Cameron: [00:00:00] Welcome to QAV America, Tony. This is episode 40, uh, for brand new listeners. Welcome. This is a show where we talk about value investing in the US markets. You might notice from our accent. That we are not accents, that we are not Americans. We are Australian value investors that have been doing a podcast about value investing in Australia for many years.

And these days we do also do one about the American market because why not? And, uh, it’s been an interesting week, Tony, in the American markets. Ford reported their worst quarterly earnings in four years on Tuesday, and a net loss of $8.2 billion for 2025. What’s $8.2 billion between friends, Tony?

Tony: Is this part of the great ev write down? I’ve been reading about all the, uh, EV manufacturers are getting back into producing V [00:01:00] eight cars

Cameron: Yeah. Drill, baby drill.

Tony: Yeah, yeah,

Cameron: Yes.

Tony: of companies riding down their ev.

Investments

Cameron: is,

Tony: off E investments.

Cameron: This is their largest loss since the 2008 recession. At least 4.8 billion of it was due to the EV division.

Tony: Yeah.

Cameron: Article I’ve got says E uh, electric vehicle sales were battered and previous corporate plans were shattered. Oh, look at that. That’s nice. Battered and shattered

Tony: Yeah.

Cameron: across the industry this year following the.

Tony: how I like my fish and chips.

Cameron: Following the Trump administration’s push to slash a seven and half thousand federal EV tax credit that was signed into law by former President Biden in 2022. Ford was one of many automakers committed to an electrified future that was hit hard by the decision. In response, the company said that it will.

Pivot from full electrification to partial [00:02:00] electrification, and in December announced a major set scale back of its electrical vehicle, pla electric vehicle plans, which included killing the electric pickup truck, F-150 Lightning. I think the customer has spoken. That’s the punchline. Ford, CEO. Jim Farley said in an earnings call on Tuesday, I think uh, Donald Trump has spoken more than the customer.

Tony: Yeah, I

Cameron: Mm-hmm.

Tony: Well, aren’t there,

isn’t there, hasn’t there been a wine back of tax credits as well for EV cars? So a way, the customer has spoken ’cause they’re not buying EVs unless they get a tax rebate for it.

Cameron: Yeah,

Tony: Yeah.

Cameron: Uh, in the absence of a tax credit, Ford and other automakers such as GM are betting on two things to spur customer demand in the us affordability and autonomous driving. At the core of that plan is a $30,000 electric vehicle with eyes off driving that Flo Ford plans to unveil in 2028.

Tony: oh my God, it’s like. We’ll pivot to EVs. [00:03:00] pivot back to Hemis. pivot to driverless cars. It’s

Cameron: Well, they gotta do something

Tony: it if it’s their own money, would they be doing that

Cameron: well.

Tony: money? Sure. 8 billion.

Cameron: What’s

8 billion?

Tony: Yeah.

Cameron: While the American EV industry suffers Chinese electric vehicle giants enjoy government subsidies that give them at times dangerously good pricing power. Chinese EVs. Yeah. Dangerous to who? Chinese EVs go for unbelievably low prices. And while they’re not allowed to be imported into the United States, the low pricing has made it very tough for American EV makers to compete elsewhere in the world.

Even long-term American Ally Canada decided last month to allow Chinese EV

imports.

Tony: Well, I’m

glad that the America’s calling Canada a long term ally now and not 51st state or, or worse.

Cameron: Gizmodo. I don’t think that’s how Donald Trump would refer to them, but

Tony: Yeah.

Cameron: bunch of Commies is probably how he’d [00:04:00] refer to them. Um, so I did a deep dive on Ford on episode six of this show back on the 21st of May, 2025. The share price is up 30.7% since then,

so

Tony: pivoting is good.

Cameron: it’s done okay.

Despite all of this that’s even taken into account. Uh, this new loss announcement, there were $10 80 when I talked about ’em. There are $14 12 at the moment, so yeah, it’s okay.

Tony: Oh yeah. And for a large cap company, it’s pretty good.

Cameron: Everyone told me I was crazy when I talked about that one back then.

Tony: Too much

Cameron: Yeah, 30% less than a year. Not too bad. Looking at the other companies that we’ve talked about over the last year on the show, um, Zim Integrated Shipping was the first we did back in March of 2025. It’s up 23% since then. I’ll do ’em in the [00:05:00] in episode order.

Um, CX ChemX is up 122%. Dac. DACD, AOS Corporation, big Greek Shipping Company, up 31% Canadian, Imperial and Bank of Commerce. Speaking about their great ally, up 50%. NL Chile is up 6.3. Ford’s up 30 IHS holding up 54. Jackson Financial, up 37 Orx Corporation, up 73. Precis Precision Drilling up 82. POSCO Holdings up 35 Zep.

Health Corporation up 682%. Sasol up 59. Bausch Health is down five. Seneca Foods up 25. Gray Media up six Titan Machinery down 0.1. Kimball Electronics down 15.9 Sno up 15 methane X up. 22 community health systems up 13 Cow Main foods [00:06:00] down. 12 dous, which was a XL up. 17 American Airlines has gone nowhere.

Topgolf is up 18.8. Pg and e is up 15.9. KA career, electric Power, doing another Korean company. Today it’s up 28%. It’s air cap is up 14. Veil is up 29.1%. Z Davis is down 16. A MC is down 20. Zfa is up. Six

is up. 6.6

Tony: Is that the bad money of our

Cameron: VLRS, the bad bunny.

Tony: Yeah.

Cameron: Why is it a bad bunny?

Tony: Well he went on the Super Bowl halftime

Cameron: Oh,

Tony: sung everything in in

Cameron: oh God. I didn’t even make that connection. I’m so outta the loop on, uh, super Bowl halftime shows. I watched the Prince Super Bowl halftime show from 2007 last night. That was pretty good.

A MTD is down a little bit.

Tony: when it

Cameron: It did. It’s [00:07:00] raining. And not only is he playing guitar and singing, but he has two dancing girls in stiletto heels.

Dancing with like an inch of water on the platform. I’m, like I said, Chrissy, how is that not a health and safety risk?

Anyway, the por the, uh, the deep dive stocks are doing pretty well. Um, let me, let me just also, uh, talk about the, uh, portfolio while I’m here. The actual QAV America portfolio. Uh, last week when we talked about it, it was up about a hundred percent.

Um, as of today, it’s up 101.36% since inception, which is September 23 versus the s and p 500, which is up about 50% over the same period of time, 50 53, 54. So doing about double market. Um, [00:08:00] since then.

Tony: And no gas strips to be seen.

Cameron: Yeah, I wrote an article last week sort of comparing, uh, astrophysics to, uh, value investing and I said that we tend to invest in large planets companies with a lot of mass, a lot of gravity, gravity being cash flow masses, cash. Not gas giants that are all hype and speed and momentum and shiny and look pretty, but don’t actually have a functioning ecosystem yet.

Uh, yeah, we don’t have any gas giants. Um, in the last, well, let’s see, year to date, uh, well that’s not a very good analogy. The last 12 months were sort of neck and neck with the s and p around about 20%. But, uh. You know, the last, we’ll say three months, we’re up about 25% versus the index up about one and a half.

Actually, we’re 26 point a half versus one point a half. So it’s been a really good, it’s actually just since the [00:09:00] beginning of the year, since the beginning of January, which is, I know just a month and a bit now, six weeks, we’re up 20, 23% in six weeks versus the s and p 500 negative. 0.14%. So, uh, things are going well.

And one of the companies that’s been doing well is in my news, I’ve, uh, did a news report this morning of some of our stocks,

Latino’s, the other bad money in our portfolio, BLX. Reported record earnings for 2025 with significant growth in net income and portfolio alongside a strong fourth quarter performance. 2025 net income increased 10% year over year to 227 million. Fourth quarter net income of 56 million marking one of the strongest quarters in their history.

So, uh, good on BLX. [00:10:00] Um, what else have I got? Oh, Renaissance r and r. They’re also in our portfolio, they’re up about 15%. Uh, they said that their, uh, reported earnings exceed analyst estimates indicating a positive operational performance. Um, 29.6 year on year growth, they reported. So, uh, yeah, that’s good.

Jackson Financial has, has formed a long-term partnership with TPG, that includes a significant equity investment. They’re gonna make a $500 million common equity investment for roughly six and a half percent ownership. So Jackson I mentioned before, we did a deep dive on them back in June of last year.

They’re up 37% and we hold them in the portfolio, uh, and they’re up 25% since I added them the second [00:11:00] time. I added ’em back in September last year. Then sold them within a week and then added them back, uh, in August of 2025. And, uh, yeah, they’re up. 25, 20 6% since then.

Tony: We went back to Jackson. We got married in a fever

Cameron: Uh, I,

Tony: than a pepper. SPR

Cameron: well I think the reason, I dunno what that is. I think we, the reason we sold ’em,

Tony: Jackson.

Cameron: yeah. I dunno what you’re going on about.

Tony: were just talking about.

walk the line in the Australian show. That’s,

Cameron: Oh. So Johnny Cash song

Tony: with June Carter

Cameron: and June Carter Cash, she was great, loved her voice. Um. I think when, when we were working out some of the bugs in our process, our, our QAV process for the American market, we were not, uh, including stocks that had a low ZED score and then we decided to ignore the ZED score, the ZED one score, and Jackson had a bad ZED one score or a like actually looking at them now they have a [00:12:00] non-existence ED score being a financials company,

Tony: Hmm.

Cameron: anyw who.

So that’s, uh, a bit of the news from around the stocks in the QAV universe in the United States. Tony, which leads me to my pulled pork, my deep dive for this week, which is another one I have not added to our light portfolio yet, because I wanted to talk to you about it because.

Tony: Oh,

Cameron: Like some of the ones that we’ve done recently.

O it’s, uh, it’s a bit of a worry.

Tony: Really.

Cameron: yeah, yeah.

Tony: it. ’cause it looked

good to

Cameron: Did it? Okay.

Tony: Yeah.

Cameron: Well this is a company called Shi Han. Um. She hin, Shinhan Financial Group. Japanese, no, sorry, Korean started, well, sort of started outta Japan fully enough, but it’s a Korean, [00:13:00] uh, bank with a bit of a turgid history, not,

Tony: Why am I

Cameron: yeah, yeah. Surprisingly for stocks that we do on this show. So SHG goes back to 1982, founded by a gentleman called Lihi Gun and a group of Korean, Japanese businessmen. It was South Korea’s first bank, built entirely on private capital rather than government banking 1982,

Tony: Yeah.

Cameron: and I thought. That’s a bit late, um, seeing as the country was sort of quasi founded after the, or during the Korean War or leading to the Korean War, really, so early fifties.

Um, and so I did a little bit of a deep dive on that. So. It was pretty much a command economy, uh, for the first couple of decades. As people may or may not know, [00:14:00] everyone thinks of North Korea as being a dictatorship. What a lot of people in the west don’t realize is that South Korea was a dictatorship as well for the first 30, 40 years, and now it’s just.

Very, very corrupt, uh

Tony: oh. says you.

Cameron: oh. And says, uh, the, the people who just took the last president to court, he was just found guilty of fraud. And I think every one of their, I. Presidents, uh, in, or prime ministers in the last 30, 40 years has either gone to jail for fraud or corruption or committed suicide while on charges of fraud and corruption.

Um, it’s, uh, it’s not just me. It’s, uh, it has a lot of problems.

Tony: Okay.

Cameron: Um, but yeah, for 20 years leading up to Shin Han’s, founding the South Korean government. Owned all the banks, staffed them and used them as basically their personal economic steering wheel for [00:15:00] the South Korean economy. Private banking door was locked, and then they had like a brief experiment with private banking in the late 1950s, but that ended in a military coup when General Park Chung, he cease power in 1961, we talked about him.

Own Korea Electric power, that episode, because he was the guy that, um, built KEP or the, the precursor to that, um, he apparently viewed the private owners of the country’s commercial banks, um, as dealing in the illicit was as illicit accumulators of wealth,

um, was I think a term that he used. Yeah,

Tony: the

Cameron: he is the legitimate general.

Yeah. They were illicit.

So he basically renationalized the entire banking sector, and it stayed that way until it sort of started to loosen up in the early eighties.

Tony: Well, don’t forget to cam, I don’t know if it’s a coincidence or [00:16:00] not, but Australia opened up its financial regulations in that, around that time as well, late, uh, would’ve been Keating and Hawke. So early eighties we allowed foreign banks to take out licenses. We floated the dollar. A few other things as well.

Cameron: Commonwealth,

Tony: up our banking system to competition.

Cameron: Commonwealth Bank wasn’t privatized until the nineties.

Tony: 92.

Cameron: Yeah, right. Yeah, fair point. The other, the other complicating factor in South Korea is the chabos, the big family conglomerates that run Samsung and lg, et cetera, et cetera. I.

Tony: how you pronounce

Cameron: dunno. I have no idea. I did look it up.

Tony: Oh, I just thought that was a different version of cabal.

Cameron: Kaar. Oh yeah, you’re probably right.

Yeah.

Tony: Hmm.

Cameron: chime, meaning money bowl, meaning faction. Um, on the model of tsu, Japanese tsu. I dunno. My, uh, what do you, what do you call [00:17:00] those pronunciation things? Um,

Tony: Language, speech. oh, aren’t you clever? Aren’t you funny? Aren’t you hilarious? You know where you, I’m gonna ask, I’m gonna ask Gemini now. You’ve, now you’ve done it.

you can ask me, just make it clear. How do you pronounce?

get a straight answer out of Gemini. You blame Gemini. Ah, I got this output. It was all wrong from ai. Ai. Uh, dear me, dear me,

Bob, we’re

both wrong. Okay? Yeah, that’s how they said. Most English speakers pronounce it J Bowl. Um, but it should be more like a show bowl, which is pretty much what I said the first time. So we went down this whole thing for nothing. Show bowl, uh, yeah, they were [00:18:00] concerned that there was just gonna be used if, if the show bowls got hold of them, they’d just be used as private piggy banks.

Cameron: So. In 1982, they started to loosen it up a little bit. Shinhan Bank was established by a bunch of, uh, uh, Korean expats that had made a lot of money in Japan, like the Korean diaspora that had gone to Japan, I believe. So anyway, it was set up and it was partially owned by the National Pension Service, owned 8.04% of it, still do.

And today, BlackRock owned 5.65% of it. The chairman is a guy called Gin O Dong. He’s currently, um. Under a lot of intense pressure to do what they call a value up, which I’ll get into in a moment. There’s another issue, like I mentioned to you in our Australian show, digging down into this was brain [00:19:00] numbingly confusing.

Um, there’s a whole bunch of issues when we’re trying to look at Korean companies that are dual listed and listed in the US There’s the whole a DR issue. There’s the value of the Korean one, the exchange rate. It’s at a 17 low, 17 year low at the moment. And then there’s also this issue of. Deliberately depressed valuations.

’cause there’s a 60% inheritance tax, uh, in South Korea. So apparently a lot of the companies, uh, the, the families that have a lot of money tied up in these things and have some parent control, wanna keep the value of them low. So when the family members die, they don’t give it all up in tax. Yeah. Anyway, uh, the core business is, you know, basically they’re the financial toll booth for South Korea.

These guys are huge. [00:20:00] You do anything financial in South Korea, you’re probably dealing with shinhan in some way, shape, or form. Everything from credit cards to corporate factory expansions. They are, uh, a massive, massive enterprise. And they also have a global footprint too. Now they’re quite big in Vietnam, Japan and Kazakhstan.

They are the first Korean bank to hit 1 trillion KRW in annual overseas profit. That sounds like a lot, but when you convert it to US dollar, it’s, it’s not that impressive. Um, I did. Where’s the exchange rate? Uh. Oh, I didn’t write it down here, but it’s like 0.0000, there it is. Uh, no, that’s something else.

It’s 0.00067 of A-U-S-D-I think for every one, one. But, uh, still they’re doing very, very well in that front, uh, [00:21:00] very big business. Uh, 4.97 trillion WAN profit in 2025. I’ll get into the numbers a bit later, but got some problems. The dirty side of it, Tony. Um.

Uh, where do I start? The KFTC, which is, uh, not Kentucky Fried Tasty Chicken. I thought it was like the Korean Yeah, I thought it was the Korean version. Yeah, can Tasty Kentucky Fried Tasty Chicken, but no, it’s, uh, the Korean Fair Trade Commission in January of this year. Declared that the Korean banking system had been operating as a coordinated cartel.

They slapped the big four banks with a combined KRW $272 billion fine for colluding on loan to value ratios between 2022 and 2024. Bank officials allegedly exchanged over [00:22:00] seven and a half thousand sensitive data points via shared Excel files. To make sure that their lending limits were perfectly aligned by coordinating how much they were willing to lend against a property, they eliminated the need to compete for customers.

If you’re a home buyer and soul, you weren’t shopping around, you were walking into a preset trap. The KFTC estimated this coordination allowed the banks to generate. 6.8 trillion one in excess interest income. Uh, Shinhan wasn’t the worst offender here. The worst offender was Hana Bank and Shinhan followed.

Second Hana Bank got a fine of 87,000,000,001, and Shinhan was 63.8 billion one. So, you know, we like to look for businesses with good, honest management that are doing a good job keeping their nose clean. Buffet and Munger style.[00:23:00]

This is, Buffett liked a good monopoly, well this is a

oligopoly. There’s four of them, but, uh, mm-hmm. yes, also a bit of a kleptocracy by the sounds of it.

This isn’t their only scandal. They’ve got two other major scandals that I came up, uh, or found out about this relationship between them and Haner Bank is interesting. They’re kind of frenemies who sue each other. There was a thing called the Lyme Asset Management scandal, which was a $1.6 trillion KRW Ponzi fraud that saw both.

Banks act as distributors, but Shinhan Securities was the prime broker and the other banks blamed them. And then on February 5th of this year, it’s like a week ago. The sole Southern District Court ruled that Shinhan investment in securities had to pay 36.4 billion in damages [00:24:00] to Hana Bank because Hana Bank had already been forced by regulators to reimburse its retail customers for mis-selling fraudulent funds.

So then Hana turned around and sued Shinhan

to claw that money back. Hold on. We committed a crime and you helped us, so we’re gonna sue you for helping us commit a crime. And they were also collaborating on the, you know, the cartel. Um, so they were, they’re suing each other. They were sharing data to rip off customers, ripping off customers left, right, and center.

Tony: Well, all I can say is I think that the, what’s it called, the Korean finger Looking good regulator should, should be exported to Australia and the US Yeah. Well, they’re actually regulating. of the same activity.

Yeah. they’re actually Yeah,

Cameron: Yeah.

Congratulations to the KFTC and wait. There’s more Steve Jobs like to say. Um. [00:25:00] Also in January of 2026, so this is all in the last month. These stories. Uh, this is in the US. A lawsuit was filed in the Southern District of Flora, Florida against the M 360 CRE Income fund.

Um, so this was a, a failing real estate fund that was failing back in 2020 when the US commercial real estate market was wobbling as a result of c. And Shinhan was allegedly allowed to redeem $151 million secretly at full valuation while smaller retail investors had their redemptions temporarily paused and then dropped by over 67%.

So the lawsuit claims that Shinhan walked away with its principle intact, and plaintiffs are calling that preferential treatment and securities fraud. [00:26:00] So they’ve got those three things going on right now. Then in 2024, there was another story. Um, they had a, there was a, you know, markets were sort of having a mini crash.

A team at Shinhan Securities ETF department lost 130 billion KRW, about 95 million USD on. Unauthorized futures trading. Instead of reporting it, they allegedly engaged in ghost trading, creating false swap transactions to mask the deficit, which went unnoticed for over two months, only surfacing during a quarterly audit.

So lots of shonky shady stuff going on at Shinhan. The Shinhan Shonky, shady Trading Bank, allegedly. Well, some of it’s more than allegedly. Some of it

they’ve been fined and [00:27:00] some of it is allegedly. Yeah. So. This is why I hesitated before adding them to Really you you Googled, have you Googled any of the banks in Australia recently or Googled any of the banks on Wall Street recently? I know, I know. You know, we look at the numbers. correct. Um, so more on these guys. They recently, uh, sort of got rid of Shinhan, they’re Shinhan AI subsidiary, which is probably a good move. Um, and so yeah. Anyway. That’s it. Now then we’ve got this currency drag thing. So the Korean wand has hit 17 year lows, as I mentioned before, and I was trying to, I was trying to work this out, so like the whole a DR thing still does my head in.

Um, and how it, there’s some sort of arbitrage thing going on [00:28:00] between shares and listed on the New York Stock Exchange and the Korean stock and ADRs and. There’s some, this, it’s too complicated for me, Tony. I’ve tried, I spent hours trying to understand this and my brain just melted in the process, but.

For whatever reason, even if the shares on the stock exchange go up, if the one falls, it can have an impact on your ability to, uh, well, certainly the dividends that you are gonna get paid, the, the yield from it, but also something to do with the, um, value of the shares can be impacted by the fall of the one.

Tony: Oh yeah, definitely. Well, I don’t know. I, it’s without going through the balance sheet of the bank, I dunno whether a falling one helps ’em or hurts them because, If, if they’re making loans, like you said before, which I also found out they’re a big player internationally. [00:29:00] So currency’s gonna be mixed, a mixed Yeah. right across their portfolio.

So going up and going

down, mainly big banks would have a little hedged anyway, but it’s more about what’s happening to their profit when it repatriates into US dollars or Australian dollars or wherever else it’s, um, being bought. Um, and what people think is gonna happen to interest, margins and career.

If the dollars. Of the ones, the valuing over there, like seen the RBA or the Reserve Bank in Australia raise interest rates for the first time and it’s coincided with our currency. Increase improving, increasing us is going in the

reverse way. It’s dollars devaluating and it’s likely that they’ll cut interest rates over there.

So, with banks generally, the general rule of thumb is if interest rates are increasing, the banks do better. They get a better Yeah. better spread on, you know, the,

what they have to pay out and deposits and what they can borrow Yeah. So, um, it doesn’t always

work that way, but that’s [00:30:00] a bit of a, a rule of Yeah. Yeah. So I

dunno how I. I’d have to go through and look at it almost line by line to work out whether a dropping, you would think a dropping currency in Korea would mean interest rates would be cut, which would hurt their margins, which would depress the share price. But a very superficial analysis of mine.

Cameron: Well, I tried to drill down into why the one is crashing to 17 year lows and. I think it’s a combination of domestic political chaos and the Trump tariffs. Um, as I mentioned before, president Yung, uh, was arrested. He was impeached and then arrested, uh, after he briefly declared martial law in December of 2024.

Tony: Yep. Uh, Wikipedia says, first time it had been declared in South Korea since the military dictatorship of wan. In [00:31:00] 1980, he accused members of the National Assembly of supporting North Korea, but lifted martial law after the assembly passed an emergency motion nullifying the declaration. A few hours later, amid widespread criticism and mass protests and impeachment motion was introduced against Yon.

Cameron: The next day, though it fell short of the 200 votes needed to pass. Yun was successfully impeached and su. Bended from his presidential powers In a second vote 10 days later, Yuan subsequently, subsequently became the first sitting president in South Korean history to face an arrest warrant, and in January of 2025, the first to be arrested and incarcerated.

So, uh, there you go. He’s currently detained and being investigated for an insurrection, for heading an insurrection and may face either life imprisonment or the death penalty if convicted.

Tony: So high stakes gain politics in Korea. um, when you, when you talk about the currency devaluing exact against the US dollar or against the Australian dollar or [00:32:00] Uh, US dollar.

Cameron: Yeah.

Tony: Yeah. Okay, I haven’t checked against Australian Dollar, but Yeah.

Which means it’s actually going down a lot because the US dollar’s been devaluing against a lot of currencies around the world Yeah. Right. which is

what has the Donald Trump’s been trying to engineer to boost Yeah. it’s not always a

bad thing. So apparently, um, surprising to me because I didn’t have the impression that South Korea had a stable, mature democracy in the first place. This, uh, has shattered its images being a stable, mature democracy, and big money managers have reclassified it as a frontier style risk. So that’s playing into this apparently.

Well, Korea does have what they call the corporate governance discount as well. Um, as you said before about the balls, cha balls, whoever you Shabo

she balls

that. Um, so. I think it’s called Resu in Japan, and it’s called something [00:33:00] else in Germany. But some company, some countries have this history of families building up a business and then cross investing it with each other’s companies. Um, and then what you find is that’s really good, in the GFC type environment because large parcels of big companies are held. By other big companies so they don’t trade. you don’t get big sell offs in share markets. but it does tend to depress things in the good times because you don’t see much liquid float those companies.

And as you said before about inheritance tax, the families are gonna run the businesses to suit themselves, uh, in the main. And so

little shareholders may have different interests. know, so that, that’ll affect things like how much dividend is paid, depending on whether the family wants income or not. it’ll, it’ll impact capital expenditure at the companies depending on how the families are going. As you said, they, there are sometimes allegations of [00:34:00] collusion because across industries there’ll be the one ownership of many companies and, um, you know, if it, if it suits, uh, the manufacturing. Part of the portfolio to do one thing.

It may not suit the banking part of the portfolio to do one thing and all the cross ownerships will get together and agree not to do it. So, know, there’s all those kinds of things. So if you look across the board in Korea, um, they generally trade at a lower than US companies. Um, safe to take and courier’s got some big companies, LG and um, car manufacturers and, uh, those Yeah.

if you look at, um, comparisons to US companies, they trade on much lower multiples and the, and the banks, no exception. Hmm. um. You know, I don’t know what the numbers

are, but you’d say a, a decent bank in the US might trade on two times book three times book. think this company’s trading on less than one times book, and that’s generally because of this cross ownership of the families in Korea and the corporate governance issues that it raises. [00:35:00] So they often see career as a, as a value investors, you know, um, a place where value investors often wind up, um, investing in because of that

discount. Well. You wouldn’t be investing investing in the presidencies because, just to give you an, an indication, I, I mentioned it being a mature, stable democracy. Let, let me run through the list of presidents and what’s happened to them in recent decades. So Hun Duwan, 1980 to 1988, sentenced to death, uh, later commuted for the 1979 coup and the Guang Z massacre pardoned in 1997, RO TW 1988 to 1993.

Cameron: Sentenced to 17 years in jail for mutiny, treason, and massive slush funds. Also pardoned. In 1997, Kim Jung Sam went from 93 to 98, was disgraced. His son was in prison for bribery and tax evasion. He left office [00:36:00] during the 1997 IMF crisis. Was replaced by Kim da Jung, 98 to 2003 disgraced. He won a Nobel Peace Prize, but his three sons were all arrested and investigated for corruption during his term.

He was replaced by Ro Muon, 2003 to 2008. Jumped from a cliff and committed suicide in 2009 while under investigation for a $6 million bribery scandal involving his family. He was replaced by Lee ung Buck 2008 to 2013, sentenced to 15 years for bribery and embezzlement, notably involving Samsung.

Pardoned in 2022 was replaced by Jun High, 2013 to 2018. Impeached in jailed. Sentenced to 24 years for the choice soon still influence pedaling scandal. She was pardoned in 2021 and then Yuk Sun Y who just, he was the first sitting president to actually be impeached and jailed. [00:37:00] So,

you know. They seem to have a

Tony: stronger Supreme Court over there than say the US does. you know, a lot of those scandals you could say, have happened before in history in other parts of the world, and they generally. under the radar or get off with a, you know, without any sort of prosecution at all, really. Or even if someone does get impeached in the US, it doesn’t seem to count for much.

Cameron: Yeah, and I think it’s also part of the, the sort of political structure of South Korea. You have this, the, the presidency is pretty much an imperial presidency. Like they have immense power over the bureaucracy in the economy. It’s like a winner takes all kind of deal. And then you’ve got the show bowls participating on all of that.

And there’s sort of a tendency to criminalize previous administration’s, uh, sort of a retribution cycle that they have over there, like a. Combined with a public blood lust for [00:38:00] justice. So, um, you know, I think kind of where the US is heading, you know, it’s, they’re sort of heading down that South Korea model.

Let’s, reminds me of, uh, solar and Mabb and Rome. We just behead our enemies and let the blood flow in the streets. Mm-hmm. the one into another tailspin.

Um. Then you’ve got a lot of capital apparently flowing outta the country because of the Korean discount. Sort of hampers, uh, goes back to what you were talking about before. A lot of the, uh, retail investors, uh, looking outside of Korea. To invest in overseas companies. [00:39:00] Mm-hmm. Then you’ve got the interest rate gap and the career discount that you talked about, and then you’ve got the inheritance tax that I mentioned and how that plays into keeping prices down.

Then there’s this value up battle that I mentioned before. So to sort of combat this, um. Inheritance tax thing where people are trying to keep the values of companies down. The government is pushing through this intervention to basically, uh, force companies to allow the shares to reach a, a real value, like to normalize their value.

And they’re doing that based apparently on a, something that they did in Japan. It was a direct copy paste of the Japanese strategy.

Tony: say, it reminds me of what Ja Japan,

Cameron: I.

Tony: done in the last year or Right. And apparently in Japan, they realized if they’re just publicly shamed, [00:40:00] companies that were trading below 1.0 book value, one times book value, um, you know, it was a matter of face it, they would start, uh, buying back shares or, or raising dividends and, and worked in Japan.

Cameron: So Korea’s running the same play, basically. Um, they have a three part mechanism. To do it. They have the carrot, the stick, and the engine. The carrot is, uh, you will if, if they. Significantly increased dividends. They’ll see their corporate tax rate drop by five to 10%, and individual shareholders can get reduced withholding taxes on those dividends.

The stick is they’ve created the career exchanges. Created a VIP club index, the career value. Index. If a company’s big and profitable but doesn’t return enough cash to shareholders, it gets left out. [00:41:00] If you get snubbed by this index, it’s a reputational blow to the CEO. So they all wanna be part of the value up club.

And then the engine is the National Pension Service that I mentioned before, which is the world’s third largest pension fund. Mm-hmm. They’ve been told to use the Value Up Index as the new benchmark. So billions of dollars of forced buying is flowing into the companies that are part of the Value Up index. It’s pretty smart.

You know, I

Tony: It is very smart play, right?

A again, I love these regulators in Korea. We should get them over here. Some of, you imagine if the ASX did oh, some of our prime ministers going to jail or having to commit suicide. Fantastic. I can think. I can think of half a dozen.

ASX naming and shaming companies

Cameron: I know, right? a value op club Yeah.

The Value Up club. By the way,

Tony: did you see The ASX CEO got sacked I did. Yeah. Yeah. [00:42:00] Um, so anyway, um, shin, idea. yeah. Shinhan is trying to be the valedictorian of the value up class, so

Biggest

Cameron: yeah.

Tony: The biggest value in the Yeah, V. they’re trying to be good students. They’re aggressively buying back shares so they can stay at the top of the value up index. Um, but you know, so it, there’s, um, it’s a war going on between the government and the shy bowls apparently, that are the big investors, uh, that, that wanna keep this down.

Cameron: So, you know, whether or not the government wins or the shy bowls win and, um, we have more presidents committing suicide are going to jail for trying to do this. Who knows? But as we’ve seen with, uh. The 28% increase in career electric power since we talked about it, which I assume is something to do with this value up play.

Um, also [00:43:00] just the basic economics that we talked about on that show, they’d been forced to keep energy prices low and they were reevaluating, et cetera, et cetera. But it’s all interesting. It’s all. It’s very complicated. You know, it’s like all of these stocks that we do in the American market, uh, a lot more going on than there is in your typical Australian business.

Tony: Yeah. However, it, it does remind me of, of Australian banks, I mean, we’ve got four banks, they’ve got careers, got four banks. big four. This is depending

on the metric, you measure

it, this is number one or number two. So it’s like the Commonwealth Bank in Australia and probably Mm. like JP Morgan Chase in the us.

It

everything. Retail, banking, credit cards, business loans, uh, wealth management. Yeah. It’s a one stop shop. Yeah.

And a large market Yeah. And unlike Australian banks these days more active in international markets, Yeah. Australian banks have struggled to make much of a play overseas. [00:44:00] So just, uh, I did the amended scoring because, so they report encyclopedia in one. So I had to, uh, adjust some of our numbers, particularly the EPS and the future EPS.

Cameron: Uh, they came down a little bit in SCORE when I did that, but not too much. So basically they had a QAV score of zero per 0.24. They were sort of top 10. Um, a lot of the ones in the, the top 10 this week we already own or already talked about. Um, they were. Still on the list, uh, including some of the ones we’ve talked about in recent weeks are still up at the top.

So 0.24 average daily trade is, uh, what’s that? 16 million, 17 million, something like that. Price to operating cash flow. 3.26. That’s good. It’s good. It’s not as low as some of the ones that we’ve had recently, but it’s, you know, it’s in the middle of our

Tony: That’s

Cameron: thing. It’s pretty low.

Tony: a, for a big bank operating in a near monopoly. [00:45:00] able to shrug off corp, uh, you know, government fines and legal challenges and all the Yeah. and you get it for three times cash flow. That’s Yeah, yeah. Good point. Wikipedia give ’em a quality rank of 57, so we only score over 60. They don’t score for that, but they do score for stock rank, uh, over 90 and an F score over 4.5. We couldn’t score them for our IV number one. Uh. I readjusted. The IV number one was 33.9, and the share price had closed at about 69.83.

Cameron: So they’re much higher than our IV number one. But our IV two adjusted for the exchange was $71 18. So it scored for that, but not for, uh, double that. Price is, uh, less than Book. Price is less than Book plus 30. The price to book is, uh, what did I say, like [00:46:00] 0.85 is their latest price to book. So it’s,

Tony: trading at less than one times a

Cameron: yeah.

Tony: book. You talk to anyone in Australian banking

circles and they will say, if you can buy a bank for less than twice book, it’s a, you know, do it. It’s a great Really? Okay. Hmm. Uh, so I scored ’em for those, not a new three point upturn. Um, but the prop calf is obviously less than seven. Forecast IV is, uh, not better than double price. Yield is not higher than bank debt. The PE is, uh, not less than the yield. Growth over PE is not greater than 1.5, but I ended up with a.

Cameron: Quality score in QAV of 77%. After the adjustments, 10 outta 13, they scored four. And as I said, uh, a final QAV score of 0.24. So messy, very messy, Tony, but cheap. Messy but cheap. I’ve married a few women like that over the years, but um,

I [00:47:00] thought I’d learn my lesson.

Tony: They weren’t Korean, They weren’t? No, no. I No, a, I’ve had a couple of Korean girlfriends, but, uh, didn’t marry them.

Cameron: No.

So what do you think Tony

Tony: I

Cameron: really. A lot of, a lot of

Tony: value. Investors will look for what they call a catalyst before they invest. So they as a way of protecting them from buying stocks, which are cheap for a reason. They’ll say, I know this is cheap. I know this is changing. That’s the catalyst. Now it’s time to invest.

And I think what you’ve described as the value club or the value up process is exactly that catalyst. It’s a great time to invest in a company like this and possibly even all Korean large companies as well.

Cameron: Wow. Okay, well there you have it folks. Tony gives it the thumbs up. I wasn’t sure about this one. I thought this is the one he was gonna hit on the head. No. Too dirty, too messy. But uh, all. I tell you what, if you look at their share price, it’s been going great [00:48:00] guns. Actually, it was trading as low as like $32 a year ago.

Now it’s up around

70 bucks, so it’s,

Tony: you go. I reckon that’s the value up. Yeah.

Change. but still coming in is very cheap on our buy list, you know?

Yeah. thing I should also mention too is that Korean companies traded a discount because of North Korea. So they’re seen as, you know, a potential, something could come out of left field potentially to hurt the economy or worse.

Um, so it’s, it’s almost straight into the war zone discount. N not quite in South Korea, but it’s, you know, this, it’s seen as having a, a level of hazard investing in Korea ’cause of that. Interest. Okay. Well that’s it Tony. That’s all I have. We did a veil of Robert Devale on the other show. I guess we can mention that briefly. It’s, um, great American actor. Sadly, well, not sadly, he was 95. Like he. You know, life. great life, great career. As I said [00:49:00] on the last show, he, I looked at IMDB and he was working up until a couple of years ago.

Cameron: He was still working in his early nineties. He’s one of those guys that, you know, you put, you could put in the crotch of the old man role, like a Gene Hackman, or I don’t know, whoever else. Lots of um, uh, Laura DE’s, dad, Bruce de, all of those sorts of guys. Yeah. exactly. Yeah.

Tony: Yeah. Was he was, I think he was in the crutch of the old man role, wasn’t he in, was it Stone Lines? The one with, uh, Michael Kane. Where they, um, used to sit in their front porch and shoot at anyone that tried to visit them.

Cameron: I hadn’t seen

that film.

That sounds good though. I think it’s developed. That’s Yeah. It’s good one. Yeah. And, and like Clint, yeah, there’s lots of crochety old man roles, I guess, in Hollywood that he got his fair share of, but um, yeah. What a tr tremendous career.

Tony: Great actor. Great Santini, um, Kilgore in Apocalypse Now. Hmm. The lawyer in, uh, what was

his name in, uh, Tom. Tom Hagen in The Godfather. Yeah. I

mean, [00:50:00] you know, lots of classic

roles that he just made his Yeah. Mm-hmm. Uh, well that’s it, Tony. We’ll see what happens this week. But look, you know, I, I, I think it’s fair to say, based on the pulled porks that I read out before and our portfolio that QAV works in

Cameron: the US market.

Tony: And, and probably the Korean market too. Yeah, no, it does. I agree.

Cameron: I mean, you know, I know before we started the North American show, we were worried about, you know, the, the accounting systems being different from the Australian and the reporting schedule’s a bit different and this, that and the other. But at the end of the day we’re, it’s still. Finding stocks that, uh, generating cash that we can buy cheaply.

Um, and that, Basic business yeah, basic, yeah, basic investing. We are finding Hmm. companies with mass,

with gravity.

Tony: The only [00:51:00] question

i’d I’d still have unanswered and I don’t know the answer to, and it’d be great if someone could. Yeah. Um, right in from the US is whether these overseas companies are causing a problem and, and, providing a valuation discount as well. ’cause people just either can’t do it from a tax point of view or there’s some other stopping them from taking, uh, making investments in adr.

I, you know, maybe pension funds don’t allow it. I don’t know. So we might even, you know, just flag them like if we have a US. company, um, flag it, in the portfolio or something like that so we can see if they perform differently to the ADRs.

Cameron: Yeah, I’ll make a note of that. Good job.

Tony: Hmm. Alright, well thank you tk. Thank you for giving that one the thumbs up. I’ll add that to the live portfolio this week and we’ll see how it goes.

Cameron: Have a good week.

Tony: Good. All right. Cheers.​