Cameron: Welcome back to QAV America, Tony, episode 26. It’s a beautiful day. Tony in America, east Ballroom being torn down. President Trump’s

Tony Kynaston: it

Cameron: gonna meet with President Xi. They’re gonna do the greatest deal. You won’t believe how great this deal is gonna be. It’s gonna be the greatest deal of all time. It’ll last about a week.

Then it’ll fall apart and there’ll be more tariffs. Uh, but meantime, everything’s going great. Market’s up. US market was up yesterday, supposedly on the, uh, joy that, uh, all the beef is behind them. Rare earth minerals will be flowing back into the United States.

Tony Kynaston: From

Cameron: We’ll see.

Tony Kynaston: From Australia but um think I think the market’s up potentially more so on the fact that the inflation figures came in okay on Friday And

Cameron: Did they?

Tony Kynaston: So

Cameron: Oh, okay.

Tony Kynaston: that’s probably driving the

Cameron: Interest [00:01:00] rates are being cut,

Tony Kynaston: Uh I think the the central bank meets this week I’m not sure what day potentially

Cameron: right.

Tony Kynaston: I’m not sure

Cameron: Ooh. Okay. Well, uh, before we get into my pulled pork for the week, I just thought I’d give an update on our portfolio and how things are going. Our US portfolio, which has been running, oh, here’s my, uh, smoothie delivery system. Thank you, dear. Uh,

Tony Kynaston: Black belt smoothie delivery system brown belt

Cameron: right. Yeah, the, uh, delivery, the delivery, the portfolio that’s been running since September, 2023. Uh, so a little over two years is up 57.6%, uh, versus the s and p 500, up 54.7%. So we’re beating the index just by a little bit, but that’s okay. That’s good. Um, the [00:02:00] pork situation, the pulled pork that I’ve done, uh, over the course of the show, I haven’t had a look to see how they are doing.

Uh, where is that list?

Tony Kynaston: that you were you were talking

Cameron: Hmm.

Tony Kynaston: portfolio’s performance and um for this financial year which in Australia’s only four months in cause we are 30th

Cameron: Hmm.

Tony Kynaston: June end of year

Cameron: Hmm.

Tony Kynaston: financial

Cameron: Hmm.

Tony Kynaston: And and that’s pretty good Do you recall those numbers

Cameron: Yeah. Uh, well, I do, the Australian portfolio is up like 25% this financial year. Our financial year is, uh, from the beginning of July through to whatever we are now, end of October. I. For the calendar year, current calendar year, uh, our Australian portfolio is up 31% versus the benchmark. The index here, which is up [00:03:00] 14%.

So a little bit sort of double the Australian market. So it’s going well year to date. Our US portfolio not doing so good. It’s down 16% versus the s and p 500, up 16, 17%. But as I say, every week, that’s because our portfolio was up so much. Towards the end of last year before Trump took over the White House, that it had a lot of gains and it’s come back.

It’s not like the portfolio’s done badly, it’s just come back a lot from massive gains. At the end of last year, it was like

Tony Kynaston: Must

Cameron: incredibly inflated.

Tony Kynaston: lots of work stocks in there

Cameron: Well, it was Willis Lease Finance Company, which was the big one. It was up 300%. It’s now only up 175% since we bought it. I dunno how woke Willis Lease Finance Company is, but there you go.

Tony Kynaston: Well it was a black

Cameron: Um,

Tony Kynaston: stepfather wasn’t it Very woke

Cameron: what you, what you’re talking about Willis Lease Finance Company. It’s what you’re going for there. Yeah. Um. [00:04:00] Some of the companies, so I’m gonna do a pulled pork on American Airlines this week, but some of the ones that we’ve done over the last four or five months, just a review of how they’re doing. Some good, some not so good.

Zim. Is down 20% since we talked about it in March. Uh, Methanex we talked about at the end of September is down 12. Titan Machinery is down 14. That’s so most of the down ones in terms of the up ones. Zep Health Corporation we talked about in July is up 1444% since we talked about it. Ford Motor Company that everyone said was carrying too much debt when we talked about it in May is up 23% since then.

Uh, let’s see. Chemex we talked about in March is up 65% Canadian. Imperial. Bank of Commerce we talked about in May is up 30% since then, some big numbers. Sasol is up 28% since we talked about it in July. Precision Drilling Corporation is up [00:05:00] 26% since we talked about it in June. IHS holding, we talked about in May it’s up 27%, but.

A couple of weeks ago or a month ago, uh, a 3rd of October, I did a pulled pork on community health systems. Remember them? Hospital rollup up, up 47% since I talked about ’em at the beginning of this month. Tony.

Tony Kynaston: They mustn’t be doing vaccinations or dispensing time and they’ll that network

Cameron: 47% since then. That’s, uh, kind of crazy ’cause it was sort of, it was a good story, but I didn’t expect that. Um,

Tony Kynaston: and I

Cameron: no one expects,

Tony Kynaston: the point to make is

Cameron: Hmm,

Tony Kynaston: a lot of those stocks aren’t in our portfolio We you just pick a stock to do deep dive on from our buy list but we only change the portfolio over if something’s a sale and Yeah So we

Cameron: wish I had put all of those in them.

Tony Kynaston: Yeah So what that’s I guess what I’m getting that’s what I’m getting at I guess is that there are plenty of opportunities outside [00:06:00] our portfolio to to buy

Cameron: Plenty of opportunities and things are going great and um, you know, I’m often seeing, as I’ve said before, people on the in value investing subreddit saying they dunno what to buy. And I’m like, are you kidding me? Opportunity everywhere. If you

Tony Kynaston: what you’re talking about Willis Lease financing

Cameron: Willis, lease Finance company.

There are opportunities everywhere when we look at the US market and apply your QAV process to it. Well, this week I was gonna do Shell because you used to work for Shell, your old employer. They are on the buy list, but crude oil is a Josephine for us. Um, it’s in a sell state, so I thought I won’t do that.

So I looked around and as every week most of the buy list is full of finance companies or shipping companies. That’s been true for the last six months. Still true today, and I’m sick of talking about finance companies and lease and shipping companies. So I’m always looking for something different. And this week I [00:07:00] picked a a l, American Airlines, which was on the buy list.

Now I’m gonna preface it by saying. After I did three hours of research on it, I checked its chart and realized it’s a Josephine, which for us means it’s above its cell line, but below its byline. It’s recovering from a bit of a dip. No, sorry, it’s not a Josephine, it’s not even a buy. It’s not above its byline at all.

Um. But that’s because my script, uh, had a bug in it. My US script had a bug in terms of doing the charting analysis. So when I was doing this yesterday, the current price was about $13 78. Buy price is actually $15 87, so we wouldn’t buy it unless it went above that. But it’s an interesting story and I wanted to do it anyway to get your thoughts on it, assuming that it does become a buyer.

’cause it’s, it’s got a lot of problems, a lot of possible red flags and um, it’s also got a big point [00:08:00] system and I know that you used to run a points based company here for one of Australia’s largest retailers. So, you know, points.

Tony Kynaston: didn’t run up but had a yeah had a

Cameron: CFO. Oh, I thought you were the CEO of it.

Tony Kynaston: No

Cameron: Okay, well, still a good story,

Tony Kynaston: yeah I still have a fair bit of experience with the with loyalty programs for sure

Cameron: right? So I’m looking forward to getting your thoughts on this when I run through it. Basically, American Airlines is a domestic heavy network with a loyalty cash engine. Lot of possible red flags, though. It’s all about the prm, Tony, that’s what I’m gonna call this episode. It’s all about the prm, PRM passenger revenue per available seat mile.

Tony Kynaston: Oh yes

Cameron: And it turns out if you don’t have enough prm, you fall into the chasm. Which is, uh,

Tony Kynaston: Hmm

Cameron: it’s a little thing. Cost per available seat mile is your [00:09:00] PRM versus your chasm, your revenue versus your cost.

Tony Kynaston: Well it’s interesting because Warren Buffet who famously didn’t like buying airline stocks but did um he he came out he used the I think he called it um kilometers flowing per seat or something like that as an example of what he called the heavy lifting KPI he said every

Cameron: Right?

Tony Kynaston: one that just one it’s usually uh as a ratio like something per something

Cameron: Yep.

Tony Kynaston: yep And uh he used this one as as a as an example of what to look for when you’re analyzing industries and companies

Cameron: The.

I mean, Americans are gonna be very familiar with American Airlines. I’ve flown on ’em. You’ve probably flown on ’em. If you’ve flown on into America, around America, you’ve probably flown on ’em at some point. Giant passenger airline based outta Fort Worth, Texas. Uh, Fort Worth, Texas, by the way, birthplace of Shelly Duval.

Larry Hagman, Ornette Coleman, [00:10:00] John Denver born Henry Don Duchen Dorf Jr. Probably a good thing that he changed his name

Tony Kynaston: They call

Cameron: the birthplace of Mark.

Tony Kynaston: Not John Texas

Cameron: Yeah. Not John Fort Worth, funnily enough, it just, it didn’t, didn’t, didn’t roll off the lips. And it’s also the birthplace of Mark David Chapman.

Tony Kynaston: Ah gonna change my world except for Mark

Cameron: Mark, David Chapman. Is he still around? I think he’s still around.

Tony Kynaston: As you know I’m

Cameron: A a l is the

Tony Kynaston: cc documentary at the moment

Cameron: Yeah. Yeah.

Tony Kynaston: they went through how Brinkley was obsessed with taxi driver and was thought to have been reenacting the uh attempted presidential assassination and taxi driver when he when Brinkley shot um Hinckley sorry Hinckley shot uh Reagan

Cameron: Yes. That’s the famous story

Tony Kynaston: Hmm

Cameron: and I’ve, but I’ve told you about Hinkley and his connections to the Bush family before. Right. It’s one of my [00:11:00] favorite conspiracy theories. So the Hinkley family. Also from Texas, one of the biggest, um, financial supporters of George Bush, senior’s presidential campaign. He was obviously vice president when Reagan was president.

Uh, on the day that the assassination attempt happened, Hinkley’s older brother was supposed to be having dinner with Jeb Bush. They were that connected, the Hinkley and the Bush families, and then Hinkley tried to kill Reagan. If he had killed Reagan, George Bush Senior would’ve become president. And it never gets talked about the connection between the Hinkley and the Bush families.

It’s like, I remember first reading about it 20 years ago and like going, holy crap, that’s crazy.

Tony Kynaston: And

Cameron: How come I’d never heard that before?

Tony Kynaston: taxi driver instead

Cameron: Blame taxi [00:12:00] driver. Yeah. So, there you go. Uh, any who? A a l largest airline in the world. In terms of passengers carried and daily flights, almost 6,800 flights per day to nearly 350 destinations in 48 countries, serves more than 200 million passengers annually.

Averages more than 500,000 daily, has about 103,000 staff members. It’s huge. It’s a huge airline. Core business is selling seats and bags on mainline and regional jets. They have the AA brand larger jets. They also have smaller jets that are known as American Eagles for domestic travel. Also makes money from cargo fees, uh, and a loyalty machine called a advantage.

That [00:13:00] is a big part of the story. This is where the loyalty program, obviously part of it comes in, they sell miles to banks

Tony Kynaston: The

Cameron: for co-branded credit cards. Yeah. In 2024 A a l generated record revenue of 54.2 US billion dollars and had record free cash flow of 2.2 US billion dollars. But it’s carrying a Titanic amount of debt, $32 billion in debt.

It’s carrying. So, you know, we don’t, we’re not. Opposed to debt all the time. Debt can be useful.

Tony Kynaston: And

Cameron: Debt can be a source of leverage.

Tony Kynaston: kind of company too They’re basically The opposite side to Willis Lease financing They’re always leasing aircraft from people so they’re always carrying debt They don’t buy the planes they probably couldn’t afford to So they lease them [00:14:00] gives em a lot more a lot more um leverage in terms of being able to operate a lot more if they lease them rather than buy

Cameron: I don’t know what their lease versus buy ratio is, to be honest, but I know that there’s problems with a lot of the planes and I know also know that. Airline travel is, uh, easily disrupted. Obviously we saw during COVID, but there’s a lot of other things that can disrupt it,

Tony Kynaston: Yep

Cameron: which is part of the story.

It’s, it’s a, it’s a difficult, difficult business. It’s a very difficult business to, to run.

Tony Kynaston: also it’s often taken as the other side of an oil trade because as the oil price drops the profitability of an airline increases cause one of the biggest costs is

Cameron: Yep.

Tony Kynaston: Yeah

Cameron: Anyway, a little bit of background sort of began during an amalgamation of about 80 small airlines in the 1920s. In 20 19, 26, there was a union of more than 80 small airlines, [00:15:00] and it was sort of run by an aviation pioneer called CR Smith. Pulled ’em all together. One thing led to another and they sort of start, I think in initially they were just doing, um, like, uh, cargo.

It wasn’t passenger based. It was cargo flying stuff around and mail mail carriers and other sorts of cargo they expanded into. Then it moved into passenger airlines. Listed on the NASDAQ eventually, and they launched a advantage in 1981, which is apparently often cited as the modern frequent flyer template.

They, if not invented it, came up with the model for how to make those sorts of things work. In 2011, due to a downturn in the airline industry, their parent company, the A MR Corporation, filed for bankruptcy protection. And then in [00:16:00] 2013, American Airlines merged with US Airways, but kept the American Airlines name because it was the be better recognized brand internationally.

And it was the, the merger of those two that created the largest airline in the United States and, and eventually the largest airline in the world. So I wanna talk about the card deal that they recently did In December, 2024, they announced that they’d signed a 10 year exclusive co-brand deal with Citi, who were taking over the business from Barclays in 2026.

And I don’t understand much about how these point systems work. Pay very little attention to them over the years. So you’ll be able to explain how this works to me. But basically, as I understand it, the bank pays the airline for the miles. People earn miles when they travel. The bank buys those off them and then uses them to get people to buy stuff [00:17:00] on their credit cards.

Is that how it works?

Tony Kynaston: Kind of yeah So uh are a product and so American Airlines make a margin by selling points to the banks who then um issue them on credit cards often funded by what’s called the interchange fee So the bank isn’t actually paying for it themselves they’re passing it on to the merchants who um Pay a fee when the credit card’s used in store Um so that there’s that But yeah so they might uh the airlines make money out of a margin on the points that are issued So they they sell points to the banks Um the banks use the the merchants or the the retailers to pay for that usually and that um Attracts people to use one particular credit card over another one cause credit cards are much of a muchness They tend to charge similar sort of fees and interest rates And uh then some will have points on a better deal than others And so [00:18:00] people uh You know almost religiously compare the points and go to the the card with the best deal best yield in in some respects So it’s good for the bank good for the airline They get a margin on the points they sell to the bank but also they get what’s called breakage So all the points get redeemed Um So people will collect points and never use them They’ll never ring up the airline and book a flight or these days it’s not just flights Of course you can get product um to redeem your points for as well And there’s a margin in that for the airline just as there’s a margin if they take a flight the airline makes a margin on that as well So the cost of the points used to book the flight is still providing a margin to the airline Um but there’s a breakage so people don’t redeem all their points and so their points lapse Oftentimes these points come with a life cycle so after three years or five years they’re worthless if you haven’t used them by then then it’s it’s actually a hundred percent margin to the airline And [00:19:00] then you’ve got um and you’ve got a thing called the redemption rate So what percentage of the points are going to be redeemed anyway Um for what things And then that there’s a fair bit of actuarial work that goes on behind the scenes to tweak what products are offered what the number of points are for those products be they airline tickets or shavers or toasters or whatever um And then how many points are being redeemed for those things And it’s a big a big math puzzle So you a an actuarial will have like a three year if the life of the points is three years by month historical profile of who’s redeeming what and for what And then they’ll say okay we think that if you issue a new point now I’m just picking a number here 60 of those points will be redeemed and they’ll be redeemed for these things and therefore you should price the point at this much And so airlines are always juggling that So it’s a a fair bit of math goes [00:20:00] into it and um yeah it’s it’s a big big machine but it’s designed to make money for the airlines

Cameron: Wow.

Tony Kynaston: Hmm

Cameron: Well, in AALS case. They earned roughly 5.6 billion in the 12 months, which ended 30th September, 2024. From cash remuneration, from co-branded cards and other partners, but starting 2026, they’re making Citi the exclusive issuer. They expect to make more money out of that reducing, reducing overlap, and competition between issuers, reducing carve outs.

And they’re expecting the amount of cash that they get out of the card to, or the point system to go from 5.6 billion to nearly 10 billion annually under the New deal. So that’s going to result in 1.5 [00:21:00] pre-tax income, an extra 1.5 pre-tax income at maturity. So it’s a good deal for them. That’s gonna bring in a lot of extra cash.

And it’s, as I understand it, it’s sort of. Um, there’s a bit of a buffer to the fuel prices and the, you know, problems with engines and planes and flights and all that kind of, the waviness of their regular business, right?

Tony Kynaston: we did I did a pulled pork on Qantas the Australian airline

Cameron: Mm-hmm.

Tony Kynaston: for our Australian show the last year or the year before And I think from memory the points business there be similar to American Airlines I would think was a third to a half of their profit something like that Um think from memory Qantas made no money or almost no money out of international travel A lot from domestic and a lot from points and

Cameron: Right,

Tony Kynaston: time to time there’s always talk about spinning off the points business cause it’s as a standalone business it’s it’s quite profitable Um

Cameron: Mm-hmm.

Tony Kynaston: And so that’s always up the sleeve of airlines like [00:22:00] American if they do get into trouble with debt or whatever else to potentially spin it off and get a big cash injection back into the underlying

Cameron: Mm-hmm.

Tony Kynaston: doing that

Cameron: Well in terms of their mix of their operating segments, it’s basically all fits under air transportation. But they do break it down by business line and geography. But the basic breakdown is domestic is about 70% of passenger revenue, um, and the international split Latin, Atlantic and Pacific. And, uh, cargo is sort of fairly small single digit.

Ai, uh, sorry. A, a advantage a a di It’s very hard to say that A advantage

Tony Kynaston: Great

Cameron: uh, really the high margin side of the business, but it’s discounted, um, which is why it’s turning up on our buy list. And I was trying to figure out why the market is [00:23:00] discounting it. It seems to be a number of reasons. I mean, airlines are cyclical, capital hungry, weather exposed, exposed to labor, exposed to fuel, exposed to problems with engines, which is a big thing.

Um, and a a l is also much higher leveraged than its peers are apparently carrying way more debt. But then they, they’ve got these problems. Well, it’s an industry-wide problem at the moment with the Pratt in and Whitney Engines p and w, they’ve got the GTF Family of Engines geared Turbo fans, particularly the PW 1100 G hyphen jm.

It’s personally my favorite engine. It’s used on many Airbus aircraft, a three twenties. It’s been hit by a manufacturing floor contaminated powder metal in parts used in high pressure [00:24:00] turbines, which can lead to cracks and early removals. So this is. Leading to a lot of, uh, maintenance that needs to happen to aircraft.

They’re grounded, means lost flying capacity, fewer seats, lower revenue, et cetera, et cetera. So the question for American Airlines isn’t whether or not they’re exposed to this, they are. It’s just how much the ripple effects are gonna hurt their revenue this year. Add in labor inflation. There’s some soft spots in domestic demand, and basically they’re trading at a fairly low multiple at the moment.

And all of the debt, which they’re carrying, which has got the market a little bit scared off, apparently the 32 billion, they have been paying off the debt and paying it down. And that means they’ve got a good Petrovsky F score. So their Petrovsky F score is an eight out of nine. And so I was trying to figure out.

If they’re carrying so much debt and that is such an issue, why do they have such a strong F score? [00:25:00] But of course, the F score is a trend score, like the financial trend we use in Stock Doctor. It’s not an overall financial health score, it’s a trend score. So there. Paying off the debt. Their situation is improving year over year, so their F score is pretty good.

Doesn’t mean that they couldn’t run into problems with that amount of debt, just that they’ve been. Improving their situation over the last couple of years. So they’ve moved from bad towards less bad. Maybe they’re paying debt down, interest coverage is improving. Margins have normalized post pandemic cashflow has returned, so that’s ticking a lot of the F score boxes.

Profitability has returned since, um, the COVID days, but, uh, it doesn’t necessarily mean they’re out of the woods. So I think there, you know, I think the market is looking at the fact that there [00:26:00] could still be lots of crises with the US economy if the economy collapses airline. See, sales could take a big hit.

Whatever happens with the US and China could, you know, have an impact on, uh, flights both domestic and international. Um, so the, the market’s factoring in a lot of possible problems. There’s a lot of things that could go wrong with the business. Whereas we tend not to forecast and you know, we don’t tend to look at macroeconomics or anything like that.

We just look at the numbers and from our perspective, it looks pretty good. There is one other issue though, that I wanted to talk about, which is climate change In terms of flight issues. Climate change is apparently one of the biggest problems for airlines. Right now is extreme weather events that are impacting on,

Tony Kynaston: Run

Cameron: um, [00:27:00] flight patterns.

Extreme heat causes air density to decrease, which makes it harder for planes to take off, causing the airline to burn more fuel, and therefore affecting both profits and. The planet

Tony Kynaston: Yep

Cameron: high temperatures can also affect the weight limit, which reduces the maximum revenue generated by each flight. A Harvard University study estimates that 30% of the flights departing during the hottest times of the day will not be able to carry their weight capacity by 2050.

Tony Kynaston: I hadn’t thought of that but it makes sense

Cameron: Yeah, me either. So there are, there are some of these impacts or some of these things about climate change that are gonna have, you know, real, are having and will continue to have real impacts on businesses like this for reasons that are aren’t obvious to lay people outside of the industry.

Tony Kynaston: hot was it in Brisbane where you are recording yesterday

Cameron: Uh, 38 [00:28:00] degrees Celsius. Uh,

Tony Kynaston: I

Cameron: well, yeah, still in spring Convert 38 C to F Chat, GPTI used to be able to do this in my head when I spent a lot of time in the us, but now it’s been a while.

Tony Kynaston: a

Cameron: That’s it. A hundred 0.4. Officially. Yep. That’s a fever, says GPT, uh, step-by-step. So we don’t commit arithmetic war crimes.

I thought it was antisemitic. War crimes. Okay. Um, so yeah, it was hot. That’s, that’s unseasonably hot for, uh, Brisbane, which does get a bit warm. But even so. So, you know, basic analysis, my basic analysis of this is it’s a, it’s a miles mint. It’s generating, you know, six now, soon to be $10 [00:29:00] billion a year in just easy cash coming from these miles.

Uh, it’s got the largest airline in the world, largest in America. Debt is shrinking, but. You know, with a lot of possible problems, but that’s what we pay the management to navigate, is to figure this shit out. Right? They’re professionals, that’s what they’re there to do.

Tony Kynaston: correct But but also too I’m guessing you’re gonna get to the Pr/OpCaf figure um which is gonna solve a lot of problems

Cameron: Yeah. So I’ll get into the numbers. So. At a QAV score level, it’s, it’s a 0.21. It’s, it’s quite, quite a ways. Down in my US buy list, it’s probably in the top 30. Uh, but, you know, uh, uh, uh, I went down that far ’cause I’m looking for interesting things to talk about, as I said earlier, but it’s prop cap is 2.41 price to operating cash flow.

Tony Kynaston: You’ve gotta do a lot of things wrong with a company that’s that’s [00:30:00] producing that much cash

Cameron: The largest airline in the world generating $6 billion a year in revenue from, um, just points, selling points, let alone everything else. Uh, yeah, like it, it, it seems like, uh, easy, easy money, right?

Tony Kynaston: cash

Cameron: Yeah. Average daily trade is, uh, just short of a billion dollars, uh, 979. Million dollars average daily trade.

Uh, in terms of the scoring, it’s got a quality rank of 64, so we score it for that. It’s got a stock rank of 96, so we score it for that. It’s got an F score of eight, as I said, so we score it for that. It doesn’t score. It’s, it’s, uh, above our intrinsic values. Our IV number one is $4 52. Price is currently 1378.

Our IV two is $5 [00:31:00] 87. So it doesn’t get a score for either of those. Doesn’t score for price less than book because the book value is negative 4 billion. So, yeah.

Tony Kynaston: interesting

Cameron: yeah, it’s not getting a score for that.

Tony Kynaston: Negative 4 billion for book failure Wow Okay

Cameron: Yeah, which I just, you know, that’s the amount of debt, uh, less, you know, assets, less liabilities that they’re carrying. Growth over PE is not greater than 1.5, so we’re not scoring it for that book value. Growth is not positive. It’s, uh, very much not positive. Couldn’t score it for anything else really. So, uh, in our checklist, total number of items was 12, got a score of six, which is a 50% quality score from a QAV perspective.

It’s not as high as we would like it to be, but with that prop calf, you know, it, uh, shoots, it, shoots out the lights pretty well for, from a QAV score [00:32:00] perspective. But as I said, a lot of issues, a lot of potential problems. But I don’t know. Tk, what do you think? What, what, what’s your analysis on something like that?

Tony Kynaston: Well

Cameron: the numbers.

Tony Kynaston: Yeah Well it just reminds me of Qantas so much really And that’s been on our

Cameron: Yeah.

Tony Kynaston: list for a while now and it’s done incredibly well for us over the last couple of

Cameron: It’s done well.

Tony Kynaston: Yeah again when when a stock likes Qantas comes on the buy list people say oh you know it’s an airline who wants to own that And um it’s got plenty of debt and blah blah blah Lots of issues I you know how could it do well And it’s doubled in price over the last year or so So

Cameron: Yeah.

Tony Kynaston: Yeah Does having a high prop calf really does give management a lot of tools to work with to solve these problems Um

Cameron: Prop or a low prop calf.

Tony Kynaston: uh low prop cap Sorry High high cash flow

Cameron: [00:33:00] Yeah.

Tony Kynaston: Yeah was just trying to find the the what the um book value was for Qantas If I can quickly it might also have a negative book value Um just let me have a quick look In other words it might be endemic to the industry that they you know they run debt loads cause they’re carrying all these leases on uh on planes Yeah can’t find it quickly per share equity per share is positive for a QAs but it’s only about 50 cents and the share price is 10 bucks So it’s it’s you know almost zero really equity per share So it’s a similar sort of not as bad as American Airlines in terms of its debt load but it’s it’s to me it looks like it’s trying to balance its its debt to equity

Cameron: Yeah. They’re like a, yeah. Almost an even situation. So that is, uh, American Airlines. That’s all I’ve got with that. But as I said,

Tony Kynaston: isn’t it

Cameron: [00:34:00] not quite a buy for us yet. Its price would need to get up a little bit more to get over the byline. So we would be a watch and see for us. But, uh, yeah, if it got over the byline, I’d probably give it a shake.

Tony Kynaston: Yeah Good

Cameron: No, that, that would change the prop calf too slightly. If it, if it got up, went from 14 bucks to over 15 bucks, it would change the price caps price to operating cash flow slightly, but I don’t think it’d have a dramatic impact on it.

Tony Kynaston: No

Cameron: Tony, well check that one out. Folks, if you’re, uh, looking for something, put that on your watch list. Perhaps a a l Do your own research though.

Well that’s the main part of the show. We got nothing for me after hours, Tony?

Tony Kynaston: Uh,

Cameron: Yeah.

Tony Kynaston: working my way through Scorsese, which is just brilliant, just loving it. Um, equally is interesting to go through all the low lights of his career when he made movies that weren’t as, um, well received, like Udan. And, [00:35:00] um, you know, he, he made a small movie, which I love, called After Hours, which didn’t, which did okay. he

Cameron: Man, I’ve,

Tony Kynaston: Bringing

Cameron: I only heard about, so I only heard about after hours like a few months ago and I’ve been trying to track it down. I watched the trailer. I’ve been trying to track down where to watch it. It looks great.

Tony Kynaston: is great. Griffin Dunn stars in it, and it was

Cameron: Yeah.

Tony Kynaston: Scorsese he come, what was he coming off the back of? He came off the back of a flop. Oh. King of Comedy, I think. And, um,

Cameron: King of Comedy be a flop. It’s like, it’s a great movie. King of Comedy. I think they,

Tony Kynaston: Wasn’t well

Cameron: it was just,

Tony Kynaston: out though. yeah,

Cameron: yeah, really just to like, sort of that dark comedy thing. People didn’t associate Scorsese with that.

Tony Kynaston: yeah. And, and he, the way he tells it, it was more of it, the Niro vehicle. The Niro really wanted to make it, and Scorsese’s heart wasn’t in it so much. So, um, that was interesting. But, um, yeah, I

Cameron: Sandra Bernhardt, [00:36:00] Jerry Lewis.

Tony Kynaston: Yeah.

Cameron: Great.

Tony Kynaston: Great. Uh, so they shot, the way they shot it was, um, had all these scenes where Jerry Lewis would be walking down like Fifth Avenue or New York or something, or going to 30 Rock or whatever to um, shoot something. And, um. You know, Scorsese be pulling his hair out saying, we gotta have the extras here. They gotta be doing this. Lewis said, no, just watch. Roll the camera. He started walking down the street and cars would pull up, Jerry, how you doing? And he just sort of wave and keep walking and people would come up and he signed all the grass and just keep walking.

Completely unscripted. But he knew exactly what would happen if he walked down the street.

Cameron: Yeah. Yeah. Wow. He’s Jerry Lewis. Yeah.

Tony Kynaston: Yeah, So, but, but great. And then they go through the last temptation of Christ, which was fantastic. And know, how, how the Christian Right. You know, took up arms against it and he had to wear a bulletproof vested the Academy Awards that year and all this kind of stuff.

So yeah, just amazing. series. Great [00:37:00] series.

Cameron: I look forward to checking it out. Um, by the way, I did mean to mention I checked my audit script. It does look for disclaimer of opinion. Yeah. It didn’t have DGL because I think the last time I ran it, it was before the report came out. I ran it in September, so I’ve gotta run it again. I’ll have to,

Tony Kynaston: Yeah.

Cameron: all the major reports would’ve been out by then, but I’ll have to, I might just set it to run once a month.

Tony Kynaston: Yeah. It’s a good idea.

Cameron: Alright. What else you got?

Tony Kynaston: No, that’s it. Horses are racing. So I got, um, lake Forest on Wednesday, Bendigo Cup dates racing there if this goes out in time. And then, uh, qua doto next week, uh, perhaps on Melbourne Cup Day, but also perhaps on kind in Cup Day the following day in, on Wednesday next week.

Cameron: Fine And cup day, is that what you’re calling it?

Tony Kynaston: Yep.

Cameron: Hmm.

Tony Kynaston: Jenny and I are going up for it too.

We’ve got a event up there. We’re going to, it’s a good idea. I’ll call a, I’ll walk in and say, uh,

Cameron: Hmm.

Tony Kynaston: better let me in. Yeah.

Cameron: Eson Cup Day. [00:38:00] Uh, well, I, what am I, I’m still reading Gravity’s Rainbow. Not sure I’m gonna continue with it. It’s too, too convoluted to read at midnight. I’m like, what the hell is going on with this? Um,

Tony Kynaston: It

Cameron: yeah, it’s about it,

Tony Kynaston: convoluted story.

Cameron: man. I was talking to ChatGPT, GPT about it ’cause I have to look stuff up, like, what’s he talking about here?

Because he’s like, so many sort of scientific and historical references, just absolutely embedded in it. And I’m like, what’s this? What’s that? What’s the other? But, um, I kept saying, I thought this guy was the protagonist pirate. There’s somebody. He goes, well, no, he was for the first 30 pages. Then it flipped to this guy.

And eh, it’ll flip back to Pirate, but it’s not, you know, it’s, it’s all over the place.

Tony Kynaston: Yep.

Cameron: Keeps you on your toes. Um, finished. Elephant Man. Loved it. Um. But, you know, again, sort of beautiful, [00:39:00] very, very simple, sweet, sad, sort of a story. Not, uh, your typical Lynch vehicle, although at the end when he, I dunno if you remember, but at the end as he’s dying, spoiler alert, people haven’t seen the film from 1980.

Um, the face of his mother appears in space and just sort of hovers there. Very Laura Palmy. Like it’s got this whole sort of, it finishes with a sort of a preview of Laura Palmy sort of head in space dead something, something which, you know, and Twin Peaks didn’t come out for another 10 years or whatever it was.

Was it 1990? I think Twin Peaks. But anyway, um, yeah, that’s about it. Oh, we had a karate grading, uh, karate kung fu grading on Friday that went well. No broken bones. No broken noses. Uh, we survived that.

Tony Kynaston: So take us through it. You were beset by attackers for an hour or so and you had to fight them off. Is that how it [00:40:00] goes?

Cameron: Well, two hours. Uh, the first, first 90 minutes was probably demonstration, so we have to do our techniques. Dummy sets, forms paired up with one person who’s like a black belt. Usually they’re throwing random punches, kicks, whatever at you. And see if’s like, show me this, show me that. Show me this technique.

Show me that technique. And you just have to stand there and block and counter punch and counterstrike sweeps. We did a lot of sweeps. Hit ’em, take ’em to the ground, punch ’em in the face. Didn’t do baseball, bat or knife defense. Um, he didn’t, we ran outta time. I think there was so much stuff he wanted to see and we just ran outta time for that, unfortunately.

Then, oh, and the dummy section of the wooden dummy. We had to get on the, do our dummy sets on the wooden dummies, all that kinda stuff. Then sparring. So then we did like, I don’t know how long the sparring went for. Felt like an hour. It was probably 10 minutes actually. It was, I think we went through about 15 rounds [00:41:00] of sparring, 15 to 20 rounds of sparring.

And I think they went for two minutes each. So yeah. What is, so it was probably half an hour to 40 minutes of sparring. And the guy who was with me at the end, he said to me afterwards, I kicked you in the ribs and you didn’t flinch. I thought, oh, Cameron’s done. And I said, ah, just, I, I was just too tired to block it.

I just thought, ah, I’m gonna wear it. And he said, yeah, but you didn’t even move. You didn’t even try to block it. I was like, yeah, I was too tired, man. Too tired to try and block it. But that was good. I was really proud of Chrissy. She did really well. Um, uh, so yeah, our next, uh, belt is our black belt, so we’ve probably got 18 months to get ready for that.

So. That’ll be the next thing to do.

Tony Kynaston: Does that mean you can go out and become a kung fu trainer or a sifu and open up your own, what do they call ’em? Doge.

Cameron: Jojo. That’s Japanese. Yeah. We call him a Kon in Chinese. It’s a [00:42:00] Kon. Uh, well, possibly, yeah. Bruce Lee only did like two years of Wing Chung and he went to America and started his own school of Kun Do. But um, yeah, I don’t think that’s in the cards. Although when AI takes over everything, then maybe teaching kung fu is all we got left till the robots come and teach Kung fu.

I saw Elon had his robots doing kung fu demonstrations this week at the, at a movie premiere in la

Tony Kynaston: Were they plugged in or were they autonomous.

Cameron: No, it was a Tron, uh, premiere, I think. And he had a, he had a one of his robots out the front doing kung fu. So that’s that. Alright.

Alright. Quite a good week everyone. Thank you TK

Tony Kynaston: Bye.

Bernard: Q A V is a checklist-based system of value investing developed by Tony Khighneston over 25 years. To learn more about how it works and how you can learn the system, visit our [00:43:00] website, Q A V Podcast dot com.

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Quote of the day: “As the physicist Richard Feynman said, ‘Science is what we have learned about how to keep from fooling [00:45:00] ourselves.”

The Beginning of Infinity

David Deutsch