In this episode, Cameron and Tony dive deep into the US market’s latest moves following Jerome Powell’s comments at Jackson Hole, the surprising resilience of investor sentiment, and a look at how the QAV US portfolio continues to beat the S&P 500. They track the extraordinary rise of ZEPP (up 1,200% since Cameron’s July deep dive) and review other stocks they’ve covered, from Titan Machinery to Sasol. Cameron then takes us through a fascinating pulled pork on Kimball Electronics (KE), tracing its history from pianos and pipe organs to becoming a global contract electronics manufacturer. Along the way, Tony and Cameron unpack value investing lessons, the quirks of US versus Australian markets, and finish with a colourful chat about The Who, Leonard Cohen, Rip Torn, and China’s unique economic model.
Timestamps & Stocks Mentioned
• 00:00 – 01:30 | Market update — Jerome Powell’s comments at Jackson Hole, Fed signalling
• 01:30 – 03:00 | QAV US portfolio performance (up 74% vs S&P 500’s 45%)
• Stocks doing well: RM (Regional Management), GASS (StealthGas), ENVA (Enova International), WLFC (Willis Lease Finance)
• 03:00 – 05:00 | Cameron’s deep-dive tracker results
• ZEPP (Zepp Health) up 1,218%
• 08:30 – 36:00 | Pulled Pork: Kimball Electronics (KE)
• 36:00 – 39:00 | Comparing US vs Australian markets, portfolio returns
• 39:00 – After Hours
• Tony’s golfing holiday & horse racing story
• Cameron on The Who still rocking in their 80s, Leonard Cohen doco, Rip Torn nostalgia, and books on China’s economic model
Transcription
Cameron: [00:00:00] Welcome to QAV America. Tony, how you doing?
Tony Kynaston: I’m doing well. I’ve just had a week off and it has been lovely and, played golf up in Yarra Wonga on the Murray,
Cameron: let’s talk about US market. Um, j Powell. Jerome h Powell said The balance of risks across the economy had started to shift raising the odds. The central bank lowers borrowing costs at its next meeting in September. After, uh, he was at Jay Hole.
Jay Powell was at Jay Hole. Um, you would think that when the Chairman of the Fed says The economy’s not going well, the market would react negatively to that. On the contrary market, thought that was the best news. Say Dad. Oh, week awake.
Tony Kynaston: Uh, it’s, we’re through the looking glass, aren’t we? Cam? I mean, that’s just, yeah. Own. Powell came out and said that he thought there could be a decline in employment, which would, uh, [00:01:00] cause a slowdown in the economy and the market. She, and went up one and a half percent the day
Cameron: times. Good times. Well, speaking of good times, uh, we just talked about our US portfolio, so for new listeners, hi, welcome. Yes. We’re two Australians talking about value investing in the United States. We’ve been doing a podcast, uh, about value investing in Australia for five or six years, and, uh, we’ve got a US portfolio that I started back in September, 2023 following our QAV methodology that Tony’s been developing over 30 odd years.
Quality at value is what that stands for in case you’re wondering. And that portfolio since inception is up about 74% versus the s and p 500, up about 45% over that period of time. In the last 30 days, our portfolio is up [00:02:00] 8.6% versus the s and p 500, up about 0.8%. So in the last week, some of the stocks that have done particularly well for us are RM regional Management up 8.5% gas ga a s, stealth gas up seven point a 5%.
Enva, ENVA and Nova International up about 6.2% overall, our best stock, uh, has and continues to be. Willis Lease Finance, WLFC. It’s up 223% since we bought it, although it hasn’t had a good year. It’s down from about 300%. At some point it was. But generally speaking, our portfolio is doing well in the us Tony, and, um, as I did, uh, last time we did an episode, I’ve got, I’ve been keeping a list of the stocks that I’ve been doing deep dives on this [00:03:00] show.
Tony Kynaston: Wow. They should send you a cheap watch.
Cameron: Price was $2 98 when I talked about it. It’s currently $39 29. I like somebody, somebody on TikTok, when I posted a story about that last week, said, yeah, but it’s not gonna last. It’ll come back down
Cameron: it probably will, but yeah, up [00:04:00] 1218%, that’s insanity. And um, I think last time we spoke, I said I didn’t know why.
I do know why they have, they hadn’t come out with new results since then, but they have come out with celebrity endorsements for their products. So, um, they, I mean, celebrities that mean nothing to me because I’m an Australian, but, uh, they have come out with news about, uh, various celebrities that are doing, uh, you know, something, something, something promoting their products, which is apparently as good.
So, um, yeah, that’s good for them. Uh, dunno if that’s everything that’s got to do with their price rise of 1200%, you’d think that there’d be more than a couple of celebrity endorsements to do that. But no new [00:05:00] financials have come out that I can see, so unless it was just me talking nicely about them. Um, I don’t know.
So, uh, what else? Let’s see. Um, the last one I did Titan Machinery. I did that a couple of weeks ago. They’re up 8% gray media that I talked about. 7th of August. They’re up 37%. GTN Sasol, the dirty, dirty company, oil company that I talked about are up 40% since we talked about ’em in the middle of July.
Tony Kynaston: Interestingly
Tony Kynaston: GTN. Yeah, I, I meant to mention this on the Australian show that, uh, I forgot to, I’ve noticed on, on our buy list, we’ve had, um, legacy media companies like Seven News and Seven Western News that’s called, Southern Cross Entertainment. So their TV networks in Australia, and uh, they’ve been on [00:06:00] our buy list on and off for a long time.
They’ve all kicked up and since reporting. Results in the last week or so in Australia. Some, I, I, I think Southern Cross was up like 30% on the day of its results announcement. So, um, I’m wondering whether that’s, uh, a theme that’s going on in the market at the moment that Legacy Media, which has been much unlocked. Because, uh, streamers are, are taking over. you know, when they, I’ve seen this before. When an industry goes through a phase where it’s unloved, it becomes a value stock. And if the underlying business still has good assets, um, eventually they become so cheap that they get bought, um,
Tony Kynaston: could be the case with GTM.
Cameron: mm mm Well, yeah, a lot of, uh, I don’t know, but a lot of our stocks have been doing well that we’ve covered on this. Couple haven’t, Zim integrated shipping that I did back in March is down 21% since I talked about it. N now Chile that I covered in May is down [00:07:00] 13%, but the rest are very much. In the, uh, black.
Tony Kynaston: a good point
Tony Kynaston: um, you know, as we know from our experience in Australia, we don’t get every call Right. Or every stock that we analyze goes up. It’s, it’s the fact that we get, you know, probably six out of 10 right? And they do well and they, um, us to cover the four out of 10 that, that don’t do as well.
Cameron: and we have rules in place for when to sell things. So the things that don’t go well, we get rid of them. When the time is right and replace ’em. Yeah. So the company that I’m gonna talk about today, Tony, is Kimble Electronics. KE is the ticket code. I do wanna point out though, that uh, I’m using an analysis that I did on August 8th when the price was $19.
Since then, they came out with new financials on August 14th, and the price is now $28. [00:08:00] So, um. This would’ve been a much more impressive pulled pork if I’d done ’em a couple of weeks ago. I haven’t run the new numbers,
um, but they probably look good because the share price went up.
50%. I, I did run the new price.
I put the new price into our checklist and it didn’t change the scoring a great deal. But, um, I think price to book is the only one that it did score for, and now it doesn’t score for, because the new price is above the book price, but it still came out well, assuming the rest of the numbers are just as strong.
I do because of how the share price reacted to their, uh, results. Anyway, as I often say when I do these, um, obviously do your own research. This isn’t a recommendation. It did turn up on our buy list a few weeks ago. I think it’s an interesting story, but the more interesting I. Thing that for me when I’m doing [00:09:00] these, is the kinds of businesses that are available to invest in, in the United States that I’ve never heard of.
They’re not the kind of businesses that we see in Australia on our buy list. It’s a different market, much bigger market, much broader scope for investments, but it’s just to point out that there are lots of, when you’re turning over rocks. Us. There are lots of gems under these rocks. Is that what you find under a rock, or do you find
Tony Kynaston: Inside the
Cameron: Yeah, inside the rock. Okay. Picking up the rock. Cracking it open. Yeah. Okay.
Tony Kynaston: Well, it’s, and the US market has different characteristics to the Australian market too, which is the other interesting thing. Far
Tony Kynaston: companies in the US than there are, in Australia, which is dominated by banks and miners, um, and market.
Cameron: just a little bit on their new financials. Um, Kimball Electronics Q4 sales Beat Estimates Q4 net sales were up 2% [00:10:00] sequentially, beating analyst expectations adjusted EPS for Q4 beat estimates. Uh, the company repurchased 162,000 shares you mentioned on the last show that you’re looking for to add buybacks into our checklist if we can figure out how to get those into our system.
Um, but my numbers, as I said, are out of date, so do your own research. So who are they? Well. Interesting company with an interesting story and background. Essentially, this company, Kimball Electronics, is a contract electronics manufacturer. They don’t sell flashy consumer stuff. Uh, they build and assemble the electronic guts inside of other companies products.
So think of. Circuit boards and control modules in car safety systems or medical devices or industrial machines. If you are a manufacturer of one of those things and you’re looking for somebody to make some of the core electronic innards, you go to [00:11:00] Kimball. They’ve been doing it for a long time. They build it for you, and they’ve got a very long track record and very good reputation for quality control and delivery and all that kind of stuff.
They’re very, um, they, they have a great reputation for being ultra reliable, for building durable electronic components, is their thing. With a great culture as well. They’re very big on their human culture. So everything from printed circuit board assemblies to finished, uh, electronic devices for clients, even non-electronic parts in some cases like precision plastic components.
But if an automaker needs a brake control unit, built a spec or a medical firm needs a potential patient monitor, assembled Kimball is one of the go-to behind the scenes manufacturers of all of that kind of stuff. The roots of it though. Go back to pianos. The roots of Kimball [00:12:00] Electronics goes back to 1961, but the parent company, WW Kimble and Company was for much of the late 19th and 20th centuries, the world’s largest manufacturer of pianos and organs.
The company started as a piano dealership in Chicago in 1857 as WW Kimble and Company started by a guy called William Wallace Kimble. He died in 1904, but, um, was a, just a kind of a legendary guy actually. I read that. He in his company at the time, he got rid of punch cards, which were the thing at the time, and just built the culture around trust.
I trust that you’re at work when you say you’re at work and I’ll pay you. So he really built a strong culture [00:13:00] that was built around trusting his employees and they built on that later on. Actually, one of the other guys built on that who ran the company. Um, the pipe organ division that he built was also large.
They, they built permanent pipe organs, including one for the Mormon Tabernacle Choir, which was installed in 1901. And I have a family connection to that because one of Chrissy’s sisters, Tanya sings in the Mormon Tabernacle Choir, so she might be singing along to one of dub dub Kimble’s creations. I’m not sure if it’s the original that’s there, but probably I, I, I don’t think pipe organs, if they’re well maintained.
Get replaced that often. Um, used to, used to know a guy had a listener of my podcast years ago whose father was the maintenance guy for the pipe organ at the Sydney Opera House.
He’s like the only guy in Australia, I think, or maybe one of [00:14:00] two people in Australia who still knew how to maintain in tune.
Pipe organs. Uh, good gig. Yeah. Now they need to see you like once, once a year, but you probably charge a lot when you go in. Um, so back, uh, in the 20th century, Kimball International. Which became built an electronics division to build electronic organs. Uh, the Hammond B three and stuff like that, you’d get in churches, which ended up as part of blues music.
I dunno if they actually built the bit for the Hammond B three, but,
Cameron: but they built electronic organs. They said they went from pianos to pipe organs, from pipe organs to electronics organs. And then they went broke, and then they were bought by a company called the Jasper Corporation, which was founded in 1950 in Jasper, Indiana, where it’s still hit, still headquartered by [00:15:00] Mr.
Arnold Hub Big. They started off making television cabinets and other cabinets and furniture. He, he has a great story. He spent 20 years with Jasper Wood products company. Started as janitor, became plant manager, then became the mem, a member of the board of directors, and then launched the Jasper Corporation.
And, uh, his own business came out of Jasper. But, you know, built his way up from nothing. This guy,
real American, you know, bootstrapping sort of story. And, uh, obviously a good time to be building television cabinets ’cause television sets were booming in the, the fifties. Then he started sort of doing this vertical integration thing and bought WW Kimble and Company as a subsidiary in 1959.
It, it had gone broke. It was nearly insolvent. For some reason, I guess the electronic [00:16:00] church organ business wasn’t really kicking it. But by 1969, they were again, the world’s largest piano manufacturer. And in 74, Jasper Corporation changed its name to Kimball International 1976. They floated on the NASDAQ and as the head of Kimball so big operated a profit sharing system for company employees and a scholarship program to fund nearly $2 million of his employees children’s college educations.
Cameron: Good guys in this story. Yeah. So there you go. Um, we got some other story,
Tony Kynaston: he restarted the piano manufacturing business when it went broke originally.
Cameron: I think. Yeah. He must have, he, he, I don’t know. Yeah. Figured out how to fix it.
Cameron: I think they’d made some Mabb, some bad investments, different places, as has Kimball [00:17:00] along the way. Um, uh, since then, you know, things don’t always work and you sell bits off and keep the core business. Apple was nearly broke when Steve Jobs came back in 1997 or eight, whenever it was.
Did okay. Turned that around. Um, what else? Oh, in as part of the 1984 Summer Olympics opening ceremony in Los Angeles, 84 Kimball pianos were played. There you go. Fast forward to 2014, the Kimball Electronics business was spun off as an independent public company, separated from the furniture business to focus purely on electronics manufacturing, but it’s still headquartered in Jasper, Indiana.
So, um, they’ve had a few speed bumps along the way. 2016, they acquired a small firm called Meditative Technologies for about about $8 million trying to get deeper into medical devices. [00:18:00] Um, then they bought global equipment systems in Silicon Valley for $50 million A few years later, it’s specialized in automation and test equipment for semiconductor manufacturing.
Didn’t go quite as well, turned out to be a bit of an odd fit. They, uh, in 2024, they decided to sell off the entire GES division, which was referred to at that stage as the automation test and me, uh, measurement business to a, to another company, label them to focus on their bread and butter, which is contract electronics for auto, medical, and industrial clients.
And, uh. The business has done well since then. Just getting rid of that bad division and refocusing. So now they operate globally with manufacturing facilities in the us, Mexico, Poland, Romania, China, and Thailand. About 48% of its revenues comes from the automotive sector, 25% from medical devices and 27% from [00:19:00] industrial applications.
So about half of the business comes from cars, uh, making stuff for cars, steering and braking control units, and the rest is split between the other sectors. You know that, that means they, they’re diversified. So if there’s a slow down in auto production, they’ve got some buffers in the medical side of things.
And, you know, as you can imagine, medical devices with an aging population, and particularly with ai, uh, helping us do figure out new things and figure out new ways to do things should be a pretty healthy business. I think in the next 10 years we’re gonna be using AI to figure out how to make people live.
Longer and healthier lives. Hopefully. I note that OpenAI have announced today that they’ve just launched a new, um, uh, scientific genetics biology division with another company where they’re trying to follow in deep Google deepminds footsteps. Google DeepMind won the Nobel Prize for [00:20:00] biology this year.
Um, for, yeah. The work that they did with, um, protein folding, they, they figured out how to, I think up until that point in time, humans had figured out something like the structures of 10,000 proteins. They did about a million in like a month or something after they build a neural network to figure out protein folding.
Um, which is a huge thing for, for medicine biology. Uh, they generate about $1.7 billion in annual sales in FY 24. Uh, they’ve got about 24 million shares out there. Market cap. Market cap is in the few hundred million dollars range. Um, what else can I tell you here? Um, what’s working and why it’s cheap. So one thing that works is it generates a lot of cash relative to its [00:21:00] size.
Last year pulled in about $154 million in operating cash flow and has had positive operating cash flow for six quarters in a row. They, they’ve done a lot of good stuff in terms of their capital management. They slashed inventory by $23 million in one quarter, which was a 25% reduction, freed up a ton of cash.
And, uh, you know, they’re just one of these businesses that’s been well run for a long time, been around for a long time and knows what it’s doing. It’s just generating a ton of cash and the prop calf is really low, but I’ll get to that bit later. In terms of a moat, uh, it’s got a pretty good competitive edge.
It seems like this isn’t. The kind of business where you’re getting the cheapest possible componentry for the low end of the market out of China. I mean, they do manufacture in China, but they’re obviously, you know, doing the quality control, that kind of thing. [00:22:00] Stuff’s going into braking systems and steering systems and medical devices.
You want it done by a company that has a good reputation for quality control. And these guys are tier one, uh, suppliers for both the. Auto industry in the, the medical industry, and they have been for over 25 years. They’ve got a golden track record. Um, very, very good relationships with the big manufacturers in medical and automotive.
Very, very rigorous, uh, quality standards. They’re known for delivering on time and on budget. Same with medical devices. So there are pretty high switching costs for those. Industries, so that’s kind of a pretty good moat. And they have a global footprint. So they build in Mexico for US customers, Poland and Romania for European clients.
Um, sort of a, not a just in time, but a sort of a build it closer to home [00:23:00] kind of model. Quicker, faster shipping. Doesn’t have to go on a ship from one side of the world to the other. I guess when, uh, manufacturing ramps up or slows down, it’s better on, um, inventory levels. Um. It’s not the biggest EMS player electronics manufacturing service player out there, but it, its motors really built around being highly dependable and highly reliable and having deep, long relationships.
But despite that, uh, the market has been discounting it. Possibly because growth has been fairly tepid recently. Uh, revenue is actually declining slightly this year or was expected to management, uh, projecting a two to 9% drop in sales for the upcoming year. Profitability also took a hit in FY 24. Their net income plunged EPS fell from about $2 22 to about 81 cents.
A lot of that was due to one-time charges, like a Goodwill write down and an asset [00:24:00] impairment related to the business they sold. But on the surface of it, you know, it, it doesn’t look great for some investors. They also don’t pay a dividend, so some investors aren’t really interested in it. They hadn’t done big share buybacks until the one that they announced recently, so.
Being sort of a smaller mid cap stock for 500 million, um, in a low margin industry, it’s kind of not really a target for big institutional investors. There’s also some fear, I think, about customer concentration risk. In FY 24, 2 customers both in automated automotive made up nearly 30% of their sales. So if they lose one of those, could be a big blow to their business.
But that said, um, so far they’re doing well. In terms of near term catalysts, there’s a couple of things [00:25:00] that could go well for them. The CEO recently noted that they had a record number of wins for future business in the pipeline. Dunno the details on that, but seems to suggest they’ve got a lot of new contracts or programs that haven’t hit the revenue line that could be kicking in over the next couple of years.
Sales could get a They’re intensifying their focus on medical devices positioning itself as a medical CMO contract manufacturing organization, usually higher margins in medical than in automotive. And it’s a bit of a stickier business. I understand. So more growth there could improve their overall profitability.
And then the sale of the GS division that I mentioned before, they use that to pay down debt and buy back the shares. So they’ve been using that money, uh, wisely to attract investors, I think, and also just to shore up their, their business situation. Lowering debt means lower interest [00:26:00] expenses, helps earnings share buybacks means future earnings are split among fewer shares, boost the EPS, et cetera, et cetera.
So they’re trying to boost shareholder value. They’ve got a new CEOI think he started last year in the, I read in the last, um, financial report. So I gather he came in to, you know, make some cuts, make some changes, you know, clean it up a little bit, getting cutting costs and doing a bit of a Tim Cook on the inventory situation.
Um, so let’s look at some of the numbers. The price to operating cash flow is three. So for new listeners, that means that the stock is trading about three times. Its recent operating cash flow. The, the way that we always talk about it is if you, if you bought a, a business, like a coffee shop is our go-to analogy that had a price to operate in cash flow of three years.
It may, [00:27:00] it would mean that it would. Feasibly pay you back in three years, which is a fairly short timeframe, um, for a business to pay you back. So that’s, that’s pretty cheap. It’s one of the most important indicators that we look at in terms of valuation. Um, dividend is zero, as I said, the Petrovsky F score, financial health score from that Wikipedia use is a seven out of nine, so that’s pretty good.
Generally, a seven indicates a company with strong financial health for a value stock. Suggests that despite a low stock price, its financial fundamentals checkout positively on most fronts. Uh, positive earnings, positive cash flow, no increase in debt. Uh, other improvements over recent years reduces the risk of there being a value trap.
Uh, [00:28:00] book Value per share is, was when I did my numbers about 22 do dollars 98. The share price was about $19. As I said, the share price is now $28, so it’s above the pb. Uh, but I haven’t rerun the PB numbers with the new financials, so I’m not exactly sure how that would stare up. So I, I don’t wanna talk too much about that one, but at the time I did the it was positive.
So, uh, why it’s on the checklist, you know, it’s a classic value play from my perspective. Solid financials, solid cash flow trading at a bargain basement valuation, had some short term issues. It seems to have done some restructuring in the last year or two. Uh, that’s put it in a better situation, but it’s not a sexy business.
It’s not doing ai, it’s not doing, I don’t know, smart watches like Zep. It’s not, uh, it’s not a company you’re probably gonna [00:29:00] read about in Forbes Magazine or the Wall Street Journal any day now. Quite little business behind the scenes contract manufacturer to other businesses. A lot of upsides. Um, as I said before, you know the, the medical business, if they can build that, uh, segment up, it could be good for them.
If automotive production picks up after tariff and supply chain issues get sorted out, if they ever get sorted out, that could be good for them. I also looked a little bit at what their tariff exposure is. It, it, you know, it’s, who knows? It’s lick your finger and hold it up to the wind. You know, the CEO says, you know, they’re factoring it in and they’re working on it, but he, like, every American CEO is like, who knows what the hell’s gonna happen tomorrow?
So, will there be another pause? Will there not be a pause? Will they go up? Will they go down? Nobody knows. So all we can do is just play it day by [00:30:00] day. There are red flags, of course, cyclical risk as I mentioned. Um, if the economy slows orders for cars and other equipment can slow, their business line can dry up.
They’ve already seen a bit of a sales dip over the last year or two. If, um, J Pals recession or job slow down or whatever it is, he is predicting picks in and the economy stumbles even further in the us, uh, that could have an impact on him. If they have pretty thin margins in the car sector, as I so not a lot of room for error if they get something wrong there.
Customer concentration, as I mentioned too, could be a problem. But again, these are all predictions and we, we can’t predict what’s gonna happen in the future. I just look at it where it is today. The punchline is they’re sort of an ugly duckling stock. I think fundamentally decent business well run. Um, market doesn’t seem to like it for whatever reason.
It’s kind of being ignored. [00:31:00] But, uh, the, the, they’re making money and they seem to be well entrenched in the businesses that they’re in, and they have some room for growth in the medical services thing. Um. Doesn’t necessarily mean the, the, the company is gonna double in size. But, um, you know, from an investing perspective, I think they’re undervalued and there could be all sorts of opportunities around that.
In terms of how they scored on our checklist, um, they have a good average daily trade. As I mentioned, um, recent financials were good. Uh, even the ones that I haven’t checked look good. The price to operating cash flow is low. Uh, quality rank is a 79 in stock. Edia, we score anything equal or above 60.
Stock rank is a 99. We score equal or above 90. Petrosky score was a seven. We score equal or above four or five. Uh, they [00:32:00] failed both our intrinsic value, number one and intrinsic value Number two, when I did an intrinsic value, number one was $5 78. Intrinsic value number two was $9 and three for new listeners.
Um, we don’t live or die on our intrinsic value calculations. They’re. Two metrics across a whole heat map that we look at, but it did fail on both of those. It also failed on the future, IV being, uh, greater than twice the price. Um. It failed. Well, it, when I first did it past book, uh, price less than book value, it would fail it today, but it would still, assuming the book value hasn’t changed dramatically, it would still pass price being less than, uh, wise, uh, book value plus 30%.
’cause book value plus 30% is $29 87, so it’s slightly below that. It’s a positive book value growth over three [00:33:00] years. Um, does not get a score for growth over pe. Um, does have a new uptrend, does have a positive three point trend, but the. Dividend yield is not high in the bank rank ’cause they don’t have a dividend yield.
So when I scored it, it got a 10 outta 14 or a 71% score for our quality score. When I reran it with the new price, it was, uh, about the same and, had a QAV score of, 0.24. So pretty, pretty strong.
Cameron: Yeah. But great little, great little business. Something a little bit different yet again, Tony.
Tony Kynaston: And I was looking at, uh, looking at its numbers in Wikipedia while you were talking then, you know, the question I always ask myself if is it’s a good business, why is it not being bought? from the fact the share price has gone up since the results came out, [00:34:00] and I, I think it comes down to. F I think the forecast EPS growth was negative, uh, at least at the last results. Um, I know it’s now forecasting to grow the future, but, um, the market’s so focused on growth, it can lose sight of the fact that it’s still a very good quality company, um, with lots of cash coming in. And, uh, that’s a good thing.
Cameron: Yeah, I mean, like, yeah, I guess there are, there are different ways of looking at companies like this from ans perspective. I mean. Okay. What’s gonna make the share price go up in the future? Yes. More growth, more money that’s gonna be doled out as dividends or used as buybacks. Um, you are looking for, um, a business that’s doing well and that’s gonna be reflected in some way, shape, or form in terms of the interest that the market has in it, but.
Also [00:35:00] just ugly duckling stocks that there’s a lot of value in it, and the market’s just not reflecting that accurately today, right?
Tony Kynaston: Yeah, correct.
Cameron: Because they become targets for acquisitions or they have cash, they can go and buy things, and they take advantage of opportunities out there that you know, that there’s lots of different ways that it can become a good.
Uh, good for an investor if it’s a well run business with a lot of cash flow opportunities.
Tony Kynaston: that’s the key. I mean, you know, if this business didn’t have the cash flow, you could say, okay, well we need to mark it down, um, on growth. And then how’s it gonna get growth? Well, probably needs to raise capital from shareholders, which is another good thing. You get dilution. But a company that has some growth, speed bumps at the moment, and
I’m, I’m saying gross speed bumps.
If you look forward, the two year projection in the stock edia is to get large earnings per share growth, just not in the next half. So, [00:36:00] You know, you’re better off having a company throwing off lots of cash and then using that cash wisely to get back into growth, either through acquisitions or retooling factories or whatever.
I can imagine this, this particular industry is quite capital intensive. if you’re building clean rooms to build, um. the integrated circuits, et cetera, it’s gonna be capital intensive, but they’ve got the cash to fund that. So in a good position from an investment point of view. You’ve got, um, you’re not paying much for the growth that’s coming, um, but there’s lots of cash to, to interest you along the way.
Cameron: Yeah, honey, if you look at their numbers going back over the last five years. Their, um, operating cashflow per share has gone from negative 25 cents, um, to cents dollars. What’s that gonna be? Negative operating cashflow per share dollars, yeah. Negative 25 cents. I guess that’s just in dollars to, um, [00:37:00] $6 18 today.
It’s gone up and down over the last five years, but the, the TTM is $6 18. Um, you look at their free cash flow. Per share, negative $1.25 in 2020 up to $4 85 today. Their, um, total revenue one point. One 8 billion in 2020 to TTM as 1.5. It was as high as 1.8 in 20 24, 1 0.7 in 2025. But it’s, so it’s gone down a little bit, but it’s still good growth over that.
It’s like a CAGR of 7.72 over five years, which is nothing to snort at. Not double digit, but it’s pretty good. So, yeah, uh, you know, if I had a business like that, I’d be pretty happy.
Cameron: Growing at seven 8% a year on average. So that’s timber electronics. So I’ll add it to my little spreadsheet here and we’ll track it and see how it does.
But um, [00:38:00] you know, I just like to see these different kind of companies learn a little bit about what’s out there.
Tony Kynaston: Yeah. We wouldn’t have a nice, an integrated circuit board manufacturer in Australia. So it’s a new, whole new industry for us that we’re seeing in the us.
Cameron: Uh, and as we said in the Australian show though, interestingly I mentioned that our US portfolio is up about 22% in the last 12 months. Our Australian portfolio is up 30% in the last 12 months. So despite all of the wackadoodle numbers like Zep being up 1200%, and lots of crazy stuff happening in the US market, the Australian market’s doing fine without these sorts of companies
Cameron: for some reason.
Yeah. As I said in the last show, somebody asked me at my kung fu class today, wh which is the better market to invest in the US or Australia? And I was like, eh, doesn’t matter. As long as you have a system that you’re following, I think it’s pretty much the same. Right.
That’s QAV America.[00:39:00]
Cameron: Thank you Tony. Any, any other, any last comments before we go?
Tony Kynaston: Known a little interesting company though. Thanks for outlining it.
Cameron: If anyone is listening to this and you’ve got questions about QAV or you’d like me to take a look at a company that you think is a good value investment, uh, shoot me an email. Uh, cameron at QAV america.com or cr at QAV america.com is probably easier and, um, I’ll have a look at it. We can talk about it on the show or answer your questions on the next episode.
Tell us what you’ve been doing.
Tony Kynaston: Oh. Went away. Had a vacation up at, uh, Yarra. Wonga on the Murray. I was gonna save it for after hours, but that’s fine. It was a lovely, lovely week away with, uh, ruddy and my brother-in-law, Wal playing golf. We stayed in the most, just a fantastic Airbnb in y Wonga, a couple of streets from the main dre, a couple of streets from the [00:40:00] lake. uh, it was just, it was a really nice house and, and super cheap. Stayed in this kind of, uh, Victorian, well, wouldn’t call it a mansion, I suppose, but it was very, um, flash and spacious and we had a great time. good fun.
Cameron: That’s nice. I’m glad it was super cheap because I wouldn’t want you to be, uh, financially burdened with your, uh, golfing vacation.
Tony Kynaston: No, well, wouldn’t have worried me, but, um, I wasn’t the only one staying there.
We had a horse run on Sunday Lake Forest, which missed the start, so it didn’t do too well. Um,
Cameron: What’s that mean? What does miss the start mean?
Cameron: turned up late. Got stuck in traffic. No one.
Tony Kynaston: played up in the barrier. and then when all the horses jumped, it didn’t, that was a,
Cameron: You’ve got one job. Horse.
Tony Kynaston: Well, jockey.
Cameron: it the, is it the jockey’s fault? Like, who gets the blame for that?
Tony Kynaston: Uh, it can be the jockey’s fault, but I think in this case, if it played up in the barriers, it was just bad timing. The start is supposed, is supposed to keep an eye on the horses and, and not [00:41:00] start the race until all the horses have settled and to go. But if, um, if
Tony Kynaston: in the barrier then the barrier doors open, we, um, we missed it
Cameron: The horse is just like, not, not feeling it today. Don’t wanna, don’t wanna be here. Don’t wanna be in this thing. Why have you got me locked into this little booth?
Tony Kynaston: of reasons. Could be, know, got a bit of an niggling injury. Could be that it’s just overexcited doesn’t want the jockey on board, who knows, gets excited like it’s ready for competition and starts to rear and buck and all sorts of things. You know, I’ve, we ask them and they never tell us. That’s a
Cameron: Give AI a few more years.
Cameron: Oh really? Okay.
Tony Kynaston: Why did the horse run so slow? You know, well, I asked it and never told me.
Tony Kynaston: Uh, been listening to your catch up with David Markham, which was really nice on the bullshit
Cameron: [00:42:00] It was nice
Cameron: and I’m hoping you’ll come on this week. Uh, he said he’ll come back and Ray and I are supposed to do a bullshit filter this week, so I’m hoping David will be able to come back on and we can do more politics stuff, but it was really lovely to catch up and have a chat with him. Haven’t spoken to him for a couple of years.
Tony Kynaston: but I, um, I haven’t listened to the whole thing yet ’cause it’s about, goes for about an hour and a half. But, um, I had a chuckle to myself I think probably in the first 10 minutes you said about two words. And, and David nonstop. So it was a very different cadence to interviews with David, which took me back to the onic times.
Cameron: That, that was where my podcasting started. Just ask David a question and then sit back and relax for an hour or two.
Tony Kynaston: Yeah. But I
Tony Kynaston: It’s great to hear, uh, hear the catch up.
Cameron: I like, he’s doing well. He is, as he said, he turns 80 in December. And speaking of people who turn 80 or are 80, oh man, the who a touring at the moment. What’s left of them? Pete and Roger. [00:43:00] I, I read an interview with him in the New York Times yesterday, which was talking about, you know, this is the 15th time they’ve done it.
This is our last tour. Tour and whether or not they’re gonna work again and all this kinda stuff. Then I saw on YouTube, people have filmed the entire concert. So I went and had a look at one. It was in Newark, just like from, I don’t know, a few days ago. Sensational, like Roger Daltry is 81 and he hits every note.
You know, I expected him to do what McCartney does, which is pull down a register occasionally when you’ve got a really high note. No, no. He goes up, he, he pushes it further than he did when he was 35. His voice is amazing, and Pete on guitar is just as amazing as he ever was. He’s not, as, you know, his windmill arm isn’t wind bill as us and Roger twirling the mic.
He starts at the beginning and kind of flubs it, but, and then he has a chuckle to the audience. But in terms of performance, unbelievable for men in [00:44:00] their eighties. Unbelievable. They are the new rock gods. I mean, the Stones are probably hitting that as well. And you know, as far as I know, they’re still kicking it.
But Mick love Mick, but Mick’s not adultery. Like Mick doesn’t, you know, I’m a midnight ram. He does a bit of a Bob Dylan, and you can’t always get what, it’s not like singing Who are You or Pinball Wizard or, you know, any of those tracks. Like Dory really had to sing. And he can still do it. It’s his sta he reminds me of Russell May from Sparks, who’s, I think he’s 76 or 77, and he still hits really high notes.
Everything, like his vocal performance is insanely good. His brother Ron is 80, like they’re up there as well. Those guys still doing two hour co show shows every night. Russell’s bouncing all over the stage, hitting every note. That’s, ah, [00:45:00] man, like this generation of rockers that has been going for 50, 60 years in the who’s case.
60, 64. 64, I think, uh, their first album came out.
Tony Kynaston: I went to the WHO turns 50 concept when I was living in Toronto. That would’ve been probably 10 years ago. yeah.
Cameron: So Ed Whistle would’ve been gone by then?
Cameron: Yeah, I think he,
Tony Kynaston: in the nineties.
Cameron: Really? Oh, okay. Right.
Tony Kynaston: He was about 50 years of age when he went. Uh, did you notice if, uh, Zach Starkey was still playing on drums? Because I know he was sacked, but I thought there
Tony Kynaston: talk he was gonna be reinstated.
Cameron: They sacked him. They reinstated him, and then they sacked him again. That was part of the New York Times article. They’re like, what’s going on? And actually Pete had a good line. He goes, he was never, he was never my favorite drummer. In fact, none of our drummers have been my favorite drummers. I didn’t even like Moon.
I didn’t like Moon as a drummer. I’m like, who doesn’t? Nick couldn’t like Moon.
Tony Kynaston: really? Go. Uh, if you get a chance, go and watch the [00:46:00] Is of White concert. Um, it’ll be on YouTube. It’s probably only about half an hour when the, who are playing. But, um, something happens, I think it’s might be whistles, amp blows and so there’s just Moon and Pete left and they start goes on for like, I don’t know how long, five, 10 minutes, where Pete will play something on guitar and Moon echo out in the drums, and then Moon will play something on the drums and Pete echo out the guitar and they just had this amazing rapport going back and forwards.
Tony Kynaston: it’s incredible. Yeah.
Cameron: I had a, a friend over, uh, one of Fox’s school friend dad’s, who’s a heavy model rock guy. And we, I, I, I have his kid comes over from school. Chrissy brings him home on a Thursday afternoon. I look after the boys. He get, he finishes work late and comes and picks his kid up. And by the time he’s gone on, I’ve always got something on YouTube usually, and it was like the Aussie tribute concert, or I’m watching something and he and I sit there and, or it’s a Go betweens [00:47:00] documentary or something like that.
We’re always talking about music and I had, um. Who concerted on from like the seventies. And we got talking about it and I said, have you, have you seen the video, the official video for Who are you? I think it’s Who are you? He goes, no. I goes, oh, my gotta see this. Keith, like just Keith in the official video, he’s got his headphones gaffer taped to his head as he often did, but just the faces that he’s pulling, like the camera’s really up close and he’s doing his drum solo or whatever he is doing.
And you know, a after the, you know, in, uh, who guess who are you? When it sort of breaks down, the song breaks down and the synth comes in. And then he and Keith comes back in
Cameron: and it starts building up and yeah. And then he’s just like, he’s, he’s like, he’s just going nuts, pulling monkey faces and, oh, so entertaining.
Tony Kynaston: That was when the kids were all [00:48:00] right, wasn’t it? And he’s there rolling his
Cameron: he does that in this too, when they’re all singing around a mic, doing the,
Tony Kynaston: that’s from
Tony Kynaston: the kids are All right.
Tony Kynaston: Yeah. Great, great documentary. I,
Cameron: Uh, after we spoke a couple of weeks ago, I watched The Man Who Fell to Earth on SBS
Cameron: and I’m now reading the book that it was based on. I didn’t know this, but the guy who wrote that book also wrote the book that the Queen’s Gambit was based on the Netflix series that blew up a few years ago.
He also wrote the book that, what’s the, uh, the Hustler was based on
Cameron: the Paul Newman film and the sequel, the Color of Money. He wrote those books as well, so he was quite a prolific. Science fiction slash apparently he was a major drug addict and gambler gambling addict. And so he wrote books about what he knew and the, the [00:49:00] manfield work is quite good.
Um, but yeah, the film really held up well and I’d forgotten Rip Torn was in it.
Cameron: And I love Rip Torn. He’s like, he was like one of my all time favorite American actors and, uh, seeing here a young rip torn in a, well, kind of middle aged rip torn I guess. But before all of the stuff that he did in the latter part of his career.
Gar Larry Shandler, Larry Sandler, the Gary Sling Show, and you know, Larry Sanders show Gary Ling and, um, men in Black and 30 Rock. And he had a great late part of his career. But I remember I saw him not long ago. He was in, um, Steve McQueen film where he’s. The, the poker play, the, the Cincinnati kid
Cameron: Rip Torn is sort of the number one guy that he needs to play in that, uh, he’s like some Texan with his drawl and whatever.
Yeah, great actor. Anyway, so thanks for telling me that was on SBS. That was great. I really enjoyed it.
Cameron: And then I saw a, I saw a Leonard Cohen documentary on SBS after that [00:50:00] too, which was fantastic. It’s all about Hallelujah, the song, hallelujah.
Cameron: And how the album that he wrote that for, you know, he famously wrote like 180 verses for that song over 10 years, and the final version had five or six verses and, um, then he did it, he’d do it live and he’d do different verses.
But the album that, that was on the label. Um, can’t remember which label it was. Columbia Records, I think, um, refused to put the album out. They said it was, the album was terrible. They hated it. There weren’t any good songs on it, and they refused to put it out e even though they paid for it to be recorded.
So it ended up coming out on some little two bit label and didn’t sell. No one bought it, and that was it. It just, LL Leonard thought he was done, thought his career was over, and he was in his sixties at this point. And [00:51:00] then they talk about how that song, um, um. Somebody did a tribute album to Leonard Cohen and John Kale picked that song and did a version of it.
And then one of the women who was the producers of the Shrek film loved the John Kale version and wanted to put that in the film. They actually had it rerecorded by some younger dude, but the John Cal version ended up in the film anyway. And then, um, Buckley,
Cameron: his name was, Jeff Buckley.
Cameron: He, before he was anyone, he was playing in this little club in New York and somebody said, um, he was looking for songs to play and it was kinda like, you know, just throw songs out.
And somebody said he didn’t know the Leonard Con conversion. Somebody gave him the, it’s on kale version. [00:52:00] He did his own version of that. Everyone loved it. It was on the album. He died before it came out. Then it became a huge hit and then everyone on every American talent show like America’s Got Talent, whatever.
There was always somebody doing the Jeff Buckley version of Hallelujah. And it blew at one point, three versions of it were in the top 20 in the US There was some America’s Got Talent star who had done it, the Jeff Buckley version. They were number one and two, and then Leonard’s version was like number 20 or number 18 or something.
Tony Kynaston: Lan covered it too. I
Cameron: Oh, I saw her do it in a tribute concert to him after he died too, which was great. It actually, the film finishes with her doing it live, which was a stunning performance. Um, yeah, so they’re just talking about how this song, the label hated it, wouldn’t even put the album out. And then it just got this massive life and, and then they [00:53:00] talk about Leonard’s career.
I mean, the whole thing’s about Leonard’s whole career and how the last chapter of his life was just amazing, you know? He was so beloved and, um, yeah, it’s amazing. Really great, really great documentary.
Tony Kynaston: I’ll look it up. Thanks.
Cameron: Mm, goes on SBS. Yeah. Yeah. So thanks for, thanks for putting me on sb s. Lot of good stuff. Yeah. And I’ve been reading a good book.
Uh, I’ve been reading, uh, Jiang Hui Hui. He’s a Chinese scholar at Udan University, um, on China. He’s got a couple of books on China’s economic and political model is the first one from 2012 I’m reading, is called the China Wave, uh, where his sort of breakdown on the China model, similar to the one that I read by the Canadian Scholar, Daniel A.
Bell a few years ago. But it’s him sort of breaking down. And this guy’s like, he’s an advisor to Xi Jinping and he was a, I think he was an interpreter for Dong Xiaoping when he was younger. So he’s [00:54:00] been in the upper circles of the CCP for most of his life. But he has a great way of just explaining why China does it, the way that China does it, and why it works, in his opinion, why it has worked so well, why it continues to work, you know, and why the West doesn’t understand China’s model.
It’s like, listen, we’ve been doing things our own way for 3000 years. You guys come along and think you know how to do things. We, we, you know, we’ve been doing this for a long time. We’ve just integrated the best of all the things that China’s been doing for 3000 years. And, you know, we’re back on top baby and we know how to make this this work.
So just sit back and watch. So, um,
Tony Kynaston: in the review of a book, uh, about, about China and comparing it to the US by a, a China, a Chinese person who had spent a lot of time in China, but then was studying in the US and spent time there too. Uh, but the quote was great. It said that the difference between China and [00:55:00] America is at the heart of the Chinese economy are engineers and at the heart of the US economy are lawyers. I thought that was a
Cameron: Yeah. But he just talks about, you know, the, the political model, the social model, and the business model and the economic model and, and how they work in China and how, as we’ve talked about before, you know, you’re allowed to be a billionaire, but you’re not allowed, as a billionaire, you’re not allowed to have any control over the political system.
Um, we’ll let you be a billionaire, but don’t think you’re gonna have any say in what happens politically. And as soon as you get too big for your boots, you get taken to a little room and reeducated about
Cameron: how things work.
Tony Kynaston: the moment.
Cameron: Yeah, it does actually. Yeah, very much so.
Tony Kynaston: Thanks. Alright, you too. 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 website, Q A V Podcast dot com.
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