Cameron: [00:00:00] Welcome back to QAV, American Edition. Tony, episode 34. Happy New Year. Our first episode of 2026.

How are you?

Tony Kynaston: I’m good. recuperative week between Christmas and New Year reading

Cameron: We’ve just.

Tony Kynaston: golf.

Cameron: That’s lovely. I was on the beach. Nice to be back in the office though. A lot going on in the world. Obviously we’ll get into my deep dive of the week soon, but before we do that, obviously lot happening, uh, in the world. In the last few days, the president of the United States sent some guys into kidnap, the president of Venezuela and his wife.

Uh. The most interesting part of that, or important part of that from our perspective, is what it means for the price of crude oil and what it does to the markets in general. We just talked about this on our [00:01:00] Australian show in some detail, but essentially to recap. No one really knows what this means for the price of crude oil.

It could go up, it could go down, uh, it could do nothing could go sideways. But one of the things that I said on our last show is we do track for people that are new listeners. We do track, uh, about a dozen or so commodities. Because a lot of the stocks, particularly in our Australian portfolio, are commodity stocks that we pay attention to, and we like to know where the commodities are because that informs our buy and sell decisions for, uh, mining companies or companies involved in commodities in one way or the other.

And crude oil has not been a buy for us for some time, but as I pointed out in our last show, it is getting close to the byline for us. I think the buy price for us for crude oil is about $65 a barrel, and it’s ran about 61 [00:02:00] 62 this morning, so, and moving up. So it could become a buy in the next week or two.

We’ll just keep an eye and see where it goes. If it becomes a buy, it means there’s a lot of. Stocks and our buy lists, both in Australia and the US become buyers again. Um, but we just play it day by day. Keep an eye on it.

Tony Kynaston: new listeners, um, if something, if a company is a minor or a, an oil producer or refiner or whatever, we use the underlying commodity as a buy and sell guide for us, because it doesn’t always have a one-to-one correlation. But I found over the years that the trends have a pretty correlation between the, where the underlying commodity goes and where the fortunes of the company, which exploit that underlying commodity go.

Cameron: it’s a bit of a lagging indicator.

Tony Kynaston: Yeah.

Cameron: So yeah, the price. If the price for oil starts to go up, then oil stocks will probably go up

a little bit later, though we can catch it a little bit early and vice versa. If the commodity starts to [00:03:00] drop, usually the share price will drop over time as well. Uh, the other story that we talked about is every Wall Street analyst surveyed by Bloomberg now predicts another stock rally in 2026 in the US markets.

Again, from our perspective, that’s interesting, but we don’t really care one way or the other. If you know, we, we play the market as it happens. If it goes up, great. If it doesn’t, that’s okay for us too. We just stick to our rules. Nothing changes. I said in my newsletter this week, you know, at Kung fu Chrissy and I are saying 2026 is the year of the kicks.

’cause we’re focusing on our kicks this year, improving our kicks. I was trying to come up with a similar motto for QAV. 2026 is the year of the, and I just got back to sticking to our rules and doing what we normally do. It’s, it’s kind of boring.

Tony Kynaston: if you like, if that helps.

Cameron: I said QAV 2026 is the year of [00:04:00] sticking to the rules. No tricks just to make a room with six. No tricks. No tricks. We’ve got no tricks. Just our trick is discipline. Yeah, that’s the trick, right? Disciplined investing rules-based investing. That, and, and it is actually a, it is the ultimate trick because as we know, most investors, amateur and professional, really, really struggle to have discipline.

It’s probably the biggest. And you know, buffet has said this, Munger said this. Ben Graham said this. Peter Lynch has said this. Uh, who wrote the, uh, what works on Wall Street?

uh,

mgl.

Oh, Shaughnessy.

Tony Kynaston: yeah.

Cameron: It was one of the big things he called out in that book from his experience is that even the professionals, if their system stops working, they jump horse midstream and try and get on the new horse, and he’s like, no, you just.

You [00:05:00] have your, you have your framework and you just do it day in, day out, month in, month out, year in, year out. Don’t change horses midstream. And you know, that’s what we do and, and it works.

Tony Kynaston: aren’t we?

Cameron: I am gonna send you that Dana Carvey chop and broccoli thing as soon as I get off the show.

Chop a.

Tony Kynaston: Well, is the year of no predicts. How about that?

Cameron: Oh, that nearly works. No predicts.

Hmm. Well,

we don’t predict, and I think it was a,

Tony Kynaston: they wouldn’t be working for Wall Street Banks.

Cameron: that’s right. And, uh, I think it was Peter Lynch, his quote, uh, people who live by the crystal ball end up eating shattered glass or something to that effect. So it is a great quote. I like it. We don’t predict, we just [00:06:00] listen to the numbers and play things, uh, day by day.

Tony Kynaston: will work

Cameron: Yes rules. That tell us when to buy, what to buy, when to buy it, and then when to sell it and ignore everything else in between. Just follow the rules. Well, for new listeners, what I do on the show each week, uh, is take our buy list and take a stock off that buy list and talk about it. We do a deep dive or what we call a pulled pork.

Dunno why we call it. I think Tony said years ago, I’m gonna pull apart this stock and I said it was like a pulled pork and it’s just stuck. But, uh, what I have been doing for the last year or so is just finding interesting companies to talk about. But what I’m doing more recently, ’cause we started the QAV Light Portfolios, which is like a demonstration portfolio where I add a stock every week and then people can [00:07:00] watch how we trade those.

They can follow along or they can just use it as a. Proof point later on, we have complete transparency. So you see what we bought it, why we bought it, what happened to it when we sold it, why all of that kind of stuff. Uh, I add a stock each week and the one that I am gonna add this week is the one that’s at the top of our US buy list this week.

It’s a company called,

it’s a long.

Tony Kynaston: it?

Cameron: Yeah, well, it’s called XPLR infrastructure, but the ticket code is XIFR, so I’m calling it zr,

but it’s

Tony Kynaston: the letter X.

Cameron: yes. Um, and like every week it’s an interesting story. For stocks to turn up on our buy list, uh, particularly to be at the top of our buy list. They’ve gotta be going through a bit of a traumatic period.[00:08:00]

You know, for people that are new, we’re the kind of value investors that look for companies that are typically. Been around a while, uh, relatively stable in terms of their underlying business. They’re generating cash, but for whatever reason, we can pick ’em up at a discount to their valuation. They’re on sale.

What was that quote you had from somebody in our last show? I.

Tony Kynaston: something like the stock market is the only thing that goes on sale and everyone runs away.

Cameron: Yeah, yeah. But not us. We’re looking for stuff that’s on sale and, you know, uh, if our system, if our checklist picks it up and says, you know what? This is worth paying attention to, then we pay attention to it.

So this company.

Tony Kynaston: on. Not, but not every

list is going through a traumatic event. There’s plenty of stocks on the Australian buy list that are doing well, but they’re just unloved or unlooked looked and

Cameron: But that’s it. Why are they unloved? Why are, [00:09:00] why are they not, uh, trading at a reasonable valuation? There’s gotta be a reason for it.

Tony Kynaston: pork I did on the Australian show, which was a iron ore mining company, which was integrated and it was starting to take off, but, uh, why was it unloved? analysts just didn’t value the road haulage side of the business as much as the iron all side. So does that make them going through a traumatic period?

No. They’re

topsy. We often see

Cameron: Yeah.

Tony Kynaston: stocks on the buy list as well, which is just

mispriced.

Cameron: Good point, good point. Well, the one I’m gonna talk about today is going through a traumatic period. So particularly the ones that I cover on this show usually are going through all sorts of trauma, but that makes it a fun story. So this is a bit of a crime scene investigation. Um, XIFR committed, the ultimate sin.

They cut their dividend, particularly, they had a lot of income investors and now it’s [00:10:00] living in purgatory. Bit of a halfway house trying to get its life back together. And I’m gonna tell that story and, and we’ll see if the assets are worth more than it’s terrible reputation. So this is a really interesting

company.

Tony Kynaston: Is that the,

Cameron: Yeah.

Tony Kynaston: the, the narrative,

Cameron: What’s that from?

Tony Kynaston: the

Cameron: Yeah, but I thought it was from a, I thought it was, yeah. Whose routine it was? You sleep with? One goat? I can’t remember who did the joke. Anyway. Um, so the backstory is, um, XIFR is a bit of a grab bag, sort of a greatest hits album of renewable energy. They don’t actually build the assets, they just own the royalties for them.

Sort of a landlord model. Now, uh, they own a whole bunch of renewable energy assets across the us. Lots of, uh, [00:11:00] big propellers, lots of solar, and they. Generate enough to, well, they own enough to generate 10.1 gigawatts of power assets across 31 states. Now, not knowing much about that, I asked, uh, Google Gemini how to get some perspective around that.

It said, well, back to the future, the DeLorean needed 1.21 gigawatts to travel back through time. So. XIFR produces enough power to launch eight DeLorean back to 1955 simultaneously.

I thought it was good because my first question after I asked it was gonna be, how much did the DeLorean require? And it, it knew me well enough to just lead with that. But to put it in more perspective, it’s enough to power roughly three to 7 million homes. Um, more perspective. A standard nuclear reactor usually has a capacity [00:12:00] of about one gigawatts.

The Hoover Dam has a capacity of roughly two gigawatts. So these guys. Produce five Hoover dams, but. Their business model is interesting. We have covered a couple of electricity companies, uh, on the show over the last few months in the us. These guys aren’t gambling on daily electricity prices. They’re essentially commercial landlords.

They signed 15 to 20 year leases. They’re called PPAs Power Purchase Agreements with utilities. And as long as the wind blows and the sun keeps shining and the tenant stays solvent. The rent check clears. So 10 to 20 year guaranteed

income for these things.

Tony Kynaston: So do

Cameron: a bad business model

Tony Kynaston: the contract? it works?

Cameron: kind of. So I, I’ll get into the, the background of it, [00:13:00] uh, in a minute. There’s sort of a long story with how this got to be built. Uh, basically they don’t build it, but their parent company builds it and then they have the rights to basically run and operate it and sell the electricity.

Tony Kynaston: asset is in ones. and the management rights from another company.

Cameron: that’s it. Exactly.

Tony Kynaston: trades on a low

trade on a large PE multiple.

Cameron: That’s right. That. So the portfolio mix, if you flew over their assets, you’d mostly see giant white turbines. About 80% of what they do is wind. Uh, 18% is solar and the rest is batteries. Two to 3% are batteries, which is a nice to have at the moment, but. But might be the future. Interestingly, we, we took Fox and a friend, my son Fox.

Fox and Friends, not the show. We didn’t take the Fox show. My son, whose name is Fox, named after Fox Mulder, not Fox News. I [00:14:00] hasted to point out, um, and a friend of his to a local swimming pool in New Market yesterday. And I noticed three huge Tesla batteries, um, at the pool. I was like, oh, that’s interesting.

Dunno what they’re doing with it, but

Tony Kynaston: I don’t fall into

Cameron: Generat something. They’re a long way away from the water. But yeah, I was like, oh, look at that. Um. So the origin story is it’s this company started off as something called Next Era Energy Partners, NEP, which was the Golden Child Yield Co of a company called Next Era.

ERA, um, which is also listed. The ticket code is NEE. They’re the largest electric utility in the world by market cap, roughly 160 to $170 billion market cap. [00:15:00] And they, they launched this venture called NEP Next Era Energy Partners. A while ago, the pitch was basically we buy assets, we pay you a fat, fat dividend, stock goes up, repeat, uh, and next era energy goes back to 1925.

Started life as a company called the Florida Power and Light, uh, organization, which then became FPL Group in 1984. It’s gone on massive acquisition sprees and you know, basically built itself into this behemoth of electricity generation. But building things is expensive and messy. You have to take on construction risk, deal with permits, spend billions up front, so they spun off any P, which is now XIFR yield code to be the perfect home for those assets.

Once they were finished. Logic being the parent does the hard work of building the wind farms and the solar farms, and once it’s running and generating cash, they sell it [00:16:00] to the child. The child’s only job is to buy it and then collect the rent and pay out fat dividends to investors. And that worked very well for quite a long time until it didn’t.

And when it didn’t, uh, they made some changes and investors were not too happy with that. So because it was backed by next era investors treated it like royalty. This, you know, was a spinoff of a very large, very successful, deep pocketed businesses, and NEP was able to get access to incredibly. Cheap capital.

It had a high stock price. Low bond yields the parent, the parent had a massive pipeline of projects. The child company didn’t have to hunt for deals. The parents just dropped them in its lap. When it finished building these things, it was growth on a platter. [00:17:00] Uh, and then they had this thing that. It was the, basically the infinite money glitch.

So the child company would in would issue expensive stock because investors loved it. Paying fat dividends, guaranteed income, guaranteed cash flow to the moon. The child used the money to buy wind farms from the parent. The parent takes the cash and builds more wind farms. Rinse and repeat, right? The infinite money glitch.

Tony Kynaston: times have we seen this story, though? At least I’ve seen it in, in Australia, where, know, the bankers get a hold of it, usually with a lot of debt. I’m not sure what the situation is with this one. and it works. For a while and then you know, something happens and it all collapses.

Like a house of cards.

Cameron: And what do you always say about growth companies?

the thing you’ve been telling me for years? Yeah, it looks great until.

But you, you normally have a Yeah, but which is always [00:18:00] watch. Watch what happens when interest rates go up, is what you’ve said to me every time. And that’s what happened to these guys too. So the model only works if the child company has access to cheap capital. When interest rates spiked, the cost of their borrowing exploded and suddenly yield Co n ep.

Um, every time I say NEPI, I think of, um, the New economic program because I’m a communist. Um, that was when Lenin was run, when Lenin was still alive running Russia in the early 1920s. He came up with the NEP when their initial attempts at collective socialism. Failed. He said, okay, maybe we need to a little bit of wiggle room here.

And he came up with the NEP, the New Economic program, which allowed a little bit more private ownership,

which Stalin shut down years later. But anyway, I. Yeah, yeah. You haven’t studied your Russian revolution. [00:19:00] Um, but that’s, every time I say it, that’s what comes to mind. Anyway, different np. So, uh, when interest rates spiked, cost of borrowing went up.

Suddenly they couldn’t afford to buy the parents’ assets anymore. The infinite money glitch turned out to be a fine amount. Money glitch, it kind of broke, and the parent company effectively said, if you can’t buy our assets, you’re useless to us. The, the flow of deals stopped. The dividend was cut. And the golden child basically became an orphan.

Um, fun fact in 2025, next era, the parent company was actually one of the donors who funded the Weis White House’s, east Wing demolition and building of the new ballroom. So, you know where they sit in the scale of things. So. Yeah, they are. So there’s this red wedding that happened, uh, January, 2025.

Interest rates basically murdered the whole business model. Um, and they did the unthinkable. They suspended the distribution, [00:20:00] uh, of dividends indefinitely. So. The trauma here is people bought this stock exclusively for the income. A lot of funds, income funds bought it. When they cut the payout, they basically broke the social contract.

The income funds sold out. Retirees panic, and the stock price crashed. So when you look at the chart, you can see this. It’s, uh, it has not been a fun year for these guys at all. Um, let me bring up my, I just got to bring up my stock Edia chart here

Tony Kynaston: isn’t it?

Cameron: has been, yeah.

Oh yeah. So if you look at it, uh, you go back, uh, may of last year. Um, it was trading around 34, 35 bucks. Um, it had already come [00:21:00] back to the beginning of this year, uh, sorry, the beginning of last year. About a year ago. It was trading about 15, 16, and then it plummeted in January of 2025 down to about 10 bucks, which is pretty much where it’s remained ever since.

10, 10 50, something like that. Where, which is where it is at the moment? 10 52.

Tony Kynaston: $86 back in

Cameron: go, if you go way back a few years ago. Yeah. Yeah. Wow. So, yes. Um, not a good time for the share price. Not a good time for investors. And they are, you know, understandably, uh, bailing on it over the last year in particular,

but.

Tony Kynaston: that there was a class action

that, uh, cessation of dividends and the changes weren’t communicated well with the shareholders or they weren’t given a chance to, um, have a say in it.

Cameron: [00:22:00] Actions in America. Nah, that doesn’t seem, that doesn’t seem likely. Tony don’t think. That kind of thing. It’s not a very litigious society over there. I don’t think that, I don’t think that would ever happen.

Tony Kynaston: Of lawyers.

Cameron: Yeah.

Tony Kynaston: Hmm.

Cameron: So, um, they renamed the company from NEP. Uh, people kept saying, what’s this got to do with Lenin and the Soviet Russia? And they were like, they got sick of telling that story. Yeah. Everyone, everyone knows their NEP uh, socialists were big investors in this. They kept getting confused, so they renamed it to XPLR infrastructure ’cause that’s not confusing.

Uh, XIFR. They basically put the ticker in the witness protection program and told investors, ah, it’s all changed now. We changed the name. It’s all different, different game. Um, but they also said we’re keeping the cash to fix the balance sheet. So it’s, it’s basically an orphaned stock. Um, [00:23:00] growth. Investors don’t want it.

It’s a utility Income. Investors can’t own it. It’s got no yield. The only. People left interested in it are value vultures like us picking through the wreckage, looking for cash that we can get cheap, and it is a very boring cash engine. The stock chart looks like a heart attack, but the assets are boringly reliable.

The wind’s still blowing, the sun is still shining. They have 15 to 20 year contracts that people are still paying for. Um, it’s a great business model, honestly. Uh, whilst they still have the contracts. Even though they’re sort of independent, the portfolio was built by next era. These aren’t hobby farms run by a guy with a wrench.

They’re institutional grade assets with high uptime. Some of the contracts run out to 2051, so that’s long duration cash flow. Even [00:24:00] if a recession hits this year, um, that money is locked in. I mean, I mean, theoretically I guess contracts can be broken and electricity companies can go outta business, et cetera, et cetera.

But you know, we’ve covered this in other shows recently when we were talking about the guys in California. I mean, states need electricity companies to stay in business. So there’s all sorts of tricks that get pulled to make cheap financing available to retailers, power retailers, right? Can’t afford to have people with electricity.

Not yet. Anyway, so the market looks at ZR and sees a debt zombie. I think they’re terrified that the cash flow is just gonna get eaten by interest payments and refinancing costs and some of that fear. May be valid. They’ve historically used financing structures that would make your head hurt. All sorts of, um, big short type convertible equity portfolios, et cetera, et cetera.

That I don’t [00:25:00] understand. I don’t think the market understands. I think that was the point of the big short, right? No one really understands how these things work. These convertible structures, they’re all designed deliberately to be confusing. The market hates homework, but when you combine. Complex debt structures with management that just burned everybody.

You get, uh, a massive discount, but uh, the management is doing stuff with the money, which I’ll get to in a second. But the other big question I had is, what about the Trump factor? So this is renewable energy, right? We know Donald Trump doesn’t like wind turbines. They kill all the birds. He loves oil. He just, um, just kidnapped a president of another country because it’s all about the oil.

He says, I’m not sure that’s true.

Yeah,

drill, baby. Drill. Yes.

Tony Kynaston: whether sentiment involved here because of the change in approach [00:26:00] or the perception of wind farms has gone down. Okay.

Cameron: I think there may be some of that, but the bottom line is these 15 to 20 year contracts don’t care about Donald Trump’s view of wind farms. Right. They’re, they’re locked in, so

unless he just,

Tony Kynaston: sorry. Sorry

Cameron: Hmm.

Tony Kynaston: who before were

to by alternative energy generators because they had investors who wanted them and those investors have shown their true colors and gone back to oil companies or whatever?

Cameron: Be some of that. I think one of the bigger things though, is the worry that Trump may shred the Biden Administration’s Inflation Reduction Act. Because that’s playing a big role in funding renewables. I don’t understand the ins and outs of it, but I know that that’s part of the, the sort of headline noise that may be affecting these guys, but.

You [00:27:00] know, if you were looking at this purely from a Trump trade perspective, there is gonna be a market knee-jerk reaction to a Trump presidency. I, I heard about a term that I’d never come across before. Buy drillers, sell spillers. You ever heard that?

I had to drill down into it. So drillers is self obvious.

Um, self-explanatory. Spillers, apparently renewables in market lingo are called spillers because they effectively spill cash on the ground whenever the grid is congested. When you, when you can’t stuff any more renewable electricity into the grid, it’s just wasting it, um, when you can’t stick it in a battery.

So yeah, they’re called spillers. So buy drillers, sell spillers is sort of the mantra over there at the moment, but you know, for whatever reason, they’re still generating cash despite. All of that. I [00:28:00] mean, the counter narrative to the Trump trade buy driller, sell spiller stuff is many analysts apparently believe that a full repeal of the IRA is unlikely because republican districts are huge beneficiaries of those renewable instruments.

It’s harder to kill a subsidy if it’s gonna kill jobs in red states. So then again, I don’t really. Take Trump as the most rational of human beings. So whether or not he cares about that sort of stuff, who knows? But you have to figure it plays into his decision making at some level. But these, these contracts that they’ve got, uh, legally binding, whatever Trump thinks.

Is, you know, it’s not gonna be easy to make these 15 to 20 year contracts disappear, so it’s got a near zero immediate impact on existing revenues. The rent checks will keep clearing for the foreseeable future. [00:29:00] On top of that. As we’ve talked about on other shows where we’ve talked about electricity generation in the last couple of months, data centers, AI and electrification are driving massive demand for power.

Utilities need more electrons, not fewer. They can’t afford to turn off the 10 gigawatts that they’re getting from ZR just because of either political rec rhetoric because these guys, um, cut their dividends. So the contracts. Remain and these guys keep generating cash. There’s another thing that happened recently.

They did end up somehow owning a massive gas pipeline called the central Pen line. I think it was an LNG CAS pipeline. There was something to do with, um, ESG concerns with some investment funds. Uh, for some reason the LNG was seen to be not ESG friendly. They recently sold [00:30:00] that, uh, H two 2025 for like, uh, a shit ton of money.

I think it was like a billion dollars or something. They sold it for which they used to pay off some debt. So. Um, you know, they’re doing stuff to improve their financial position, getting rid of some of these assets, using the cash to pay down stuff. Basically. I think the Trump presidency might be a valuation headwind, but it’s not a revenue headwind.

The market is sort of pricing it as a renewable Armageddon, but the contracts mostly protect against it. The risk is strictly on the future growth math tax credits for Repowering, but not the current cash flow. So the garage sale, um, with Central Pen Line is helping to make a ton of cash, but you have to remember that what Yield Co was designed to do, it’s a machine that [00:31:00] basically eats contracted cash flow and supposedly spits out dividends.

Um, and now it’s not spitting out the dividends anymore. It’s using that money to fix its financial position. So that sucks if you’re an income investor or an income fund, but for us, a company that’s using its cash to get rid of its debt,

that’s, that’s good. That’s all goodness. From our perspective, Ron.

Tony Kynaston: of metrics are for this company, when it was paying a dividend, what the yield was. But you know, if it was yielding 5% and it was a hundred percent geared, and I dunno what the ratios are, then in 20 years or less, it’s paid off all its debt. Um, so Yeah.

quite possibly a better use of how it operates and paying off yield or paying off dividends to customers.

Cameron: It’s actually hard to figure out what their dividend [00:32:00] yield was before they changed. Yeah, my understanding. So if you look inia, it’s just got blanks and I think that has something to do with the ticket code change. As best I could understand it, it sort of confuses the Wikipedia numbers, um, for some reason.

Um, but if you look at their financials, I’ll get into the QAV numbers in a minute, but if you look at the financials and stock edia, there’s a few things that jumped out at me. If you look, um. At the average shares down under balance sheet 2019, they had about 59 million shares. Today they have about 94 million shares, so in five years they’ve diluted shareholders by about 60%.

They have to, they had to keep printing new shares to buy new assets. When the stock price crashed and they couldn’t print shares anymore, the machine broke. [00:33:00] So, yeah, so now they’ve got 94 million shares out there, which people probably didn’t care for a long time, but now it doesn’t look too friendly.

Tony Kynaston: in

Cameron: Uh,

Tony Kynaston: too, they were paying off about three

60 a share dividends before they cut them.

Cameron: yeah.

Tony Kynaston: Um,

Cameron: At its peak.

Tony Kynaston: well, it was,

Cameron: If you go back five years ago, it was like a dollar 97, and then it got up to $3 60 and now it goes to nothing

next year.

Tony Kynaston: uh, again, analysts, but if you take that two or $3 a share, uh, on its current share price of 10 bucks, it should pay off its debt in a couple of years. Really?

Cameron: Yeah, well, yeah, so the net debt’s about 5 billion, 5.1 billion at the moment. Some other numbers that jumped out at me looking at this. Um, if you look at their cash [00:34:00] flow versus their CapEx, operating cash flow is about $8 92 per share. The CapEx, which I figure is just money going out to do stuff, build stuff, is about $7 85 per share.

So. If they stopped spending that on CapEx, which I don’t think they, I mean, I, I thought that they weren’t the guys that built stuff that Next Gen built it and they just bought it off them, but I guess they have to repair it. Would that come under CapEx maintenance? Yeah. So how much of that they can save?

In their new business model, I don’t really know. Instead of having like a dollar free cash flow, they might be able to, um, save a lot of money there, which can go to paying off the debt. But there’s um, a lot going out to CapEx, which I don’t really deeply [00:35:00] understand where or, or how they would pull that back.

But there seems to be a lot of leeway in there. If you look at the, um, the back to the yield line, sort of saying the TTM yield is 9%, but then the forecast is zero. I think that’s kind of a ghost yield left over from the last couple of quarters. I think they were, um, you know, sort of pulled it back in stages.

Uh, if you look at the balance sheet and the book, value per share, uh. $33 book value per share. $33, 33.6 book value per share. Um, and it

share price is 10 bucks. Yeah. So I assume the book value is the assets that they own, the, the steel and the [00:36:00] ground. So like it’s, that’s crazy to me. You could buy it for a third of its book value.

I mean, somebody’s gotta see the va see the value in that, right.

Tony Kynaston: haven’t done the analysis whether the assets are as much the physical, uh. Uh, pylons and solar panels and wind farms or whether it’s some kind of monetary value assigned to the contracts. So, um, but either way, they still both have value. And you buying it for much less than what It’s on the book app.

Cameron: A third. It’s insane. So that’s why it pops up in a buy list. Um, so the market caps are around about 955 million. So it’s, you know, big enough for most of our investors, but probably small for big fund. Um. It’s price for distress. The PE is about 2.6 [00:37:00] times. Um, price to operate in cash flow is 1.14. So longtime listeners know that we look for stuff that’s less than seven.

1.14 means you buy a share and it basically pays you back in a little over a year in terms of operating cash flow. So if we use our old, um, cafe analogy, if I could buy a cafe and it would pay me back by buy price in a year and a couple of months, it’s pretty hard to say no to that. Particularly if it has 15 to 20 year contracts guaranteeing it’s cashflow, right.

Tony Kynaston: we have to unpack it a lot more. I haven’t done the analysis on this that you have, but know what, what are the, if it’s a use the coffee shop analogy, what are the CapEx requirements? What are the, know, where are the risks? What’s the debt that you’re inheriting? All that kind of thing. with that kind of operating cash flow, there’s [00:38:00] a lot of cash to solve all the problems

Cameron: Yeah. And look, you know, and, and again for new listeners, we, we don’t do. Deep micro analysis on our stocks. That’s not my objective. Um, with my pulled porks, uh, I’m like, okay, this is at the top of our buy list. Wonder why. What’s going on? What does it do? Why is it cheap? That’s really, uh, uh, what I wanna know.

Um, I don’t know the ins and outs of this company’s business. I don’t care to, but I know that. It’s generating quite a lot of cash and it has guaranteed incomes for 15 to 20 years, and we can get it really, really cheap. So. Well, let me sum this up. Um, the red flags, to be honest, it’s messy. It’s very messy.

Um, there could be all sorts of things in the financing structure that could come back and bite you. Management kind of needs to navigate this very well. They could screw it up in a number of different ways, but that’s [00:39:00] always true. Part of our job is trying to find companies that are well managed. And I’m sure the US is not that much different to Australia.

We know that very few publicly listed companies are very well managed. A lot of them just, uh, a dog’s breakfast. And so we try and pick the ones where the management seems to know what they’re doing. And if we get it wrong, then we can sell it later on. But finding the ones that seem to know what they’re doing and look, these guys were in a tough situation.

I mean, um. Um, I guess on one hand you could say interest rates were always gonna go up eventually. So having a business model built around the idea of permanent low interest rates was bad. But we had one of Australia’s, uh, leading media comment, financial media commentators on our show five years ago, basically saying, this time it’s different, Tony, cheap money forever, the money will flow.

Interest rates are always gonna be cheap. He didn’t say that literally, but that was the animation. [00:40:00] Uh.

Tony Kynaston: I think that’s our biggest red flag.

Cameron: Yes. Um, let me, uh, run through the numbers just to wrap it up. Um, QAV score of 0.69, which is very high for us. It, it doesn’t score on any of the. Wikipedia metrics, quality rank, stock rank F score, couldn’t score it for any of those. Uh, the price was less than both our IV number one and our IV number two.

It’s also less than book price. And of course, book plus 30 doesn’t have a new three point upturn, but the book value growth is positive. Um. And, well, this is a tricky one. Is PE less than the yield? Um, yes, but we know it doesn’t have a yield moving forwards. But looking at the numbers where they were, it did [00:41:00] score for that.

The forecast IV is greater than twice the current share price. Pr/OpCaf is less than seven, as I said. So in our scoring, uh, it got an 11 out of 14, which is a quality score of 79% stock. Edia gives it a quality score of 30%, but ours is, uh, scoring differently, obviously. And as I said, a QAV score of 0.69. So that is zfa.

Um, on the top of our buy list, I am gonna add it to our live portfolio this week and we’ll see how it does.

Tony Kynaston: one last thing to add is that the sentiment seems to be bottoming out if not turning, if you look at the stock price. So,

Cameron: yeah,

Tony Kynaston: yeah, it’s, it’s

its, um, byline. It’s above its sell line, it’s been slowly increasing off a base. Now, um, the trend could easily break and we’ll have to sell it, but I’m guessing it’s found the bottom. [00:42:00] At the.

Cameron: Well, from your lips to Trump’s ears, uh, Tony, um. Uh, we’ll see what happens. I’ll just wrap up by looking at our US portfolio. It’s been a good month for our US portfolio. It’s up about 5% in the last 30 days versus the s and p 500, up 0.46%. Um, but for the last one year we’re still down. We’re negative 13% for the last one year.

But as I say, every year, that’s be every show. That’s because we had a absolute ridiculous year the previous year where we were up like a hundred percent for the year. So it’s come back a bit for since inception, which is since September, 2023. Our US portfolio is up 68% versus the s and p [00:43:00] 500, up 55%, so we are doing quite a bit better.

Not double market yet that we would like to see, but as I said, it was triple market going back a year ago. Came back a bit over the last year with interest rates and different things going on, but some of our stocks have continuing to do very well. WLFC is up 200%. ENVA is up 172. ESEA is up 93 BLX is up 80, et cetera, et cetera.

Career electric power that we added a while back a few weeks ago is up 6% since we added it, by the way. So that was a nice call. Um, the stocks that I’ve added to the light portfolio over the last couple of weeks are both down a couple of points. A MCX is down 3%. GTN is down 3%, but you know, it’s early days with that.

So I’m not really fussed at all. And I will add zip A, [00:44:00] uh, and we’ll see how it goes.

So that’s that tk.

Tony Kynaston: Was he the in Picnic and hanging rock? Was his name, er remember the theme from Picnic and Hanging Rock the soundtrack

Cameron: No, I don’t remember.

Tony Kynaston: playing a

Cameron: think it’s as if as an instrument,

Tony Kynaston: Yeah,

Cameron: hop or something.

Tony Kynaston: I Every

Cameron: Picnic and hanging rock.

Tony Kynaston: picturing it.

Cameron: I have, I haven’t seen that since I was a kid. Yeah.

Um, alright, well that’s the, that’s, that’s the show for this week. Thank you tk. Thank you to our listeners and, uh, we’ll be back next week with another American stock to take a look at. Do your own research though.

Tony Kynaston: Thanks Ken.

Cameron: Thanks tk.

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