Transcript QAV 423

Episode: QAV 423 Club

Cameron Reilly: [00:09] Welcome back to QAV. This is episode 423 TK, how are you?

Tony Kynaston: [00:15] Good, good now recovered.

Cameron Reilly[00:18] From? Tell them all what happened.

Tony Kynaston: [00:21] I had an AstraZeneca virus jab on Thursday, pretty violent reaction to it Thursday night for about five or six hours. I was shaking and sweating, and my heart rate was up to I don’t know what it was, it felt like 200 beats a minute for about six hours and limbs ached. Yeah, and by the next morning, I was better. Just had to spend the day in bed recovering from it. No sleep that night.

Cameron Reilly: [00:51] That’s just Bill Gates’s secret chip. Embedding itself in your neural cortex, just getting you to, you know, to optimize as Windows is rebooting. Basically, to get ready to control everything.

Tony Kynaston[01:06] I tried to resist.

Cameron Reilly[01:10] Because you’re a Mac guy. The ghost of Steve Jobs was fighting it inside you.

Tony Kynaston[01:14] Give me the Steve Jobs one.

Cameron Reilly: [01:18] That’s not good. I haven’t had mine yet I’m waiting for my doctor to tell me they’ve got some I mean to give it to me but hopefully, I don’t have that kind of reaction.

Tony Kynaston: [01:26] It’s strange for all that, I mean I could have driven out to Olympic Park and gotten I suppose earlier but it took until last week to get one from our local area, Dr. Stone.

Cameron Reilly: [01:38] Well in other news, I sold IMA during the week, Tony. A lot of people on Facebook told me it was a bad decision, you should hold on, should have held on longer, they think.

Tony Kynaston: [01:49] What happened with it?

Cameron Reilly: [01:49] Well it just breached the sell line, you know, it had been hovering around the sell line for about four months. And it finally went down to 16 cents. And so, I dumped it, of course it’s back up to 17 cents now, where it was before that. But I had a loss on it, and you did say on a recent episode if you have any losses going into the end of the financial year, you want to take advantage of your capital gains loss to offset some of your gains, like the  millions that I made out of TRS last year. I thought I should do that so….

Tony Kynaston: [02:30] Having a look at image resources now it’s pretty close to its sell line, isn’t it?

Cameron Reilly[02:36] Yeah. But it dropped out or came back up, somebody said though I should have waited until the end of the month, and I know sometimes we have done that but honestly, I was looking for a good excuse to dump it.

Tony Kynaston: [02:47] You must have sold it close to the end of the month anyway.

Cameron Reilly: [02:53] Oh, no.

Tony Kynaston: [02:54] When you sold it last week?

Cameron Reilly: [02:56] Yeah. Last week, I think it was so…

Tony Kynaston: [02:59] I wouldn’t wait three weeks for the end of the month if something were dropping. I think you’ve done the right thing.

Cameron Reilly: [03:08] That’s good. Yeah. Now I’m going to sit down at some stage this week with Taylor, and one of his mates who’s into QAV now, we’re going to sit down together and do all the manual data entries and do it all together. Okay, we divvy up all the manual data between the three of us for a day and, yeah, give them an opportunity to roll their sleeves up and get their hands dirty. And a shout out to Ed, I caught up with Ed for three hours and did a mini-workshop, it was Ed that suggested the idea of a workshop, and he happened to be in town yesterday, he’s traveling around the country, retired, traveling around, living the life. And, you know, I sat down for three or four hours in a cafe yesterday and went through it all, which was great, it’s always great to meet QAV Club members and hear a bit about their stories and see how they’re going but he’s fired up about QAV, which was nice.

Tony Kynaston[04:01] Yeah, good. What a great lifestyle too.

Cameron Reilly: [04:04] Yes, he’s really living the life. And he was introduced from a mate of his, James, down in Canberra. So, thank you, James. Thank you to everybody who’s recommending their friends. We added another member of the Coady family, I think we’ve got the entire Coady family now as QAV club members.

Tony Kynaston[04:25] Can we make a football team shirt with Coady on the back. Coady number one, number two, number three. They could fight about who’s number one but yeah.

Cameron Reilly: [04:36] I think it’s in order of who signed up. I think that’s our first full family QAV subscription, we have to do like a family Subscription Plan or something, some sort of discount for families. All right, what else have I got my notes for this week? Oh, there’s a new video that Andrew Flitman and I made last week. On him walking through his version of the checklist with the tables and that kind of stuff. So, if you didn’t see that on Facebook, go up to our videos page if you’re a QAV club member and you can have a look at that, or if you download the latest version of the Andrew Flitman checklist from our dropbox folder, you’ll see I’ve stuck a little link to the video in the first tab on that to make it easy, so I hope that helps. A couple of people emailed me over the last month, asking for a video. So, Andrew was good enough to make some of his time available recently and he and I did that so hopefully that helps when people are working their way through completing the checklist. What else have I got…  insider trading ,Tony, talk to me about insider trading?

Tony Kynaston[05:44] yeah good piece of research done by some, I guess they’re economists, Researchers from Queensland Uni recently. And they were looking at data, I think, predominantly from the US, and they’re looking into announcements by companies and sales of shares by insiders, so CEOs, board members, CFOs, that kind of thing. And what they found was really interesting. So, there’s obviously a lot of rules and laws around when an insider can trade, and you can’t do it when you’re in possession of news that could move the market you meant to announce that news and then trade if you still want to after that. And most companies in Australia have trading windows in place. Generally, a CEO can trade this stock, I think usually about a month or sometime during the month after their company results come out twice a year. So, the rest of the time they’re in what’s called a blackout. I imagine there are similar rules in other countries, but what the researchers found was that it looked like, and I guess you have to be careful, alleging things here, but it looked like companies were putting out lots of information just sort of muddying the waters, just dumping everything, and then using that as their, you know, here’s the bad news, I’m going to sell and selling after that. And yeah, there was some research to show that that kind of murking of the waters was being used by insiders who were trying to sell their shares without coming out and just saying here’s the bad news, which is going to affect the company.

Cameron Reilly[07:26] So dumping so much stuff that people can’t wade through it in time to execute as quickly as the CEO does.

Tony Kynaston: [07:34] And not just wade through it but find that relevant information, as I said, they’ll dump a haystack worth of information and the important stuff in the middle somewhere.

Cameron Reilly: [07:45] sneaky, very sneaky.

Tony Kynaston[07:49] very sneaky Yeah. You know, it’s still one of our, I guess, not a hard and fast rule but one that we look at is insider selling. So you can just probably ignore what they say, just look at what they do.

Cameron Reilly: [08:03] Excuse me well I just take a sip of my drink here.

Tony Kynaston: [08:07] your merchandise, I actually got mine out I forgot.

Cameron Reilly: [08:10] Yeah, come on, man. Get it out. Look, it’s got the maxmis on the back.

Tony Kynaston[08:18] It actually looks really good.

Cameron Reilly: [08:18] Yeah, the maxim mug is available, and the golf balls. You’ve got some golf balls now, you’re too sick to hit them, I guess.

Tony Kynaston: [08:28] I’ll go out tomorrow and play.

Cameron Reilly[08:30] Yeah, still trying to figure out how to send people golf balls. I think what I will do is I’ll send them a mug and put a golf ball in the mug and then just send the mug, I think. Right. Anyway, if you want to buy one yourself, if you want to buy a coffee mug, go to the shop link on our website, QAV.podcast.com.au. Go to the shop, buy yourself a QAV mug or buy one for a friend, give it to a friend and say something. Say something clever I can’t think of anything but that’s how you get them into QAV, here you need this trust me just say that.

Tony Kynaston: [09:09] Speaking of golf balls. Do you remember Dan Rowan and Dick Martin’s laughing? They used to give out an award called the Flying Fickle Finger Of Fate.

Cameron Reilly: [09:16] I remember the show but not that no.

Tony Kynaston: [09:18] Oh yeah, the Flying used to have a statue with a hand. Yes. And I was just thinking out of yesterday I was watching the golf a guy called Jon Rahm, Spanish golfer, was having like a day to remember it’s like the third round of a four-round championship. He’s the defending champion from the year before. No one’s ever won back-to-back since Tiger Woods and Tiger Woods is the only person to ever do it. He’s like five shots in the leader’s head, a hole in one. It’s like everything’s going his way. Steps of the 18th career, they tap him on the shoulder and say Oh, really sorry. But your Covid test has come back positive. We have to disqualify you from the tournament, you can’t play.

Cameron Reilly[09:57] Couldn’t he just wears a mask and keeps playing? Oh, yeah, it’s horrible. Yeah. Well, speaking of gold.

Tony Kynaston: [10:10] Were we?

Cameron Reilly: [10:10] Well you said, golf, and I just, I sort of move that to gold. You posted an article about some US property barons Sam Zell, who is capitulating on gold. He said he’s been saying gold as investing his gold has done for decades now, he’s investing in gold. What did you make of that?

Tony Kynaston[10:35] I just thought it was, I thought it was interesting, Sam Zell is a really interesting character who has probably the best property investor in the US for decades. I’m just reading his biography at the moment which is really good. It’s called, AM I BEING TOO SUBTLE, he’s got a reputation for that just being a straight talker.

Cameron Reilly: [10:58] I know the feeling. Yeah, my mother’s nickname for me is Cameron the blunt, right.

Tony Kynaston[11:07] Yeah, yeah. So yeah, I can’t remember what the details were, he’s never thought gold was a good investment, but he’s sort of worried about inflation at the moment I guess when he’s buying gold.

Cameron Reilly[11:17] Yeah, but they didn’t really explain, outside of that, why, in the article, like, can he get better. What’s gold appreciate by on average, year on year, do you know?

Tony Kynaston[11:27] I don’t know what it will appreciate by, it’s an upswing at the moment for us but it’s more of an inflation hedge. So, it’s a store of value. So, gold does have commercial uses so it can go up just on the fact that it’s used in manufacturing silicon chips and jewelry. Probably a few other things too. But it’s a great store of value so if inflation goes up if you have money in the bank, for example, you have money under your mattress and inflation is going up and it gets to a high number, even 5% or something. If you have $100 under your mattress the next year, it’s worth 95. Yeah, so you get the sort of negative compounding effect of holding cash in an inflationary environment. But if you’re holding Gold. Gold tends to retain its value. I guess because it’s still used in manufacturing, and it’s pretty much a traditional store of value but it could. I mean, to me, you could hold the iron, or you could hold other commodities as well like they’re sort of doing the same thing it’s just a golds had this status as an inflation hedge. And for a long time, I guess it as well was always the, you know, things like the currencies were tied to gold up until Richard Nixon so it was seen as being a very stable commodity. But I think that’s changed since then.

Cameron Reilly[12:54] I’m just on goldprice.org. According to its little table here, in the last year, gold has gone up by 11%. In the last five years, it’s gone up by 50%. So, on average 10% a year which doesn’t sound overly impressive but it’s not bad. It’s like the index, right?  But over 20 years, it says it’s gone up by 607%, which would be like 30% a year,

Tony Kynaston: [13:24] But yeah probably a bit less than that but yeah 20 Odd.

Cameron Reilly: [13:27] Yeah 607 divided by 20 is 30.35 According to my calculator.

Tony Kynaston[13:33] Your Calculation’s right but that’s not how you calculate compound growth.

Cameron Reilly: [13:37] What am I doing wrong, how do you calculate compound growth?

Tony Kynaston: [13:39] You got to use the formula of N price over the starting price, raised to the power of the number of years minus one, something like that. Google CAGR calculation, but that’s it.

Cameron Reilly[13:59] Yeah, looking at seeing if gold’s been a good investment over the long term. Statista, rate of return, gold.

Tony Kynaston: [14:06] Yeah just traditionally people flocked to gold when inflation is going up.

Cameron Reilly[14:09] I know they do but I’m wondering if that means it’s a good investment or not just because that’s what they do, doesn’t necessarily mean that it’s good, right.

Tony Kynaston[14:16] Correct, yeah right. Yeah, exactly, and Buffett and Zell in the past has railed against doing that because they say it’s like putting money into a rock, it’s got, you know, it’s inert, they do concede that does have some value because it’s being used by the jewellery makers and watchmakers and chip makers and stuff. Yeah, but that value is, you know the price of gold is much higher than what that value would actually be worth if it didn’t have this store of money type function as well.

Cameron Reilly: [14:46] Right, well I can’t easily find that CAGR of gold over 20 years

Tony Kynaston: [14:52] Well I will tell you how to do it quickly. So, it’s 60, over 20 years. So, 60 years, two to what 64 would be two to the eight is it? So that’s about six doublings in 20 years. So, it’s doubling every three years, three into 72 years is. Yeah, it’s probably going to be about 21, 22% Something like that. 24%

Cameron Reilly[15:26] Better than your performance, you should just sell everything and put your money in gold, Tony. What are you doing?

Tony Kynaston[15:34] Yeah, true. Hindsight is a wonderful thing, isn’t it? And past performance doesn’t predict future performance.

Cameron Reilly: [15:40] And it’s as good as Buffett’s return. Buffett’s full of shit, he should just collapse Berkshire Hathaway and put all of his money in gold. I’m serious. Why shit on gold if it’s at that kind of performance over 20 years?

Tony Kynaston: [15:56] Yeah, good question. I don’t know, do I trust it to continue to get 24% per annum going forward, no. Why don’t I trust it? Because I’ve got no way of working out working out its value, no way of knowing where its value is going. This is where Buffett makes sense, he’s saying if he was comparing an investment in gold to putting it into different sectors of the American economy, if he put money in to farms he can see that, you know farms are going to sell something, improvement in agricultural technology means that there’ll be growth in the farming sector. If he puts it in railway stock, which he did, he can see how that’s going to improve, he can see the dynamics of the economy supporting that. You know, that’s what he’s comparing it to. If I put my money in gold, I’m just, I’m either, you know, buying a lump and putting it under my bed and hoping that something cataclysmic happens to you know make it more expensive than what it is today in the future sometime in the future, it’s probably a safe bet, given the way the human race is going. But it’s got to become scarce ever to become more valuable.

Cameron Reilly: [17:07] Well if the human race wipes itself out, I can’t see gold being that valuable if, you know, we’re all scavenging for food, it’s the walking dead out there I’m not sure gold’s going to do much good, but

Tony Kynaston: [17:22] It’s in the sneaker category, right? Go have a look at the 20-year price increase in a pair of Air Jordans that Jay Z signed or, on a particular like or…

Cameron Reilly: [17:31] Michael Jordan you mean? No, Jay Z, you don’t even know who Jay Z is, you’ve never listened to a rap song in your entire life.

Tony Kynaston[17:38] I have, he wears sneakers.

Cameron Reilly: [17:40] So does Jerry Seinfeld. Yeah, so it’s in the category of gambling then,  you’re taking a punt. Buying something early and hoping it does well. But as it turns out, gold has done well over the long term.

Tony Kynaston: [18:00] Yep.. Which is kind of strange because the interest rates and inflation haven’t been. Interest rates have been going down and inflation hasn’t really been a part of our society since probably the 90s Really. So, it’s kind of strange that gold’s going up.

Cameron Reilly: [18:16] Yeah, but, you know, then you had

Tony Kynaston: [18:20] Well you had Gulf Wars, you had dot com bubbles, you had GFCs, all that kind of stuff is what drives called up.

Cameron Reilly[18:25] Trump. Yeah. All right. Well, there you go, Sam Zell might be on to something. Hey Folks, Cameron in the editing room here, I just went and had a look at the history of the gold price and what’s interesting is that, sure in the last 20 years it’s actually done quite well, between the year 2000 and the year 2020 it went up, as we discussed, quite well, but if you look at the previous 20 years from 1980 to the year 2000, it actually went backward by about a half to two-thirds, and the preceding 20 years it didn’t perform very well either, it was all over the place. So, I think Tony’s got a point, you know, even though it’s done well in the last 20 years, it didn’t do well before that, and we really have no way of knowing how it’s going to do in the next 20 years. So, yeah, just thought I’d share that. For people that aren’t already signed up to Navexa, and are looking for an online platform, the nice boys at Navexa have created a coupon code for QAV listeners, QAV2021, use that when you sign up you get a 15% discount on all subscriptions. So, thank you to Navarre and Tom, for putting that into place.

Journal entries, Tony, you’ve done a couple. You want to talk about those. Your most recent one, on the third of June, you were talking about Inghams, had its earnings update.

Tony Kynaston: [19:51] Yeah, so it’s interesting like there’ll be a couple of questions later on about some stocks which have had earnings downgrades. And Inghams was the reverse of one that with an upgrade. And it was dropped out of the QAV top scorers list I think around March or so because the CEO resigned and went back to the States, and they appointed a new one and the share price dropped, and it became a sell, and in fact, I owned the stock and sold it at that time. And you know it’s not a bad thing to do because it wasn’t a prepared for a change of CEO. So that was a bit of a red flag and there’s also a propensity when CEOs change for the new person to come out and really try and mark the stock down as much as possible. Like, they call it clearing the deck so they’ll go through and take whatever provision they can, they’ll go through and, you know, make people redundant and try and get the business into its, you know, finest or its most Battle-ready setting. So that they can look good, so from then on, the share price goes up under their watch. All of their options are set off the low price when they came in. And they can point to the good job they’ve done after three or four years when they’re looking for another job.

So, there’s a lot of good reasons if you’re new CEO to just really trash the share price, do all the hard work in those first six months, just because you’ll never get another chance to do it, right. Because if you try and do it after that, you’re going to be worried about not getting options that year, or whatever, you’re not getting paid a bonus that year because, you know, whatever you’re doing will depress the share price. So, clearing the decks is a common thing that happens when CEOs change that’s usually a good sign to sell. In this case, it didn’t happen, and the new person has come out with an upgrade about three months later. And so,  the stock has risen again and it’s back on the buy list, back on the top scorers’ list right.

For people who don’t know who Inghams are, look at the supermarket, they produce a large share of all chickens in Australia, both, you know, frozen and fresh, huge company. They were owned by the Inghams Family until about five or so years ago when they sold off, and now they’re listed. So yeah, it’s a pretty good company, it’s pretty basic. It’s large scale chicken farms, and it depends on being able to do good deals with supermarkets which they have traditionally had good relationships with, and it’s got a large market share of that market, so it tends to do well, just year in year out, you’re not going to get rapid growth from it but it’s been a pretty good business over the years.

Cameron Reilly: [22:41] Thanks for that. Well, on May 31 You did a journal entry where you said you were selling JB Hi-Fi and buying VUK, Virgin UK. I had a couple of questions about that from people about why you sold JB Hi-Fi so we can start there, then I want to ask you about the Virgin UK buy line, because when I was sitting down with Ed, we were looking at that chart yesterday and I was like, oh no I don’t think that’s a buy, I don’t know why Tony’s got that on the scorecard so let’s start with JB Hi-Fi, why, why, JB Hi-Fi, Tony?

Tony Kynaston[23:20] Why JB Hi-Fi. Okay, better be careful how I say this. It is tied in with our discussion before about your sale of Image Resources. So, officially I’m selling it because its QAV score is towards the bottom of the top scorers’ list. And I wanted to run as I said last week, I wanted to run a champion challenger portfolio looking at taking something from the bottom and replacing it with something at the top. That’s my official reason for doing it. The added benefit is that may have been sold at a slight loss for me which will have some tax consequences. But that’s not the reason. That’s not the reason. The reason is I’m selling is because the QAV score is low and there’s something better to buy.

Cameron Reilly[24:14] Right, had nothing to do with the announcement of the CEO leaving,  the group CEO?

Tony Kynaston: [24:20] No, no. JB Hi-Fi ? That was a long time ago.

Cameron Reilly: [24:24] Was it?

Tony Kynaston[24:24] Yeah, that was a month ago, maybe two months ago, and the CEO was replaced by an ex-CEO anyway, who had a good name.. Yeah, so the CEO was pinched by Solly Lew to go and run Premier Investments, Solly Lew’s retail company, when Mark McInnes announced he was going to retire. And yeah, so the JB Hi-Fi board went back to a prior CEO who has a good name and they put him in. So, no issues there with the CEO.

Cameron Reilly: [24:57] Okay. But you were looking for something to sell for this new experiment that you’re doing, and it was the winner.

Tony Kynaston[25:05] Yes, it did have the added benefit of being in a slight loss for tax reasons too.

Cameron Reilly: [25:12] Well you know I was; it was a side point but somebody I think it was Jamie, suggested to me in an email the other day that it would be really good to have a quick reference guide somewhere on our website where people can look up a couple of bullet points that answer a lot of the common questions that people will have when it comes to investing, like just you know, remove all the bumpf, just bullet points, this is what Tony says about x, this is what he says about y. And the first one that I was doing today on that was a question that somebody asked a while back. If you have to sell something because you need the cash, how do you decide what it is, what to sell? And so, I bullet-pointed that, and you said the first thing is you look at, sell losses first. You said what I’m trying to do is avoid selling something and having a capital gains tax liability against that sale, then sell the ones that are trending down even in the short term, even if you think they’ll do well later on, if they’ve trending down you sell them. And then, thirdly, you probably sell the ones which don’t pay dividends. That was in episode 413. And so, this would fit that model if you need to sell something.

Tony Kynaston[26:29] It could probably add the fourth and the fourth one is like you might want to; I would sell something with a lower QAV score as well.

Cameron Reilly: [26:45 Right. Okay. I’ll add that in, something with a lower QAV score.

Tony Kynaston[26:48] Yes, so I’ve definitely fit that model with the selling of JB Hi-Fi, nothing against JB Hi-Fi I think it’s a fantastic company it’s got a great retail culture. I love going into their stores, their service is really good. The staff look like and act like and speak like computer nerds, which is great because I normally need help trying to get the right Dongle for my Apple Mac or whatever. Because the friggin dickheads there keep changing them every time they release a new iPhone, it pisses me off. Just have one interface, guys. I just want to plug the

Headphones into the new iPhone.

Cameron Reilly: [27:27] Technology, you’re supposed to have air pods by now air pods have been out for like four years Tony. They’ve given you four years to catch up to the Bluetooth revolution, it’s not their fault if you’re clinging, like clinging to near death to your old, corded headphones. Technology moves on, Tony. It evolves, there are better things better to have, what do you want them to not use the best technology in Apple devices.

Tony Kynaston[27:54] I’ve lost two sets of Bluetooth headphones.

Cameron Reilly[27:57] You’ve lost them?

Tony Kynaston[28:00] Yeah.

Cameron Reilly[28:00] How do you lose them?

Tony Kynaston[28:04] Well, one flew out of my ear when I was walking and went down a sewer. It was like, thank you, Steve Jobs, fuck you.

Cameron Reilly: [28:11] He’s been dead for 10 years.

Tony Kynaston: [28:14] Lucky guy. And then the other one I think fell out of my pocket when I went whale watching in a choppy sea. Whereas these things you don’t lose them, they get tangled up and they are like a 10th of the price. Yeah, so like, yeah.

Cameron Reilly[28:35] I’ve never lost a Bluetooth headphone that’s all I got to say.

Tony Kynaston: [28:38] You don’t go out.

Cameron Reilly: [28:41] Well that’s true. You’ve got me there. Hard to lose stuff when you just sit in one spot every day. Okay. Oh, so that’s your JB Hi-Fi explanation. What’s your VUK justification, bring up the chart for me.

Tony Kynaston: [28:56] It’s a fudge, if you look at the top scorers’ list, it’s listed as a fudge.

Cameron Reilly[28:59] Well I did see that, but you didn’t explain how or why. So exactly how are you fudging it?

Tony Kynaston: [29:08] Okay, so I’m just calling up the chart. So, Eclipse is another one that looks like this as well. Yeah, so this is something that, I’ve been considering even making a rule and the work that I have been doing with Dylan to automate the three-point check line process is making me even more convinced it’s the right rule. When you have a, if you look at the Virgin UK chart, and look at the two high points, they are fairly similar. They’re almost like a flat plateau, so the first one’s July 2018 at a price of 6.06, and the second one is September 2018 at 5.95. That’s within, like, what 5% of each other. If even closer than that. And if you draw a line using those two points which is the classic way of doing it, then you’re right. that the share price is just slightly below the buy price. But what I’ve been finding is that when you get those kinds of plateaus where you have two or three lines at a similar sort of price, you’re better off just using the rightmost one as if that were the high point and then drawing your buy lines from there.

So, in this case, to fudge for Virgin UK, I use September 2018 at 5.95 and then went down to December 2019 at 3.49. And that gives us a buy line, which is at the start of the upturn, which is more preferable anyway. So that’s how I did the fudge there. So yeah, someone’s asking a question a bit later about TRS and it is the same sort of thing in reverse. I guess my logic is if you look at this VUK graph, those two high points which are similar, is kind of saying that to me that’s kind of saying that’s like a U-shaped high point or high period, and they’re only usually a couple of months apart when it does this sort of thing. And how’s that different to  having a V-shaped high point, it’s a similar sort of thing really. Just that there was a couple of months where bumped around before it drops.

So, I’m coming over to the point of view that we should use the rightmost peak when there’s a couple which are near the high point, and they’re close together, they’re almost like a flat line, in some cases, they are a flat line, right, because otherwise, if you had those two peaks and they were the same price, you’d be waiting till VUK gets to six bucks before you buy. And I think that’s waiting too long, and it’s also, if you flip it over, a lot of people have pointed out, well, and the VUK is a good example of this too, look at the low points you’ve got a low point in March 2020.

Cameron Reilly: [32:09] If I drew a line through the high points, if I draw a line through the two high points that are close together, my buy line comes out just north of 4 bucks, 4.20, not six bucks.

Tony Kynaston[32:24]  I’m just using a hypothetical. If you had a case where they were both at around $6

Cameron Reilly: [32:33] I see what you mean, right

Tony Kynaston: [32:33] Which we often do. You get this sort of double bumping on the high point, as things try and breakthrough and they don’t, and they drop. And the reverse is true for the low point, and if you look at the low points on Virgin UK it’s a similar sort of story. So, March 2020 the low point’s $1.24. And then September 2020 it’s $1.30. And if you draw the sell line there it’s really quite low.

Cameron Reilly: [33:00] So you would be fudging that as well, you’ll be starting with the second one?

Tony Kynaston: [33:03] I’m thinking of it yeah, I think that’s probably the way to go, so it’s actually going to sail pretty close to its sell line at the moment.

Cameron Reilly: [33:09] Well, let’s see if you sell and if it goes below that.

Tony Kynaston[33:14] Yeah, that’s right, I think you said, and I think that is that,

Cameron Reilly: [33:18] is there an inverse fudge rule? If you find one side of it you need to fudge the other side?

Tony Kynaston: [33:25] You kind of get hooked on the fudge, don’t you?

Cameron Reilly[33:26] Tom Cruise did.

Tony Kynaston[33:31] Anyway, so we’re still looking at examples of this to try and work out whether it’s a hard and fast rule but it’s kind of making sense to me. That rather taking these kinds of lines across the bottom and across the top, because we’re looking for trends, right, up, and down, not lines across the top and the bottom. And so, it’s making more sense to me that once you have something clearly going up or clearly going down to use that as the high point or low point.

Cameron Reilly[33:55] I said that to Ed yesterday in our workshop, like, what I come to understand about the three-point trendlines is you’re trying to get a sense of, he said it sounds pretty subjective and I said, well, it is subjective, that’s the thing. There are some basic guidelines but we’re trying to determine the confidence, the market has in the stock, and what the bands are of that confidence, try to make some educated guesses about where those confidence bands lie and umm.

Tony Kynaston[34:26] Right, so yeah, the whole thing sort of is a simplification of what happens with these kinds of price movements is that they tend to go in sort of a channel. So, if you look at VUK. It goes down in a channel, both at the top and the bottom so you know you’ve got the top of the channel from September 2018. Then goes down through January 2020. And then continues on where the share price crosses in about October – November 2018, but equally if you look at the bottom of that, if you drew that line, if you also drew a line across the bottom, you’ve got those, I call them troughs, so something around December 2018 and September 2019. So, the shares tend to move in ranges, they might go sort of, oscillate up and down in a wave pattern, but they go upwards or downwards usually. So, I’m looking at the VUK graph, there is kind of three ranges as the initial one up until late 2018 September 2018 which is slightly going upwards. Then there is the downturn comes through until about midway through 2020. And then now there’s the upturn, so, we’re kind of just trying to use those ranges, or those directions to decide whether we buy or sell, and it’s clearly an upturn now so, waiting until it gets to $4 is missing out on quite a bit of the upturn.

Cameron Reilly: [35:54] So how do we process this? Generally speaking,  we’re buying something that hasn’t truly breached its by line. Because you’ve fudged the buy line.

Tony Kynaston[36:10] Yeah, well, if you look at the top scorers list, I record where I fudged them and there’s, you know, four or five, I can’t remember how many, four, on the buy list, and they all have this pattern where there’s kind of like a plateau rather than a definite peak that we can use for our buying, and if we use the plateau, We’re always kind of what we’re going to be a long term, a long time before we can reach that plateau again to buy safely. Whereas I think if there’s a clearly established trend, use the right-hand side of that plateau as the starting point. So, we’re just looking at that at the moment, you know, Dylan and I are working on the algorithm for three-point trends, and it looks promising, so we might want to make a change to the rules on this one, and which also to, I’m quite, you know, cognizant of always trying to solve the FMG question which is, we know it’s a commodity, we know that iron ore is going to kind of cycle.

We know also know the graph is going up and has been going up for a while and if we draw the sell line based on the current graph, we get that kind of flattening out effect, we have, you know, a kind of almost like, not quite a straight line but a bit of a straight line, around sort of around $5 when the share price is now $22. So, I’m thinking that when you have that kind of flatline. We need to take the rightmost trough and use that as a starting point, which will give us, in FMG’s case, it’ll give us a sell price more around sort of 16 or 17 bucks, rather than five.

Cameron Reilly: [37:44] Okay. Well, the people in a funny wagon are going to come to pick you up because they’re hearing all of this and they’re like, he’s lost it, I can hear the sirens, they’re going, he’s lost it. He’s changing the rules again we better pick him up.

Tony Kynaston: [38:02] Someone just had a COVID jab, I guess.

Cameron Reilly[38:05] I think it’s your COVID Jab, it’s making you fudge stuff as what it is.

Tony Kynaston: [38:11] Yeah Bill Gates is whispering in my ear. Maybe it’s Tom Cruise. Tom Cruise and Bill Gates are in cahoots.

Cameron Reilly: [38:21] Goodness me. Well, you got a stock of the week for us, Tony? Before we get into Q&A.

Tony Kynaston: [38:25] I spoke about it I was kind of using it, I was going to use Inghams as stock of the week, but we’ve covered that already. Okay. Yeah, so iI think it’s well it’s not way up on the top scorer’s list,

Cameron Reilly: [38:37] No point one six I think it’s score was,

Tony Kynaston: [38:39] Yeah, yeah, but it just came back on to it and it’s a reasonably sized company and it’s a reasonable business so that’s why I called it out there for people to have a look at.

Cameron Reilly[38:48] Okay, all right Q&A time. Stewart wants to know your thoughts on ANZ, I noticed that you had it in the watch list but not on the scorecard last time I checked.

Tony Kynaston[39:03] I think it’s on the scorecard. First of all, I own it. So, it would be on the scorecard at some stage I just look at me

Cameron Reilly: [39:09] Oh it is now.

Tony Kynaston: [39:14] Yeah, I get its what point one six or something it was point one six I have it as.

Cameron Reilly[39:18] It’s also on the watch list but it’s probably because you just haven’t moved it off, moved it over. Yeah. Why, what are your thoughts on ANZ?

Tony Kynaston: [39:27] Oh yeah it’s good, good business. Same, I mean it’s part of this whole banking thing that we’re seeing where the provisioning that was taken last year to account for people who may be affected by the COVID shutdown or not be able to service their mortgages, all that provisioning seems almost unnecessary now that we’re through, I hesitate to say we’re out the other side, but we certainly, certainly people have come off their holidays, they were given  mortgage repayment holidays by the banks at the insistence of the federal government. And no-one knew how that was going to work out, whether people would have money to pay their mortgages if they weren’t working, all that kind of stuff, so that’s all panned out quite well for the banks and I think there’s something like 90+, 95% plus repayment, you know, people coming back on to their normal repayment loan schedules now. So, it hasn’t affected the banks at all.

So, they’re writing back those provisions which is a boost to profit. So, there’s that is a tailwind for the banks, but also to their, you know if the economy is going well, and we saw some figures out just recently to suggest that, largely I guess because of the way we handled COVID and the government stimulus that was involved. And the banks always do well during a strong economy, during good economic times. I don’t like being thematic when I invest but it’s certainly the case that in the last six months, all or most of the major banks have come on to the top scorer’s list. That started way back with Macquarie group and I count them as a major bank even though they’re an investment bank, but they were first out of the blocks and joined our top scorer’s list and they’ve done well for us and then Virgin UK came along, a Scottish bank, and they’re doing well, and then CBA I think was the next one to come on, and now ANZ.

And I also think Westpac and NAB if they’re not on the top scorers are still pretty close. So yeah, it’s a good time to be a banker. They’re having their day in the sun so to speak. I think as well  they’re always being good dividend payers. And so, you know, they’ve been in a downward trend for a long time they’ve been beaten up by the Hayne Royal Commission. I think people will start to come back to them, like retirees in particular, and see them as being investable once they steady their ships, and because of the good dividends they pay, they’ll become attractive again to retirees, so I think the banks will do well going forward. And ANZ is a major one.

Cameron Reilly[42:14] Thank you for that, Stuart. Darren, says he listened to episode 303 again, and was interested in your thoughts on operating cash flow because you said you use operating cash flow because you don’t know where machines at the mine were going to need replacing, says My question is there will be times when OPC healthy, but unexpected scenarios arise that require cash to be spent. So, is there anything in the QAV checklist that accounts for that, or do we rely on things like the three-point trend line for these sorts of scenarios?

Tony Kynaston: [42:48] Yeah. So, I just wanted to be clear, the reason why I’m using operating cash flow as a way of comparing companies using a relative metric. So, you know, traditionally, people have invested based on the P/E price, Price to Earnings Per Share ratio, but I found that earnings per share were so becoming so muddled and subjective that it wasn’t as useful as it could be. And so operating cash flow which is higher up the P&L and balance sheet and cash flow triumvirate of company reporting and it was harder to manipulate. And so, therefore, is a pure way of comparing companies, one to the other, and ranking them. That’s the main reason I use operating cash flow. It wasn’t because I don’t know when the mine’s going to need replacing. I guess my point there was there to be able to tell whether a company has the right depreciation on its books or Amortization on its books requires a fair bit of detailed understanding of the industry and the company. And I don’t get down in those kinds of weeds because I try to invest across all industries. And don’t have the detailed knowledge to know if a mine is being depreciated properly for.

So that was the reason for my comment around that. But we don’t look at depreciation and cash flow in any of our metrics, specifically, we rely on a quality of management, we rely on the fact that they are depreciating these assets properly. So, Darren’s right to a certain extent, the analysts will pick up, the people who do have detailed knowledge of the industry in a company will pick up if they think the company is not providing enough depreciation to replace mines or equipment, and we will see that in the sentiment for that stock. So that’s kind of, I guess where I kind of do it, but it’s also, you know, providing the right depreciation amount is also bound up in the other metrics about financial health and about equity, increasing those kinds of things. Although you could increase your equity by under-depreciating so maybe not in equity increasing. But certainly, in the other health metrics, we look at you would find out, I think that if there was a company which was shortchanging itself that it would come a cropper, and, and be found out, either by the analysts or by operating but, you know, suddenly equipment breaking down they’ve got no money to pay for.

So, it’s not specifically looked at in the checklist. It’s kind of there in the health ratios, but to fully understand whether a company is depreciating properly you’d have to get right down into the nitty-gritty of the industry, and people do it, Buffett does it. I mean, Buffett is a big believer  in checking out depreciation, and there was a great chapter in a book I read once on Buffett’s investment style I think it might be the Warren Buffett workbook or something like that, I forget which book it was, but the author of the book went through and looked at the way Buffett bought Coca Cola, which is one of his big investments back in the 70s I think, and a key reason for that was Buffett thought that Coke was over depreciating and that they would write back to profit some of that over-depreciation over time and they did. And that was a rocket under the share price which he benefited from after he bought the shares. So, there’s certainly some value, if not a lot of value, in understanding depreciation, but it is just something I’m not an expert at or have a metric for.

Cameron Reilly: [46:31] So the Stock Doctor financial health rating is sort of something you rely on to pick up if there are any problems with their finances?

Tony Kynaston: [46:41] Yeah, I do rely on that but even that won’t pick up on a company that’s not depreciating properly. So, yeah, I fully call out that I don’t have a good metric on depreciation. And if Darren can enlighten us on something about the industry like the mining industry that he knows about that can help, that’d be great. But the health rating is more around the ratios you know the debt to equity, the quick ratios, all those kinds of things so I’d have to analyze it further. My gut feel is that if a company scoring well on the financial ratios, they’re probably the kind of company that is also depreciating properly for its future. I can’t imagine that somebody who’s, you know, is carefully managing its finances would not want to depreciate for the future.

Cameron Reilly: [47:34] The sense that I got from Darren’s question was really asking how do we know that these companies have got enough cash tucked away to handle what he says, unexpected scenarios. And so, you know, that sort of comes back to just the general financial performance and health of the company, right?

Tony Kynaston: [47:56] Yeah, exactly right but the companies which will ride out storms like unexpected problems, you know, if a mine wall collapses or something like that, are going to be the ones that throw off lots of cash and the ones that are in a good financial situation so they can either fund it from a cash or their own equity or borrow, they’ve got plenty of headroom in their borrowing to go and borrow and fix it.

Cameron Reilly[48:21] Like Fortescue Metals and their whole iron dome, whatever it is, the thing they’ve got, the Iron Bridge Project, which turns out it’s going to cost a couple of billion more than they originally planned for.

Tony Kynaston[48:35] Yeah, yeah. And there was a slight impact on the share price when that news came out but didn’t really affect it that much and wouldn’t affect the company that much either. Yeah, definitely.

Cameron Reilly: [48:46] Thanks, Darren. Rebecca asks, Oh no, she suggested we do a show for people who are new to stocks, stepping them through how to buy stocks, which brokers to use, what to look out for, etc. I think we’ve touched on this a bit, but it might be nice to do that at some point. You know we’ve talked about the fact that you use full-service broker, Baillieu’s, you have done for decades. A lot of the people, though, that are listening to this, are probably using either Commsec or something like self-wealth or superhero now, companies that are sort of low service, low costs, just an app that kind of thing. But there are some things to look out for, like, I remember when I started buying some stocks, having to figure out, well I want to do it at the market? Do I want to do it at the limit? What are the implications? This day, next day, buying or selling? There are a few things in there that we could maybe provide some tips around,  anything that comes to mind for you, Tony?

Tony Kynaston[49:59] We can go back and listen to the podcast interview we did with Alex. Alex Hay from Baillieu’s, because we went into all that kind of stuff about what to watch out for when you’re doing your own executions. But yeah, I’m probably not the best person to talk about this because I’ve used a full-service broker for a long time. I didn’t have an e-trade account, way back when e-trade was a thing and came out first on the market. So, I have a little bit of experience then but, as I have, no experience with the new apps or new people. So, if we need to, we can get someone on to talk about them and what to watch out for, it’s not a bad idea.

Cameron Reilly[50:34] Okay, but there’s a tip. To start with, look at the interview that we did with Alex Hay, Rebecca. H A Y, just Hay or Hayes.

Tony Kynaston[50:46] H A Y,

Cameron Reilly[50:47] And have a listen to that one if you haven’t already because we did go through that, Tony’s right.

Tony Kynaston[50:52] Are we going to maybe include something like that in the workshop that we do?

Cameron Reilly: [50:55] Yeah, that’s not a bad idea. All right, Daniel asks IGL has been consistently buying back shares for the last five months their business guidance came out the other day with a positive outlook, and the share price rocketed. I’ve been keeping a close eye on it and was half tempted to add to the position from the consistency of the daily buybacks. I know ECX is starting on this trend of buying back shares after they reported some positive results. Does Tony have any recollection of companies performing well, where management feels the company is undervalued and carry out such an act, or any thoughts or insights on the matter would be great?

Tony Kynaston: [51:32] I think the better question is, do I have any thoughts or have any recollection of a company doing poorly when they start to buy back, and I don’t know generally a share buyback is a very good sign. Including with great man Warren Buffett who will buy back shares in Berkshire Hathaway when he thinks they’re undervalued so, you know, you would think the person who can value the stock the best is the CEO or the chairperson so if they’re going, if they’re buying into the stock, it’s a good lead, you really should be following. So yeah, I think the two stocks you’ve spoken about they’re both good examples of what tends to happen. It’s a bit like when, you know, coming out of COVID or the GFC when you can see that there are plenty of opportunities around us. In the past, I didn’t do it with COVID, but in the past, I’ve geared up and bought into the market,. You know I’m in a good position to know that the market’s cheap so I’m going to buy more than I normally would. The same thing with a company saying, you know my shares are undervalued we should get in there and buy.

Or if you want to use another analogy, it’s a bit like if you’re a homeowner, and you’re in there’s been some kind of depression in the home market, and you can’t believe how cheap property prices are and your next-door neighbor says I’m selling. So, you might want to go and take another mortgage out and buy their property so it’s got all the hallmarks of a great investment, it’s somebody who knows what they’re doing, somebody who knows their company or the situation or the industry, who’s saying look we think this is a good buy. On the flip side, there’s been, there’s often criticism leveled at people who do that by some analysts who say well if, that’s the best investment you can find us to buy back your own shares, what’s wrong with your industry? So, there’s you know there’s some truth in that. And that tends to be done by bigger  companies who have sort of like they grew up a little bit but not shooting the lights out in terms of growth, so they do find it a way to boost the share price by buying back into the shares rather than, you know, opening another coffee shop or another store or whatever.

Cameron Reilly: [53:45] So talk me through the purpose of buybacks, I know we’ve talked about it before but it’s not clear in my head so when a company buys back its own shares are they removing those shares from the overall pool of shares that are available? They’re not going to buy them and sell them six months later when the price goes up. So, if they buy them back, they’re eliminating them from the number of ordinary shares.

Tony Kynaston[54:13] Correct.

Cameron Reilly: What’s the upside for the company in doing that? I know that, in theory, the buy back reduces the supply of shares in the marketplace, which means that maybe the value of those shares will go up because the dividend per share will go up in theory if they’re paying a dividend. What’s, but the company doesn’t really benefit from the share price going up, they don’t get anything out of that. Do they?

Tony Kynaston[54:37] The company itself doesn’t per se but of course the stockholders do so it’s a way of boosting the share price.

Cameron Reilly[54:44] So if a CEO has shares, then the value of his shares goes up but he can’t spend company money in order to push the value of his own shares up so what’s the actual justification, what’s the corporate justification for spending company money on buying shares?

Tony Kynaston: [55:00] Just that, to improve the share price for all shareholders. That’s it.

Cameron Reilly: [55:05] You said, if you know, it’s a good vote in the confidence of the business if they can’t see anything better to do with their money but they’re not improving the business then they’re just improving the value of the business for the shareholders. I understand they have an obligation to do that. They have a director’s obligation to do what’s right for the shareholders, right. So yeah, it comes down to if that’s what they think is the best thing that they can do for the shareholders, then they have an obligation to do that.

Tony Kynaston[55:34] Correct, and it’s self-interest but, also to they’d have to have a good view of what they think is going to happen to the company or the industry going forward. So, they’d be foolish to buy back their own shares if they thought the industry was in a downturn and the shares are going to be worth less next year so it’s also, I guess, a signal to the market to say hey we think we’re doing fine, the company’s doing well, the industry is doing well. So, we are prepared to buy some shares and vote for ourselves and our own industry,

Cameron Reilly[56:05] That the company doesn’t actually derive any direct benefit out of buying back its own shares?

Tony Kynaston: [56:10] No I mean there’ll be some slight cases where it might, like for example, there have been cases in the past where companies will do a buyback just simply to take smallholders off the register. So, like, sometimes when some of these companies had once been like a mutual or a Co-Op or something like that and they floated and then you know Farmer Joe has 23 cents of shares because he had, you know, a small stake in the Co-Op before floated. That happened a bit with companies like Commonwealth Bank when it floated, AMP… You know people there were people who were entitled to some share so only ever had small shareholdings. And so, the company will say look we’re going to do a buyback just on our marketable parcels because people get stuck, like if they’ve got a dollar’s worth of Commonwealth Bank shares, sometimes it’s an impediment to getting out because the brokerage is going to kill them like if there’s an if it’s Comm Bank and I forget now what COMSEC has as a minimum trade, but they might charge say 40 bucks per trade or a percentage of a high trade. So, if you own 30 bucks of Comm Bank shares, you’re never going to sell them right because you’ll lose money. And so, the company will sweep and do a buyback of all those small parcels just to help out people who are stuck like that. It is also a slight cost saving to the company going forward if it has a smaller shareholder base because it doesn’t have to doesn’t cost as much in comms going forward but that that’s probably neither here nor there these days when things are done by email, it was much more of an issue when you had the mail out annual reports to people and stuff like that. Right.

Cameron Reilly: [57:50] Okay, thanks for explaining that. Hope that helps, Daniel. Sam says, bonjour, a question on the announcement of AVG to restructure the capital, how is this different from buying back shares and how will that impact the QAV score when it becomes reality. On the one hand, it values the company higher than the current share price and means cash is paid back to the shareholder. On the other hand, it means the management may be running out of opportunity to invest at the current rate of return, which is a concern for future opportunities. Finally, perhaps they had funded a large capex program over the last few years and take the opportunity of a good return in 2020 to reduce their liability, that’s a more positive signal, the market has reacted very positively with a 10% surge in the share price, and I was keen to have Tony’s considerations on this.

Tony Kynaston[58:51] AVG, Australian vintage wine company. Yeah, similar to the last discussion around buybacks I hadn’t seen a buyback necessarily structured this way before. So that’s kind of unique. So, I’m guessing there might be some tax benefits around doing it this way. So, I think in terms of how it will affect the QAV score, Samuel could go into the spreadsheet and just change the metrics where he thinks that he can predict what’s going to happen and there’ll be less share. So, I think they’re taking out 10% of all shares so you can reduce the shares on the issue by that amount. And you’d have to probably reduce equity by that amount because they will buy, you know, 10% times the 85 cents because they’re using equity to buy the shares and you will get to a new QAV score.

But long story short, I would expect the QAV numbers will probably go up because you’re going to have the same operating cash going through less shares, so operating cash per share will score better. And then the other metrics probably will as well. Things like earnings per share will go up. And we use that for our future IV calculation, etc., etc. so I expect that the QAV score would go up for this company. Just haven’t seen this way of doing it before so I can’t really comment on that. I think what’s happening with this case though was they’ve come out and said they’re buying back shares at 85 cents or 10% of shares at 85 cents. The share price is sort of moving up towards that price, so people are seeing some value in that, and I think last time I had a look.. I’ll just have a look at it now.

I’m guessing the share price is going to be 10% below 85 cents… so it’s 78 cents, so it’s pretty close. So, the market’s kind of working out what the share price will be after the buyback. And it’s moved up to get to that price. Yeah, so that they’re the pros of that, of the buyback. The cons that you should be aware of. I can’t work out why they did just didn’t do an on-market buyback so I’m guessing they could have potentially bought the shares cheaper than what they’re doing this way, but like I said there could be some hidden tax consequences or some benefits to doing it this way so Samuel might want to have a look at that. But yeah, I think, again, it’s a form of a buyback and that’s good for the company. Good for the share price.

Cameron Reilly[1:01:23] Right. Well, I hope that answers your question, Sam. Dave had a question about selling JB Hi-Fi which we’ve already gone into. Yeah, I think that’s a full lid,  we’ve got lots of other questions, but they might have to wait until next week, I’ve got just before we go, I’ve got an Navexa open in front of me, our portfolio for the financial year is up 46.25% versus the ASX 200, which is sitting at about 27.81%. So, it’s a few more weeks left, anything could happen. But, looking good, QAV portfolio’s looking nice for this financial year.

Tony Kynaston: [1:02:10] Yeah, we didn’t get to talk about the Reject Shop and Gascoyne resources, I know that people will be sweating on that, so we can leave it till next week, but I’ll just quickly say that it’s a bit like with the other stock, like Inghams coming out with a profit upgrade,  these stocks have come out with profit downgrades. Gascoyne are taking a  provision for increasing costs of the mine, and The Reject Shop are pointing out that they still have stores in areas which are affected by shutdowns and people not pretending to work in the cities, and stuff like that, so both of those shares have dropped I think about 10% in the last couple of days. So just quickly with that, we will answer the questions in detail when we go through the next week but, I own shares in the Reject Shop. I’m not going to sell them. I tend to wait and see what the sentiment’s like after these kinds of announcements, certainly it meets the criteria for a negative announcement so if you want to sell based on that, go ahead. But then if you look at the share price graphs, they’re still in their buy territory so unless they start to drop dramatically closer to the sell lines and then I’m not going to personally sell them at this stage.

Cameron Reilly: [1:03:27] So, I know Sam asked how you would draw the sell line on GCY,  can we do that one before we go because it’s got a big flat stretch.

Tony Kynaston[1:03:41] It’s a tough one, isn’t it? It’s a strange one, and again this is like another example of why I think the rule might have to be you take the right hand, sort of, right, first of all, I’ll  start with the sell line, there’s a big flat line across the bottom when it was suspended from listing for a while. And then when it came back on it shot up. So, rather than say it’s a sell at 2.77 cents which is what that line is there. And the current share price is like 40. Yeah so a long way above that. I think it makes more sense to take the right-hand part of that line, so September 2020. This is what I’ve been saying about fudging it, and then go up from there and then it probably is in sell territory at the moment if you do that because the next lowest trough to the right would be, When is that, December 2020 at 43 cents? So that would make it a sort of breach then around about February 2021 at 52 and a half cents. That’s when it would have gone below that sell line using the right-hand side of the bottom of the flat line, and it hasn’t become a buy since then so Gascoyne, to me, and I don’t own it, and this is just how I look at it, is in a sell at the moment. But I understand that confusion because if you’ve got that huge flatline at the bottom there, which says it’s a sell at three cents, rather than 52 and a half.

Cameron Reilly: [1:05:21] And while we’re doing charting then and talking about JB Hi-Fi, Paul wanted to know what the sell line was for JB Hi-Fi, how you draw that …  TRS sorry, sell line for TRS I mean,

Tony Kynaston[1:05:35] Yeah, sure. And again, from memory, and I own shares in TRS so I was looking at it just recently, when I got the announcement, so I’m just calling it up now, and yeah so again it’s got one of those kinds of, you know, bumpy troughs at the bottom so the low point is June 2019 $1.78 And then the next point to the right that was low, is I’m going to call it, November 2019 at $1.97. So again, it’s kind of like this umm… There are two or three points that go along that line. But if you use that line, you’re drawing a sell it at slightly above $2, Maybe $2.50, Which is, again, way below, Where the sell price is now. So, I’m inclined again to use the rightmost of those

Cameron Reilly: [1:06:26] Way below where the price is now?

Tony Kynaston[1:06:28] Sorry, where the price is now sorry. Yeah, so again I’m inclined to use November 2019, which is the trough, which is the rightmost of those three that go along that bottom line. And then the next trough to the right of that would be March 2020 at 2.67, in which case my sell line is coming in, Just looking at this, you know, sort of 520 ish, I’ll have to go and use my three-point trend calculator to have a look at it. Clearly, the Reject Shop is coming down, it’s going to meet that line, I think, unless something happens, and it goes up. So yes, I’m going to hang fire even though it was bad news, and just see what happens but I’m going to use that as my sell line. Yeah, actually I think I’ve worked it out on the weekend just let me have a quick look at the

Cameron Reilly[1:07:22] If I was TRS I’d be hoping that everyone finds out the vaccines don’t work, and we have major breakouts again because they had their best little run there during the first lockdown didn’t they? When I bought it.

Tony Kynaston[1:07:36] Yeah, yeah, and that’s good. Yeah. So, I’ve got $5.16 as the fudge sell line. At the moment.

Cameron Reilly: [1:07:45] Okay well I hope that helps everybody.

Tony Kynaston[1:07:48] Yeah, so that’s what I’ll be doing I’ll be just seeing if it drops down towards that. Again, if it sort of keeps going down and down and gets close, I might sell out a bit before it, but I think I’ll wait until around 520 Before I make a call.

Cameron Reilly: [1:07:59] fudging sell lines, there we go. Never a dull moment in QAV. Thank you, Tony. Hope you have a good week.

Tony Kynaston[1:08:10] Th ank you.

Cameron Reilly: [1:08:10] No more shots? When you get your second shot?

Tony Kynaston: [1:08:13] Not for three months, chatted it to the doctor about that and it’s like, am I going to go through that again. And he didn’t think so. So hopefully not. It’s quite scary.

Cameron Reilly[1:08:25] Yeah, I bet. It sounds horrifying. Well, I’m glad you’re well, and we’ll be back next week everybody.

Tony Kynaston[1:08:39] Alrighty, looks like Fox need you as well now.

Cameron Reilly[1:08:47] Sending light signals in the background.

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