QAV US 002 Audio

Cameron: [00:00:00] Welcome back to QAV US Edition. Episode two. Tony, how are you, Tony?

TK: I am well, thank you about the same as I was five minutes ago when we were chatting on the screen show.

Cameron: Oh, well, just, yeah. You know, you’re ruining the illusion. No one wants, well, no one wants to know how the sausage is made. Tony.

TK: No. Okay.

Cameron: Um.

TK: good to, good to see you, cam. It’s been what, two weeks?

Cameron: Ah, well. Quickly, we’ll get into it because we don’t have a lot of time today. I just wanted uh, on our US portfolio performance. Uh, ’cause it’s been a couple of weeks when since we’ve talked about it, all right, um, still, uh, all time up around about 70% return versus the s and p 500, about 27% over the same period of time.

So again, it’s doing not triple, but I don’t know, two [00:01:00] and a half times the s and p 500. It’s been, uh, a rocky time in the markets over in the US obviously in the last six or eight weeks, and I had a story on that in the New York Times. Uh, the economy, the Fed, and the rates, Mr. Trump promised to end inflation starting on day one.

And declared in his inaugural address that the Golden Age of America begins right now. Instead, inflation has remained stubborn. And while Mr. Trump has been in office less than two months, economists warned that his tariffs are likely to make it worse. Measures of consumer and business confidence of plummeted and stock prices have tumbled attributable in large part to Mr.

Trump’s policies. And the uncertainty they have caused. The Federal Reserve is expected to keep its key rates steady on Wednesday after a series of cuts that lowered rates by a full percentage point last year, according to a article in the New York [00:02:00] Times. I know you are reading the Wall Street Journal, Tony, and that’s a Murdoch publication.

You’ve got the Failing New York Times on one side, the, I don’t know what Trump’s term, I dunno what his relationship is with Rupert Murdoch these days. Is they, they, they seem to be frenemies. what’s the Wall Street Journal saying about the US economy? I tried to subscribe to the Wall Street Journal this week, by the way.

I tried on my Mac. I tried in Safari and it wouldn’t, it said it had an offer $2 a month for 12 months, and then 15 9, 9 thereafter per month. I tried to subscribe to that, hit the purchase button, nothing would happen. I switched to Chrome thinking it might be a browser thing, exactly the same pricing deal.

Click, click, click. Wouldn’t work. thought I’ll do it on my iPad. Opened up my iPad, downloaded the app. Try to subscribe. In the app it said $2 for the first one month. And then $60 a month thereafter. That’s the difference from [00:03:00] trying to subscribe in the MacBook to the iPad price difference of 15, 50,

TK: Wow.

Cameron: or $60 a month.

didn’t

TK: I think on $3 a month I had an intro as well. Intro

Cameron: Right.

TK: Yeah. But I did that on my Mac, on my Mac, on my MacBook, on my MacBook, my laptop. No problems.

Cameron: it?

doesn’t wanna let me do it, so I gave up. So anyway, I dunno what the Wall Street Journal saying, what’s the Wall Street Journal saying about the US economy?

TK: Oh, not, not too different really to what The New York Times article said. Um, oh look, I think I don’t wanna be sucked into this whole maelstrom of Trump saying one thing and then commenting on it, Donald Trump saying something different. It’s just, that’s business as usual. Um, the important things are that rates are being left on hold. By the Fed. Um, inflation might be, you know, probably is [00:04:00]raising, but it’s not a concern.

Not of enough concern for the Fed to cut rates yet. So, um. Yeah, I, I, I think there’s, there’s what someone says and what someone does is, is important in this whole conversation. And the, we’re talking today on Tuesday, the 25th of March our time. I. Which would be 24th of March US time and the market was up 1.8% in the US because, uh, Trump, after threatening tariffs across the board coming in in April, has now walked it back a little bit saying that there will be some exemptions for some car makers in the market, you know, jumped on that kind of news.

So look, I know the policy settings of the US government are vitally important. Um, I think it’s gonna take a little while for those uh, policy settings to actually reveal themselves. A lot of it’s, um, a lot of it’s negotiating, uh, as we talked about before. [00:05:00] I’m gonna threaten you with a tariff and I’ll see what you do and if you come and kiss the ring or if you play ball on something else, if I can get something else outta here, then those tars may not go ahead.

Cameron: Mm. it’s creating havoc on the markets.

TK: Well, as we said before, the markets don’t like uncertainty. It’s, it’s, as we always say, you can’t predict things. And this is probably a good example of how you can’t predict things because there’s so much uncertainty going on. So I think you just gotta look at, as we always do the numbers and, and make our decisions based on that. And, and look, you know, uh, I’m, I’m gonna point to an article, um, which may have an impact on our portfolio because we have a number of shipping companies in our portfolio. So, we don’t, we don’t necessarily. Look at sectors or be sector specific, but it’s so unusual for our buyers to have a number of, um, companies from the one sector pop up because that sector’s, you know, [00:06:00] um, having it doldrums.

But the companies in there are pretty good. So their prices are beaten down, but they will have their day in the sun when regression to the mean takes. Place. there was an article in our paper, not a US paper, I’m taking this from the Australian Financial Review, but chances are it was reprinted from one of the US papers anyway, um, as they sometimes are in our country. Uh, it was by Lisa Barline, Carl Plume, and Timothy Gardner. So I don’t recognize them as being Australian journalists. Some of our listeners in the US might. Recognize them. from March 20th, but it, uh, it, the headline reads, Trump’s massive shipping fees threatened US trade. And it goes to, um, on, to outline that, uh, and I’ll quote, Trump is drafting an executive order that would rely on funding from a US trade representative proposal. VY finds it up to 1.5 million US China made ships or vessels from fleets that also include ships made in China. Those potential port [00:07:00] fees have limited the availability of ships needing to move agri agriculture, energy mining, construction, and manufactured manufactured goods to international buyers according to major US exporters and transportation providers. and this is kind of throwing. Global shipping in into a bit of a talisman at the moment. Uh, and the article goes on to say vessel owners have already refused to provide offers for future US coal shipments due to the proposed USTR fees, ex coal energy and resources. Chief Executive Ernie Thrasher said in a letter this month to US Department of Commerce Secretary Howard Lutnick, that enacting and implementing those fees could cease exports of US coal within 60 days, putting a one 30 billion. dollar worth of shipments at risk. Thrasher said, he said the fee structure could add up to 35% to the, the delivered cost of US coal, making it uncompetitive on the global market. And it goes on [00:08:00] to list other examples of that from other industries, like, uh, soy being exporters and, and grain dippers, l and g carriers, oil carriers, et cetera, et cetera. So again, a case of, um. Something, whether it’s a kite flying exercise or it’s gonna actually happen. Uh, but it’s, it’s, it’s being mooted as a measure to, uh, to guess, move manufacturing of ships back to the US. ’cause other court reports something like only 200 vessels. the current fleet of us flagged cargo vessels is less than 200. And not all are US built. Um. This is one of the quotes from, uh, this article. So, uh, look at the aim of having ships manufactured in the US is a good one. Um, whether you need to cripple lots of, um, eco economies, uh, uh, to do it is questionable and perhaps this is gonna be watered down or, [00:09:00] um, you know, have lots of carve outs on a case by case basis.

Um, and, um, won’t come into being but another example of. Of we’re talking about, that there’s a lot of and fury going on, and then the reactions are gauged and deals are done and it does affect, um, it may affect some, some. Companies. I, I went through and had a look at some of the shipping companies our, uh, our buyer list, and I, I can’t remember the numbers, but it was a, I think it was only one that was down. Um, share price was down. Since that date, most of them are going up, so don’t know whether that means they’re only operating US ships or whether it, uh, it means that the market’s still digesting what could happen and it’s all up in the air. But this is gonna be a feature of. market dynamics going forward, um, as long as this administration’s in power.

Cameron: mm Well, I, if I look at, uh, Zim, who we talked about on our last [00:10:00] in the last they’re down quite a bit actually from. $22 down to 1562 hasn’t been a good month for Zim. ESEA. Euro Sees, um, on the other hand is gone from $26 76 a month ago up to 31 15. So bit of differential there between the two.

TK: And, and same with other ones. DSX, TK Tankers are more shipping. There’s quite a few of them on our buy list and I think most of ’em are up, but, uh. course, the curse of the pulled pork to Zi. I think so. You gotta add that back to their share Our US sisters won. Know about that yet. But yeah, you better watch out for stocks, which we pull apart, uh, they, they can react negatively to the scrutiny.

Cameron: Stealth gas we have in our portfolio. They, they provide [00:11:00] gas transportation as you might stealthily. Um, of course, uh, their share price has gone down a little bit in the last month, but not, not by much. 10 cents, something like that from $5, uh, 95 down to $5 80 cents. Anyway, so yeah, interesting stuff. But of course as longtime QAV listeners know we, we read, we listen, we pay attention, but.

We just let the numbers really drive us. We don’t get caught up in all of the froth and bubble of market news and analysis and fearmongering, or the hype cycles, the boom cycles, the bus cycles. One of the great things about QAV is we just let the system tell us what to buy, when to buy, what to sell, when to sell, all of the noise, other people worry about the noise, I

TK: Yeah. Take the emotion out of it.

Cameron: Hmm.

TK: And look, I, I [00:12:00] don’t wanna sound, um, overly critical of what’s going on in the us. If it results in, you know, better economies there are longer term gains, then sure, fine. I, I’d probably side with the market commentators and say it’d be good to have some clarity, but, uh, you can’t have everything.

So, because in the old days, if there was gonna be a. Tax on Chinese ships arriving in the us then within minutes the market would’ve factored that into all the pricing on all the stocks, on all the shipping companies in the world. But that’s not happening at the moment. ’cause there’s, there’s just too much gamesmanship going on to be able to rely on that kind of, um, ability to, to, to take new news into account and make your decisions based on that. So, failing that, we can’t do it and we don’t do it.

Cameron: Well, I’ve got a question from one of our Australian listeners, Trent, but obviously. He’s been paying attention to our US stuff. He said, cam, the buy list you ran on the [00:13:00] 20th of January has only one stock that was on the previous buy list from the 29th of December. American Airlines. Do you know why they, why they’ve all changed over as that level of turnover is not something we see in the Australian QAV lists.

I first suspected it might be quarterly results, but when I checked the only stock from either list that had released Q4 results seemed to be Delta Airlines. The US buy list seemed to have around 20 stocks with a QAV score higher than 0.10, which is a lot less than we get from the Australian market.

This seems a bit odd considering a much larger universe of stocks. Any theory on why there are less? So, Trent, I went back and I looked at the 29th of December buy list, the 20th of January buy list, and the most recent one I did, the 17th of January buy list. The 17th of January has 110 stocks on it.

The 29th of December had a hundred stocks on it. The 20th of January had 20 stocks on it. Let me explain [00:14:00] to you the reason for the difference. dunno. Uh, that’s my best explanation. Um, I think I may have filtered out some stocks on the 20th of January for some reason, but I can’t remember why I have nothing in my notes.

know I was having Excel issues, I’m still having Excel issues. Uh, so it might’ve been that. the bottom line is, I don’t think there’s any good reason for it. I think I just stuffed something up. I needed to buy one stock. 20 stocks on that buy list. That was enough for me to find one.

And I don’t know, I dunno what I filtered out or why I did spend like an hour trying to work it out yesterday. I couldn’t work it out. I gave up. So, uh, you are right though to. Ask the question about why few stocks, something, something happened. I don’t know what it was. I’d, if it was intentional, I probably would’ve said so when I published that one, I don’t think I did, so it probably wasn’t intentional, so I, my apologies.

But thank you for [00:15:00] attention.

TK: There was a, there was a time I, I dunno if it was the 20th of January when we were looking at filtering stocks further down or tightening the filter on quality. I dunno if that was part of the process of that.

Cameron: It might have been. I did consider that we were taking F scores and Z

TK: Yeah.

Cameron: and moving them around.

TK: Yeah.

Cameron: I couldn’t find any evidence to support that in my. Little analysis last night, so I don’t wanna say it was that, but could have been any number of factors. Trent? Uh, I wish, I wish I had a better answer for you, but I don’t.

Anyway, this week’s or last week’s buy list had what, what I think is now, it is interesting though, that wouldn’t be unusual for us to have 80, a hundred stocks on an Australian buy list.

And for the US buy list to produce the same number out of of three and a half thousand, [00:16:00] uh, no, six and a half thousand I think, is interesting.

But we do, you know, there’s a lot of filtering that goes on um, so that’s what it gets cut down to at the end of the day, once we. Once we filter prop calf and we filter sentiment and uh, all the other things that we look at, that’s what it comes down as down to. And as it turned out, this week, we’ve got a problem with prop calf on the US data as well, which we’ll get into shortly.

So I am gonna do a pulled pork today on the stock that I added, I had to sell. Um. CPSS Last week it was a three point trendline sell and I replaced it with a company called STEM X, share Coders CX probably shouldn’t have, which we’ll get into and I might get rid of it. Um, but it was, it’s a good story Anyway.

I do that, Tony, do you have any other news items you wanna [00:17:00] talk about?

TK: No, that was the, that was the only one was the shipping one. Thank you.

Cameron: Okay, so cx um, I’m gonna do it, uh, with the caveat that I’ll probably sell it today or tomorrow anyway, and I’ll explain why. But, uh, I had, I had so much fun doing the Paul Pork on it that I’m gonna do it anyway ’cause I learned a lot and it’s a great story. and it may be a buy in the future, but, uh, Cemex is a Mexican.

Cement business now. I know nothing about cement. I, I didn’t until I did this Paul Pork. Now I know a lot about cement it’s great. Uh, being an historian, I learned about the history of cement and I was, you know, I knew a little bit about it from ancient Rome and the building of the pantheon with concrete, et cetera, et cetera.

But learned a lot more about it in terms of the modern history of cement, and it’s the first Mexican company I’ve ever bought shares in, so that [00:18:00] was interesting too. So I’ll do a quick, deep dive on this. Sorry, did you wanna add something?

TK: I was just gonna say, I went, I saw you were gonna do it, and I went to their website as part of my pre-show research and, um, tried to find their annual report. But of course it’s the Mexican, it’s in Spanish, so uh, I had to give up.

Cameron: You don’t speak Mexican. Tony.

TK: No.

Cameron: can the website to Australian um, or to English. Sorry.

TK: I couldn’t even find out where to do that. ’cause it website was in Spanish. Was

Cameron: up the top that says ES. You change the to EN and it’s all in English. Okay, well, there you go. Uh, so I love learning about history.

I’m a big fan of concrete. I love brutalism. You a fan of Brutalism, Tony?

TK: Uh, not really, but I, you know, except respect the fact that it’s part of an architectural history. So I’m not saying we should tear it down, but I wouldn’t say I was a fan. Um, too many of the skill [00:19:00] buildings and et cetera when I was growing up were pri list. I had enough of it at the time.

Cameron: I am a big fan. Oh, look, there’s good brutalism and bad brutalism. Don’t get me wrong. There’s like no effort. Brutalism, which is just block. Then there’s. Then there’s, you know, a architectural brutalism where it’s designed and well thought through. And, um, there’s, there’s some great books.

actually been trying to get one eBay for years. A friend of mine who’s a. A designer has a copy of it in her house, and whenever we go over for dinner, I just sit there like a autistic nerd and, uh, read her book on brutalist architecture. I don’t wanna buy it, but it’s like 300 bucks. I’m not paying

for this book.

I, I

TK: she, she probably trots it out. Cam’s coming around for dinner tonight. Oh. I better get the Les book out. Otherwise, it’s, it’s free will in the Christian Church for two hours.

Cameron: [00:20:00] Yeah, she has lots of great design books that I love going through. Um, yeah, anyw, who, uh, big fan of Brutalism, I, all I’ve always wanted is a house that’s just all concrete, polished, concrete floors, concrete walls. I. Smooth, clean lines. Cool. that’s what I love most about the concrete is just growing up in subtropical Queensland, just the coolness putting your face up against concrete.

Ah, so good. The cool, the, I love the cool, it’s like cheap marble. It’s cheap marble with its coolness. Now for people like me who dunno the difference between cement and concrete, ’cause I needed to look this up again. Cement is an ingredient of concrete. It’s like the flour and bread. bought me a flour, uh, tin.

Dunno if you saw this in my light update yesterday, but when she was a bribe island for the school camp last week, she went to a Vinny’s and she got this beautiful mid 20th century. Uh. [00:21:00] Swedish loaf, tin, ceramic loaf, tin, uh, beautiful condition, mint condition. Uh, so I made my first loaf of sourdough in that yesterday.

It was lovely. Anyway, cement is like the flour in concrete. you, you mix it with other stuff. It’s a powder and you mix it with other stuff, gravel, sand, rocks, and then water to make concrete. Uh, so the cement is basically the glue and the concrete is the glue plus the rocks, plus the sand, plus the water, all of the solid stuff that you build with.

So we’ll be talking a lot about how cement is made over the course of this, uh, deep dive because it’s fascinating and I knew nothing about it until this morning. X though is cemex, S-A-B-D-C-V. This is according to Wikipedia, a Mexican multinational building materials company headquartered in San Pedro near Monterey, in [00:22:00] Mexico.

It manufactures and distributes cement ready, mix, concrete, and aggregates in more than 50 countries. In 2020, it was ranked as the fifth largest cement company by the amount of cement produced annually in the world at 87 million tons of cement. That is a lot of cement now. Sab cv, Tony, do you know what that stands for?

TK: I think it means it’s li a listed Mexican company.

Cameron: Very good. Tony. Check out the big brain on Brett. Um.

Sociedad Anónima Bursátil de Capital Variable.

or variable, but ble ble, I think is how it’s pronounced in Spanish.  Sociedad Anónima uh, basically means it’s a Mexican [00:23:00] equivalent of a publicly limited company. Like a limited or an Inc

TK: Mm-hmm.

Cameron:  Bursátil means it’s publicly traded on the stock market. Um, and.  Capital Variable variable capital basically allows it flexibility to increase or decrease its capital structure without bureaucratic hassle or formal restructuring.

In everyday terms, it means we’re a Mexican corporation, our shares trade publicly, and we can easily adjust our capital structure without jumping through too many legal hoops. According to stock Edia. Cemex is a Mexico based operating and holding company, primarily engaged directly or indirectly through subsidiaries in the production, distribution, marketing, and sale of cement ready mix, concrete, aggregates, clinker.

And other globally provided construction materials. I said before, as in 50 countries. It includes Mexico, the United [00:24:00] States, Europe, south America, central America, Caribbean, Asia, middle East, and Africa cement production facilities in Mexico, the United States, Spain, Egypt, Germany, Columbia, Poland, Dominican Republic, United Kingdom, Panama, Puerto Rico, Thailand, and Nicaragua.

Used to have some in Australia, but they sold ’em off when they needed some cash, which I’ll talk about. So as soon as you go to their website and figure out how to convert it into English, the first thing you’ll see is that they are recognized as one of the world’s most ethical companies.

In March of 20 25, 2 weeks ago, they received the world’s most ethical company’s recognition from Ethisphere, a global leader in defining and advancing the [00:25:00] standards of ethical business practices. They were recognized for exemplary business integrity, ethics, compliance, and governance standards. So I thought that was interesting.

Um, yes, the redheaded the back. You had a question.

TK: does making cement contribute to global, uh, warming.

Cameron: It turns out it does,

that until kept reading, according to the Global

TK: but, when they hand out the ethical awards, they don’t worry about warming.

Cameron: When I finish the story, you’ll why the cement industry is the source of about five to 8% of the world’s carbon dioxide emissions. I. And this is on their website.

This is on, um, uh, Cemex website. We also know that our end product ReadyMix concrete is the most used manmade material in the world and [00:26:00] plays an essential role in society’s development and growth. sets the stage for us to contribute to climate change mitigation by reducing CO2 emissions in our production processes, as well as the entire life cycle of our products.

they’ve done a lot of work around this to their. Press materials, um, and I didn’t realize cement was so bad. So as I said earlier, I don’t know much about stuff. I know a lot about a couple of things and everything else, um, kind of ignorant. Um, Chrissy said, you’re not a man who works with his hands.

I said, well, I type on a, I type on a keyboard. Technically, that is my hands of that. Yeah, I dunno much about how the world works. History, uh, yeah, a little bit outside of that, not so much so. For people like me, and I’m sure most people listen to this, are either manly men who know more than things about [00:27:00] me or women who are just as smart, who know more than about how the world works than I do.

concrete, it turns out, is a dirty. Fiery chemical process that takes a lot of energy, a lot of energy. make cement, you have to heat limestone, calcium carbonate at insanely high temperatures, 14 to 1500 degrees Celsius. You do that, so it decomposes into calcium oxide and carbon dioxide bad. For the atmosphere, it’s a chemical process known as calcination.

Calcination is fundamental to making cement, that process is responsible for about 60% of its total emissions, the all of the carbon dioxide that gets released during the calcination process. to achieve the temperatures in the kilns, you have to burn coal or [00:28:00] petroleum or natural gas. That’s another 30 to 40% of the total emissions is that process.

And then on top of that, you’ve got the grinding and the crushing and the transportation, which consume a lot of electricity and fuel. So overall making concrete is a huge carbon emissions trap. So Cemex has a brand called ua, V-E-R-T-U-A. Which is marketed as a more sustainable way of producing cement and concrete.

It’s a whole lifecycle thing. Uh, using the ground up stuff from buildings they pull down into rebuilding other things, recycling it, et cetera, et cetera. They claim that their processes can reduce carbon emissions by over 30%. Whilst maintaining the strength and durability of the product. I read a story, uh, just last month or so, it came out, um, from their [00:29:00] British operation.

They’re partnering with High Rock, H-I-I-R-O-C, a British and hydrogen company to use carbon neutro drill hydrogen. Using Hy Rock’s proprietary thermal plasma electrolysis process, which requires just one fifth of the electrical energy used in water electrolysis and captures carbon as a solid byproduct, avoiding CO2 emissions.

So they’re doing lots of stuff like that to try and reduce, um, the carbon footprint of making cement.

TK: Fantastic.

Cameron: The company started in 1906 with the founding of a business called Cemento Algo In 1931, emerged with another company, cemento Portland, Monterey. Based in Monterey, the combined entity became Cemento.

Mexicanos, or Cemex went public on the Mexican stock exchange in 1976, [00:30:00] at which point they were the largest cement producer in Mexico. Then they started acquiring companies. Mexican companies in the eighties ended up as one of the 10th largest cement companies in the world, and then they started buying companies all over the globe.

Um, they’ve had a few issues along the way. In 2006, they announced that they were buying a rinka group in the United States for

billion US dollars. United States Department of Justice brought an antitrust lawsuit against Cemex and blocked the acquisition and force them to sell off about 40 cement and concrete plants that were part of the deal.

In the mid 1990s, they bought Venezuela’s largest cement company, vens. But then in 2008, Ugo Chavez nationalized the whole cement industry in Venezuela, claiming the industry was its products because they could get higher prices [00:31:00] exporting it, and it was sort of capped pricing in Vela, Venezuela was causing industries Venezuelan construction, domestic construction.

So he nationalized all of their businesses. He did pay them for it. Um, they got 600 million US dollars in compensation and the cancellation of $154 million in debt. Then the GFC happened also in 2008. Um, they apparently were highly leveraged at the time. They had a lot of issues with debt. They sold off their Australian holdings in 2009 to a Swedish group wholesome.

Um. And you know, anyway, they’ve had some issues along the way, and this is, but talking about their ethics award last year, in August, 2003, the US National Labor Relations Board, the NLRB, that Cemex had engaged in over 20 unfair labor practices during a 2019 union election [00:32:00] involving the teamsters.

These violations included threatening, surveilling and interrogating employees, as well as hiring security guards to intimidate workers. The NLRB used this case to set a new policy that an employer who interferes with a union election will be compelled to recognize the union without an election. A national wide policy that was put in place as a result of this.

So,

TK: So how much does it cost to buy one of these ethical awards? Cam?

Cameron: Tony, I would not. I would More than you. More than you and I have. Well, more than I have. Maybe you could buy it. Maybe you should buy one for QAV. World’s most My world’s most ethical value investing podcast. No,

issues[00:33:00]

TK: But they’re good marketers and they, they put their worst, they market their hell outta their worst thing. Yep.

Cameron: and props to it was in their PR team that

you know what we need? We need one of these world’s most ethical companies awards. That’s what fix all of our

TK: of approval. Yeah.

Cameron: You know, when I think cement companies. I don’t think

TK: Ethical.

Cameron: com maybe. I watched The Sopranos too many times and I lived in Melbourne for too long, um, when, you know, too many bodies of, uh, enemies of construction companies were turning up and the foundations of Melbourne buildings and stuff like that.

Uh, anyway, um, I. I’m, I’m not, I’m not passing judgment. The company was run for many years by Lorenzo Ano, his grandfather also Lorenzo Ano, [00:34:00] um, founded Portland Monterey Company in 1920, but Lorenzo. Uh, the junior died 10 or 11 years ago. Um, interestingly though, ’cause I’ve been doing some stuff on war profiteering in my other podcast recently, uh, Monterey had been destroyed during the Mexican revolution in 1910 and was being rebuilt in 1920.

And so the company that the grandfather founded played a large role in the rebuilding of Monterey profiting. I guess from the rebuilding of the company after the Mexican Revolution. I wanna talk a little bit about the history of cement though, because, uh, this is the most fascinating part for me.

Cement is the most common type of cement in general use around the world. Look at you nodding there, like you, you’re an ex brickie or something. Like what?

TK: I’ve heard of Portland Cement.[00:35:00]

Cameron: It, it’s the basic ingredient

TK: You can buy it.

Cameron: mortar, stock, stucco, um, and some kinds of grout. Uh, it was developed from other types of hydraulic lime in England in the early 19th century by a guy called Joseph Asin. obtained a patent for it in 1824, and he named it Portland Cement, y Tony. I should point out to new listeners that Tony won several trivia contests in Australia back in the day.

So the way he’s nodding Sagely, there should not be a surprise because Tony knows lots of stuff about lots of stuff.

TK: I don’t know why its name Portland Cement, but I’m guessing it happened in Portland.

Cameron: for $50,000, Tony

TK: It happened in Portland. He discovered it in Portland. I

Cameron: where.

TK: where he lived?

Cameron: Oregon.

TK: No, uk, Portland,

Cameron: famous kind, or the [00:36:00] most, the most prized kind of stone for British architecture for centuries was Portland Stone. It was used in Paul’s Cathedral, the British Museum, hard, shiny, beautiful looking stone, and he believed that Portland cement, when it. Hardened looked like Portland Stone, so it was a cheaper alternative to Portland Stone.

You could, uh, you know, mix it up yourself rather than having it quarried, I guess. Um, his son William, so William Stone, sorry, um, was creator of this, his son Joseph I mentioned before. Uh, was the inventor of modern Portland cement in the 1840s. He created a mix with higher loam, stone content burned at a higher temperature and increased wear and tear in the grinding process, which made it stronger, harder.

It was a bit like the $6 million man of cement. We can. is [00:37:00] stronger, faster. It’s for people that were around in the seventies get that reference. Um, we have the technology to build him harder, stronger, faster. Now cement, uh, can be traced back to ancient times. There’re actually. occurring deposits of cement are 12 million years old that were found where there was an occurrence of oil shale right next to a bed of limestone had been set on fire through natural occurrences, and it created cement.

But Chemically Cement is a product that includes lime as the primary binding ingredient. in ancient times, the Babylonians and the Assyrians used bitumen or, or pitch to bind stuff together, alabaster slabs and things like that. Then the Egyptians used burnt gypsum. The, the basic, uh, foundation of chalk or plaster of Paris.[00:38:00]

The ancient Romans used a lot of cement and concrete, though things like the Pantheon I mentioned before or the, the Traian baths were built with cement and concrete still standing today. The Pantheon, my favorite building in Rome. I, I went there when we went on our trip to Rome, took my mother there.

She’d never, it was her first trip to Rome. just something. Marvelous. Now, Pantheon geeks will know, of course, that the original Pantheon is not the one standing today. It was built by a gripper, the best friend anyone ever had, Marcus SIUs, SIUs Gripper and a Claus, Augustus Octavian, or Augustus’s best friend, without whom Augustus probably wouldn’t have survived the first couple of years.

Agrippa was his go-to get shit done. Guy won all of his battles, held his fleets, then ran Rome for him until he died. Sadly, [00:39:00] uh, he built the original Pantheon, but it burnt down and, uh, was rebuilt by Hadian. Probably dedicated around 126 ce. And rebuilt in concrete, and it still stands to this very day, largely because the Christians took it over and turned it into a church.

But, uh, anyway, it’s an, it’s an amazing, impressive, a building still has the largest re unreinforced concrete dome anywhere in the world. Built in 126 ce. Um, and the interesting thing about Roman concrete, one of the interesting things is it’s more sustainable than modern concrete. ’cause they obviously, they couldn’t burn it at those sorts of temperatures, but it was made with about 85% volcanic ash.

So they didn’t need to burn their own limestone, they just went and dug it up outta volcanoes and [00:40:00] that. And it used to had a lot of volcanic ash and volcanic rock in it too. And there’s been lots of studies I’ve seen in the last decade or so says that it is, uh, able to hold up under earthquakes a lot more because of the rock component when they’ve done.

I don’t know, whatever sound wave scans of it, some sort of sound wave X-rays, Sonic X-rays, they can see all these chunky rocks in it that give it some sort of, uh, extra stability. Then, uh, the modern concrete has apparently. Um, modern developments of concrete cement and concrete started after the industrial revolution and it was driven by three main needs, hydraulic render.

Hydraulic mortar and just stronger concrete in general. Now, again, being an idiot, I, I think of hydraulic as being pumps or things driven by water power. I didn’t realize that hydraulic also [00:41:00] applied to concrete, and when you apply it to concrete, it’s about. application of water in the process. again, something else I didn’t really understand is that concrete doesn’t dry.

It hardens big difference and it, it requires water. So when you mix water the cement the other ingredients that you put in it actually, uh, there’s a chemical reaction. The calcium. Silicates and the illuminate that are in the limestone after it’s been broken down, react with the water and create crystallized, um, structures.

Hard, stable, crystalline s instructions structures that require water and can even be created underwater. I know the Romans used it to build. facilities, they, there’s underwater concrete, um, off the coast of Italy that [00:42:00] has survived. So you can actually build concrete underwater and it will harden as it would on land because it water is a part of the process.

So fascinating for me and everyone else is probably rolling their eyes going, you’re such an idiot. We already knew this. We’ve known this since we were kids. screw you. I learned something today and I’m not ashamed of that.

TK: Well done. That was interesting.

Cameron: By the way, if I told you that Chrissy’s decided I’m autistic.

TK: Is that why she keeps putting the brutalist architecture book in front of you?

Cameron: Hmm? Yeah. Yeah. Apparently I’m autistic. She’s decided.

TK: Mm-hmm.

Cameron: CX by the numbers. Now this is where we have to flag the fact that we think the numbers are bad.

TK: Yeah.

Cameron: so one of the key long-term listeners will know, new listeners may not have picked this up yet. One of the key things that we look at is price to operating cash flow.[00:43:00]

And when I was buying this for our portfolio last week and I ran the buy list, I did see that as price to operating cash flow outta stock. Wikipedia was insanely low, 0.01, basically means it would take several days. Uh, uh, for the, the. Company to generate enough cash, enough cash flow per share to pay for the price per share, which did surprise.

I looked at it, I went, whoa, that looks weird. then I had a look at its F score and some other things in stock of Peter and they looked healthy and it looked like it was doing okay. I looked at its operating cash flow looked, it was doing one and a half billion dollars of operating cash flow. 1.8 I think.

I was like, eh, it’s making money. Uh, I didn’t think anymore about, then I get an email from Tony this morning going, oh, on it’s prop calf is actually 14. what? No. And then I did the numbers and surprisingly long time listeners will be surprised by this. Tony was right and I was wrong. [00:44:00]Um, that’s never happened before.

So. Edia have got a problem with their prop calf number here,

TK: I think so.

Cameron: is, how many other stocks in my buy list have that problem? First thing I’m gonna do when I get a chance tonight is to run some analysis on their prop calf numbers, because when you do the prop calf manually, you look at their operating cash per share, and you look at the share price.

Yes, it comes out as 14, not 0.01. Having said that, their market caps around, uh, 26 million. Um,

TK: Billion

Cameron: is it? Well, again, it says, oh yeah. Million USD No, hold on. 26.2 million USD it says here.

TK: for the market cap of a big company like Cemex.

Cameron: know, right? Why does it say million? It should be billion. It should be 26 billion.[00:45:00]

TK: Hmm.

Cameron: Average daily trade is 61.7 million. So

TK: So

that the whole company gets traded three times every day.

Cameron: three times every day. Yeah.

TK: They put it in the cement mixer. It goes round and round.

Cameron: I don’t know. I dunno if I can trust these numbers. anywho, uh, in terms of our scoring, leaving outside the prop calf for a second, uh, quality rank on stocked is 63. Um, the F score is pretty good. It was, uh, let me see, what is the F score? Seven. Pretty good for an F score. Um, I score, you know, so again, leaving aside the, the prop calf stuff, it scored well for us on score.

The price is. Higher than TK IV number one, which is a dollar IV one. Our [00:46:00] IV two though is $6 50. It’s lower than our, uh, IV number two, so I scored for that. Its price was less than Book plus 30 had an uptrend. Um. It had price is less than book as well of course, as well as prices less than book plus 30.

Growth over P was greater than 1.5, so we couldn’t score it for that. was greater than bank debt. Uh, sorry. Yield was less than bank debt, so I couldn’t score it for that. Um, I did score it for prop calf, of course, which turns out to be a problem. So anyway, it ended up with a quality score of 64% and a really good QAV score.

But on second thoughts with the prop calf, it probably, you know, wouldn’t have got up there, so it shouldn’t be on there. Also, one thing I didn’t do last week, and I did do this morning was down a commodity price for cement. Uh, because it’s not one of our normal commodities that we look at, uh, because we don’t have a lot of big cement companies, uh, [00:47:00] our buy list.

In Australia, I did find a commodity price, and in fact, cement is in a cell. So it’s, uh, again, if I’d known that last week, I wouldn’t have bought it. So, w with that, I’m probably gonna sell it, I think, and get replace it with Tony.

TK: I think it’s worthwhile asking, stocked to explain the operating cash flow discrepancy.

Cameron: Yeah.

TK: Um, but yeah, I don’t disagree with you. The only question I had on what you just said was, I thought the forecast earnings per share growth was reasonably high. Just try and look it up now. Uh, anyway, that’s a minor thing. Uh

Cameron: got, got a no for greater than twice the price Forecast forecast. [00:48:00] Earnings per share for one year is 0.67.

TK: Okay.

Cameron: high.

TK: So 67% forecast.

Cameron: Yeah.

TK: And then if you, if you put that over the pe, which is about seven, it’s gonna look pretty good. I, anyway, check that one.

Cameron: Yeah, I will. Any who? Um, we have lost a little bit of money on it, like it’s down two or 3% since I. Added it. Uh, I bought it at $6 seven. It’s down to 5 91. I think I’m gonna cut my losses on it though. Now that I have more information or I’ve actually paid more attention to the information, let’s put it that way than I did last week.

TK: Actually, you’re not gonna lose much. ’cause stocked is saying it last traded at $6 and 6 cents.

Cameron: really, that’s not what my spreadsheet says. My spreadsheets really, uh. My stock history is really not wanting to update today. [00:49:00] All my prices will go. All right, well, so there you go. I will dump that. I’ll get out of it neutral and I will figure out something else to replace it with and um, will double check the prop calf before I do that.

TK: Good.

Cameron: Well, that’s it. That’s all I’ve got. But I hope, I hope somebody out there something about cement and, uh, concrete and enjoyed that. Just in case you’re in a trivia contest and somebody

TK: Hmm. And most importantly about ethical awards.

Cameron: Yes. Now ethical awards work.

TK: Yep. Terrific. Good.

Cameron: All right. Thank you, tk.

TK: Thanks,

Cameron: week.

Talk to you next time.

TK: Bye.

Cameron: All right.

TK: on. [00:50:00] [00:51:00]