Transcript QAV 358

File name: QAV358 The Halloween Pumpkin

Duration: 1:02:12

[00:06] Cameron Reilly: Welcome back to QAV episode 358 season 3, 58. How are you this Monday? The 30th of November 2020. 

[00:17] Tony Kynaston: Doing very well. Thank you. A little bit hot. Sydney had 240-day degrees on the weekend. It’s cool down a little bit now. With the window closed and the air cool off plus the background noise. But I’m starting to sweat.

[00:36] Cameron Reilly:  When you sweat. I bet It smells like champagne. What are rich people sweat smell like Tony? 

[00:46] Tony Kynaston: Same as normal people.

[00:48] Cameron Reilly: No. I like to think it smells like milk and honey. Speaking of rich people. Famous people, celebrities. We just did a great interview with Cameron Williams channel 9 sports editor. I think he calls himself. Which will be up in the next couple of weeks. Some video, some audio of that. He’s been a QAV listener for a year or so. He’s always fun to chat with. A lot of great anecdotes. Tell us about when he met Mike Tyson, and Muhammad Ali, 30 years ago. It’s a good story. 

[01:32] Tony Kynaston: Yeah. And I appreciate him, giving us the time for it too. That was good.

[01:36] Cameron Reilly: He didn’t have any privacy in the new studio, so he went home to shoot it and then he has to go back to work. So that was nice of him. 

[01:44] Tony Kynaston: It was. We appreciate it. Thank you very much. I’m glad to hear you’re doing well with the process and the investments.

[01:50] Cameron Reilly: Yeah, really great. Before we get into the show this week. Jenny’s got a book. Tell us about Jenny’s book. 

[02:04] Tony Kynaston: The Gist of Generosity by my wife.

[02:06] Cameron Reilly: Now is that a typo in the printing because I’m pretty sure she told me it was the gift of generosity.

[02:11] Tony Kynaston: Yeah, I thought it was the Gift of Generosity for a long time too. No, it’s not. and I remember also that she agonized about whether it should be gift or gist. But she decided gist. 

[02:20] Cameron Reilly: So tell people what the book is about and where and when they can get it.

[02:22] Tony Kynaston: Yes, it’s a coffee table book. It’s her thoughts on how she likes to live her life and what living a good life means. Which is being generous to people. And it’s not a bad philosophy really because if we act like that. Everyone did something for somebody else. And gives lots of things to other people, which is also gratifying. So it’s a good philosophy. And the book is lots of pictures of artwork that we, some of it are ours, some of it are our friends. Ones that they have produced. Some my daughter has produced. So it’s sort of glossy, pictorial as well as having a little bit of text on each page about generosity. Definitely a website. It looks like it’s not set up yet. Cause the book only arrived today. So I’ll get right to you.

[03:11] Cameron Reilly: Well that’s great. I’m looking forward to reading it. You two are certainly very generous people from my experience. We’ve always been appreciative. Being the recipients of your generosity and also just how you two help people around you. So good role models. 

[03:33] Tony Kynaston: Thank you. Yeah, it’s something that we’ve evolved to. We’re being fortunate enough to have made some money in our lives and we donate to various charities and things. But I actually prefer to help people around us who are in need, and get involved with them, rather than give it off anonymously. 

[03:58] Cameron Reilly: And you know in all the podcasts that I do. Since we started doing like premium podcasts six or seven years ago. We always had a policy where we give free accounts to people that need it. Unemployed or students or just doing it tough. I always say listen if you need a free account just email me and we’ll give you one. And it’s part of I guess that philosophy is paying it forward. I had one guy who’s recently in the US, gone back to work after being out of work for a year and he had been on a free account for that time. A year or two actually. He said I’m back at work now. He’s finished, he went back to UNI and he said. How do I repay you? I said just you know pay it forwards man. Find a way to be generous to someone. To give something that you can doesn’t have, it’s not much but I think that’s a nice philosophy to pass around. The pay it forward thing. 

[04:55] Tony Kynaston: Yeah, it is. And I think the other thing too. One of the reasons for me doing the podcast is to pay it forward. I work in a soup kitchen, but that’s not the best use of my skills. Doing something like this has a bigger impact, I think. 

[05:09] Cameron Reilly: Yeah, definitely. Cameron Williams would say so. Well, that’s great. Look forward to getting our hands on a copy of that, and you just had some good news about Alex. Do you want to mention Alex’s good news as well?

[05:22] Tony Kynaston: Yeah. She just won the Dean’s award. Academic award for painting. She graduated from RMIT Fine Arts this year. So she’s very excited. 

[05:32] Cameron Reilly: That’s awesome. Good for her. 

[05:37] Tony Kynaston: I haven’t had a chance to go through them all yet. But I think there’s a website to go to and have a look at those as well, the paintings.

[05:43]  Cameron Reilly: So I can’t talk, I’m doing QAV Alex. That’s what she said?

[05:47] Tony Kynaston: Well we’re talking with Cameron. I think that’s why my Skype, my Zoom was fighting. I kept getting ping after ping and text from Alex. 

[05:57] Cameron Reilly: Right, yeah that’s exciting. I will link to the stocks, you said something about p f g and a qualified audit last week. I think you wanted to clarify that this week.  

[06:09] Tony Kynaston: I did. We’re talking about qualified audits. That was a question from a listener last week. And we’re talking about different types of qualified orders and I said that oftentimes, more often than not, it didn’t matter what the qualified audit was. But the company will have problems. Because we’re talking about that stage which went down following its qualified audit. But it’s since gone back up again. And we’re talking about the most material of a qualified audit. Which is the one where the auditors, raise a question about the ongoing viability of the company. 

And then there are other various grades of it. I did mention a company that I had invested in, in the past. And it had a qualified audit. And the share price went down quite dramatically and quickly. And I thought that company was PFG but it’s not. I just wanted to correct that. The company I was thinking of was Pioneer Credit PNC Not PFG which is a premier Financial Group. So apologies to anyone associated with that company for mixing that up. And I hope it goes straight now. 

[07:20] Cameron Reilly: Well speaking of Zimplats. Actually got a question on the Facebook page this morning from Paul in Sydney. Lawyer Paul, he says does simplex have a clear audit? I can’t understand what the auditor’s report is actually saying, did you find if there was an update to that audit. A qualified audit that they had earlier in the year? 

[07:40] Tony Kynaston: Yeah. I had a look after our show last week. It’s still vague. It looks like Zimplats may have change auditors between its half-year and full-year account. [cross talking 07:55] As soon as my side that they will try and get a better result. But hasn’t changed. To me reading it. I’m not an expert in this area but it looks like they are not questioning the ongoing viability of the company. But they are calling out that they may have been a breach of law. Or at least in breach of the accounting standards. As far as Zimbabwe goes, where Zimplats is based. 

Because the auditors point out that some of the assets on the Zimplats balance sheet and their register. Have been booked using US dollars, whereas the law in Zimbabwe says they shouldn’t be booked using whatever the currency is in Zimbabwe. Now I can fully understand why Zimplats would have done that because chances are, they had to convert Zimbabwe currency into US dollars to buy mining equipment and whatever else they’ve put on the register. And that’s pretty common in Zimbabwe because the dollars are not widely accepted outside of Zimbabwe. But the other problem with Zimbabwe, of course, is that they’ve had hyperinflation. For a while and it must be hard to pin down what the exact currency exchange is. To put something down on an asset. Register, one day it’s worth a million Zimbabwe dollars. The next day it might worth 2 million. 

But the US dollar doesn’t fluctuate as widely. So I can see why they’ve done it from a pragmatic point of view. But they should have done it in the local currency. The management of Zimplats is saying it’s too hard to go back and unpick that spaghetti. And then try and work out the right conversions for those assets. And so they are going to leave it where it is. And the auditors have highlighted that as being a potential problem for Zimplats going forward. What the magnitude of that problem is I don’t know. Whether it’s a fine. Whether it’s a slap on the wrist. Whether it means nothing, or whether it could be a company threatening event. And so that’s one of the reasons why I still wait for that to be cleared off the books of Zimplats. Before I look to it as an investment going forward. 

[10:02] Cameron Reilly: Somewhere in my office where I’ve got some, I think a couple of billion-dollar notes from Zimbabwe. That my friend, the journalist Adam Schande gave me. He’s got a house in Zimbabwe. He usually spends six months of the year there. He married a Zimbabwean and he came back from there once. And gave me a couple of, I can’t remember if they are billion-dollar notes or million-dollar notes. But whatever it was they are ridiculous. 

[10:31] Tony Kynaston: I think I had another friend they had them Thorsten and sent us some. He’s from Utopia. On Bitcoin as a way of kind of high lighting how the currency can have lots of problems. But Bitcoin will be here forever. 

[10:46] Cameron Reilly: Yes, we still need to get Thorsten on the show. Speaking of the documentary. Somebody pinged me over the weekend and told me that they found it on Magellan TV. Which is documentary only I think cable channel and online channel online thing, streaming network in the US. Can also download an app for like Netflix but it’s only documentaries. [cross talking 11:19].

[11:26] Tony Kynaston: I’m sure those cents per view are just going to.

[11:27]  Cameron Reilly: Zimbabwe millions. I bet I have in Zimbabwe dollars. Okay, so that’s Zimplats. Do you have stock of the week that you want to draw people’s attention?

[11:42] Tony Kynaston: Yeah, I have a couple. So I do the download last weekend and sent you some stock journals. So let’s talk about those. Three of them I was going to focus on. The first one is called, the code is MLD which is a company called Mica. M.I.C.A. Just going to call up the stock doctor now and have a look at it. It’s a mining services company. And it’s been on our watch list for a while and in the last week, its share price has risen. And it’s now just crossover at three-point by long. 

[12:14] Cameron Reilly: Sorry not MCA that’s [inaudible 12:16]. What was it MCD?

[12:17] Tony Kynaston: MLD Mica limited 

[12:28] Cameron Reilly: Australia does but that sounds like an interesting business. So yes, back to MLD.

[12:34] Tony Kynaston: Yeah. So they’re a  servicing company for mines. Contract mining, they do some crushing. Crushed down the ore and separate it. And a lot of construction work for the mining industry. I think also too from memory. They may have started off as a provider of mining camps of side camps for fly in fly out workers to live in. But I could have that wrong. Certainly, a provider of services to the mining industry for a long time. They’ve been up and down over the years I’ve learned them in the past, but they just turn up again now. And the QAV is pretty good so I’ll just call it up too. When I did my download which was last week, there was something like about QAV of 0.38. But I’ll just have a look at that to confirm that.

[13:29] Cameron Reilly:  Yeah, I’m looking at that chart now. Point three eight is what you told me in the journal. So, you will walk us through the chart because people love a bit of chart talk. I’m getting the high point, going back to late 2017, maybe August, September, and then September, and then the second point. Just July, August 2020, is that what you’re using?

[13:59] Tony Kynaston: Just let me confirm that. Sounds right I’ll just have a look at that, and it is August 2020. Yeah. Just let me turn my phone on. I’m going to videotape myself. Holding a ruler up to the screen just so we can show people what we are doing. This is not a bad example. If it works for you, you can post it when you do you.

[14:26] Cameron Reilly:  Hot and sweaty, Tony. In the video, holding a ruler.

[14:32] Tony Kynaston: Good thing it’s not smellivision. Okay, just let me get my phone on. 

[14:41] Cameron Reilly: Hi Call me. Call me now. Tony Kynaston. 

[14:44] Tony Kynaston: Okay here is my stock doctor screen for MLD. It’s a five-year monthly chart. The high point you can see quite easily. So, if we work from there, going forward. The second point is the point in the next month. But if we use that it becomes a cell where it crosses the line down here. So what I’m going to do to neglect that is to just take the ruler and rotate it. A bit higher. It’s kind of a second time, put the ruler on top so we can see it a bit easier. It kind of cross a second time. And that second time is right around there which is. That’s going to be, if I use the next highest peak for the line it’s November 2019. 

The three-point bars going across it in May 2020. And then if we use the rightmost peak which is the last. It’s basically the highest point on the graph. And the last peak that doesn’t have any other peak crossing it. You can see right down in the corner. The point today is poking up above the line. And that’s a 3-point thread line. I’ll do it both ways with the ruler below and the ruler above. And you can see in the bottom corner there it’s just poking above. So that’s how I do it. A short video to show you and if people have questions, they can just know. Okay, we’ll stop there.

[16:23] Cameron Reilly:  Any worries that this might be a falling off? 

[16:28] Tony Kynaston: Yeah potentially, it could be a falling off. 

[16:32] Cameron Reilly: It seems to keep sort of sticking its head up above the byline and then a groundhog back in.

[16:39] Tony Kynaston: So it could be a falling off. But certainly, it’s a tough one. I started to do a bit of research on it. Because just to do some research for the show. As they’ve got some exposure to a mine which has now been shuttered and basically riding off the lost payments on that and it’s going to administration. So they could be, it could be a loss of revenue for them. But by the same token, they’re also announcing. They’re picking up. Morning contract work at the moment. And one of those companies is remilious resources, actually. Which we’ve kind of gone full circle there, but it’s got such a good quality score I suspect it may not be a falling off. 

[17:24]  Cameron Reilly: So, talk me through your thinking with a falling off/ groundhog, like this. If it was at the top of the list. And if you were looking to buy something and you saw this and you saw the falling off on the chart. Would you buy it anyway but then keep an eye on it. And sell it if it drops back below the buy line. Or would you just skip it because it’s falling and look for something with a better buy line? 

[17:53] Tony Kynaston: I think, in this case, it looks reasonably clean. There’s an optic so I would buy it and then watch it. And if it fell back below before the end of the month or soon afterward, I’ll be selling it. And you can see as well from the sell line stock, which is going to be. Using March 2020 and then October 2020. That sell line is not going to be too far away from where the share price is now. It might not take much if it does turn down to go back across the sell line. So you definitely have to watch it. Some of the ones where I struggle to buy them. Is when perhaps last month for this stock. It was just getting up to the buy line. But hasn’t pushed through yet. Then I probably hang back and just wait for a bit of confirmation. For a month or so. 

[18:43] Cameron Reilly: Right. Yeah, so I’m just having another look at this now to try and see where the sell line is. 

[18:51] Tony Kynaston: March 2020 is the low point on the graph. 64 cents. And then October 2020 is at eighty-two and a half cents. So just eyeballing it, it’s going to be around the low 90s I think probably about 92. If I bought shares in this, the next thing I would do. Is to get on to the three-point thread calculator. Work out what the sell price is and put a stock alert in stock doctor for that pass.

[19:16] Cameron Reilly: Yeah. So we’re good. You also talked about it. Well, you talked about a bunch of stuff. Do you want to talk about base resources?

[19:26] Tony Kynaston: BSE is another mineral sands miner which is interesting. We’ve had a couple of those pop up on our list. So sometimes that happens with the industry itself. Might be showing some signs of the loft. Anyway, so again, just like the last one has just gone through a three-point trend, buy line in the last month. In fact, it’s kind of quite dramatically in the last month from something like it was 23 and a half cents an ounce. 29.7 cents so it’s run-up 25% roughly in the last month. But if I look at this graph, the high point is back in October 2017. At a price just above thirty-two cents. And then the next point would be March 2019 and that price was 13 and a half cents. And then if I put my ruler across those two. It’s just crossed in this current month. Into the buy territory.

[20:31] Cameron Reilly:  Yeah. Again, just poking its head but not as much of a falling off as the other one and the sell line goes right back to early 2016. 

[20:42] Tony Kynaston: Yeah so, we go sell line back here in January 2016. Of course the second point, so the sell was going to be just around 15 cents. 

[20:54] Cameron Reilly: Yeah, just south of 15 cents, the big gap there, it looks better now. In the journal, you said it had a QAV score of point three one but actually, in your buyer list, it seems like it’s point two nine so I’m not sure which one of those is out of date. Fairly close though.

[21:11] Tony Kynaston: Yeah, it’s probably just the change in the price. 

[21:17] Cameron Reilly: Yeah, right. Okay. 

[21:17] Tony Kynaston: And looking at the average dollar trades on both of those. Because I think they were reasonable from memory so 150,000 for the base. 344,000 for [inaudible 21:28]. It’s not too bad. And then just to mention a couple of other ones quickly. An ETF called AUDS which is an Australian dollar investment ETF. That’s also cropped up as a buy recently a decent score, that’s got a score of 33 or.33 I should say. And just gone into an uptrend and I would guess it’s gone into an uptrend because the Australian dollar is rising. 

Partly because the US dollar is falling. And partly because the Reserve Bank cut interest rates again which can sometimes cause the dollar to go up. So that’s what people might want to have a look at, as we’ve discussed before on the show. Those kinds of ETFs come onto the QAV watch list because they probably had a sale of some other underlying assets which has come through as a large operating cash income. So they often come on for six months and then go off for six months. But it’s certainly scoring well at the moment. And probably the last, well a couple more to mention but. 

[22:39] Cameron Reilly: Hold on. Before you move on. Can we just talk about the chart for IUDS? So I’m getting the buy price coming in, just south of 10 bucks it’s currently at 10.51. Is that what you got? And it’s actually I will say it’s a shorting it if I look at the sell line. 

[22:59] Tony Kynaston: Almost, maybe there’s a smidge in between them, but it’s currently [cross-talking 23:06] So I’ve got a high point in January 2018. Yep. And then next I’m going to use the rightmost PQ which is the appropriate one the second point. And that’s August 2020. That would give me a buy price. It’s going to be about nine cents and it’s currently ten and a half. And in the sell is also going to be around that buy price.

[23:44] Cameron Reilly: Not shredding it, because it’s above that. But the sell price and the buy price are about the same. 

[23:47] Tony Kynaston: Yeah, that’s right. But it’s well and truly above that. So it’s safe territory. It could be a falling off cause it’s been going down since 2018. But so is the Australian dollar.  Probably scrap the Australian dollar, I think. I don’t have any idea where that’s going to go.

[24:14] Cameron Reilly: Because you don’t forecast. 

[24:16]  Tony Kynaston: I don’t forecast. Especially not the currency that’s for sure.

[24:21] Cameron Reilly: You mean George Soros hasn’t told you what’s going to happen with the currency. Don’t you talk to George, fairly regularly? 

[24:26] Tony Kynaston: I’ve never spoken to George. 

[24:30] Cameron Reilly: My mistake. You don’t catch up with the rich guys’ secret meetings or anything like that?

[24:37] Tony Kynaston: Well first rule.

[24:47] Cameron Reilly: Good one, what’s next? 

[24:50] Tony Kynaston: My old friend MYI. That’s come back onto the buyer list. Yeah, I think this is one of what they call the rotation stocks. So now that there’s a vaccine on the horizon. Some of the stocks have suffered badly during the COVID lockdown. And now finding some love in the market. People are starting to go back out to department stores. And they are a good thing, but we will see. 

Anyway, if you look at that share price graph. That the high point is back in December 2016. At $1.38. And I’ll use my ruler again. And now I’m going to use the peak in September 2019 at 61 cents as the second point. And so it’s just crossed over at 6 by, which would be around 26 cents that’s now 30, 36 cents. There’s also some other speculation in the newspapers anyway that could be bought out again. 

[26:06] Cameron Reilly: And the sell line comes in. A little bit below the buy lines. 25 cents ish. kind of they try to get 36, so it’s well above both lines. But again, looks like a falling off but you think it’s one of these things that might do well now that COVID. Well, it’s been falling since 2017 it’s not COVID-related full. Though it did take a hit of course during COVID it’s been going south for a long time. Kind of reminds me of the conversation we had with your mate Joe. Last year, is like one of our first guests, I think. And Joe was talking about, we were talking about the challenges in retail that was 18 months ago. 

[26:50] Tony Kynaston: Yeah, know exactly, tripod areas. And I think, the whole trend is being fallen is being a fixation of management who is trying to turn that around. The latest guy seems to be quite experienced. And is seeming to kick some goals. So that could also be wondered too.

[27:05] Cameron Reilly: Yeah, I tend to think none of these people have a clue what they’re doing. They are like television. When we were talking to Cameron. Television, newspapers, old retailers, old telecoms. They’re all just clinging on for dear life as their industries get these, the disrupted. I was thinking of another D-word. But that will do. Deconstructed by the internet, they are like yeah, it’s all going to be great. We’ve got a great plan. Every couple of years. I hear DC talk about what a great plan they going to have. And then they lay off 10,000 people. Now that we’ve laid off those people. It’s going to be great from here on in. I don’t really see them doing anything.

[27:57] Tony Kynaston: The plan for MYI has been really obvious for a long time. Based on its online presence. And closed down half its network. 

[28:05] Cameron Reilly: Which makes sense but, I mean, I haven’t bought anything from online MYI, have you?

[28:11] Tony Kynaston: I did Christmas before last, I think. And It was an absolute disaster. 

[28:18] Cameron Reilly: Right, yeah. So, like, if I’m going to buy something online. I go to eBay first, Amazon second, and that’s about it really. Unless it’s a specialty thing, that’s where I go looking for stuff. I don’t even think about going. I wouldn’t even know where MYI’s online presence is. But maybe that’s just me. 

[28:37] Tony Kynaston: I’m no expert either. I tend to just Google things and go, whichever way I’m directed. Yeah, that’s the plan. The trick is If you cut out. Well first of all I probably can’t. Close half their stores because I’ve got long leases, you know 15, 20, 25 leases. And the second thing is, if you shrink the retail presence and you haven’t grown the online presence, you start to lose a lot of bargaining power with the people who supply your goods. And so your prices go up so you can’t be the cheapest in the market which is important if you’re a retailer. So that’s a fine balancing act and to date, MYI just hasn’t got their head around it yet. 

[29:20] Cameron Reilly: All right. Do you want to talk about our portfolio, for a bit? 

[29:25] Tony Kynaston: Okay, sure. I haven’t looked at it for a while. How’s it going?

[29:28] Cameron Reilly: Yeah, well we sort of jumped up a lot last week after we throw in some dividends and also just with the growth going up. At the moment we’re running. For this new year we’re running at 9%, and the old orders at 10%. So we’re at a point below. It’s obviously, today’s the end of the month. And before I send out the newsletter this morning I jumped in and just did a quick end of month summary. Even though it’ll change a little bit by close of business today.  Since Inception was running at 13.3%. The total return is 6.2. So we’re doing roughly double we’re up 7% on that. We’re running with sort of the goal of double all odds since inception. Even with the huge jump that the old orders had this month. I actually did some charting. Because last week on the show you said it’s mostly the banks and cuantas and people like that. I jumped in and have a look at a bit a little chart having a look at the share price in the last month and it is insane like some of them are 25, 30%. The banks, cuantas, etc. in November. So they had a huge jump. 

[30:42] Tony Kynaston: Yes. And likewise too. And also other things we had some gold miners which are holding us down. And once the vaccine became inevitable. People took more risks, and they took investments out of gold and put them back into these beaten-up stocks. Because of COVID. 

[31:04] Cameron Reilly: As you mentioned last week one of our big winners. In terms of recent additions is C6C. Copper Mountain, we bought that a month ago it’s up 35%. 

[31:16] Tony Kynaston: Yeah, we should have just sold the portfolio on [inaudible 31:19]. 

[31:20] Cameron Reilly: If only we knew. Which one is the winner? 

[31:22] Tony Kynaston: Well I hope some of our listeners have followed us in, that’s good.

[31:29] Cameron Reilly: Yeah, Capral, the aluminum guys. It’s up 6%, so it’s not terrible, but not as good as C6C. Grange hasn’t moved since we bought it, a week or two ago, sitting at zero movements. But our portfolio is doing okay. I mean, up 9%, since the beginning of September’s pretty good. I mean, not as good as the odds but still pretty good for three months. 

[32:00] Tony Kynaston: It is. I mean there’s a lot of articles around at the moment. Saying with vaccines coming and borders opening etc. The government wanting that job safety. The economy might do well next year. Who knows? I’m not going to predict at all. We had a topsy turvy year this year. And hopefully, it is going to be better next year. To teach stock market investing, I think. Yeah, I think we learned lots of lessons along the way. Getting in and out of the market at the right time using that 3-point trend lines. Yeah. Well, I think back to COVID we’re all scratching our heads. Not knowing what was going to happen. Predictions were out there about millions of people dying or hundreds of 1000s of people dying. Which didn’t eventuate. So it’s been interesting. 

[32:51] Cameron Reilly: Except in the US. 

[32:56] Tony Kynaston: And it’s still happening, unfortunately.

[32:56] Cameron Reilly: I think yesterday they had their first 200,000, new case day. 

[33:03] Tony Kynaston: I read a, might have been in the last week or so anyway. I had a link to a blog post by somebody who was a hospital worker in one of the US hospitals. And they said the worst part of being a frontline worker in the US Medical Systems is you come home. You’re absolutely exhausted, you wipe the sweat off your face from being in full PPE all day. And then you remember that the last person you helped was someone who was trying to get your way because Joe Biden was going to steal their rights. I just thought, how courageous are these people who are just treating everybody when these idiots trying to refuse treatment. Because they think their rights are being violated. 

[33:56] Cameron Reilly: I’ve got a couple of listeners to some of my history shows, husband, wife, doctors in Utah, Salt Lake City. And Megan, the wife is an ER doctor. Post some updates on Facebook or Instagram fairly regularly. Just talking about what she’s seeing in the hospital. Just how horrifying it is. Just the people that come in, that are just dying in drives. Well not in drives, in Utah. Utah is not one of the worst places over there. But regularly. That she’s you know they just can’t help. Even with all the stuff that they’ve learned this year, it’s just devastating. And one of Chris’s friends. A woman in Albuquerque who actually came out and visited us a few years ago. Did some guest teaching she’s a volunteer. Did some guest teaching for Chris out here.

She and her husband were in their 60s, I think. Both in ER at the moment or in ICU  beds with COVID. And the woman join has been posting video updates from the hospital bed to Facebook. And she looks and sounds like she’s on death’s door. She’s barely able to get a sentence here. But she’s saying I’m doing this because I want people to know what this is like. Like this is, this is real. We’re barely hanging on probably going to die from it the way we’re going. She’s posting, like daily teary updates that we’ve been watching. It’s devastating just to watch people you know go through this. And we are at a distance, we’re not seeing it close up. 

[35:42] Tony Kynaston: That’s a horrific story. And there’s a virus and people have died in Australia as well. But it’s not the virus that’s killing people, it’s people killing people. It’s the beliefs and their point of view and their misguided actions. Especially in places like the US. I even heard of a case. A friend of a friend in Greece was over there for work. And he caught it trying very hard when he was over there to use lots of antibacterial. Wear masks and all the rest of it. He caught it and he said the reason was that the Greeks, just like the Americans don’t follow the government. The government is telling them what to do and what the Greeks are like. No, we’ll be alright. We’ll still go out for dinner. We’ll still get together at people’s places. And that kind of stuff. 

[36:32] Cameron Reilly: Well the Greeks have got a long tradition of that. 

[36:35] Tony Kynaston: People defeating the people. I just don’t get that. 

[36:39] Cameron Reilly: I saw this, somebody in Adaline in quarantine. She like escaped quarantine to go out for pizza or something.

[36:50] Tony Kynaston: I think there is a language barrier, the person was an English as a second language student. And piecing together what I’ve heard on the news this morning. He was, I think he did like a week in quarantine and had a second test. And he thought he was told that after the second test he was safe to leave. So he went out. Obviously, being locked up for a week. I’m going to get out and have some fun. 

[37:19] Cameron Reilly: Anyway, as a question. A couple of dividend related questions. Kelly partners KPG has switched from quarterly to monthly dividend payouts. I was after TK’s thoughts on monthly dividends as I’ve not come across them before. I’ve never heard of that before either is that a common thing, TK?

[37:38] Tony Kynaston: Not common at all. I can’t think of another stock that does it. Very uncommon. 

[37:45] Cameron Reilly: Have any idea why they would do that?

[37:47] Tony Kynaston: I don’t know the business that well. But I would think it’s because they’re trying to appeal to the retiree market people who need it. And so, you know, they want that regular monthly dividend check to fund the retirement. That would be my guess. But don’t hold me to it. That’s only a guess. Just looking at it now, the yield is. It’s currently 4.36%. That’s pretty good spin hard on that. On June 20 it was 7.79%. If you bought back, then you’re doing well.

[38:20] Cameron Reilly: A single brain chartered accounting network, KPG. Not to be confused with KPMG. So that’s interesting branding Kelly Partners. 16 owner-driver operating businesses across greater city and driver operating this. Do we call that an accounting business and owner-driver, really? I guess I thought that was taxi businesses than owner-drivers. And one operating business in Hong Kong primarily focused on providing accounting and taxation services to private small and medium enterprises. So they probably know a lot about what retirees are looking for, in terms of dividends. 

[39:02] Tony Kynaston: Yes. Speaking of dividends too. I should just mention that. That stock we spoke about base minerals. It was paying a 12% dividend yield at the moment too. If anybody’s interested in that. 

[39:15] Cameron Reilly: So I’m looking at the Kelly Partners chart. It’s a nice-looking toothy grin. Do we have a name for these? For the toothy grin?

[39:29] Tony Kynaston: Looks like a Halloween pumpkin doesn’t it?

[39:30] Cameron Reilly: It does look like a Halloween pumpkin. That’s the official title for these now. It’s a Halloween pumpkin. It’s, they’ve had a lot of positive growth since the COVID crash. I wonder what’s leading to that.

[39:44] Tony Kynaston: I think it’s also being on their border since about then. You know the price of, probably around a dollar. And it’s now $1.62.

[39:56] Cameron Reilly: Really what’s the QAV score. Oh, there we go 0.14. Not great, not bad. But not great. It’s ranked like 47 or something on their buyer list of 40 on their buyer list. 

[40:10] Tony Kynaston: Yeah, but I’m pretty sure it’s been much harder. The price rise brought back that to worth. Sorry, I can’t shed any more light on it. But I don’t think it means much to the company where the replies are six-monthly, quarterly, or monthly. Except that there’s a lot more admin involved. Obviously, they’re trying to I think encouraging people to buy the shares if they’re interested in getting a monthly income.

[40:39] Cameron Reilly: Let’s do some charting on this one. Because it’s an interesting one. Buy line would you started back on February 18 and then use the second point is sort of December 19. 

[40:52] Tony Kynaston: Yeah. So it’s actually January 19, I think. And then I would use the second point as I would use December 19.

[41:08] Cameron Reilly: Right. Then after the COVID dip, it would have crossed the buy line in April, May 2020. And the sell line is one of these that is flatlining. Comes in at around 73, 74 cents or something. 

[41:28] Tony Kynaston: Oh no. I think the sell line. Let me just check that. Let me just have a look, hang on. So there’s a 72 cents. There’s actually you’re right sorry. There’s a 72 cents trough in May 2019. And a 72 and a half-cent trough. It’s going to be in that sort of 72 and a half, seventy-three. So you’re right, yeah.

[41:49] Cameron Reilly: So it’s well and truly been bouncing up. But you don’t think that the monthly dividends are going to mean the bit of the price will drop every month. As a result of the usual sell on the dividend activity?

[42:02] Tony Kynaston:  Well it hasn’t been. Every month it’s been going up. I don’t think so because it’s paying a 4% yield now. It’s going to give a very small dividend yield as a percentage each month. One-twelfth of 4% so what’s that point three of a cent or something. Point three of a cent.  So I can’t see it affecting the share price much at all. 

[42:24] Cameron Reilly: Second part of our question is, that the KPG dividend has steadily increased year after year by about 10%. Is this something Tony regularly sees with dividend-paying companies. That score well with the QAV system. My thought is that it probably is given the quality side of the QAV system. Looks at cash flow net equity financial health etc. Thanks to both of you I never thought I would look forward to listening to two men talk so much. You’ve created a great community.

[42:58] Tony Kynaston: Thanks for that feedback Allen, I appreciate it. 

[43:02] Cameron Reilly: Dividend increases. Do you see that often in QAV stocks?

[43:08] Tony Kynaston: No. Not necessarily. There’s no link between the QAV score and increasing dividends. Just trying to work out what the payout ratio is. Don’t know if we can see it in stock doctor easily. I’m just going to have a look at what the earnings per share are. Which were three, roughly three cents in June, and then the dividend per share is. They’re actually paying out 4.8 cents per share and they’re only making three. So that’s a bit of a red flag there. First of all. They will be paying out from equity. Or from cash reserves or borrowings. So that’s a problem. If you go back six months before that. The earnings per share were 10.46 cents. And they were paying out 4.62 cents. 

So they are paying out just under half 38, 39% of their earnings are paying out in dividends. That’s a reasonable amount to be paying out. But when their earnings per share at the last half dropped to three cents. They are paying out more in dividends and they’re actually earning. So they’re either borrowing to fund that or they’re taking it from cash reserves. I also hasten to add that the forecast earnings per share for this company for June 21 is back up to 10 cents again. So this June 20 result is obviously some kind of aberration. Probably COVID related but I couldn’t say for sure.

But the point I was going to make is. That’s something to look at for high companies, companies that pay lots of profit in dividends. Because of the share if the income per share drops. There’s no way they’re going to lower their dividend. And if people are buying the shares to get a dividend. Then that can be a lid weight around the share price. It hasn’t been at the moment, I guess people looking forward to next year. But I like the idea that in the past six months prior to June. So back in December, they were paying out less than 40%. So that gives them plenty of income to reinvest in the company as well. Which is what we want companies to do. Not necessarily paying less dividends. And that’s really what happened to the bank, the big banks. The big four banks in Australia. 

After the GFC they latch on to this trend of people wanting to own companies that paid good dividend yields. And so the big four banks and Telstra, and some of the big companies like that. Started to pay out something like 70 to 80% of their profits in dividends. And the following sort of five to 10 years. They’ve really hurt that because they don’t have enough money to reinvest into their own business or going out the door and dividends. 

[46:08] Cameron Reilly: Dividends you said before, the consistency of dividends doesn’t factor into our checklist. I’m assuming that’s because you’ve never found a correlation between that and a good stock?

[46:23] Tony Kynaston: It’s a good question. I have found correlations and certainly if the stock breaks. It’s the trend of dividend-paying. it can be a real problem for it. So it’s kind of a negative score if you like, it does break it. 

[46:39]  Cameron Reilly: But how does that factor into a checklist?

[46:42]  Tony Kynaston: It doesn’t. We don’t have an opinion on it. There is something I can take on board and have a look at. 

[46:54] Cameron Reilly: Intern, bring me a coffee and look at the consistency of dividends correlated to growth. 

[47:04] Tony Kynaston: Yes. And I think also, probably more importantly dividend payout ratio. 

[47:08] Cameron Reilly: I think our intern, the intern didn’t reply. I think she’d already gone out for.

[47:11] Tony Kynaston: No it’s a he. 

[47:17] Cameron Reilly: You’re intern might be a he. My imaginary intern is she. 

[47:22]  Tony Kynaston: You turned to yourself and you ask for some coffee. Then you turn back to yourself and say milk and sugar with that.

[47:30] Cameron Reilly: Yes. Okay. Thank you. Good questions, very good.  Ashish posted on Facebook during the week asking about GURU focus. It’s a website that is supposedly all about value investing. And charts and metrics and data all geared around value investing. I remember I did look at this site back early on when we started. But didn’t spend a lot of time on it. When I was looking for stock doctor alternatives. And Ashish asked if it was a stock doctor alternative. Because it’s cheaper, I think he said it’s half the cost of a stock doctor. Don’t know if that’s still true. With the stock doctor Christmas promotion that’s being run at the moment. If you haven’t seen the link to that. Check out the latest blog post on their website. Latest podcast notes. They are running a discount sale. As the share site,  people were kind enough to give us. What are you laughing about? 

[48:29] Tony Kynaston: Sorry. I thought you said share analysis.

[48:31] Cameron Reilly: Share site. Share analysis is the opposite of a discount. You pay your money, and they take it and run. Sharesight, Doug Morris was on the share site. He was a guest. And they’ve given us a terrific deal. I think you say four months of the cost of an annual share site subscription. If you use the QAV link. sharesite.com/qav. But back to guru focus. I’m guessing you probably haven’t looked at it in the past.

[49:02] Tony Kynaston:  I haven’t I only came across it when you made me aware of it last week. And I started to play around with it. Not enough to work out whether or not it could replace doctor stock. [cross-talking 49:19].

[49:19] Cameron Reilly: A little bit. I want to set aside some time this week to play around with it more. I have to sign up for one of their premium plans to really get. To play with Australian stocks, you have to so you can test it with the US stocks. But to test the Australian stocks, you need to sign up for a premium plan. I plan on doing that this week. I noticed they do have what they call a screener. Which basically looks like a stock doctor filter. You can go in and select the sort of data that you want. I don’t know how flexible it is. And how much it, how closely it maps to your checklist. But I’ll spend some time on that this weekend and see.

[49:56]  Tony Kynaston: Okay thanks. I couldn’t see operating cash flow. I don’t know if you’ve seen that yet. 

[50:01] Cameron Reilly: Price operating cash flow is there. [cross talking 50:09] They have a price to free cash flow and a price to operating cash flow. 

[50:11]  Tony Kynaston: Okay well good. Well, that’s a first, I couldn’t find it. So you’ve found it, that’s great. Because my question was going to be whether the accounting standards in the US were the same as those in Australia? And was operating cash flow was the same thing. We need to do a comparison. 

[50:26] Cameron Reilly: Yeah. Yes, I want to try and set up a filter on it. And run it and compare it to a stock doctor filter and see what we get. It’s always nice, we had share analysis. As a second source for a while. This might be a replacement for the stock doctor. might be a secondary data source for us to replace share analysis with.

[50:48] Tony Kynaston: Other models if we can replicate stock doctor with US stocks and overseas stocks. That might give us an inside into those markets too. 

[50:56] Cameron Reilly: Yeah, because we have been trying to figure out how to lunch a US addition to the show. Because we have a number of US subscribers. Clutching together and Canadian subscribers clutching together. Their system instead of the best they can. We’ve been trying to find something. So thank you for re bringing that to my attention. The last question was from Jamie this morning on Facebook. He says the KMDCO has just resided. Is that a trigger to sell? Other investors seem to think so. Given the share price slum this year.

[51:30] Tony Kynaston: I have not seen that. Let me have a look. I’m surprised to hear that. What’s happening? I just got a call from the stock doctor. What’s happening with the share price. It’s gone down a bit. Just going to look at the five years share price. Looks like it might be getting close to a sell. NO, it’s probably still above its sell. I don’t think that’s where the morning news hasn’t probably caught up with the monthly share graph yet. That would be my guess.

[51:53] Cameron Reilly: Just pulling up the announcement off of stock doctor. Resignation of Kathmandu holdings group CEO Xavier Symonette. After five and a half years with the company. Xavier has decided to pursue another opportunity. With the Australian public services in a senior role. Which will be announced shortly. He’s ever reminded the company through a six-month notice period. Until the board decides to release him. The chairman, David Kirk said we are disappointed to lose Xavier. But understand his desire to take up a senior role in Australia, public service. For which he has very credentials. Doesn’t sound like he’s being fired for doing a shitty job.

[52:31] Tony Kynaston: No. He’s been there for 5 years.

[52:38]  Cameron Reilly: Share price, share prices. Not been doing well this year. But that’s understandable. What’s it like over the long term?

[52:46] Tony Kynaston:  Well it’s like all the other [cross-talking 52:48] that went down during COVID has come back up. So if in review saying that the CEO Xavier Symonette has resigned. After 5 and a half years. Is going to hit up the Australian trade and investment commission.

[53:07] Cameron Reilly: Oh, that sounds like a cushy retirement. 

[53:10] Tony Kynaston: Well he’s pretty young, he’s not that old. [cross-talking 53:13] And the trade ministers have announced there.

[53:21] Cameron Reilly: I met the Australian guy once. I was featured as an Australian prominent export Austrade thing in LA. Some years ago. The height of my notoriety.

[53:37] Tony Kynaston: What were your exporting?

[53:37] Cameron Reilly: Podcasts. The podcast network. They had me up there. I’ve got a photo of myself shaking hands with the CEO of Austrade. Or whatever his position was at the time. Yes, they’re not near the sell line yet. I’m looking at their chart, but it actually might be almost ready to cross the buy line. 

[54:02] Tony Kynaston: Yes. I think they have been on the buy list at some stage. 

[54:06]  Cameron Reilly: They have been yeah. But looks like they are just on the buy line now. 

[54:12] Tony Kynaston: Right. Okay. Well, I think we have to wait and see what happens with the share price. I’m wondering why someone has been running the public retail company. Is going back into public service roles. Especially a challenging one with a. I’m making this Austrade we’re dealing with the Chinese tariffs coming on. While in the bowl and other things. That would be a tough gig. He was, just reading through the rest of the article. It was at the head of Kathmandu last year when they bought Rico and double the size of the company. But also increase their debt. I’m paraphrasing here. And their profits, their 2020 profits were decimated by the pandemic. 

Which reduces sales and lead to a 44% drop in underlying net profit. So, reading between the lines here and suggesting that. The possibility is that he didn’t get a bonus this year. Or he’s being shown the door for putting extra risk in the company. And who knows. I’m speculating there. I don’t know. At this stage, to answer the immediate question. I’m going to wait and see what happens with this company. It’s not liked the person is being sacked for putting his fingers in the till. Or doing a spectacularly bad job. It seems more like that there might be some other issues applied. And I mean a lot of the share price will hinge on as they replace this person as well.

[55:44] Cameron Reilly: Well if you look at the financial health in the stock doctor. It’s been strong. Neutral to strong for the last few years. 2019 it was neutral, but 17 it was strong. 18 it was strong, 20 its’s been strong. Revenue growth has been strong, even this year. If you go back, the last few years. Last few halves 7.89, 4.36, 1.35, 9.16,17.75 January 19. 40.26 on July 19. 32.96 on June 20. 41.9 on July 20. Although I guess acquisitions will help with that right. Yeah, basically by revenue.

[56:30] Tony Kynaston: And I’m just looking at it now. So the downloaded last week has a share price of $1 49 on that, and it’s now $1.16.So it dropped significantly. $1.49 was just off the bottom of the buyer list. I’m just going to look at this $1.16. And it’s, no it’s still at a .09 score. I don’t think this is really getting to the buyer list. But it’s getting close. 

[56:59] Cameron Reilly: So I guess the question here is. We often talk about one of the reasons you’ll sell a stock. Is on bad news. CEO resigning slash getting pushed. Is that necessarily kind of bad news that would make you sell or as a contingent on other things?

[57:20] Tony Kynaston: I think it’s contingent. Like I said if there was some kind of proprietary going on behind us. Which doesn’t seem to be the case. Then I’d definitely sell it. But I’m going to see what the share price does. It’s still a bit above its sell price. It’s down a lot, from $1.60 to $1.16. So the market isn’t that happy with what’s going on. I think for me it’s a worse case. Who does the person gets replaced by? That another interesting thing in itself. If this guy, well I imagine he’s been interviewing for the Austrade job for a while. If he hasn’t kept his company or his board apprised of what’s going on. And they haven’t got someone to go underwings. Then this looks like, it’s a quick job. And then something’s happened to precipitate, the move. Because if it was a good succession plan. They would have come out and say sorry to see the old guy go. Meet the new one. But they are not saying that. That’s a red flag because that could mean that this guy or the board has uncovered something. They are meant to tell the market if they have done that. Sometimes they can be a bit slow in doing that. The more I think about it. The more I probably go towards selling in this case. 

[58:47] Cameron Reilly: Do you hold it?

[58:47] Tony Kynaston: I don’t, no.

[58:50] Cameron Reilly: It’s not in our portfolio either. Yeah, it’s interesting. It’s an interesting one when there is no announcement of the transition. 

[59:00] Tony Kynaston: Yeah. Exactly. 

[59:03] Cameron Reilly: So on the monthly graph. It’s still holding up well. I’m kind of 50-50 on this. I’d like to know who is going to replace the guy. And what the ball plans were. Good one. Thanks for bringing that to our attention Jamie. And that’s the full lid boys and girls.  As CJ Craig would say. 

[59:22]  Tony Kynaston: Well thank you. Spend a couple of hours talking with Cam Williams. And then going through this as well. So some good questions there.

[59:29] Cameron Reilly: Yeah. Been fun. What’s on for you for the rest of the week TK? When do you head to the country villa?

[59:37] Tony Kynaston: Not for a couple of weeks. But I’m going down to play golf in the hunter over the weekend. I’m taking a long weekend up there.  Which will be nice. Every year around this time we have a charity challenge. Golf tournament.

[59:51] Cameron Reilly: You said the one you won last time. 

[59:54] Tony Kynaston: Yeah, it’s the same guy. Slightly different tournament. This is another, the one we won last time, was an annual event that sort of correlates after a year. Of the golf tournaments. This one follows that, and the same people go away for a weekend. Play courses usually in Melbourne. Because the third day is a celebrity Ambrose event to raise money for charity. But we are doing it in the hunter this time. Because the borders were opened when it was being planned.

[1:00:27] Cameron Reilly: Right. Is this with Ruddy? Is he coming up on the team?

[1:00:30] Tony Kynaston: Yes. Definitely. We’ll have some fun. Even if we don’t play golf very well. But we’ll have some fun. 

[1:00:37] Cameron Reilly: Bottles of red wine in the Hunter Valley region already running for cover.

[1:00:46] Tony Kynaston: They are putting their prices up. Because they know they’ll make sales this weekend.

[1:00:48] Cameron Reilly: Tony is coming. Prices are up. Christmas comes early. 

[1:00:56] Tony Kynaston: That will be fun. So you just want to get a few things knocked off before I go. Because we will come back and head for our holiday again on vacation.

[1:01:06] Cameron Reilly: Right. Lovely. Okay, enjoy your week. Stay out of the heat.

[1:01:13] Tony Kynaston: Yes. I can’t wait to put the air conditioning back on.

[1:01:19] Cameron Reilly: Thanks.

[1:01:17] Both: Bye.

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