ve seen reported. I don’t know exactly what near zero means. Do you know the details on what the Fed did?


Tony Kynaston [02:48]: All I heard was they cut interest rates by 1%. So they’re going to be at either 0.5 or 0.25, I think now.


Cameron Reilly [02:54]: Right. Good time to borrow money.

Tony Kynaston [02:58]: Yeah. It’s a good time to borrow money. I just don’t know if I’d invest in the share market quite yet.

Cameron Reilly [03:02]: No.

Tony Kynaston [03:03]: But certainly good time to get your ducks in a row in terms of having access to more cash. Yeah.


Cameron Reilly [03:08]: Yeah. Well I mean, we recorded late last week because of my travel schedule and your travel schedule. Here we are just a few business days later recording again, but I think people listening to this probably will want fairly regular updates from us. Even though my take on this is it’s just going to be craziness for a while. So Friday things were dropping dramatically. I saw a couple of the stocks in our portfolio breach. I thought their sell line, the three-point trend line, emailed you, you didn’t reply. I figured that meant you were probably on a golf course. So I went ahead and sold a couple of stocks.


Tony Kynaston [03:51]: I was.


Cameron Reilly [03:51]: In our portfolio. Thought so. We do some mining of Rand Mining and Infigen Energy. You did get back to me later in the day and said, “Oh yeah, I agree with Rand.” I think you thought it was a bit jumped the gun a bit on Medussa and Infigen. But then of course I did this by the middle of the day. Then the market picked up again on Friday afternoon. Shut up a bit. So it turns out I did jump the gun. You were right. What do you think’s going to happen today? Are you even guessing or are you just going to wait and see?


Tony Kynaston [04:26]: Like, if I guess, it would just be a guess.


Cameron Reilly [04:29]: Yeah.

Tony Kynaston [04:29]: I’m going to wait and see. Yeah. I don’t think you made a mistake on Friday. It was a call and you made it. And I mean the market’s trending lower. The funny thing about this, this time round is the fact that central banks are really trigger happy. They try and support the share market by dropping rates and that’s different to the past events in the market like this. When central banks didn’t sort of have that kind of view, they would wait until the recession was either upon us or nearly upon us, and then try and stimulate the economy to shorten the recession or keep out of it. So yeah, it’s different. Now it’s been like a general who’s shooting all their ammunition before they get to the battlefield, as far as I can see. And that’s what’s driving markets at the moment. I think if the central banks weren’t doing that, the markets will be a lot lower.


Cameron Reilly [05:22]: Right.


Tony Kynaston [05:23]: Yeah. And just to put things in perspective too, we haven’t seen the worst of things yet. That’s my feeling.


Cameron Reilly [05:31]: Yeah.


Tony Kynaston [05:32]: Yeah. During all this, I mean, we’re talking about recessions yet, but the recession hasn’t started. When the recession does start and I’m pretty sure it will start, we’re going to see bankruptcies and all sorts of other problems hit the economy and therefore the share market with, you know the central banks don’t have much lower to go. Although they’re talking about quantitative easing, so they’re going to print money, but I think that has long-term implications anyway. So I’m not sure if that’s going to help in the long-term.


Cameron Reilly [06:03]: My mother Jan, who, you know well, traveled Europe with my mum. She posted an article on Facebook yesterday that she re-posted from somewhere saying that the interest rates in Australia are going to go into negative territory and at that point you will have to pay the banks to hold your money for you. That’s how negative interest rates work according to this article that my mother posted.


Tony Kynaston [06:29]: Yeah. Well, I think if you put your savings in the bank now, it’s pretty close to zero in terms of what you’ll get from giving them your money. Yeah, so she’s probably right. I don’t know if it will get below. I don’t know if the banks will start charging people to put their deposits with them. It might just get to zero and stay there. Typically, that negative interest rate applies to bonds rather than to savings accounts. But who knows. Dogs and cats living together who knows. And, you know, in terms of quantitative easing, maybe the central bank should be printing toilet paper rather than money. [Inaudible 00:07:08] be more useful. But the thing that we haven’t seen yet and that’s the point I really want to make is we haven’t seen the credit crunch yet.

It always, all these kinds of downturns in the economy, whether it’s a recession or whatever, we see a credit crunch. And we haven’t seen that yet, and that could be months away. So that’s when companies don’t have the cash flow to service their debt because sales have dropped. Particularly say like airlines at the moment, but also builders are always susceptible to this. Retailers are going to find it particularly tough, especially if they’re trying to import apparel or footwear from overseas, because the dollars hitting new lows. Every time the US Fed drops interest rates over there, our dollar drops as well in lockstep, which is just a fact of life that money flows towards the US in bad times. So our goal is now at 61.75. So as the dollar drops, the retailers who are importing things and the builders who are importing things, can’t check their prices up fast enough to cover the loss of margin and so they start going to the wall.

And then the banks who get, they get very nervous about who they should be lending to and so credit starts to dry up. And then the banking system starts to miss its gears and they start to lock up because they don’t know. Because the banks are so interconnected around the world now and they often lay off their loans to other banks, they just don’t know who’s going to go broke and who’s not. So they stopped doing that. So you see this whole meshing of the gears in the financial market, and we haven’t seen any of that yet, but it’s coming and it always does. And that’s when typically, the share market gets down to its lows.


Cameron Reilly [08:52]: Right. So you think, you know, we’re nowhere even close to wanting to buy back in.


Tony Kynaston [09:01]: Oh, look, I’m always looking and I could be wrong and things could turn round. But yeah, I’m not close, I think, you know. I want to see a couple of months of uptrend before I start to buy in. And…


Cameron Reilly [09:11]: A couple of months.


Tony Kynaston [09:12]: Yeah. Well, at least six weeks. I mean, we’ve got to see a trend, right? Like if I look at some of the graphs on the shares today, they’re saying that they’re up 10% based on the Friday close.


Cameron Reilly [09:23]: Yeah.


Tony Kynaston [09:24]: But if you look at their five-year monthly share graph, they’re still nosediving.


Cameron Reilly [09:29]: Right.


Tony Kynaston [09:30]: So, you know, we can get sucked into an early rally here and it just, you know, tears the face off you, really because it keeps going down.


Cameron Reilly [09:39]: What? Tears the face off you? It’s like a Nicholas Cage, John Travolta scenario here.


Tony Kynaston [09:45]: The face tearing dead cat bounce. Yeah. But I could be wrong. I’m happy to be wrong and the share market could rally and we could see it rally for the next six weeks and then I’ll be a buyer. But at the moment I’m very cautious.


Cameron Reilly [09:59]: Yeah.


Tony Kynaston [10:00]: Yeah.

Cameron Reilly [10:00]: Yeah. So I was getting emails from our subscribers last week saying, is it now? Should we be buying now? And I said, look, I think Tony’s going to wait until he sees a turn around, sustained turn around.

Tony Kynaston [10:17]: Correct.


Cameron Reilly [10:19]: Okay.

Tony Kynaston [10:19]: Yeah. And I haven’t seen that. I’m not seeing any indications of that. Albeit, we keep seeing the Fed and the RBA in Australia lower rates which gives the market some kind of rally for a while but then it drops again.

Cameron Reilly [10:32]: Yeah. Because the fundamentals are, I mean, our economy wasn’t doing great. We were talking about this a year ago when we had Alan Kohler on and Montgomery and those guys, don’t know, eight months a year, whatever it was, they were saying then that the economy wasn’t great, the Australian economy with its fundamentals. Then we had the fires. Now we’ve had this. It’s just been the nail in the coffin, I think.


Tony Kynaston [11:01]: Yeah. I mean, that’s right. The economy is quite fragile. I mean, Roger laid it out for us, didn’t he? He said, share markets will have a price. The economy is fragile. Look for a reduction in building starts, which has happened. And look for a black Swan event to nosedive the market and that’s happened too. So he was spot on.


Cameron Reilly [11:20]: Okay.


Tony Kynaston [11:20]: And I think I’ve just read a couple of things from him at the moment. He’s got he’s cash power, and he’s looking around for things to buy into. But I’m not noticing him saying he’s buying anything at the moment.


Cameron Reilly [11:29]: Yeah. I’ve posted a couple of videos. Like he’s doing sort of weekly video updates on YouTube that I’ve been sending out to our QAV Club subscribers in the weekly newsletter because I like hearing where he’s at and what he’s thinking.


Tony Kynaston [11:44]: Yeah. No, he’s good. And it’s good to turn to those guys at this kind of time to just touch base with what they’re doing and get their take on things because let’s face it. I mean, we’ve been through recessions, we’ve been through downturns in the markets, but we’ve never been through this kind of event where countries are in lockdown. And you know airlines are reducing, Air New Zealand said overnight, they’re reducing their international capacity by 85%. This kind of constriction of the economy has never occurred in this way before. So, you know, we’re in unchartered territories, but typically when we’re in uncharted territories the market just closes the shop until it’s sure of what’s going to happen.

Cameron Reilly [12:31]: But from a value investor’s perspective we’re just going to wait it out.

Tony Kynaston [12:40]: Yeah. I mean, things look cheap. Don’t get me wrong. I mean Qantas is close to three bucks now, when it was $7.30 when we were holding it. So yeah. I mean it’s tempting to buy back in at this stage, but and certainly if you’re a dollar cost average investor, yeah keep putting a bid into the market each month. But you know, Qantas at three bucks might prove to be a high point. It could get down to $1.50 going forward.


Cameron Reilly [13:05]: So when it does turn around and it will, at some point, we’ll get through this, what would you expect to see happen from that point onwards like rapid growth or just back to, you know, slow, incremental 10% year on year growth on average across the market?


Tony Kynaston [13:26]: No, I expect to see rapid growth. But I also expect to see some capital raises going on too. I think that’s got to come first. If this follows an almost sort of, you know, playing out that these kinds of events have, even though this time it’s in a different form, what’s going to happen is, well, first of all, the companies who are on cash burn, so your dotcom stocks, they’ve got six months to live, right? So they’re going to have to go back to the market because none of the banks are going to lend them money. They’re going to have to go back to the market and say, “Okay, we’re raising more capital.” So you’ll see that first off. Then you’ll see other companies who may just be exposed to the particular sectors that are hurting. So maybe Qantas goes to the market in six months and says, look, you know, we’re in good shape but we want to shore up our balance sheet. We don’t want to take any more debt on. So let’s issue some more shares and we’ll see that from other companies.

Depending on how severe the credit crunch gets with all this and you might see it from a lot of companies, this is what happened after the GFC, most companies tried to get off the, you know, wean themselves off debt and issue some more shares to raise capital instead. And that’s when Stephen Mayne started he’s, you know, world’s biggest little share fund. And he was buying little stakes in lots of companies and then waiting for them to issue capital at huge discounts to their share price and he was investing in that. And that’s what happened after the GFC. It may happen this time. I get the feeling it will because I think a cash flow is going to get really tight in the economy in the next six months. And so we’ll see capital raisings. And I think after all that, then we’ll see a rapid increase in share prices. So I wouldn’t be surprised if we’re sitting here in six months still, you know, sitting on our hands. As someone [inaudible 00:15:21] on one of the uploads yesterday, wash our hands first, then sit on them.


Cameron Reilly [15:33]: Dear me.


Tony Kynaston [15:35]: Yeah.

Cameron Reilly [15:35]: Well, let’s talk about the tech stocks. Explain that to me again. So you were saying, you think they’re going to burn through their cash and banks aren’t going to lend them money.

Tony Kynaston [15:46]: Correct. Yeah. I mean, they’re basically going to be very careful about who they lend money to and the last people they want to lend money to at the moment, it’s going to be people with high cash burns and low operating costs, although, sorry, low operating cash flow coming in. And that’s the tech stock area. So I mean, they do have a business plan, any way of raising capital, you know, all the time through share placements. But that’s just kind of accelerate because I think in this kind of fragile market, I mean, you know, we pick on AfterPay a lot and I don’t know if this is particularly the case with Afterpay, but here’s a scenario. A retail goes into meltdown because the dollar drops and they can’t afford to keep importing stuff from overseas and they can’t jack the price up enough to cover and recover their margin from the dropping dollar. So retail goes to the wall.

Afterpay is very linked into retail. It starts to find that their sales are dropping and they projected they have growing cash flows and they start to recede and they don’t have the cash in the bank to cover their cash burn because they’re not making a profit. So every month they keep the doors open is eating into their bank balance. And so at some point they go to the market and say, “Look, we think it will ride this out, but it might take a year. Let’s raise more capital, issue more shares and put more money in the bank to get us through this period.” So that’s a scenario. That’s not based on any deep knowledge of Afterpay, but it’s based on, you know, running retail through recessions and through low dollar cost periods when it’s really hard. You know, I was running My Direct when the dollar got to 55 cents and you know, which means I’m paying $2 for clothing and then trying to sell it for a dollar or try and sell it for two. But that puts me out of the market in terms of being comparative with other people in the market. So it’s really tough.


Cameron Reilly [17:45]: Yeah. And then I guess in terms of the Afterpay type tech stocks scenarios, their future depends largely on whether or not their capital raising gets supported by the market.


Tony Kynaston [17:56]: Yeah. That’s exactly right. So the first thing you have to expect that it’s going to be deeply discounted. So, you know, oftentimes a capital raising might be 10% below the current share price as a way of enticing people into the market. These could be at 50% discounts or more.

Cameron Reilly [18:13]: Right.


Tony Kynaston [18:14]: Yeah. So expect to be diluted if you’re in those companies and they expect for the share price to go south to meet the price of the capital raisings.

Cameron Reilly [18:23]: Interesting times, Tony.

Tony Kynaston [18:26]: Yeah. And look, you know, please don’t take that as any sort of financial advice. It’s just a guess on my behalf. But yeah, we’re kind of going through the scenario we were warning about last year with these tech stocks. When things get bad, they don’t get supported.


Cameron Reilly [18:41]: Yeah. I mean, just looking at the chart for Afterpay, I think they closed on Friday around about 23.24 from a high of nearly $40 a month ago. Yeah. So they’re sort of back to where they were about August last year. Times have passed.


Tony Kynaston [19:03]: Yeah and don’t forget. Like, if I’m making these kinds of guesses in the market, the fund managers and institutional investors are also making these kinds of guess.

 Cameron Reilly [19:12]: Yeah.


Tony Kynaston [19:12]: Guesses as well. And so they’re already factoring in the capital raisings that need to come and when, and how much they’ll be discounted by. And they’re probably selling the stock based on that.


Cameron Reilly [19:21]: I wonder how many of the people that were in Afterpay in February timed the get out correctly.


Tony Kynaston [19:32]: Yeah. Well, good luck if they did. Yeah, I mean, if they were making guesses, like I am back then and then great, good luck to them. But I wouldn’t be exposed to these kinds of companies in the next six to 12 months.


Cameron Reilly [19:49]: Yeah. Now, so their stock has dropped by, as I said, nearly 40% in a month. Some of our stocks have dropped as well. You know, look at Ramelius Resources, it’s down 32% from when we bought it. Most of the stocks in our portfolio though are down somewhere between four and sort of 25%. We’ve got a couple that are still up. Fortescue Metals, one. Actually Fortescue Metals is still up.


Tony Kynaston [20:26]: It is. Qantas is probably the case to point to in terms of drops that’s dropped a lot.


Cameron Reilly [20:32]: Yeah.


Tony Kynaston [20:33]: Yeah. So I mean, that’s our Afterpay, I guess. And probably for the same reason that the fund managers are also or institutional investors are also going, you know, if things get really bad and travel shuts down, then Qantas is going to have to come to market with a capital raising as well.

Cameron Reilly [20:49]: Yeah.


Tony Kynaston [20:50]: Yeah.


Cameron Reilly [20:52]: Okay. So oh, I’ve got a question here from, we didn’t have a lot of questions since Thursday, over the weekend, so I guess it’s not surprising. We did have a question from a new Club subscriber, Adam. He says, “Hi, Cameron, love your show. Great work you and Tony are doing. Looking at your checklist, I gather that Tony is looking for stable companies, which pay dividends as this is Tony’s direct means of earnings. I’m looking for stocks that don’t necessarily pay dividends but increase their share price. The reason being is I already have a full-time job and I would much rather see stock price appreciation rather than dividends as it is tax-wise in my situation.” Not sure what that means. “What ratios/advice would Tony have for investors like me to include in our checklist when looking for a company. Cheers, Adam.” And now I replied to Adam. I said, “How many episodes have you listened to Adam?” I don’t think based on what Tony said before that he’s using dividends as his income.


Tony Kynaston [21:54]: No, correct. So first of all, Adam, you know, feel quite free to take the dividend line out of your checklist. It won’t make a big difference. But the reason the dividend line is in there is two-fold. One, because dividend paying companies are more stable. And if a company is paying a dividend, it’s a vote of confidence from the board that they are going to keep making profits going forward so they can serve as a dividend. Because the last thing companies want to do is to cut their dividends. That just makes them look very flaky in the market and lowers their investability in the eyes of investors. So that’s the first reason. But the other reason is I think I’ve spoken of before, I do have some gearing and that is serviced by dividends. But certainly I’m kind of agnostic as to whether I’m buying a share. When I’m buying a share as to whether it pays a dividend or not.


Cameron Reilly [22:45]: Yeah.


Tony Kynaston [22:46]: It gets a bump in our checklist, but it’s not in any way sort of going to drive that purchase decision.


Cameron Reilly [22:52]: Yeah. Now I know you’ve said in the past that because your wife, Jenny has been working you, I think you lived off her income. She’s recently left work, resigned. What are you going to do? Well, you know, what’s your plans for income, if you don’t mind revealing that, now that your wife doesn’t have a job?


Tony Kynaston [23:15]: Yeah. Good question. Given the share market’s tanked. It’s like both sides have closed down. Our podcasting, Cam, that’s our plan. And making documentaries on early Christianity.

Cameron Reilly [23:29]: Very profitable enterprises, both of those things, Tony as you know. What else? Got anything else?


Tony Kynaston [23:37]: No, send the wife back out to work, I think.


Cameron Reilly [23:39]: Right, right.

Tony Kynaston [23:40]: No. Just kidding. No, I think if Jen said tomorrow, she doesn’t want to go back to work. I’ll just restructure things so I would live off the dividend income. And my plan would be to pay down our debt. And our gearing is probably in the order of 20% of our value, of our net worth. So I may actually increase that if I think the market’s compelling value at some stage in the future. But no, if we go into, I’ll call it retirement mode, then we pay off the debt and yeah, then I do have a preference for dividend paying stocks and we’ll live off the dividend interest.


Cameron Reilly [24:19]: Right.


Tony Kynaston [24:20]: But like, I think if I go through our checklist, there is enough stocks in the checklist that pay dividends to make that possible while still getting exposure to growth.

Cameron Reilly [24:31]: Right.

Tony Kynaston [24:32]: Yeah.


Cameron Reilly [24:33]: Okay.


Tony Kynaston [24:34]: It probably means that I don’t keep buying the sort of small mining stocks that often don’t pay dividends.


Cameron Reilly [24:39]: Right. Yeah. So you would filter your portfolio based around dividends at that point.


Tony Kynaston [24:44]: Yeah.

Cameron Reilly [24:44]: Right.

Tony Kynaston [24:45]: Yeah.

Cameron Reilly [24:49]: Berkshire Hathaway have announced that their annual shareholders meeting is going to be virtual this year. Virtual only.


Tony Kynaston [24:58]: I wondered if that was going to happen.


Cameron Reilly [25:00]: Yeah. Warren, Charlie, and a few others will be there and a few people maybe to ask questions. But yeah, here we go, Warren said, “We won’t ask the [inaudible 00:24:14] employees and we won’t expose Omaha to the possibility of becoming a hotspot in the current pandemic. Therefore, we will limit attendance to me, possibly Charlie and several Berkshire employees who will deliver proxy votes.” I imagine that Warren and Charlie, both being around about 150 years old.


Tony Kynaston [25:33]: Very much mortality [inaudible 00:25:37], aren’t they?


Cameron Reilly [25:39]: Yeah. They’re in the danger zone.


Tony Kynaston [25:42]: Like, I like how he said he wouldn’t make Omaha a hotspot. What he didn’t say was, I’ve got a 10 to 15% chance of dying if we hold the AGM. [Inaudible 00:25:51] I’m not going to expose myself to it.


Cameron Reilly [25:54]: Well, I think based on his letter that I read out a week or two ago, he’s already expecting that he doesn’t have long. So…


Tony Kynaston [26:03]: Yeah.


Cameron Reilly [26:04]: And I think he would be that surprised if his days are numbered. Okay. Well, that’s about all I think we have in terms of things to talk about this week, Tony, unless you’ve got anything else?


Tony Kynaston [26:18]: Just one more thing. There was, I think I sent you a paper on the weekend, the treasury modeling of a pandemic, which was done 10 years ago and they modeled a SARS type virus, I think. And they modeled what the impact on the economy would be of a, I think it was a 0.2% mortality rate and they came up with a 5% hit to gross domestic product, GDP. So we’re expecting a three and a half percent hit or mortality rate based on the rest of the world. Unless we have something different happening here. So that’s going to be a much bigger hit to GDP than 5%. So again, that’s telling me that the worst is yet to come.


Cameron Reilly [27:05]: Right. Well, one other thing, speaking of the worst, Alan Kohler’s event in Sydney tomorrow has been cancelled that you and I were going to go to.


Tony Kynaston [27:14]: Yeah.


Cameron Reilly [27:15]: So that’s a shame. I really was looking; I think the event was called This Time It’s Different. The This Time It’s Different Event by Alan Kohler of Invest SMART. I was looking forward to seeing what he had to say about how different it is this time.


Tony Kynaston [27:30]: Well, I think he’s being spot on and he’s been talking about the demand side recession, also he’d been calling it the supply side and demand side. I think I spoke about that last week, but that’s something we haven’t seen since perhaps the oil shock in the seventies. When you just can’t buy things, even if you want to. And that’s going to have a very different effect on the economy than we’ve experienced for a while.

Snippet [27:51]: It is different every time. It’s always different, Tony. It’s never the same.


Cameron Reilly [27:58]: I never get tired of that. Every time I want to make myself laugh. I just play Alan Kohler.


Tony Kynaston [28:07]: Well, I imagine he’d be in the danger zone too, I suppose. He’s what? He’s late sixties. Yeah.


Cameron Reilly [28:12]: Yeah. I mean, I don’t want to just be taking the piece out of Alan, but, you know, for people who are new and may not have heard that episode when we had Alan on, you know the argument was, we were sort of talking about the fundamentals of value investing and he was talking about a couple of tech stocks. And one tech stock, I think that he particularly liked one of the Afterpay type, but there was the church one, whatever that one was.


Tony Kynaston [28:43]: Oh yeah. Pushpay, I think it’s called.


Cameron Reilly [28:45]: Pushpay, wonder how they’re doing. And you know, you were sort of talking about this fundamental idea that Buffett and Buffett’s disciples have, which is that over the decades, one thing that has proven true is that markets go in cycles and the businesses that tend to perform best decade in, decade out are those that have solid fundamentals. And in terms of stocks, if you can buy those stocks with solid fundamentals, good performance year in, year out, good management, and you can buy them at a discount to what you believe their intrinsic value is and you do that in a disciplined way, over time you will tend to outperform the market. As opposed to buying the hottest, sexiest tech stocks, and to time your entry and exit points effectively to ride the cycles without dying, without you know, doing a meatloaf and like bat out of hell and your bikes spins out. And I’m down at the bottom of the pin and the blazing sun. And you will say, you know, I’m reading all this stuff people are saying it’s kind of different this time because interest rates are low, et cetera, et cetera. And he was trying to make the argument well, this time it is different. But well…

Tony Kynaston [30:18]: Not really.


Cameron Reilly [30:18]: Something came along and proved him wrong. So Pushpay is trying to get, well, it was on Friday, I think. No, today, $2.88, down from $4.62 a month ago. It’s back to where it was sort of November. So that’s only lost four or five months so far.


Tony Kynaston [30:42]: Yeah. Well, it’s also back to where it was in 2017. So it’s…


Cameron Reilly [30:47]: [Inaudible00:30:47] get a bigger chart. Okay. Yeah.


Tony Kynaston [30:50]: It’s breached its three-point sell line. Yeah.

Cameron Reilly [30:52]: Yeah.


Tony Kynaston [30:54]: Well, just think about it too. If the churches have more than five, I guess they don’t have a 500 person ban in the States, but people are still going to want to stay home rather than going to church I would have thought.


Cameron Reilly [31:04]: Oh, I’m sure they won’t stop churches from collecting money though, Tony. Well, that’s the whole point of Pushpay is you don’t need to go to church and put your $2 coin in the plate anymore. You know Jesus wants your money whether you’re in church or at home.


Tony Kynaston [31:21]: Right. You can do it virtually. Well, what if they lose their job though. Jesus still wants their money, I guess.


Cameron Reilly [31:27]: Yeah. I know that’s how it works with the Mormons. You know Chrissy’s mom, like even if you’re unemployed, you still need to tithe.


Tony Kynaston [31:34]: Wow.

Cameron Reilly [31:35]: Or you lose your secret handshake.


Tony Kynaston [31:39] Oh really?


Cameron Reilly [31:40]: Oh yeah.

Tony Kynaston [31:41]: So okay. So tithing gives you some sort of status in the community, does it?


Cameron Reilly [31:45]: Oh yeah. You have to be righteous for a temple recommend. Anyway, let’s not get into that. That’s going to be the subject of our next documentary, Tony, the Mormons.


Tony Kynaston [31:54]: Oh okay.


Cameron Reilly [31:56]: Oh, it’s a great story. Such a great. Have you seen the Book of Mormon?

Tony Kynaston [32:00]: No.

Cameron Reilly [32:01]: The musical.


Tony Kynaston [32:02]: No.

Cameron Reilly [32:03]: What?

Tony Kynaston [32:03]: And I can’t see it now because Broadway shut down.

Cameron Reilly [32:07]: It’s been touring Australia for the last year.


Tony Kynaston [32:09]: I know I just didn’t get a chance to see it.


Cameron Reilly [32:10]: You haven’t been to see it.


Tony Kynaston [32:11]: No.

Cameron Reilly [32:12]: Man, you missed out. It is the funniest thing. Yeah, it’s so great. But it’s particularly great like if you’ve spent, like I have spent your life around Mormons and you’ve spent a lot of time in Utah because they absolutely nail the whole Mormon and the mindset is terrific. But yeah, they just scratched the surface. I really want to do it. I really want to do a documentary about the Mormons. It’s a lot of fun. Anyway, so what else do we have, Tony? So we are going to be in Sydney tomorrow and going to be interviewing Mark Jones. Mark is an old friend of mine, former technology editor for the Financial Review. These days he runs a marketing consulting business in Sydney, but he’s got a book that’s just come out called Beliefonomics and we’re going to interview him about the book.

Tony Kynaston [33:12]: Is the subtitle This Time It’s Different?


Cameron Reilly [33:15]: Well, it’s interesting actually, because it’s a little bit about, I think it maps to what we’ve talked about before in terms of telling a good story. He’s a believer. I haven’t read the book yet, but I believe it’s about how to get people to believe in your story. He, you know, he advises CEOs or people like that, about how to tell a good yarn to the markets. So I think it’s going to be fun. We’ll be able to see what he’s teaching CEOs in terms of how to put a good spin on a story. I want to see what he’s telling his clients now.


Tony Kynaston [33:50]: Yeah right.


Cameron Reilly [33:51]: What’s the story?


Tony Kynaston [33:53]: And as we know, from the QAV Checklist, we don’t listen to the spin.

Cameron Reilly [33:58]: Yeah.


Tony Kynaston [33:59]: Yeah. If you want to buy a story go to a bookshop.


Cameron Reilly [34:02]: Yeah. Well and buy a copy of Mark’s book and my book while you’re there, Psychopath Epidemic. I do like, I should have called it The Psychopath Pandemic. Imagine all of the Amazon sales I’d be racking up now, if I’d call it a pandemic.


Tony Kynaston [34:21]: You’ll be number one on Google. Wouldn’t you?


Cameron Reilly [34:23]: I would be. God damn it. I wish just call this an epidemic. I mean, are you personally worried about the whole thing or are you like me? Because I’m not worried at all.


Tony Kynaston [34:35]: I’m not worried, but I think we’ll catch it. You know I’m getting up into the age bracket now where it will have some effect, but probably not. I’d probably not die from it. But yeah.


Cameron Reilly [34:47]: Yeah. I mean and you might miss a couple of games of golf.


Tony Kynaston [34:51]: Yeah. And be quarantined for a couple of weeks.

Cameron Reilly [34:55]: Yeah. Which is really not that much different from your normal life, right? You don’t go out.


Tony Kynaston [35:03]: Well, we normally do. We normally go out every night.


Cameron Reilly [35:06]: Yeah to eat. But you’ll just Uber Eats your food.


Tony Kynaston [35:08]: Yeah.

Cameron Reilly [35:09]: Or you just buy the restaurant that you normally dine at and just tell the chefs…


Tony Kynaston [35:14]: [Inaudible 00:35:14] chef up.


Cameron Reilly [35:15]: Yeah. You get a chef up to your house. Yeah. Look, I mean, my whole take on the whole thing is it is a massive overreaction, I think. I mean don’t come to me for medical advice, but I just figure, look, I’m going to get it. Most of us are probably going to get it. Most of us will be sick for a couple of days or maybe even not. You can be asymptomatic and we’ll just get on with life. Stay away from old people. If I was the Prime Minister, I’ll be saying, listen, just go about life. Don’t panic. If you get sick, stay home. If you’re, stay away from the elderly for a while. If you’re elderly, self-isolate. You know don’t expose yourself unnecessarily. Everyone just get on with it. Just like a bad flu season.

Tony Kynaston [35:54]: Well, I think there’s two schools of thought. There’s that and then there’s other one, which says that if it infects 40%, maybe 60% of the population, which is some of the numbers being thrown around with the three and a half percent death rate, then you’re talking about three or 400,000 people dying in Australia.


Cameron Reilly [36:12]: But they’re mostly the elderly. So what I’m saying is, no, I’m saying…


Tony Kynaston [36:18]: I get it. The non-producers. We’ll save some money in the pension. That’s great. No, you’re right.


Cameron Reilly [36:23]: It’s called a purge, Tony. No. I’m saying…

Tony Kynaston [36:27]: We’re calling the herd.


Cameron Reilly [36:28]: Keep away from the elderly, isolate the elderly. Yes. Isolate the elderly. They’re the ones most at risk. Everyone under the age of 50 or 55 or 60, just get on with it. Just get on with your life. Don’t worry about it. But anyway.

Tony Kynaston [36:45]: I think it’s somewhere in between.

Cameron Reilly [36:47]: And I think the 3% number is probably going to prove to be a much higher than it really is.


Tony Kynaston [36:53]: Really? Why you’d say that? What’s your evidence for that?


Cameron Reilly [36:55]: Well, because we don’t have a real handle on how many people are infected yet. If it’s the fatality rate of 3%, you know, two to 3% is based on confirmed cases, fatality rate of confirmed cases. There may be 10 times as many people or a hundred times as many people who have caught it, but we haven’t been tested or asymptomatic. So we don’t know that they have it. I can have it right now and don’t know about it. So we could find out that actually a billion people got it. But we, and the fatality rate was only 0.02%. We didn’t really know that at the time. We won’t know the full numbers for probably a year or two.


Tony Kynaston [37:37]: Yeah, you could be right.


Cameron Reilly [37:39]: It could be more like swine flu. Do you know how many people got swine flu 10 years ago?


Tony Kynaston [37:44]: No.


Cameron Reilly [37:45]: It was somewhere between 700 million and 1.4 billion were infected with H1N1 around the world.


Tony Kynaston [37:51]: Right.


Cameron Reilly [37:52]: And I don’t remember this kind of panic over swine flu. Did the markets, did everyone close? Did countries shut down over the swine flu in 2009?


Tony Kynaston [38:01]: No.


Cameron Reilly [38:01]: One of the reasons was, Chrissy said, why didn’t the share market collapse when we had swine flu. I said, well, it had already collapsed the year before. It was in the mirror in the middle of the GFC. So the collapsing, there was nowhere left to go. It had already bottomed out. But we didn’t shut down schools and airports and sporting events and all of that kind of stuff, as I recall.


Tony Kynaston [38:22]: No. I remember during SARS the share market went into retreat. But I think SARS was a different sort of virus to this one. It wasn’t spreading as quickly.

Cameron Reilly [38:36]: No, SARS was lethal, but fairly well contained.


Tony Kynaston [38:40]: Yeah, that’s right.


Cameron Reilly [38:41]: But H1N1 was massive.


Tony Kynaston [38:46]: Yeah. Look, you could be right. I don’t know. If you’re right and it’s all just panic, then the share market will rebound quickly. [Inaudible 00:38:52] to work those things out, doesn’t it?

Cameron Reilly [38:56]: Well, yeah, but the panic is real and the effect on the economies is real. Governments are shutting down. All of these things are going to have long-term effects and to the bottom line of businesses. Right?


Tony Kynaston [39:10]: Yeah. Absolutely.


Cameron Reilly [39:11]: And economies in general, governments are spending money that they don’t have.


Tony Kynaston [39:16]: Yeah.

Cameron Reilly [39:16]: Couldn’t afford to spend more money on you know, preventing fires, but apparently we can spend a ton of money on stopping old white people from dying. So you know.


Tony Kynaston [39:26]: And look and expect them to budget to the Treasury. They go look, “Really sorry. We really had to spend some money on this particular pandemic, but we hate to do this, but we’re raising your taxes to pay for it.”

Cameron Reilly [39:39]: Yeah.


Tony Kynaston [39:44]: Temporary levy. Temporary levy on your top marginal rate, which I think has been in place now for about 12 years.


Cameron Reilly [39:50]: Right.


Tony Kynaston [39:51]: Temporary levy.

Cameron Reilly [39:52]: Yeah. So we’ll put up again, we’re going to put up your taxes.


Tony Kynaston [39:56]: Yeah. [Crosstalk 00:39:59] analyze a company today?


Cameron Reilly [40:01]: Sure. Yeah. For the hell of it, let’s do it.


Tony Kynaston [40:05]: Yeah. Well, I was going through our watch list and most things are in retreat. As you said before for Fortescue, was it? But we’ve done that one before, even though it’s new results. I was going to suggest MacMahon Holdings, MAH. MacMahon Holdings.


Cameron Reilly [40:23]: MacMahon.

Tony Kynaston [40:25]: So I mean share price is also in decline. Hasn’t really breached its three-point trend line yet. It may. So I’m not recommending that people go out and buy this stock, but it’s one that we can analyze now.


Cameron Reilly [40:35]: Okay. It’s good for people to get practice and me to keep getting practice on how the spreadsheet works. MacMahon, MAC like my family, come from MacMahon’s.


Tony Kynaston [40:50]: Oh, really?


Cameron Reilly [40:52]: Hmm, good Scottish MacMahon’s. MacMahon Holdings.


Tony Kynaston [40:57]: So they’re a mining contractor?

Cameron Reilly [40:59]: Right.

Tony Kynaston [41:01]: So they provide services to the mining sector. Stock Doctor is also saying through Southeast Asia as well, Australia and Southeast Asia. Surface, underground mining, civil design and construction equipment repair and maintenance consulting, design, and fabrication of mining infrastructure and mine site and maintenance and rehabilitation services.

Cameron Reilly [41:26]: All right, well, let’s have a look at the spreadsheets. So we’re doing this today, the 16th of March. Their net operating cash flow December 19, 153.645 million.


Tony Kynaston [41:49]: Correct.


Cameron Reilly [41:51]: Shares on issue.


Tony Kynaston [41:54]: So, sorry, just before we leave that, I mean, this is another example of why I’m waiting. So 153 million of operating cash flow is probably its largest ever. So things have been good in the mining sector recently and they’re still not too bad. I mean, Fortescue Metal is showing that. Some of the gold miners are showing that. But whether the cash flow drops in the next six months waits to be seen.


Cameron Reilly [42:17]: Yeah. Right. Shares on issue. Do you ever show where I find this in Stock Doctor, always takes me a while to dig it up? Where do I find that?


Tony Kynaston [42:30]: So first tab, Financial Metrics and down the bottom of the page under Liquidity.


Cameron Reilly [42:38]: First tab, Financial Metrics.

Tony Kynaston [42:41]: So if you’re at the cash flow tab, that’s the right most tab. The left most tab is Financial Metrics.

Cameron Reilly [42:47]: In financial statements, right?


Tony Kynaston [42:49]: Yeah. Sorry.


Cameron Reilly [42:50]: Fully paid ord shares. Yeah.


Tony Kynaston [42:53]: Yeah.


Cameron Reilly [42:54]: 2.155 billion shares, fully paid ordinary shares is in the millions.


Tony Kynaston [42:59]: Yes, that’s right.

Cameron Reilly [43:01]: So it’s 7 cents cash per share. Share price today at the moment is 21 cents.


Tony Kynaston [43:15]: Share price is down 6.7% today too. Market’s only been open for 45 minutes. Let’s catch the falling knife though.


Cameron Reilly [43:31]: Well, as you said, we wouldn’t buy this right now, but it’s worth having a look at.


Tony Kynaston [43:35]: Yeah. It’s on our watch list. Yeah.


Cameron Reilly [43:37]: Yeah. So share price is 21 cents. Price to cash ratio as of this moment in time, 2.95.


Tony Kynaston [43:46]: Yeah. 2.95. Yeah.

Cameron Reilly [43:48]: Which is less than seven. So it’s pretty good. Gets two for that. Does it have a positive trend? Well…


Tony Kynaston [43:59]: I think it does. It hasn’t breached its three-point trend line. So I’m going to give a…


Cameron Reilly [44:03]: Really?


Tony Kynaston [44:04]: Yeah. It’s most recent trend is down, obviously.


Cameron Reilly [44:08]: Yeah.


Tony Kynaston [44:09]: Yeah.

Cameron Reilly [44:09]: So let’s talk about that because this is one area where I think I and many others still get a little bit confused. So whilst, as you say, it’s dropped from 30 cents, give or take, down to 21 cents in the last week or month really maybe, if you’re trying to work out the sentiment question, you’re still using the five-year line for the chart.


Tony Kynaston [44:35]: I am yeah. Yeah. But by the same token, I’d expect that this share price may well breach it’s sell line at some stage in the near future given the share price is dropping. So…


Cameron Reilly [44:50]: If you go back, if you look at the five-year chart, Tony, are we starting in June 2016 and then going through October 2016?

Tony Kynaston [45:01]: Oh, I’m starting in April 2015. That’s the lowest point on the chart. Can you see that?

Cameron Reilly [45:10]: Yeah. Hold on. When I open up my drawing tools, it changes my chart thing. Oh, okay. Yeah. Right. So yeah. April 2015 going through October 2016?


Tony Kynaston [45:26]: Correct. Yeah.


Cameron Reilly [45:27]: Yeah. Okay. So that gives us about sort of a yeah, well where it is now really 20 cents, 20 1/2 cents.


Tony Kynaston [45:36]: Yeah. So, yeah it’s getting closer, isn’t it?


Cameron Reilly [45:39]: It actually says it’s down to 20 1/2.


Tony Kynaston [45:41]: Oh really.


Cameron Reilly [45:42]: It’s dropped half a cent since we started talking about it.

Tony Kynaston [45:46]: All right. So it’s going to crash through, isn’t it really?


Cameron Reilly [45:48]: Yeah.


Tony Kynaston [45:49]: But yeah, so that’s a good point you raised. I mean, when I see this kind of share graph, if it was say, if the share price was say 23 cents, you could tell it’s heading lower, so I’m not going to buy. So even though technically on the five-year graphics, it’s a buy, you just need to wait and see what happens with the trend.

Cameron Reilly [46:07]: Yeah. Okay.

Tony Kynaston [46:08]: You’ve got to use some common sense.


Cameron Reilly [46:09]: Right.


Tony Kynaston [46:10]: Yeah.

Cameron Reilly [46:11]: But we’re going to give it a two.


Tony Kynaston [16:13]: Yep.

Cameron Reilly [46:14]: Because as of this second, it’s above the three-point trend line. A second from now, may not be.


Tony Kynaston [46:21]: That’s right.


Cameron Reilly [46:22]: No recent positive upturn, dividend yields. Go to my Stock Doctor dividend chart. I’m getting a dividend yield of 3.66 as the latest.


Tony Kynaston [46:35]: Yep. That’s right.


Cameron Reilly [46:37]: Is the dividend yield higher than the mortgage rate? What is the mortgage rate at the moment, Tony?

Tony Kynaston [46:42]: Well the bank [crosstalk 00:46:43].


Cameron Reilly [46:43]: Zero?

Tony Kynaston [46:45]: No, that’s the RBA rate or the US Fed rate. I’m looking at ANZ’s web page and it’s saying that they’re still charging 4.5% on principal and interest.


Cameron Reilly [47:02]: I’ve been using 4.25, recently.


Tony Kynaston [47:04]: Yeah. So it should have gone down because they passed on all the right cost, didn’t they? Most recently.


Cameron Reilly [47:09]: I don’t know. Did they?

Tony Kynaston [47:11]: Well, they said they did, but whether they did or not.


Cameron Reilly [47:16]: Maybe they’ve put it up.


Tony Kynaston [47:17]: Yeah. ANZ page isn’t suggesting that. We’ve been using 4% and they should have passed on a rate cut down to 3.75. So maybe ANZ isn’t the best one to look at. Let me check out CBA.


Cameron Reilly [47:32]: Right Citi is telling me there’s 2.44%. UBank 2.84%. Speaking of which Gerd Schenkel who I think started UBank is coming to our screening in Sydney tomorrow night.

Tony Kynaston [47:48]: Okay. They’re not giving me rights on the CBA websites. I see, they’re at 4.8%.

Cameron Reilly [47:55]: Who is? CBA?

Tony Kynaston [47:57]: Yeah. It says from 3.14.


Cameron Reilly [48:01]: Right.


Tony Kynaston [48:03]: I think 3.75 is probably the reasonable number to use.


Cameron Reilly [48:07]: So we’re not going for the lowest possible rate in the market. Like a UBank. You’re going to one of the big banks.


Tony Kynaston [48:15]: Well, the big banks are at four and a half, so I’m probably going to go somewhere in between. We were saying 4% before the rate cut. So let’s use 3.75.


Cameron Reilly [48:26]: Okay. Well, the dividend yield is not higher than that. PE…


Tony Kynaston [48:34]: Although, refresh your browser, it might be.


Cameron Reilly [48:41]: PE ratio. Let me see on the home page, share price value, PE latest 8.12.


Tony Kynaston [48:54]: Yes.


Cameron Reilly [48:55]: So PE, turn that into a percentage, is it less than the yield? No, it’s not.


Tony Kynaston [49:01]: No.


Cameron Reilly [49:03]: Okay. So PE historical, we go 11.29, 7.42.

Tony Kynaston [49:15]: Which is the lowest.

Cameron Reilly [49:17]: I’m going to take all these columns out of my spreadsheet. I don’t need to have the columns anymore. I’m just going to go, is it the lowest? No, it’s not. So it gets but it’s not the highest either. So it gets a zero?

Tony Kynaston [49:33]: Yeah. Correct.


Cameron Reilly [49:36]: Net equity. Okay. Net equity. I’m going to go to my Financial Statements. I’m going to go to Balance Sheet, got Net Equity, December 19, 467 496.


Tony Kynaston [49:53]: Correct. So 467.496.


Cameron Reilly [49:56]: Million.

Tony Kynaston [49:57]: Yep.


Cameron Reilly [49:58]: Going backwards, looking at its history. We’ve got 447,424, 409, 374,184, consistently going up since June 17. December 16, it was a little bit higher. So dipped but we want to go back what? Three years?


Tony Kynaston [50:22]: Yeah, that’s right.


Cameron Reilly [50:22]: Six halves. So one year, two years, three years. That gets us back to December 16.


Tony Kynaston [50:31]: Yeah.


Cameron Reilly [50:32]: So no for consistently increasing equity.


Tony Kynaston [50:35]: I think so. Yeah. Let me just see what it was doing. Yeah. Because if you go back further than that, it was higher. It was 207 and 223, then 221. So I think it’s a good score and probably in next month or in the next six months, the next score probably gives it a one, but at the moment it’s a zero.


Cameron Reilly [50:54]: Right. Okay. Well the share price is now 20 cents. Got to change my calcs here, 20 cents.


Tony Kynaston [51:09]: Going to probably have to make it, it’s now probably another three-point uptrend. Is it?


Cameron Reilly [51:14]: No. Well, no. So we’re going to give it a, what would we give it if it doesn’t? Give it a zero?

Tony Kynaston [51:21]: Yeah.


Cameron Reilly [51:22]: Share price 20 cents. Net equity per share. My spreadsheet is calculating 22 cents. So the share price is now less than the NEPs. So it gets a one for that.


Tony Kynaston [52:37]: It does.


Cameron Reilly [52:38]: A price to book ratio, I’m getting negative 8%.


Tony Kynaston [51:45]: Yeah.


Cameron Reilly [51:47]: So let’s talk about that price minus, NEPS over NEPS, the lower, the better. So let’s review what that’s telling us. So the NEPS, the book value net equity per share tells us if we were to sell the business today, how much we would get for it, we said that’s 22 cents a share. The price is less than that. So that’s a good thing means we could buy it, flip it, sell it a minute later in normal conditions if we weren’t in a bloody recession where everyone’s running around like chucks with their heads cut off.


Tony Kynaston [52:35]: Trying to sell things.

Cameron Reilly [52:38]: And at least in theory, you’d be able to flip it for a profit.


Tony Kynaston [52:43]: Yeah. Correct.

Cameron Reilly [52:45]: Okay. And it’s minus 8% is less than 30%, according to my Bundaberg maths. So gets a one for that.

Tony Kynaston [52:56]: Yep.


Cameron Reilly [52:57]: Now, our earnings per share. I flicked back to Stock Doctor and I go to, can I get this on the home page somewhere, I think?

Tony Kynaston [53:05]: No. Financial statements, financial metrics.

Cameron Reilly [53:10]: Financial metrics and earnings per share, EPS. Under profitability December 19, $2.52, 2.52.


Tony Kynaston [53:22]: No, 2.52 cents.

Cameron Reilly [53:23]: Cents. 2.52 cents. Future earnings per share, they’re saying June, 22.9 cents, which is a growth of earnings per share over PE of 1.86, which is higher than 1.5. So it gets a one.


Tony Kynaston [53:46]: I’m just seeing the share price drop to 19 cents. It’s down 15% today in half an hour.


Cameron Reilly [53:54]: All right. So we update to 19 cents. It’s making it look even better, or at least in this part of the chart. So growth over earnings per share, divided by the PE based on Peter Lynch’s peg, we’ve talked about recently on the show, no need to cover that again, but it gets a one for that means that there’s some good growth coming. According to…


Tony Kynaston [54:18]: [Crosstalk 00:54:18].

Cameron Reilly [54:19]: Yeah, well, yeah.

Tony Kynaston [54:22]: I’m just going to…

Cameron Reilly [54:23]: All things being equal.

Tony Kynaston [54:24]: For this company, Stock Doctor has two analysts covering it. So I suspect there’ll be downgrades coming at some stage in the future.


Cameron Reilly [54:32]: Yeah. Right. Well, anyway, let’s pretend that the sky isn’t falling and these are normal times. Intrinsic value, I get of 12.92 cents or 0.1292 dollars.

Tony Kynaston [54:53]: Okay.

Cameron Reilly [54:54]: Current price is 19 cents or at least it was a minute ago. Who the hell knows where it is, right? But let’s, oh! No. Okay. Let me refresh the page. We should do that. Yeah. 19 cents still. So the current price is above the IV number one. So it gets a zero. But you know give it 10 minutes and who knows. Intrinsic value number two, we still using a 6.75 hurdle rate?


Tony Kynaston [55:31]: Yeah. I’ve used 6.75 in mine, too. I’m just going to check what the RBA cash rate is. And then we add 6% to it, 0.75. So it’s 6.75 still.


Cameron Reilly [55:42]: Okay. Well that gives IV number two of 43 cents, which is not only above the share price, it’s more than twice the current share price. So it gets a one in AK and AL. Both of those columns. Is it a star stock on Stock Doctor? I’ve got it as a no. No stars appearing.

Tony Kynaston [56:04]: Correct.


Cameron Reilly [56:05]: On our share analysis, I haven’t checked. Let me have a look.


Tony Kynaston [56:10]: Was it B2, I think when I had a look.

Cameron Reilly [56:12]: And share analysis is up, surprisingly. It’s just making me go over and renew my free trial. I’m not going to pay for it. It goes down every other month. All right. What are you getting anyway? It’s going to take me forever to get in here.


Tony Kynaston [56:28]: B2.


Cameron Reilly [56:29]: All right. So it gets a one.

Tony Kynaston [56:31]: Yeah.

Cameron Reilly [56:31]: Stock Doctor’s intrinsic value. Home page?

Tony Kynaston [56:36]: Yes. Bottom right on the Home age, 33.50 cents is the consensus.


Cameron Reilly [56:41]: 33.50 cents. Share price is below. That also gets a one. Can you see the share analysis?

Tony Kynaston [56:51]: Share analysis has 22 cents this year and then 20 cents next year. So it’s below both of those but the IVs decreasing.


Cameron Reilly [57:00]: Right. Financial from Stock Doctor. Financial health is a strong, so that’s a stable. Gets a one. Is the CEO or board member, a big holder, shareholders?

Tony Kynaston [57:17]: I go into Corporate Details for that.


Cameron Reilly [57:18]: Corporate details. That’s right. Mr. Michael John Finnegan. There was an old man called Michael Finnegan. He grew whiskers on this chinikin. The wind came along and blew them in again, poor old Michael Finnegan begin again.


Tony Kynaston [57:32]: You have a five-year old, do you?

Cameron Reilly [57:35]: No, I grew up listening to the Irish Rovers or something.

Tony Kynaston [57:28]: Oh, right. Okay.


Cameron Reilly [57:39]: I think that’s an Irish Rover song. He’s got 0.15%. So we don’t take that as a big enough number.


Tony Kynaston [57:48]: No, correct.


Cameron Reilly [57:49]: Okay. So we give it a no, yeah.


Tony Kynaston [57:50]: Yeah. Zero.

Cameron Reilly [57:52]: Intrinsic value in share analysis, you said was going up or down?

Tony Kynaston [57:56]: Down.


Cameron Reilly [57:57]: So we blanked that, I think. No, we give it a zero.

Tony Kynaston [57:59]: A zero, yeah.


Cameron Reilly [58:00]: Yeah. All right. Well, I’m getting a total of 11 out of 18, Tony, which is 61% and a QAV score of 0.23, which would be very, very good, except it failed the sentiment score. So we would not buy it and we wouldn’t buy it anyway right now because you don’t try and catch a falling knife.

Tony Kynaston [58:22]: Share price is down to 17 cents now.


Cameron Reilly [58:24]: Oh, it’s going to look even better. By the way, according to my Google sheet Q Energy has just hit the three-point trend line.


Tony Kynaston [58:36]: I think we have to sell it then.


Cameron Reilly [58:38]: Well, you better just check and make sure I’ve got my figures right. I’m saying it’s 7 cents.


Tony Kynaston [58:43]: Okay. Let me have a look. It looks to me like it’s still just above the three-point trend line. Very, very close. I’m happy to sell it because it’s going to go lower, especially today. Well, I’ve got share price at 7.50 cents in Stock Doctor which is right on the line.

Cameron Reilly [59:05]: So let’s talk about this one though. This is a good one.


Tony Kynaston [59:08]: Yeah.


Cameron Reilly [59:08]: Now on a five-year monthly, my first low point is January 2016. I think we just did this one again recently, right?


Tony Kynaston [59:18]: Yeah.


Cameron Reilly [59:19]: Right. But we’re actually starting, if you drew a line from January 2016 through August 2017, it would just be a straight line that would come in at around 0.05. But we’re not doing that.

Tony Kynaston [59:33]: No.

Cameron Reilly [59:33]: We’re starting at August 2017 and going up. And explain to me again, why we’re ignoring January 2016?


Tony Kynaston [59:42]: Well, I think you might because you have a different one. But January 16 is 0.05 and August 17 is 0.049. So August 17 is the lowest.

Cameron Reilly [59:51]: Oh, okay. I see.

Tony Kynaston [59:53]: Yeah.


Cameron Reilly [59:54]: Right. Good. Okay. So we start there. This is slightly lower, you’re right.

Tony Kynaston [59:57]: Yeah.


Cameron Reilly [59:58]: So we start there and we go up. So yeah, that gets us in at, what about 0.073?

Tony Kynaston [01:00:06]: Yeah. Something like that.

Cameron Reilly [01:00:07]: Yeah. Okay. 0.073, so it’s still slightly above.

Tony Kynaston [01:00:14]: But it’s going to go lower next time we refresh I think.

Cameron Reilly [01:00:17]: The reason why my thing says 0.0…Yeah. Okay. My chart, I’ve got my three-point trend line sell signal column working on two decimal points. So it’s saying 0.07, baby.


Tony Kynaston [01:00:32]: Well, it’s just the share price has just dropped to point 0.072. Down 10%. So I think it’s a sell.


Cameron Reilly [01:00:38]: So we sell Q. Thank you Q. Been nice knowing you. Not really. What else is looking close? Nothing really. A bit of room in everything else I think.


Tony Kynaston [01:00:54]: That’s good.


Cameron Reilly [01:00:56]: What’s left? I’ve only got eight stocks left in our portfolio and two of those are Fortescue Metals.


Tony Kynaston [01:01:06]: How’s Fortescue doing today? Let’s have a look. It’s down three, but that’s okay.


Cameron Reilly [01:01:11]: 3%?


Tony Kynaston [01:01:12]: Yeah down 3%.

Cameron Reilly [01:01:13]: All right, Tony. Well that’s a good show. Thank you to everybody for who’s so tuning in. Welcome to the new listeners and new subscribers. It’s going to be a fun ride. This is a good time to be going to QAV University, I figure while there’s nothing to do, there’s really no buying to do. It’s a really good time to go to university to get ready for when the inevitable turn around happens. It might be a month. It might be six months, might be a year. But you want to make sure that when it’s ready, you know what you’re doing because this is where the big boys play and the big girls. Don’t want to be sexist there. Big girls and the big boys, this is where they play.


Tony Kynaston [01:01:52]: Yeah. Welcome to [inaudible 01:01:52], as Kerry Packer used to say.


Cameron Reilly [01:01:55]: Really?


Tony Kynaston [01:01:57]: Not in the way grade, son.

Cameron Reilly [01:02:00]: And you’re channeling him because you’re living in his old apartment, is that what’s going on?


Tony Kynaston [01:02:06]: Technically, he didn’t live here but he didn’t have a contract on it at one stage.


Cameron Reilly [01:02:09]: He built it and then didn’t live in it. Was that the story?

Tony Kynaston [01:02:13]: Yeah, he like built it for him and he never took possession because it didn’t have a personal lift for him. So we have a key that we can, you know, turn the lock to make the lifts go up and down just to us and don’t stop at the other floors. But that wasn’t good enough for Kerry. He said [crosstalk 01:02:35] personal lift.


Cameron Reilly [01:02:36]: Wow. But I imagine he checked it out. He walked those floors.


Tony Kynaston [01:02:43]: I’ve got no idea. I guess so. Yeah.


Cameron Reilly [01:02:45]: You can like feel the spirit of Kerry in there. Like when I go to Paris and I have Tom, I always go to visit Malmaison, the house just outside of Paris where Napoleon lived with Josephine. And I walk those floors and I can feel. I think to myself, Napoleon walked these floors. He lived in this house. He walked these gardens. He had meetings in these gardens, in this house. He wrote letters. He wrote notes. He wrote instructions. Yeah. You’re doing the same with Kerry and you get to channel a little bit of Kerry Packer. I like that.


Tony Kynaston [01:03:22]: Absorbing it, yeah, through osmosis.

Cameron Reilly [01:03:27]: All right. Thank you.

Tony Kynaston [01:03:29]: See you tomorrow.

Cameron Reilly [01:03:30]: See you tomorrow. Cheers. Bye. Well, don’t forget everyone now more than ever, this show is not here to provide financial advice. We’re just here to, I guess, give you some insights into how Tony thinks. Tony’s one guy, an investor, we’re just talking about how he thinks about investing. If you need financial advice, see a financial advisor. Stay calm. Stay cool. Stay collected. It is a good time. As I said earlier, to get stuck in a QAV University, we’ve got ton of episodes to go back and listen to. You can go through and practice doing the checklist and using Stock Doctor or whatever data source you want. So by the time this thing turns around, you’ll be ready to go with a watch list of stocks that meet the criteria and be ready to jump in with both feet. So until then, send us any questions you’ve got. Looking forward to seeing some of you in Sydney at the dinner on Wednesday night this week, and we’ll be back next week. Cheers.