THE QAV STORY

THE PODCAST

QAV started in 2019 as a podcast about Tony Kynaston’s approach to value investing. Since then it has turned into a vibrant community of value investors who learn Tony’s QAV system and help others to become successful investors.

Tony and his co-host Cameron Reilly have known each other for about 20 years. Tony was a fan of Cameron’s early podcasts in 2004–2005 and they gradually developed a friendship. Over the years they collaborated on a number of projects, including a book and a film, and they and their families travelled the world together.

In early 2019, as they were wrapping up their film project, Tony suggested they work on a podcast together. He had recently been on another podcast (produced by Cameron’s sons) where he briefly explained the investing methodology that he had developed over 25 years, which he had used to become wealthy. Cameron suggested they do a detailed podcast about that investing system.

That became the QAV Podcast.

TONY’S INVESTING BACKGROUND

After a twenty-year career as a senior executive at Shell and Coles, Tony retired to become a full-time investor.

He studied the greats like Buffett and Munger and developed his own QAV (Quality At Value) system which has been refined over the decades. He designed it to meet his needs – he wanted a system that would allow him to find shares in well-managed companies that had a history of generating plenty of cash but that were available to buy at a discount to their intrinsice value. He also wanted to spend his time with his family and playing golf, so he didn’t want it to be a full-time job. It needed to be something he could manage with an hour a day of focus.

From time to time, people ask to see Tony’s historical returns. He’s talked about them a couple of times on the podcast, the most recent episode being #547.

• FY03 10%
• FY04 98%
• FY05 35%
• FY06 38.4%
• FY07 41.4%
• FY08 ‑19.9%
• FY09 ‑31%
• FY10 115%
• FY11 32%
• FY12 0.8%
• FY13 39%
• FY14 6.5%
• FY15 6.6%
• FY16 14.3%
• FY17 12.4%
• FY18 1.2%
• FY19 ‑10%
• FY20 14.2%
• FY21 19.4%
• FY22 ‑17% (Tony’s wife Jenny retired from a career as a senior executive and they started pulling money out of the portfolio to live on)

As you can see, there have been good years, average years, terrible years and great years. It’s the long-term average (roughly double market) that counts. All investing strategies have good years and bad years. The mistake most amateurs (and even many professionals) make is to change strategies during the bad years. The smartest approach is to stick to your strategy during positive and negative cycles and ride it out. 

CAMERON’S BACKGROUND

Cameron worked in IT for 15 years before co-founding the world’s first podcast network in 2004.

He’s been making podcasts ever since, and has written a few books and made a history documentary. He knew nothing about investing when they started QAV. Today he manages all of the QAV portfolios, as well as his own personal portfolio.

Frequently Asked Questions about QAV Investing

What is QAV (Quality At Value) investing?

QAV is an investing methodology developed by Tony Kynaston over 25 years, influenced by successful investors like Warren Buffett. It focuses on value investing, which involves buying shares of high-quality companies that are performing well, have good future prospects, and are currently undervalued by the market. Unlike speculative gambling based on emotion, QAV employs a data-driven, scientific approach to identify these opportunities, aiming for long-term wealth building through consistent, compounded returns. Tony Kynaston, the developer, has achieved an average annual return of double market returns over 25 years using this method.

How does QAV differ from typical amateur stock market approaches?

Most amateur investors make decisions based on emotions like fear and greed, leading to impulsive buys during bull markets (FOMO) and panicked sells during downturns. QAV explicitly avoids this “gambling” approach. Instead, it relies on rigorous data analysis through a detailed checklist of 17 financial data points to objectively assess a company’s performance, value, and future prospects. It stresses patience, a long-term view (decades, not quick riches), and the avoidance of emotional, speculative, or forecasting-based decisions.

What does QAV Cost?

We have free and premium versions of the podcast. QAV Club members also get access to weekly buy lists, our proprietary checklist system, training and support. See our membership page for more details. 

What are the core principles of Tony Kynaston’s investing style?

Tony’s investing principles are straightforward:

• Buy undervalued shares with a high margin of safety: This means finding quality companies whose stock prices do not reflect their true value.
• Hold for the long term: Shares are held unless specific negative events occur:
• Negative financial outlook or updated guidance.
• Share price drops below the three-point trend line (3PTL).
• Funds are needed for other significant purchases (e.g., property).
• Invest consistently: Investing should occur regardless of market conditions (bull, bear, or “kangaroo” markets). The emphasis is on time in the market, not timing the market.
• Avoid emotional decisions: Steer clear of fear, greed, forecasting, or FOMO.
• Maintain a concentrated portfolio: Typically, a maximum of 20 shares.
• Never catch a falling knife: If a stock’s price is declining, wait for a confirmed rebound before buying.
• Listen to the numbers, not stories: Disregard company, broker, or analyst narratives; focus on verifiable financial data.
• Minimise fees and taxes: Be mindful of costs that erode returns.

What is the QAV Checklist and how is it used?

The QAV Checklist is a proprietary Excel-based tool developed by Tony Kynaston to systemise the process of identifying undervalued quality stocks. It involves inputting specific financial data points for each stock, which are then scored and analysed through various ratios. The checklist aims to remove emotion and guesswork, making investing more scientific. Users can either develop their own checklist or download provided Excel versions. The process involves gathering financial data (from services like Stock Doctor (Australia) or Stockopedia (Australia / USA) or free sources), importing it into the checklist, and completing any manual data points. This process typically takes a few hours and is performed a few times a year once a portfolio is established.

What are some key financial metrics and concepts used in the QAV Checklist?

The QAV Checklist evaluates numerous metrics, including:

• Sentiment (3PTL): Assesses market confidence and trend.
• Net Operating Cash Flow: Measures the cash a business generates from its core operations, considered a more reliable indicator than earnings.
• Price / Cash Ratio: Compares share price to cash per share, indicating how long it takes for the business to neutralise the investment in cash flow terms (ideally < 7).
• Dividend Yield: Indicates financial health and potential income, compared against the mortgage rate as an indicator of market valuation.
• P/E (Price/Earnings Ratio): Compares share price to earnings, indicating how long it takes for the business to cover the purchase price through earnings. QAV looks for low P/E ratios, especially the lowest in the last three years, and a P/E less than the dividend yield.
• Net Equity & Net Equity Per Share (NEPS): Total assets minus total liabilities; indicates the intrinsic value of the business’s assets. QAV prefers consistently increasing equity and a share price less than or not significantly above NEPS (ideally less than 30% above).
• Earnings Per Share (EPS) & Future EPS: Share of company profit and expected future profit.
• Growth of EPS / PE (PEG Ratio): Based on Peter Lynch’s ratio, aiming for growth of earnings per year to be close to the PE ratio, ideally > 1.5.
• Intrinsic Value (IV#1 & IV#2): Calculated based on EPS/Hurdle Rate (Tony’s historical average of 19.5%) and Future EPS/Market Hurdle Rate (RBA cash rate + 6%). Checks if the share price is below these calculated intrinsic values.
• Stock Doctor Ratings: Utilises external ratings like “Star Stock,” “Financial Health Trend” (recovering/stable), and “Financial Health Rating” (strong/satisfactory) as qualitative indicators. Stockopedia has different but similar metrics. 
• Founder/Board Member Ownership: High ownership (10% or more) by a founder or board member is a positive sign, aligning with Buffett’s preference.
• Qualified Audit & Corporate Governance Red Flags: Companies with these are immediately excluded due to high risk.
• Average Daily Trading Volume (ADT): Ensures sufficient liquidity for buying and selling, especially for larger investors.