QAV US 3

Cameron: [00:00:00] Welcome back to QAV, the US Edition episode three. is currently the 29th of April, 2025. My name is Cameron Reilly with me coming from his palatial, uh, golf Hut in Victoria. Tony Kynaston. How are you? Tk.

TK: Oh, I am good, cam, how are you?

Cameron: Good. just did. Now talking about the Australian market, now we’re gonna talk about the US market.

TK: far

Cameron: you say about the US market? Well, yeah, look, it’s uh, still crazy times. Um, bit crazier over there than it is here. You’ve been, uh, paying a little bit of attention in the last week. Do you have any insights on what’s going on in the US market? Tony?

TK: Well, I think we just sneaked this show out now ’cause the market was up [00:01:00] last night. Um.

Cameron: Yeah.

TK: before people lose their minds again, when it goes down again with, with something going on over there. As I said before in the Australian show, we’re, we’re about to go to the polls here in an election and the market care less.

Cameron: Hmm.

TK: is intently focused on reading the uh, white, the White House tea leaves in the US market

Cameron: Yeah.

TK: completely

Cameron: market. Both the Dow Jones and the s and p 500 are sort of up, uh, this week, as is the Australian market for reasons that aren’t very clear. I mean, nothing has really changed. I mean, the Trump administration seems to be pulling back a little bit on the tough tariff talk and claiming that the Chinese have reached out to them. Chinese are like, no, we haven’t.

TK: No, it wasn’t us.

Cameron: Yeah. Uh, but I don’t know. The market seems to be a little bit more optimistic over [00:02:00] there. It’s almost not quite back to where it was before the tariff announcements, but um, it’s certainly getting back up to towards there. Yeah. Liberation day. But of course, as our longtime listeners, uh, would know from the Australian side of things. We don’t really pay that much attention to what’s going on in the markets. Uh, it doesn’t really affect our investing strategy much at all. It just means that sometimes we sell more than other times. uh, really we’re just looking at individual companies, either the stocks in our portfolio and looking to see whether or not they breach one of our selling triggers.

And if they do, we sell them and then we see what there is to buy based on our. Checklist, the framework that you’ve developed over the last 30 odd years. And, uh, as a, as a, I guess, an indication of that I can talk about our [00:03:00] portfolio. I. Because I did start a US portfolio a little bit over a year ago, and uh, it’s doing okay.

It’s picked up a little bit all time, so. Uh, started it in, uh, September, 2023. It’s, it, it’s currently tracking it around 53% return over that time the s and p 500. About 24% over that time. At one point before the, uh, US presidential elections, it was up around a hundred percent our portfolio. So Trump has managed to halve. in whatever that is, six months since the election. Good job. Hmm. But if I look at the last, uh, sort of month, I. [00:04:00] We’re down about 3% in the last 30 days. The s and p 500 is down about 1% over that same period of time. So I’ve had to sell a few things. I’ve had, I’ve struggled buying things over there.

Two recently and, um, the, this week I bought something and then sold it immediately, uh, like a day later. And I’ll tell you that story. When I get to do my pulled pork, my deep dive in a minute. Do you have anything you wanna share before I get into my deep dive of the US market? Tony, do you wanna talk about the, uh, analysis stuff?

TK: yeah,

I.

did. Um. The only thing I’ve got to share is the data dump you gave me on the weekend of the differences between us and stocks and the way that market works and the Australian stocks and the way our market works. And I thought it might be worthwhile just racing through a summary of that. Uh, it’ll probably be of interest to the Australian listeners [00:05:00] who will listen to this, but it’s gonna be, I guess, illuminating for the US listeners to understand where we come from.

And that we’ve just taken the Australian checklist and used it on American stocks, and seems to be working well, but we may modify it over time once we get more experience investing

I think

the, the, basic difference, um, that you highlighted was the accounting standards are slightly different.

in America, they follow the U-S-G-A-A-P standard, the General Accounting Rules standard, and we follow the international called the IFRS standards. And they’re they’re, they’re probably fairly similar. I mean, they all have balance sheets and. P and l statements and cash flow statements. So at a, at a, you know, general level, they’re the same.

Some things which are different are account how things are accounted for, like research and development. [00:06:00] So, um, I. They’re treated differently under both accounting standards. Uh, US tends to capitalize or has to capitalize us. Companies have to capitalize their research, sorry, has to expense their research.

Australians have the option of capitalizing it so that that’ll just mean that, uh, one’s, you know, Australian balance sheets might have slightly more intangible assets and US and losses might be depleted by any research going on. Hasn’t really been an issue in the Australian market because we don’t do a lot of research.

Um, primary research in Australia, we’re uh, financial mining sectors, um, heavy in Australia, which again is a difference with the us. So, um, there are a few biotech stocks. Um. There’s one big one, CSL, which does some research too, so it affects them. But, uh, overall it doesn’t, you know, how much a company spends on research and where it’s accounted for doesn’t play a big [00:07:00] part in their investment decisions in Australia.

Cameron: Particularly for us value investing, the biotech stocks are either have no cash flow ’cause they’re just hype and research and we don’t go near them or they have found something and they’re hyped. Hyped out of the stratosphere and their price to operating cash flow is ridiculous and we won’t even look at it.

So don’t really end up on our buy list a lot.

TK: Yeah. so, so a lot of these differences are, I guess, are nuances. And you’re right, if it’s, um, I, I, if there is a difference, it may not appear on our checklist anyway because the, uh, you know, we are value investing and the companies that this will apply to are in the tech space or the biotech space, and they have, high PE ratios.

Um, bit of a difference in the way you account for inventory in the US versus Australia. Uh, again, there’ll be some differences, which I’m not going worry too much about. Um, [00:08:00] they are different. I don’t think there’ll be a big, uh, impact on the checklist. US companies have to use first, in, first out to to, um, uh.

Value their inventory. Australia has an option of doing that, but they often use last in first out, so there’ll be differences to asset valuations and their p and ls because of that. Um, US has quarterly reporting, which is a. Big difference to Australia where we have, uh, half yearly reporting, um, to make up for that, Australia has a continuous disclosure regime.

So if you think, if you’re a, a board of an Australian listed company and you think that something’s happened, which I. If it was known would materially affect the share price, you have to disclose it. Now, that doesn’t apply in the US although there are similar rules. But basically companies, because they’re four times a year, will generally wait for [00:09:00] a quarterly announcement and then up any sort of, um, market moving statements with that.

Um, and there is also, of course, as we found out recently. Our regulator, um, which is the company called the ASX, who runs the market here, um, has, I think, taken their eye off the ball a bit with continuous disclosure. So, um, there’ve been a, a couple of surprises we wouldn’t have expected to see in the past that have come out during our half yearly reporting seasons.

Um, so there’s that difference. another difference in Australia is it’s, it’s a little bit more in, uh, individual shareholder friendly. So America allows, um, dual stock holdings or dual classes of shares. So you can have the Murdochs with preferential shares or the owners of Alphabet with preferential shares controlling, um.

The voting in the company, even though they don’t control by majority the number of shares [00:10:00] in the company in Australia, that’s not allowed. So, you have one share, you have one vote. Uh. So that, that’s the difference. Um, what else? There’s a couple of other issues with re regards to shareholder activism.

I think it’s fair to say the US has a, um, um, a legacy or a history of shareholder activism, which isn’t seen as much in Australia. are shareholder activists here, but, um, they don’t, uh, they tend to work behind the scenes a lot more, engage with the board or engage with large shareholdings. That I think, uh, that’s probably, um, a legacy of, uh, of our superannuation system where there’s a lot of large institutional holdings which take, um, which take stakes in Australian companies and therefore you’ve got a kind of appeal for them if you’re an activist taking a stake, um, to convince them that you should all band together the change management.

And then generally you try off and see management and convince them make a change. ’cause you know you’ve got a [00:11:00] large, uh. Holding in the company. Um, we still, we still do have class action lawsuits here, which they do in the US as well. So that’s similar. Um, we, I. Separate the role of chairman of the board compared to CEO.

And that’s a little bit different in the US where you have, uh, a lot more executive chairmans than you do, um, in Australia. So you can do it in Australia, but, um, to be in smaller companies, uh, just to kind of, um, save on costs, I guess, you know, employ a chairman and the. Um, only a chief executive officer, but generally the governance principles in Australia is the board is meant to be overseeing the, the management.

Um, and that that can be a little bit blurred in the US and then, you know, um, there are obviously differences in the liquidity and the size of the US market versus the Australian market. So be interesting to see. Uh, how it goes for us as value investors. A lot of the companies we [00:12:00] look at in Australia don’t get much endless coverage because the market is, um, uh, focused on liquidity and focused on the top end of the Australian market, whereas in the US liquidity goes a lot deeper.

Um, and so you can get coverage all the way down to, to companies and what, you know, what would be a medium cap company in Australia is probably class as a small cap company in the US anyway. Uh, and, and therefore gets, um, coverage. So small caps get more coverage in the US because they are larger than they are in Australia.

So all those things may be an issue for us, but it hasn’t affected our dummy portfolio to date. So I’m not sure that will play out, um, in our investing with the US stocks. Uh, but probably one of the biggest differences between the US and Australia in terms of how the companies. Operate and how investors focus on them is Australia has the franking credit system, [00:13:00] so dividend imputation, and if US listeners don’t know what that is, ’cause you don’t have it in the us it’s a, it’s a double taxation regime.

So Australia, when a company pays their corporate tax on their profits then distributes a dividend, the. And recipient of that dividend doesn’t then pay tax again on that dividend. And I know you, there is a, um, a few rules about that in the US as well. So, um, some dividends that get paid do get taxed preferentially, but in Australia, you get a, a either a rebate for the tax the companies paid, or if you, if your tax, your personal situation is you don’t pay as much tax in a percentage basis as the company does, then you get a.

Um, a, you get a, a rebate from the, the government for the tax that’s already been paid, so you get money back in your account. So, um, that has meant over the years, coupled with our superannuation industry, again, which is [00:14:00] different to us. Um, if I can quickly summarize, in Australia, um, by law, a salaried worker or an employee will get 11% taken outta there.

Earnings and put aside into compulsory superannuation funds. you can set up your own fund, um, and run it yourself and invest yourself. But I probably, the vast majority of workers will use the superannuation industry, which is either broken up into, um, for-profit and not-for-profit sectors. but they, they then have large resources which are pooled towards the retirement incomes of, um.

Of companies, it was set up, um, to, um, reduce welfare payments to retirees. and, and by the way, of the pension, Uh, so there are some good things about the system, but what it’s meant is that Australian companies do pay a lot more dividends than American companies. [00:15:00] Um, again, to help retirees fund their, their retirements.

1. Um, via superannuation, but also to take advantage of the franking credits, which are, um, uh, payable in Australia, but not in the us. US companies tend to do a lot more share buybacks. So, um, similar sort of thinking, I guess is how do we return. Uh, profits. We don’t need to reinvest in the company for growth.

we can either pay it off as a dividend back to our shareholders, or we can buy back the shares, which will mean per share goes up and therefore that will benefit the, the shareholders that remain, uh, in a similar sort of way to paying them a dividend. are two skills of thought that says one’s better than the other, but basically both share markets have done the same sorts of returns.

you look at a hundred years. Sort of performance o of them. a sort of, both doing about 10% as kind of 1% difference. [00:16:00] I think the ASX has come out in front, and suggests that’s probably because of the franking credits, but really I think it’s line ball over the years. Um, that’s in a nutshell the differences between the a ASX and the um, US, uh, stock markets.

Cameron: Out of that. On first glance, Tony, is there anything that you think we need to tweak in our checklist to accommodate any of those differences?

TK: nothing

mind, and it reminds me of the times in Australia when the accounting standards have changed.

Cameron: mm-hmm.

TK: recent example was, uh, the treatment of leases. So again, they moved from one, style of accounting for them to another style, which had an impact on balance sheets and p and ls.

And everyone said, well, we, we had a question asked, should we change our checklist because of the effects operating cash cashflow? And it didn’t really [00:17:00] affect it. You know, it may have bumped something up one point on the checklist or down one point on the checklist, but it wasn’t a, a big difference. And as you’ve outlined with your portfolio performance report, our investing to date in the us, which has been going for how long?

12 months. 18 months.

Cameron: 18 months

TK: 18 months, yeah. I haven’t seen anything to adjust in the checklist so far.

Cameron: Mm All right, well thank you for that. Uh, we’ll keep an eye on it. And I guess one of the things about our checklist is it is flexible. We can modify things as we need to, but so far it seems to be working quite well as is, and we don’t want to mess with it. Unless we have to. So one of the things that we do on our episodes usually is what we’ve, what we call a pulled pork.

It’s a deep dive. You know, if you haven’t, uh, come across our stuff before, generally speaking, QAV as an investing system [00:18:00] tends to avoid getting too deep into what a company does or what a sector is involved in. The, one of the great things about the system, as Tony developed it over the years is that we let the numbers do the talking.

We look at the fundamentals of the company, how much money they’re making, you know, whether or not they’re making more money more ca they’re generating more cash flow year after year after year. Good. The quality of management, the quality of the business, how well the business is performing. And then, so it’s the quality side of it.

The value side of it is, can we buy it, it as, as a, at, can we buy it at a discount to what we think a fair valuation the company would be on a. Per share basis. it doesn’t really require us to get too deeply analytical about a particular business or a particular company. That said, it is [00:19:00] fun to open up the doors of one of these companies that we’re looking at and learn a little bit about them because. are curious who are, who are these guys? What do they do? What kind of business is this? Not really because it’s part of our standard investing methodology, but I like learning about the businesses just when you do the Paul Pork in our Australian show each week, because it’s an opportunity to something about.

A,

TK: Yeah.

Cameron: a, a sector what, what people are doing and why businesses are doing well. So we tend to pick a business that’s on a buy list. Maybe we’ve added it to the portfolio recently, and we ask ourselves a question, who are these people and what do they do? So I was going to do SKM. as my pulled pork, which is SK telecom telecoms company in South Korea that happens to be listed on the New York Stock Exchange. I added them to our US portfolio over the weekend. I. Because, um, I did a buy list [00:20:00] on Friday, Saturday and was looking for stuff to add. was one of the stocks that looked good when I did the numbers. However, uh, when I went to do the pulled pork on them last night, I saw that the weekend, Monday in South Korea, before the market opened in the us they had come out and said. There had been a massive data breach of their entire network and all 23 million of their customers details had been and their share price had fallen 7% in the Korean stock exchange. But this is before the. US markets had opened so I jumped in and I sold them before the US market opened, they did go down 8% today in when last time I looked in trading in the New York Stock Exchange.

Now it’s one of our normal sell triggers. they were at the same price as they were when I bought them. [00:21:00] So I was like, I’m out. I’m outta 5,000. And I got in and out and put in my cell order and got out. So before, before it went through. So backed that one out before it happened basically.

TK: Well, that’s prescient because it has fallen below. sell price for us to sell using the the, uh, ator.

Cameron: Really? Yeah, I, I don’t think it was very high above it in the first place, uh, when I bought it.

TK: Yeah.

Cameron: But I know I dropped quite a bit today. I checked it just before we went to air. So the other stock that I added is the one I’m gonna do. It’s DAC. DAC is D AOS Corporation. It’s another shipping company. Um, on I think our first episode or second episode, we did Zim,

TK: Mm-hmm.

Cameron: Shipping Company.

Our US portfolio has a lot of shipping companies and financial services companies on it, and as we’ve explained in other episodes, that’s not. Through a a design, but we [00:22:00] do find different times that our portfolios tend to be weighted in this sector or that sector just because those sectors tend to be undervalued for some particular reason, we were in shipping pre-Trump. And his tariffs. Uh, there’s been a lot of obvious, uh, problems in global supply chains over the last few years. Covid, Ukraine, war, et cetera, et cetera, stuff happening in the Red Sea. Um, and there’s now more things happening with tariffs, throwing a spanner into global supply chains and what the future of them holds. But again, we don’t forecast. Part of our system is we don’t forecast what the future holds. We look at the numbers as they are today, and it’s a great quote. Can’t remember which one of the great it might have been Peter Lynch, somebody like that said he who invests with the crystal ball [00:23:00] ends up eating broken glass or something like that.

TK: Yeah.

Cameron: W we do not try and predict the future. We just look at what, what seems to be value today. And the way I’ve always understood it, if they’re a well run business, they’re probably gonna do a pretty good job of navigating the waters, the economic waters, as they move forwards. We’re putting our faith in them if they’ve been running the business well

TK: Correct.

Cameron: recent. Years. Um, we only look at the last few years, but if they’ve been running it well, they should. You know, have a good chance of running it well into the future. So anyway, Dan aos, now, they own a bunch of container ships. they’re based outta Greece, I should say. First of all, um, not Israel, this time Greece, but listed on the New York Stock Exchange. They own a bunch of container ships and they sell long-term charters to their vessels, to a range of liner companies. they’re [00:24:00] kind of the back end of ship transport. I guess. They, they buy them, they build them, they buy them, they operate them, and then they lease them out. Long term charters mostly.

There’s a few short terms in bare boats things, but it’s mostly long terms. According to their recent 20 F filing, and for Australian listeners, that is sort of the equivalent of an annual report for foreign listed companies in the US. They issue a 20 f. As of February 28th, 2025, anos had a fleet of 74 container ships aggregating four thousand four hundred and seventy one thousand four hundred and seventy seven tus and 15 under construction container ships. Aggregating 128,220 [00:25:00] tus, which makes them one of the largest container ship charter owners in the world based on total TEU capacity. Tell everybody what TEU stands for, Tony.

TK: I did know it. It’s used for unit, it’s basically the, basically the, um, the cargo box side size.

Cameron: The Ray knows by now, after working with me for 15 years, that if there’s an acronym.

TK: Yep. I.

Cameron: If no, then if there’s an acronym that’s gonna be used in the show, be prepared.

TK: Yeah.

Cameron: I’m gonna throw it to him to see if he can Google it quicker. stands for 20 foot equivalent unit. I had to look it up. I didn’t know what it was.

20 foot equivalent unit. It’s a standard unit of measurement in shipping to describe the capacity of container ships container terminals. One TEU is one standard 20 foot long shipping container. [00:26:00] A shipping container in Imperial is 20 feet by eight feet wide by eight and a half feet tall in metric that’s a little bit over six meters long, 2.43 meters wide and 2.59 meters tall. a 40 foot container is two tus. So a container ship fleet, like, uh, these guys contains about, as I said before, 74 container ships all up. 53 container ships are deployed on time charters, they have two container ships deployed on Bareboat Charter, and the rest are on shorter term. Leases a Bareboat charter for people like me who dunno.

What that is, is when you charter out a ship nothing on it, no crew, no [00:27:00] supplies, no maintenance, basically just an empty ship. the charterer is fully responsible for everything. Hiring the crew, operating the vessel, maintaining it, ensuring it. Fueling it, handling the paperwork, the whole kitten caboodle. So the company’s headquarters are in Pere, Greece, the main harbor of Athens. We’ve, you and I have been to Athens. Um. Separately, but, uh, you, you bowed out of our European tour when I took a bunch of people to Athens, but, um, reus, I got, I got, uh, what you mugged, not mugged. I got, uh, pickpocketed in Athens. Must have been the most disappointing pickpocketing of their lives. Those guys, they spent half an hour picking my pocket to get like 70 euro or something. Um. [00:28:00] The, uh, peu is the main port of Athens, and it has been since the fifth century. BCEI talked about it a lot on my Alexander, the Great Series. peu played a big role in the various revolutions that Athens had back in the day.

In the good old days, the company is named after eos, the Greek mythological figure who. Was the king of Libya in Greek mythology. His identical twin brother was Aus, the king of Egypt. And if you remember your Greek mythology, Tony DEOs had 50 daughters and Egypt had 50 sons. About half as good as Elon Musk stories now are starting to emerge and say that Elon Musk has got a hundred children.

Have you seen those?

TK: No.

Cameron: Getting his, getting his sperm out there doing its job? Uh, ’cause he wants the world.[00:29:00]

TK: when he, when he walks back, his involvement with the US government, do you think he’ll have time for Tesla still or is he gonna go and say some more kids?

Cameron: Oh, I don’t think he’s personally involved in siring the kids. Most times it’s, uh, mail order. I think uh, sending, sending his sperm out probably a drone that lands on them. Um,

TK: drone

Cameron: anyway, uh, Egypt just wanted to marry his sons to S’S daughters

TK: because he had

Cameron: daughters.

TK: and Yeah, he had 50 and

Cameron: 50.

TK: Mm-hmm.

Cameron: Yeah. And you know, little bit of in, in breeding never did anyone any harm. S’S daughters didn’t wanna marry the sons. So DEOs made the very first ship in history. He invented shipping DEOs according to Greek mythology, and he and his daughters all [00:30:00] escaped. But then. They figured out there was gonna be a war. So they went back and the daughters all married the men and then murdered all of them. Well, 49 of them murdered their husbands in the middle of the night, chopped their heads off and buried them, one refused to because he was nice to her. And that’s a whole other story.

But anyway,

Deo,

TK: What

Cameron: of that is DEOs built the very first ship.

TK: What was that first cruise ship call? That wasn’t the um, p and o Oriana, was it? With 50 50 daughters on it.

Cameron: There’s a love boat. That’s what it was. Yeah. So any who, the company was founded by Dimitri Tus in 1963 when he bought his first ship. And, uh, he ran it for a very long time. Just built and built and consolidated and built. And, uh, they floated, I [00:31:00] think in the eighties or something like that. Uh, but the company’s doing very well, as I said before.

They’ve got, um. 73, 74 ships, all, of which are in fixed time charters, which might help their revenues. Uh, in the short term, depending on how many of the companies that have those wanna renegotiate or go outta business. Depending on whether or not there even are any tariffs a month from now, who the hell knows whether there will be or won’t be, but. Breaking it down. The sort of factors that affect their revenues are number of vessels in operation in their fleet. Some are, obviously, they’re not all operational all of the time. Some are out for maintenance and those sorts of things. The charter rates, how well they can sell them and keep them actively employed. The [00:32:00] utilization of the fleet their expenses, uh, keeping their expenses down as much as possible Now. They seem to run a pretty tight ship. However, side note, when I was researching them about a year ago, one of their ships was banned from Australia for three months being unseaworthy. I. A little bit before that, they had another ship, the Sewers Canal, that was subject to a prolonged detention by the Australian Maritime Safety Authority. This is in January, 2004 for not being in good condition either. The second one that was banned was called Peace. And, uh, Mr. Withall, who is a representative of the Maritime Safety Authority here said state of peace was so poor, could have been talking about, I don’t know, just the world right now was so poor that it represented a very [00:33:00] real and unacceptable risk to the safety of seafarers on board and Australia’s marine environment.

Ships cannot be operated in this unseaworthy state. State, allowing a ship to fall into a state of deterioration is completely unacceptable. There are no excuses for this level of neglect. That is why we have taken the next step of banning this ship from entering an Australian port again for three months. Further action may be taken against the company itself. Should D or shipping continue down this trajectory of operating unseaworthy ships. So he did not hold back Mr. Withall anyway, that was the only negative news I could find about them in their unseaworthy ships. Mr. Withall scathing.

TK: learnt, their lesson and they’re all

seaworthy now.

Cameron: Now o obviously drilling down [00:34:00] into the, you know, I said we don’t, uh, predict, we don’t project, but there obviously are a lot of things that, you know, with tariffs that could impact shipping businesses and container businesses that, as I said earlier, have already had sort of a rough run he had the first Trump trade war with China in his first administration. That sort of continued to some degree during the Biden administration. We had the Ukraine War still going on. We had issues in Israel and the Red Sea and the Houthis, and there’s, been tensions affecting global supply issues. And of course. tariffs are gonna make imported goods into the US more expensive just be less of them if they, people just stop buying it, um, into the company, which means container shipping companies are gonna be in the hot zone for that.

They’re [00:35:00] gonna have less business, or they’re, they’re people chartering their ships are gonna have less need for their ships. There could be flow on effects. For companies like Dan aos, they do. have long-term contracts now, but everything is up for negotiation and people try and get out of contracts obviously when times get tough, uh, and all those companies just go belly up or go bankrupt or whatever, and that can affect their revenues. And, and then even if they don’t do that, it might mean if this tariff war and this decoupling the West and China continues, that when those long-term charters are up for renegotiation, they may be at lower rates. There may be fewer of them. I guess the other difficulty for this company might be that if it, it’s already got 15 ships construction out of China.

I [00:36:00] believe, uh, you know, you can end up with too many ships. enough. Charter contracts, not enough cargo for the ships. Ships could get idled or scrapped. There’s a whole bunch of things and, and back in Trump’s first term global container shipping rates did fall. Companies saw lower rechartering rates, reduced volumes, higher idle fleet percentages, so be some heavy, heavy wins coming for these guys that said. I ignored all of that when I bought them the other day because it might happen. It might not happen. Trump’s tariffs could all disappear tomorrow. Who knows?

TK: All there’s that, but there’s also, um, you know, all that stuff’s baked into the share price. And we, track the sentiment and we have our, we’ve calculated our price to get

So if, if. Any or all of those [00:37:00] things come to pass, it’ll be reflected in the share price and the share price will fall below our trigger and we’ll sell.

So

Cameron: Yeah, exactly.

TK: deal with predictions. But I mean, you, it’s a good summary of what’s going on. I mean, we’re seeing, as we we’ve said before, a decoupling of international trade. So, um, that’s got. You would think affect these kinds of companies, but given that they’re on our valued buy list, it’s probably factored into the share price.

Cameron: Yeah. Yeah. And I, I, I think, you know, that’s one of the reasons we have a lot of shipping companies on our buy list is they’re facing some. Challenges, and they’re not the sexy kids on the block, but that’s when we like them, right? They all, of particularly if they’re making money,

TK: sexy kids are expensive.

Cameron: you should know.

TK: We’ll, we’ll, we’ll take the Greek kid down down the road.

Cameron: Why with the mono brow? Let’s get,[00:38:00]

TK: The ships.

Cameron: uh, so look, they’ve the businesses. Been doing quite well. If I look at the total revenue line, I’m in stock Edia now. Total revenue over the last five years. So from 2019, they did $447 million in revenue. up to 4 62 in 20 26 90 and 20 21, 9 93 in 2022. a little bit in 2023. 9 74. 9 74, 2024 went up over a billion.

One, uh, and 14 million. projections for 2025 is around about 1,000,000,040 6 million, and then the projections for 2026 actually dip a little bit, but they’ve had great growth over the last five years. They’ve more than doubled their revenue over five years, their operating [00:39:00] profit. Has followed a similar sort of trajectory, 201 million in 2019, up to 541 million in 2024. Uh, that’s their operating profit. The net profit has gone from 131 million in 2019 to 505 million in 2024. Did go up over a billion in 2021, which is insane from 131. To a billion, but I assume, you know, there was a lot of ships that were being built at various stages there.

TK: Well in

Cameron: uh

TK: So you raising,

a good point.

you know, as we’ve said, as you said before, you know that the world would’ve been pulling its hair out during covid about what was gonna happen to shipping companies. But these guys who’ve seen it all before and been through downturns in the industry, had been able to manage their way through and survive and prosper.[00:40:00]

And that’s one of the benefits of, of the quality side of the QAV methodology. We’re trying to find who’ve been around a long time and have been through cycles and know how to manage their way through downturns if

Cameron: Right.

TK: Yeah.

Cameron: The earnings per share has also gone from about $8 in 2019, up to $26 in 2024. Again, like the net profit, as you would expect, it sort of spiked a lot higher 20. 21 came down 20 22, 20 23. But, um, you know, it’s come a long way. In the last five years, their operating margins have, uh, gone up a little bit, 45%, 2019 to 53% today. The dividend per share was nothing back in sort of the Covid era, but is now looking at. Last year it [00:41:00] was, uh, $3 25. The forecast for this year is $3 40. Cash on the balance sheet has gone from 139 million in 2019, up to 514 million in 2024. Like every metric that I looked at, uh, ran through a checklist, looked pretty good.

I’ve got the, got the checklist here. I’ll go through the, the scoring. Um. a start, their average daily trade is little over eight and a half million. for the US that’s a small company For us here in Australia, that’s a very large,

TK: Yeah.

Cameron: average daily trade. Their quality rank on stock, edia is 78. Which is pretty strong. I scored them a one for quality rank. I scored them a one for their stock rank. I scored them a one for their F score, a negative one [00:42:00] for their Zed score. Penalized them on the Zed score, but it didn’t really make much of a difference price.

TK: Zed score outta the checklist. Didn’t we have

Cameron: I, I. Well, no, I decided to penalize companies if they had a bad Zed score, so they get a negative one.

Sort of a slight tempering of financial health. But, you know, if, if everything else is good, a negative Zed score doesn’t really seem to make much of a difference on the overall score. Their price, uh, is um, below our first. Intrinsic value metric. It’s also below our second intrinsic value metric, our IV one and our IV two. It’s also below Book plus 30. They do have a positive uptrend, so they got a score for that. Don’t have a new three point up turn. Growth over PE is not greater than 1.5, so I couldn’t score them for that. [00:43:00] But their book value growth is positive. Their PE isn’t less than the yield. The yield isn’t higher than the bank debt. Um, their forecast IV is not great. Oh, is greater than twice the share price. So I scored them for that. Their price to operating cash flow, obviously is less than seven, whether I use our number or the Wikipedia number. So they got a score for that. So they ended up getting a quality score of 79%, which is pretty good.

And then their QAV score was 0.33. They weren’t at the top of the buy list however, but um. I did a buy list on Friday, our time, I think it was, and then I sat down over the weekend to, I sat down like on Saturday to buy some stuff, to get ready for [00:44:00] when the markets reopened. And um, a lot of stuff had dipped.

We were having down days on the Friday, the Mabb, a lot of stocks had had a hit. a lot of the stocks that were higher than, than on the buy list, I couldn’t actually buy. I had to go down, they were like number 10 position on my buy list. I had to go down quite low to find something that was still a buy after 24 hours had passed. But, uh, that’s Danios Corporation, Tony Greek shipping Magnates.

TK: Can I add a couple of things? Just, um, I had a quick look at it when you said you were gonna talk about it today. Uh, do have an owner founder, which you spoke about before. Um, or at least it’s the, it’s a relative or the son of the founder, And I think I’ve pronounced that properly. And the comfort, the, the.

is still a 47% shareholder, so we would call them for a known [00:45:00] founder as well. couple of other things I noticed they are buying back their shares and they’ve recently announced they’re going to do that at a faster rate, so they’ve increased their buyback. Which is not part of our checklist, but I wouldn’t be surprised if putting buybacks into our checklist becomes a thing sometime in our near future.

it, we have had this question raised on the QAB show in Australia before as. Uh, we use operating cash flow. Why not free cash flow. So free cash flow for this company was negative in this half and they, that was basically, as you said before, they’re building lots of ships. So they have a big CapEx built this half.

But if you look at the trend of CapEx expenditure in stock, edia, a one off exp expense. Expense. So, um. I, I tend to focus on operating cashflow for that reason. It’s, you know, whether they decide to use that cashflow for building [00:46:00] ships or doing buybacks or whatever else is up to them. um, you know, we’re trusting in their good management.

They’ve been around a long time doing this. So, um, I’m not going to begrudge them, you know, a bit of CapEx spend this year. Um, and then the last thing I’ll say is they’re, they’re getting pretty close to their sell price, so should be aware of that. And, you know, obviously we’re not recommending this company.

You have to go off and do your own research and have a look at it. But, um, you know, we look at, um, I. We look at, uh, sentiment and it’s getting pretty close to its, uh, sale price based on that. Um, stock price is about 1% above our sale price.

Cameron: Yeah, and it from memory, I don’t have the chart open in front of me, but it was just above its byline as well, I think. Is that right?

TK: by price? No, it’s a fair, fair bit above the buy line. The by price is, um, in change and they, and they’re just under $80 now and the [00:47:00] sell price is 79 point 32. So they’re about 60 cents above their sell price. But, um,

Cameron: Oh, okay.

TK: by price.

Cameron: Let me just bring up my bread later. Dak.

TK: So if for new US listeners, um, when we refer to the Ator, it’s a tool we use to, uh, to chart sentiment, it gives us a buy price and a sell price that we use before we a purchase or make a sale. I.

Cameron: Right. Okay. So Okay. So they’ve just gone the price, just. Went up recently and got it just above the cell line.

TK: Mm-hmm.

Cameron: that’s what I was thinking. It’s, it’s, it’s a little bit above, went above its byline, looks like back at the beginning of the year, but it’s just, yeah, just above the cell line, which is why it’s a buy.

So it could go either way. If you keep going up [00:48:00] the cell, the cell line’s going up pretty steeply as well, but that’s gonna change. So it’s L one. July, 2020. So, uh, there’s another one there in October. Yeah, it’s cell line’s gonna become a lot less steep, I think once we get through the next couple of months, but that one in October won’t change it dramatically anyway. If it becomes a cell, it becomes a cell

TK: correct.

Cameron: stay. Love. E. Anyway. Thank you for that additional stuff, Dak Dan aos. Well, that’s all I’ve got for, uh, the show. Tony got anything else to talk about?

TK: I have not, no,

people can, I’m sure are glued to their Wall Street journals and their [00:49:00] Fox News and CNN or whatever, finding out what’s happening in the market. But, um, we just treat that as noise.

Cameron: Yeah, ignore the noise. Focus on what’s real, which is the numbers, the cash.

TK: Correct.

Cameron: uh, you have any questions, if you’re a, a US listener and you have any questions, feel free to

TK: Mm.

Cameron: just CR at QAV podcast. Dot com au. maybe.com too. I think I own.com. Just QAV cr at QAV podcast.com should get to me. If you do send that and I never reply, then maybe it didn’t. But, uh, you can, you can also join our Facebook group. You can, uh. Get us there. If you have any questions QAV or how it works or what what we’re doing in the US market, feel free to reach out and throw us a question that we can either answer on the show or privately.

It’s up to you and we will be back soon with another US show. [00:50:00] Thank you. Tk K-M-Y-S-E. Happy Missy.

TK: Happiness.

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