AERO: The Mexican Airline

AERO: The Mexican Airline

QAV AM 57 [https://qavamerica.com/wp-content/uploads/2026/06/QAV-AMERICA-57-art-optimised.jpg] This week we dig into the SpaceX IPO numbers and they are genuinely terrifying: a Pr/OpCaf of 1,750 times, a $4.9 billion net loss, and a total addressable market pulled straight from a science fiction novel. We also cover the US-Iran deal tanking oil prices and forcing a bunch of sells across the portfolios, then Cameron does a Pulled Pork on Aeromexico (AERO), Mexico’s national airline, freshly listed on the NYSE and trading below its IPO price with a Pr/OpCaf of just 1.55 times.   This week’s full episode is for QAV Club members only. The free episode is available below. Also check out our podcast archives link and our pages on Apple Podcasts or Spotify or watch clips on TikTok [https://www.tiktok.com/@qavinvesting]. Or visit our homepage [https://qavamerica.com/home/] to learn more about QAV and how it works as a value investing system that you can learn and apply to beat the market. Free Podcast Archives [/listen/] TRANSCRIPTION QAV AMERICA 57 Cameron: [00:00:00] welcome back to QAV America episode 57 Tony been a big week in the news with the uh Iran deal and the SpaceX float Tony Kynaston: Yes, Cam. Oh, well, big in news with the octagon brawl on the White House lawn and the president’s 80th birthday. Happy birthday, Mr. President Cameron: Do you think he had um somebody like Marilyn sing Happy Birthday Mr President Tony Kynaston: I, I think he had the Ayatollah in Tehran give him a big birthday present. Cameron: Uh we’ll see We’ll see how that plays out the first thing, I would guess, that’s, uh, of direct impact with us is a supposed peace deal, worth the paper it’s written on, between the US and Iran. Uh, we haven’t seen the paper or the terms of the deal yet, but- Tony Kynaston: Uh, I mean, I know rules are rules. I sold, I [00:01:00] sold some, uh, shares in oil companies that I own because the oil price became a sell, but I’m l- I’m doing it hesitantly going, “This is not gonna last. there’s not gonna be Cameron: Yeah Tony Kynaston: But, you know, rules are rules, so I had to sell Cameron: I had to sell a ton of things, both in the Australian portfolios and the American portfolios. Interestingly, the US portfolios, uh, stocks that I sold, we made like 30, 40% on all of them and I’d owned them for like three or four months. So it was okay. I was happy to get out. Um, but hard to replace them. I’ve replaced one, but I’m struggling to find things to buy in the US at the moment. And here too, the buy list here is down. I don’t know what yours looked like this week, but mine had, after I took out the crude oil commodities stocks, which was half of them, the rest were, you know, there was very little and stuff that I’d mostly bought before. Sun, um, Suncorp and, uh, [00:02:00] let’s see, what was the other one? Can’t remember now. Anyway, Slim Pickens. Yeah, CGF it was. Yeah, yeah. Slim Pickens. Every– ‘Cause everything’s sort of Josephines. Tony Kynaston: Hmm. Cameron: it’s been a, it’s been a rough ride. Market’s up today. It dipped a bit this morning, but it’s back up. But, uh, yeah, as you said, like, you know, Is- Israel’s not party to this. They’re still saying they’re gonna stay in Lebanon. Uh, you know, it’s. Tony Kynaston: Was clearly, was wonderful of the Iranians to give Donald Trump an 80th birthday present. That’s probably all it is. Cameron: On– It’s, it’s a wonder they didn’t turn up to his, uh, wrestling match in the front lawn of the White House. Tony Kynaston: The claw. The claw. The claw. Not the claw, the claw on the White House. Wasn’t that amazing? It was. I really, I’d love to have been there. It, it was he introduced as the, the Hammer of Hummus, the Terror of Tehran. Cameron: Oh, you need a. You got a. Yeah. Tony Kynaston: Donald [00:03:00] Trump. Cameron: Oh, you got a, you got a career as a caller of wrestling matches. Uh, yeah, absolute craziness with all of that. Um, the greatest deal ever made to get us back to where we were before it all started, but it looks like Iran’s getting $300 billion in reparations, is one claim. We don’t know the details, but I saw, I saw one analysis today that said that, um, Germany had to pay 5 billion in reparations after World War II, I think, which indexed would be about $100 billion, 90, $95 billion. The US are gonna pay Iran $300 billion for their three-month. That’s one rumor. That’s, uh, probably something the IRGC are looking for, but how much they actually get, giving up sanctions, releasing funds, it’s all. No one knows Tony Kynaston: And what do you think they’ll do with that money once they get it? Or what does Trump [00:04:00] think they’ll do with that money once they’ll get it? Sea mines, landmines, nuclear weapons, Cameron: buying more missiles. That’s, yeah, yeah. Well, the other big new– So that’s been a, that’s been a, a big thing for us, uh, this week, having to sell our oil stocks, which we’ll probably buy again a couple of weeks from now. Uh, the SpaceX IPO, Tony. I, I drilled down into this one a little bit despite myself Tony Kynaston: It feels like we’ve jumped the shark this week, Cam. I’ve gone away on holidays and the shark’s been jumped while I’m away Cameron: It’s like people have been saying, like, which, which f- you know, multiverse are we living in here? So, um, I don’t know if you’ve seen the numbers or saw my TikTok on this, Tony, but, um, what is, uh, what’s our, what’s our Pr/OpCaf cutoff, Tony? Can you remind me again what it is? Tony Kynaston: times. Less than, Cameron: S- Tony Kynaston: be less than seven Cameron: And what’s the average Pr/OpCaf for stocks on the market, Tony? Tony Kynaston: Oh, I don’t know. I’d be guessing it’s [00:05:00] about 16, but that’s just a guess Cameron: 1516 from what I can tell. Tony Kynaston: Yep Cameron: Do you wanna take a guess what SpaceX’s Pr/OpCaf is right now, Tony? Tony Kynaston: Well, I’m surprised it’s, it’s not infinity given that it probably doesn’t have any cash coming in. Not, not much. I guess it’s got the Starlink income, so it’s gonna be like 1,000 times I would’ve thought. Cameron: Close, uh, 1,750 times, Pr/OpCaf Tony Kynaston: Bargain. Bargain. Gina, Gina knows a bargain when she Cameron: Oh, doesn’t she? Gina got a billion in there somewhere, I believe. SpaceX closed yesterday at a near $2.1 trillion market cap. Their 2025 revenue was $18.7 billion. Uh, that’s a price to sales ratio of about 112 times. That’s not earnings, that’s price to sales. They didn’t have earnings. They posted a $4.9 billion [00:06:00] net loss for the year. For context, Apple trades around nine times sales. Nvidia at the absolute peak of the AI mania was around 30 times. SpaceX just IPO’d at nearly four times that while losing money, which Apple and Nvidia aren’t. So the only part of the company that actually makes money is Starlink, uh, of which you’re a subscriber. Tony Kynaston: Correct Cameron: part of their $11.4 billion in revenue that they did Tony Kynaston: could have sent me a share, couldn’t they? Cameron: They could have, yeah. Tony Kynaston: early Cameron: So you’re paying a $2 trillion valuation for what’s basically a satellite ISP company with a rocket on its back and an xAI cash furnace bolted on that they merged two months before they floated. So, but the, the best part, and I think, um, Alan Kohler pointed this out in his article yesterday, the total [00:07:00] addressable market in their S1 document was $28.5 trillion, is their total addressable market Tony Kynaston: Is that the GDP of Mars? Cameron: Uh, that’s– I think Alan wrote, “That’s the number you write down when you need the valuation to make sense and the actual income statement won’t cooperate.” It’s just like dot– like the dotcom b- bubble has nothing on this. It’s just absolute insanity. Insan- not insanity that he had a crack at it, but insanity that people went into it. I heard the investment banks made $500 million in fees out of the whole thing, Tony Kynaston: Yep Cameron: people bought into it. Um, so I did a TikTok saying, you know, our seven times Pr/OpCaf is like, well, it’s seven times, you know, f- the average of 15 times Pr/OpCaf, I was saying on [00:08:00] the TikTok that 15 years to get your money back is a long time. 15 years ago, most people thought AI was 100 years away, at least. 50– A lot can happen in 15 years. Even seven years is a long time these days. I don’t know what the world’s gonna look like seven years from now. 1,750 years, like 750 years ago was like 286 CE. The Roman Empire was still in full effect. Uh, I think Diocletian was probably emperor. The, the, the Christianity was about 10% of the Roman Empire. It was still a relatively small religion. The, the Goths were still on the borders causing a little bit of trouble. I mean, a lot’s happened in the last 1,750 years. Anyway, it’s madness. Absolute madness Tony Kynaston: Well, a bit of growth brings that number down, but you need a lot of growth to bring it down to a reasonable sort of number. Yeah, look, it’s, it’s crowd [00:09:00] psychology, isn’t it? People, people are investing. They’re almost throwing their money at it, not caring what happens to their money. I mean, some people, I guess, treating it like a lottery. It may go up. They might get three hundred times their money like they did with Tesla. So, know, it’s, it’s a bit like Bitcoin, isn’t it? I’m gonna of put my toe in the market and see what happens, is what I think the– most people are saying. But it Cameron: often referred to, you’ve often referred to Elon as a Bond villain. I think, you know, Bond villains had nothing on Elon. Bond villains would’ve loved to. Like, if you had a, if you had a Bond movie where the Bond villain became the world’s first trillionaire by launching a, a company that says we’re gonna send rockets to Mars, Tony Kynaston: He should Cameron: would’ve got laughed out of the cinema. Yeah. Yeah, I’m, I’m sure he pl- played with the idea. He loves naming all of his things after books and films and, you know, Grok Tony Kynaston: But, the Cameron: is off, out of a book Tony Kynaston: it seems like. I, I mean, you never know what you’re buying with Elon because it could be– [00:10:00] he pivots a lot and get, you know, becomes an international boring machine or something like that, or mag- magnetic trains or whatever, maglev trains, um, or brain chips, so you never know. from what I can tell, the concrete plan or the immediate concrete plan is to put data centers in space. Cameron: Che Tony Kynaston: And so that’s a– there’s a business case for that, but they didn’t spell it out, and the analysts that I’ve seen who have tried to spell it out say it’s not gonna work ’cause it’s just too expensive. Um, you know, if they, if data centers stop being built on Earth because of concerns about, you know, electricity usage and water usage and things like that, then maybe space is the answer. But a lot of ifs and maybes in that analysis, I think Cameron: Well, the big thing I think, uh, you know, I think, um, like Elon’s an impressively ambitious guy. You gotta hand him that. He’s, uh, done a lot of interesting things. Certainly not a very stable genius, uh, in the last few years. I’m not [00:11:00] exactly sure I’d be putting my trust in his ability to, uh, get much done, uh, with his, uh, mood swings on a consistent basis. But like, you know, Tesla was interesting, but now the Chinese have stomped all over that. Robots are interesting, but I’m pretty sure the Chinese are gonna flood that market as well, and I think they’re gonna flood the space market too. He’s got a bit of a head start on China. China’s still trying to get their– I can’t remember the name of their, um, satellite launching service, but, um, I have looked into it in the past. They’re a few years at least behind. Uh, I think their, their plan is to have a few, like 500 satellites up this year versus his twen- 19,000 or whatever it is. But, um, it’s only a matter of time before they catch up and, uh, then the economics of everything change dramatically from what was in his S1, I think once the Chinese catch up Tony Kynaston: Yeah look, I agree. And, uh, you know, I’ve seen some [00:12:00] analysis saying there’s so much space junk up and all that now that putting data centers up there is be resisted. So, Cameron: Yeah Tony Kynaston: be a blight on, um, on our sky, in our sky. So Cameron: Well, it only just takes one piece of space junk to hit your data center and, uh, then you, you got problems. Hmm. They do have systems in place to prevent those space junk from running into satellites already, but, uh, yeah. Anyway, moving right along. Big chip sell-off, uh, last week, Tony. Hundreds of billions of dollars wiped off of the value of US microchip giants. Shares in Broadcom, US chip maker building AI processors for OpenAI, slumped 15% after it issued weaker than expected sales forecasts and, uh, all of the other major players went down as well. And this is, uh, interesting timing because both Anthropic and OpenAI are also looking at going public in the n- [00:13:00] near future. So as these chip businesses are all struggling and all the tech giants have not had a good couple of weeks. Share price wise, of course, did you see what happened to Anthropic and their Claude model last week? Tony Kynaston: Uh, the one that was blocked by the US government from being used. Cameron: Yeah. Tony Kynaston: Yeah Cameron: That’s, uh, depressed all of us. It– Claude, I used it for the 48 or 72 hours or whatever it was available, uh, was amazing. It was truly, truly amazing. Tony Kynaston: In Cameron: Stuff– Just its ability to code things that I had been struggling with, with Opus 4.8, their top model before that, for weeks trying to get it. Uh, threw the same problem into Claude, one shot. Went away for an hour, fixed it, wrote it, came back, all done. Tony Kynaston: Hmm Cameron: I was like, “Holy crap, that’s insanely good.” So it was a huge step up, and I [00:14:00] hope we get it back. Taylor was living on it as well. He’s been depressed ever since they blocked it. Um, it j- its, its ability to code Tony Kynaston: available for 24 hours or 48 hours, wasn’t it? Cameron: 4872, but we were all just. But they said at the time they, they were only gonna have it as available as, as part of the plan until June 22nd anyway, and then they were gonna come up with some sort of a new billing model for it. So everyone was trying to get all of their coding done in two weeks, and then it got pulled for very spurious reasons, by the sounds of it. The latest news is today that somebody at Amazon, I think it was the CEO of Amazon, spoke to the US government and said, if you gave it a code base and said, um, “Find the security flaws in this,” it would say, “Sorry, I can’t do that.” If you said, “Fix this code,” it would then tell you all the security flaws. Um, but, uh, uh, people have been pointing out, security analysts have been pointing out that all of the top-tier models will do exactly [00:15:00] the same thing. It would do it in a better way ’cause it was more powerful. But, um, just the fact that the US government, I think, is now, uh, you know, pulling top-tier models off the marketplace, demanding that they pull it out of the marketplace and giving them. I think they gave them 90 minutes to do it initially, to cancel it, is a interesting level of, uh, administrative interference. Particularly, you know, the Biden administration put in some sort of AI guardrail policies, and one of the first things Trump did, like on day one, was sign an executive order saying that they couldn’t interfere with AI. And then I think he tried to get that in the OBBB, Big- One Big Beautiful Bill Act, and then it got watered down before it was signed by the Senate. But, uh, now they’ve gone from, “No one can interfere with AI. We have to rule the AI. We have to be better than everybody,” to, “You can’t have that out there. That’s too powerful.” So, hmm Anyway Tony Kynaston: Well, [00:16:00] I mean, I think it’s, um, you know, you’ve mentioned the two of the three, or we’ve talked about now the three big IPOs that have either happened or are happening, uh, it really reminds me of the peak bubble boom now with this happening. And I did see an article in Business Insider about this, um, which says that the race to go public among mega cap tech companies might be a warning to investors that the tech field stock boom is nearly over. That’s because there’s an important sign that the IPO rush is sending a signal that last flashed during the boom of public offerings from the late 1990s to the early 2000s. to analysts at TS Lombard, the mega IPOs on tap signify a desire among company insiders and early investors to offload stock on the public at the peak of the market. It’s exactly what happened during the dot-com boom. Yeah. So. And a-apart from the fact there’s been a lot of, um, analysis about where’s the money coming from for three big [00:17:00] IPOs, and, Cameron: Mars Tony Kynaston: who’ll go. Yeah, Mas, who’ll go first? Will it be Anthropic or, or, um, OpenAI? Because the second one to market might not get off. all that kind of stuff. And what’s gonna be sold by the indexes to buy into these uh, these, um, IPOs. And that’s the other interesting thing, is that people have been, the regulators are bending over backwards for these IPOs to happen. So the, I mean, the people that benefit, I suppose, are the, are the listing exchanges and the bankers. Um, but there’s typically rules in place. As we saw with the Cuscal listing in Australia, that it doesn’t become part of the index for twel- up to 12 months, we weren’t, we were finding it wasn’t coming in our downloads because it didn’t have a GICS code, is part of that listing index inclusion process. Um, US indexes have said, “Nope, SpaceX can come in a week after listing into the indexes.” [00:18:00] ASX or whoever’s doing it in Australia, I’m not sure if it’s the ASX or the government, has said, “Yeah, sure, we’ll do the same.” So, you know, basically can laugh about this being a, a sort of a crazy chamber of people investing and throwing their money at Elon, but really it’s, it’s everyone, because you’ve got your money in a super fund in Australia, chances are it’s gonna have a share of SpaceX and the other IPOs as they come on and get included in indexes. So one of the reasons why it is a worry that this is potentially peak AI and peak tech bubble, and when it turns down, it’s going to affect, uh, um, a lot of us. Cameron: So um portfolio in the US Tony is doing well I didn’t mention this on our last show but have live portfolio updates now on our websites If you go to qavamerica.com you can see live portfolio updates Well actually it says 12th of June so that’s four days old but it sh [00:19:00] should be relatively live portfolio updates It’s supposed to update every day But as of the 12th of June our main portfolio was up 108 in the US uh which is total return versus the S&P 500 up 67 So we’re not quite double market but still an okay That’s uh since inception which is September 23 Year to date calendar year to date we’re up 27 versus 8 So that’s uh pretty pretty good And our light portfolio since inception in the US with inc inception is uh December 2025 late December 22nd December We were up 88 versus the S&P 500 up 8 so we’re just above it And uh year to date we’re up 917 versus 835 So we’re back [00:20:00] beating the index over there but it’s been a bit choppy I had to sell five stocks yesterday because crude oil became a sell and uh they’ve been hard to replace So I bought one yesterday which is the one I’m gonna do my Pulled Pork on today But was struggling to find stocks that weren’t oil related or financial services related that uh were doing dodgy stuff with their operating cash flow and spiking the numbers Seen a lot of that lately Um price to operating cash flow that we’ve talked about before where they’ll take on a big loan or they’ll get in a bunch of cash and it’ll show up temporarily in their price to operating cash flow and spikes the numbers So I’ve got to figure out how to filter those out in a more effective way It’s really messing with my process You know I I I I have a list and I start going through the list and I just have to go No Dig into this one Oh no [00:21:00] that’s dodgy No this is dodgy This is dodgy Tony Kynaston: Wow. Cameron: Mm Tony Kynaston: it’s interesting, isn’t it? ‘Cause I’m, um, We spoke to Tobias Carlisle last week. He didn’t know why that was different to Australia, but we don’t have that problem in Australia. It’s, um, those kinds of lumpy cash flows tend to be investing or financing cash flows, not operating ones. Cameron: Yeah Tony Kynaston: Hmm. Cameron: Anyway let me get into my Pulled Pork for this week Tony my deep dive Doing another airline this week Um not just any airline Mexico’s airline the Qantas of Mexico um for Australian listeners I think Americans know who Qantas is The national carrier have been flying for 91 years They’re called Aeromexico México Tony Kynaston: Mm-hmm. Cameron: Ticker is AERO I did my analysis on them yesterday which was the 15th of June The price was around about 17.34 They are an ADR [00:22:00] but we’ve accepted ADRs after our chat with Tobias And uh they are an interesting business that’s got a really fascinating history which I’ll get into So th first thing that’s really interesting is they only listed on the New York Stock Exchange in November last year 2025 So been around 91 years but floated on the New York Stock Exchange six months ago Tony Kynaston: Mm. Cameron: Listed at 19 They’re now down to 17 something as I said So we’re belo buying it below the IPO price which is an experience that I’m sure many SpaceX uh shareholders will become familiar with in the uh coming f year when people realize that they’re not making any money the excitement dies down Um according to their website they are the most punctual airline in the world That’s gotta be a good thing [00:23:00] This is from their website They also won the APEX Award the Airline Passenger Experience Association Not sure if they created that themselves I’m assuming they didn’t For the first time Aeromexico has been recognized as the best airline in North America in 2026 by the Airline Passenger Experience Association In addition for the seventh consecutive year we have been awarded the title of five star global airline consolidating our leadership in international travel experience As part of these achievements we were also recognized by APEX with the Best Entertainment and Best Seat Comfort in North America in 2025 awards highlighting the quality of our inflight entertainment offering and the comfort of our cabins designed to provide a superior experience on every flight So when Donald Trump says they’re sending their criminals and their rapists to America at least they’re traveling in style with number one rated entertainment and uh seat comfort It’s very [00:24:00] important when you send your rapists and your criminals somewhere else that they’re comfortable That’s how they get over the wall Donald Trump built a wall They built very very comfortable planes to fly over the wall in Tony Kynaston: you and I have both flown in the US, and I- sure it takes much of a hurdle to be the best providing comfort and entertainment on the, uh, North American flight. Cameron: Well I probably fly a different very different class of flight when I’m flying in the US to you Tony I fly you know in the in the luggage compartment usually Tony Kynaston: wing. Cameron: yeah with down with the animals in uh the hold where you uh travel in front of the pilots Um Tony Kynaston: Backseat driving. What are you doing? Cameron: What’s this knob do What happens if I press this I am serious and don’t call me Shirley I said that to uh Tony Kynaston: Roger,[00:25:00] Cameron: of the guys at one of the guys at kung fu a few weeks ago said uh Surely you can do this And I said I am serious and don’t call me Shirley His his son who’s about Fox’s age has been calling me Shirley ever since Hey Shirley Which is pretty funny Um so these guys uh have a hub at Mexico City Airport They fly 787 Dreamliners to Madrid and Tokyo um as well as the uh US-Mexico routes 91 years old as I said founded in 1934 Market cap about 24 billion US dollars Fleet of 165 aircraft 24.59 million passengers in 2025 They’re part of the SkyTeam alliance Air France Korean Air and Delta who is a founding member of the airline Delta Airlines owns 18.7% of Aeromexico and they have a joint [00:26:00] venture on the US-Mexico route So when you buy a seat on Delta to Mexico City you’re probably on an Aeromexico plane They’re deeply intertwined which adds an interesting dimension uh to this uh as a business because they sort of have this backing of Delta But um the history of it’s uh pretty interesting So uh by the way the etymology of Mexico I looked into Aero obviously from the Greek aer meaning air Uh Mexico from Mexica the name the Aztec people called themselves although the etymology of Mexico is actually debated It could be from Mexitli a war name for the god Huitzilopochtli or from Metztli moon and Xictli navel the navel of the moon So there you go It’s good to know Tony Kynaston: The navel of the moon? I didn’t know the moon had a navel Cameron: Well Mexico City was literally built in the middle of a lake so [00:27:00] they may have considered it the navel of the moon of the lake of the something I don’t know They were in a lake The lake was in the the navel of the moon I uh don’t ask me So founded in 1934 um by the Mexican government Aeronaves de México Airplanes of Mexico was the original name Barry and Stan consulted on that for a long time 100 million fee How about we call it Airplanes of Mexico Genius Uh for the first few decades seminationalized semiprivate It’s always a bit of a political football Mexican aviation apparently And then 1988 happened So by the mid-1980s the airline was a basket case Uh an insider later wrote It was not a secret that Aeromexico was paying wages to people who weren’t even employed there Politicians artists hangers-on of the uh PRI party [00:28:00] that were ruling Mexico at the time It’s a bit like garbage contracting business in The Sopranos Uh a lot of people getting paid that didn’t actually turn up Uh it was lending planes to the president for personal trips It was like Qatar today for Donald Trump It was um paying some of the highest aircraft rental fees in the industry had a very powerful and entrenched ground staff union that the government couldn’t touch And they also were going through the peso crisis at the time Mexico’s peso had devalued 470% in Tony Kynaston: Hmm. Cameron: 1982 alone By 1988 a dollar that cost 46 pesos in 1982 cost 2298 pesos So their foreign currency costs fuel aircraft leases international fees had all gone through the roof And then in April 1988 the [00:29:00] 1988, no what’d I say 1988 the ground staff union went on strike and the Mexican government went full Ronald Reagan They just declared the airline bankrupt and sacked everyone and basically shut the whole thing down for six months There was no there were no airplanes No one could afford airplanes anyway I guess uh sort of uh with the the value of the peso And then they s set up a new company September 1988 Aerovías de México Had the old brand the old logo the old livery but was a completely different entity um and completely different contracts So the old union contracts went nowhere The phantom payroll went nowhere It was all wiped clean and they relaunched with 25 planes and 3500 workers which was vastly [00:30:00] smaller than um what had preceded it six months earlier Since then it’s gone through various ownership structures and alliances and crises including COVID When COVID hit in 2020 they filed for Chapter 11 Mexico’s airports shut down And the Mexican government uh run by a guy called López Obrador AKA AMLO he was known as AMLO just like Madonna He was just AMLO Um Claude told me it was like Scomo in Australia We had Scomo for Scott Morrison or Albo we have today for Anthony Albanese He was AMLO Not sure you he get that out of López Obrador but uh I guess there’s an AM in there somewhere for the LO Unlike our government and the US and European governments no bailouts for airlines in [00:31:00] Mexico at the time He said Tough titties And so they had to do it the hard way They emerged from Chapter 11 in March 2022 and their major lenders Bunch of credit funds and hedge funds and private equity firms like Oaktree uh ended up as shareholders in the airline They loaned the airline money during their restructuring and got equity in return Delta kept its stake and uh that’s basically the layout of the business as it is today And then they floated it on the New York Stock Exchange as I said six months ago to try and get some of their money back I guess with the IPO So the core business is pretty much what you’d expect Uh domestic flights flying Mexicans around Mexico from Mexico City to Cancun Guadalajara uh the beach Competing with Volaris who we talked about back in February and are down [00:32:00] 15 for obvious reasons Uh oil has been probably killing their business in the last six months or four months whatever it is three months They’re also competing with a budget carrier called VivaAerobus Um so that’s big part of their business Then they have the transborder to the US business This is where most of the money is Mexico City to New York Los Angeles Miami Houston This is where the Delta joint venture kicks in They cosell seats and share revenue on these routes And then layer three is the wide body internationals the Dreamliner as I mentioned before um flying to Madrid Tokyo São Paulo Just launched Barcelona and Paris this year And it all goes through Mexico City International Airport AICM one of the most congested airports in the world [00:33:00] Aeromexico has a massive allotment of takeoff and landing slots there which they’ve accumulated over decades That’s kind of their moat Um but it’s also getting them into a bit of a mess with the United States which I’ll talk about in a second So oh World Cup big thing for them recently Tony Kynaston: gonna Cameron: They’ve yeah been flying people in and out It was being cohosted by the US Canada and Mexico So um it’s been a nice little business for them but I haven’t seen that come through in the numbers yet Tony Kynaston: The other thing too I should mention while we’re on that is, um, with the oil price being low, it’s, it’s gotta be a good thing for their business going forward Cameron: You would hope if it stays low but again we don’t know we don’t know what tomorrow holds Tony Kynaston: Yep Cameron: I have seen their unaudited first quarter 2026 results Total revenue growth of 13 year on [00:34:00] year operating margin of 11 So it was a good quarter for them Tony Kynaston: Mm-hmm. Cameron: or it was a bad quarter for them last year one of the two Um so they went bankrupt as I said and part of that is worth mentioning Their current balance sheet still shows negative equity I think they’re sitting on about 3 billion worth of debt Tony Kynaston: Mm-hmm. Cameron: I think their negative equity is about 580 million So more liabilities than assets but they’re generating nearly a billion dollars of cash a year So lot of debt not great but it’s not like they can’t afford to restructure and pay the debt off as they go So it’s manageable I think Uh it’s a real business that’s got real cash flow Um but there’s this thing going on between [00:35:00] the Mexican government and the US Department of Transportation or US DOT Uh there’s it’s called the Slot War which sounds like fun actually Sounds like um something to do with casinos slot machines slot machine war No Tony Kynaston: I’m guessing it’s access to terminals in the US Cameron: Yeah Takeoff and landing slots uh at Mexico not in the US in Mexico Tony Kynaston: Oh, okay Cameron: Yeah so the US uh claiming that Mexico had arbitrarily cut US carrier slots in violation of bilateral agreements and so they blocked 13 routes for Aeroméxico Volaris and Viva Aerobus into the US I think it’s got something to do with the whole Trump trade war Mexico you know tariffs uh [00:36:00] scuffle that has been going on Tony Kynaston: It’s hard for– I mean, you know, you need to abide by the contracts. Shouldn’t be j-just unilaterally tearing up contracts, should you? Like NAFTA Cameron: Yes Um one might think that uh that might be a you know an honorable way to conduct oneself but I guess when one party doesn’t conduct itself that way the other party’s like Well you know guess you’re not landing planes in Mexico then Uh good luck with that Tony Kynaston: good luck Cameron: You’ll have to climb over the wall if you wanna get here that you built So that’s going on Um and the 11th Circuit Court of Appeals has granted a formal stay in November 2025 but it’s still playing out The there’s a hearing happening I think a decision is [00:37:00] expected There was a hearing April May just passed and uh a decision is expected around August September around how this is gonna play out So you know sort of a scuffle between the two governments I’m sure that something will get worked out It it sounds like everyone’s best interest is served by planes being able to fly in and fly out of Mexico and the United States But that is going on at the moment If it goes badly it could be bad for these guys Their CEO a guy called André Conesa has been running the airline for 21 years So uh Yeah that’s interesting You don’t usually get airline CEOs that have been around for more than two decades I don’t know what his story is but that’s a long time I didn’t look into his background but there you go Um what else can I tell you Um yeah that’s basically it Yeah Can’t tell you any [00:38:00] more about it Oh the fuel problem obviously we talked about Fuel prices were up Q1 2026 fuel costs were up 13% year over year But uh they they’re coming down You know where they go what happens is anyone’s guess So full year guidance was suspended after Q1 Too much fuel price uncertainty to forecast the second half Um but mm again no one can forecast the future Tony Kynaston: No. And also too, I know, I know from Qantas’s take on things, and I guess it’ll be the same or similar for Aeroméxico, is that like they’ve managed high fuel prices before. They’re– They’ll be looking at the yields, have– They’ll be canceling un-underbooked flights. They’ll be, you know, throttling back on service, all that kind of thing to try and up for the fact that their fuel price is going up Cameron: Hmm Yes I imagine that they know how to manage these sorts of things Um [00:39:00] and there’s all the other you know political issues going on between the US and Mexico but these things will play out the way they play out We can’t invest by forecasting the future I’m not smart enough to do that Um but these guys uh have a pretty healthy business and you know they they are the national airline of Mexico Got some competition with these budget airlines but uh they they dominate the whole industry as far as I can tell They’re they’re a pretty big deal but they’re cheap Tony Kynaston: Did– Sorry, just while you’re talking about the business, did you get a breakdown of their loyalty points business at all? As, as how much, how profitable it was and how much of a it was to their profit? ‘Cause I know for Qantas it’s a huge contributor to its profit. Cameron: It didn’t come up I did read about it somewhere um but Tony Kynaston: but they don’t declare it[00:40:00] Cameron: yeah I couldn’t get it in my notes for exactly how much it is Um Yeah no there was uh I had something about that but I can’t remember what it was now Anyway that’s about it Tony It’s just uh they’re an airline They’re cheap right now for some of those reasons that I just mentioned Um but the business is uh cranking along by the looks of it as far as I can tell So on the analysis on our scorecard this is from uh numbers I did over the weekend QAV score of 0.21 seven items out of 13 scored Uh quality rank of 72 on uh Stockopedia Stock rank was 85 couldn’t score it for that It’s below the 90 threshold that we have Piotroski F-score of six so I could score for that It’s above 4.5 The price is less than our IV1 [00:41:00] Our IV1 is 34.28 Um price is 17.34 Um price is also less than our IV number two Uh IV number two is uh Oh hold on No the price is not less than that IV2 is 7.73 so couldn’t score it above that Interesting that IV1 is higher than IV2 It’s normally the other way around Tony Kynaston: Mm-hmm. Cameron: Um yeah I guess it’s something to do with the EPS figures uh for next year Um book value uh they’ve got negative equity so couldn’t score them for book value No dividend so can’t score them for any of the dividend stuff Their yield is zero But the price to operating cash flow is 1.55 Uh full year [00:42:00] 2025 operating cash flow was 913 million Market cap was 2.37 billion So generating like nearly 40% of their market cap in cash every year So um yeah I couldn’t find any real gotchas in this one Tony apart from some of the political wranglings and oil price issues that talked about um over the course of the show but it’s just cheap airline And I know airlines are famously Tony Kynaston: Not great Cameron: you know Tony Kynaston: holds, are they? They’re cyclical. Cameron: businesses yeah But we buy them Tony Kynaston: Yeah. And that’s why because, you know, no one wants to be a long term holder of an airline really except for perhaps other airlines like Delta. But COVID shows us exactly why that’s the reason that they can be incredibly cyclical. Cameron: Yeah Tony Kynaston: and, uh, yeah, so but that means that, know, we, we get the market to ourselves sometimes, and it’s, it’s a overwhelmingly good thing [00:43:00] to, um, invest in because it’s throwing off heaps of cash. And yeah, it’s got a lot of debt. We see that a lot with companies, um, on our buy list. Uh, but you know, you, you can repay that debt pretty quickly with a truckload of cash coming in the door every day Cameron: Yeah Now looking at some of the other airlines that I’ve done Pulled Porks on over the last uh year or so American Airlines that we talked about back in October last year is up 12% since we talked about it We don’t hold it in a portfolio but uh we did talk about it Um AerCap Holdings is up uh 7% since November last year It’s not taken over the world but it’s in a positive direction But Volaris is down it’s down 12% as of uh today So um you know sort of a mixed bag there with the airlines that we’ve talked about over the last year As you’d expect it’s been a pretty turbulent period for airlines Tony Kynaston: Yeah. And we’ve certainly held [00:44:00] Qantas in the past and then sold it, um, over and Cameron: of times Yeah So I mean I’m I’m like that with airlines Like I I’m like Ugh really It’s one of those things that I’m never super excited about buying but Tony Kynaston: Mm-hmm. Cameron: The rules don’t say we don’t buy airlines Our rules don’t say we don’t buy airlines You ne you never wrote that into the rules so Tony Kynaston: very profitable, but you just got to realize you’re not gonna hold it for the rest of your life. Cameron: Right So we hold them until we have to sell them Tony Kynaston: Yeah. But, you know, with Qantas I’ve, I’ve certainly had periods where I’ve held it for, know, a short period of time and made thirty or forty percent out of holding it. Cameron: Right Tony Kynaston: yeah, they can be profitable, um, investments just, uh, you know, on a sort of short to medium time horizon usually Cameron: So you buy them when they’re cheap let the price go up and then sell them when they trip a sell trigger huh Tony Kynaston: exactly Cameron: Okay Well that’s all I have [00:45:00] for today Tony That’s uh we’ll see how they go Tony Kynaston: Good. Well, thanks for that Cameron: think that gets us to after hours. Been a few weeks. What’s been keeping you amused? Tony Kynaston: Uh, I think I heard you talk about it while I was away, but I’ve been watching Spider Noir with Alex. It’s, it’s pretty good. Liking Cameron: get f- Tony Kynaston: Cage acting Cameron: got, I only got like three or four episodes into it and then I kind of got distracted. But, uh, Tony Kynaston: out? Hmm Cameron: Fanta said it was worth keeping up with, but how far into it are you? Tony Kynaston: Yeah, we’re at episode three as well, Cameron: Oh, okay. Right. Tony Kynaston: it. I think it’s Cameron: Hmm. I like, um, Nicolas Cage hasn’t had much to do there, but I like, uh, Brendan, whatever his name is, Gleeson. Yeah, he’s always fun to watch. Tony Kynaston: I agree. Yep, playing the bad guy. Cameron: Yeah. Tony Kynaston: Musk character. Cameron: Yeah. Okay Tony Kynaston: Watched another one, uh, uh, episode of, uh. Sorry, documentary on Netflix called [00:46:00] Vardy. Um, Cameron: Hmm Tony Kynaston: don’t know if you’d like it, but I, I quite enjoyed it. Roddy and I watched it. It’s about an English soccer player, um, who was a bit of a lad uh, uh, got into soccer late ’cause he was too busy drinking and, and fighting and all that kind of stuff. then, uh, a manager sort of picked him out as an up-and-coming talent and stuck with him through all the grades, and eventually he started playing for Coventry, then went on to win the EPL as a huge outsider. uh, it’s a bit of a rocky story really, but, um, it was fun to watch. Recommend that to the sports fans out there Cameron: What else? Tony Kynaston: f- uh, been listening to My Favorite Toy, the new Foo Fighters album. Came out, I think, in April. Cameron: Hmm. Tony Kynaston: quite good Cameron: Hmm, didn’t pick you for a Foo Fighters fan Tony Kynaston: Yeah, yeah, I like the Foo Fighters. I Cameron: Hmm. I like kung fu. Is it kung fu [00:47:00] fighters? I’m a kung fu fighter Tony Kynaston: Uh, been reading, um, a book on Jefferson by Christopher Hitchens, which is really good. I recommend that. out for a while, but I came across it recently. Cameron: He’s been dead for 10 years, so I’d hope so Tony Kynaston: Yeah, so it’s been, it’s been out for a while. like his writing style, but, um, uh, I– it’s going into all the detail of, uh, the early days of America, um, which I wasn’t that familiar with, so that’s been Cameron: Hmm. Hmm. Tony Kynaston: Yeah. Um, you know, talking about little things like, uh, how Jefferson cribbed a quote on, um, the pursuit of. called? The pursuit of life, happiness. No. Uh, what’s the quote? The life. What’s in the Constitution? The pursuit of happiness, life. I’m getting that mixed up Cameron: Yeah, can’t remember Tony Kynaston: Yeah, anyway. Originally, it was instead of Cameron: Life, liberty, and happiness for all. Li- liberty and something, yeah Tony Kynaston: But originally, the original quote was from Locke, and it [00:48:00] was life, liberty, and property. um, so given the sort of double-edged meaning property had back then, they decided to change it to the pursuit of Cameron: Ah, yeah Tony Kynaston: which, um, I thought that was interesting. But Cameron: Jefferson, Jefferson liked his, uh, female properties too, didn’t he? Tony Kynaston: He did, and he still, he still kept slaves, Cameron: Hmm. Tony Kynaston: even though he did a lot of work in the Constitution to try and, uh, get around the ownership of slaves. He sort of danced the thin, the, the line there. And that’s– I thought that was interesting, and at the very start, when Christopher Hitchens says, “Look, no one’s all good or all bad.” This, this guy, you know, was all about life and liberty, but he held slaves. So you know, you gotta judge him on that basis, I guess. Cameron: Hmm Tony Kynaston: and but there’s a lot, lot in there about the, um, the reasons for seeking independence to– a lot to do with the English and the French War. Um, uh, how money was required by the English to fight those various wars, and how they were taxing Americans to do that. Um, how, you know, [00:49:00] at the end of some of those wars, they had a chance of, I think, uh, was it Guadeloupe in the West Indies? They had the chance of either taking that or Canada, um, over as a colony, uh, from the French, and they chose Canada. And, uh, if they had have chosen Guadeloupe, that would’ve had a different outcome for the history of America. So yeah, interesting to go through and pick apart all that history that was going on at the time, and the Americans’ reaction to it. Cameron: The original tax dodgers, as I always call them. Tony Kynaston: Right Cameron: The founding tax dodgers. Mm-hmm. Tony Kynaston: And, uh, a couple of good, good results from our horses this week. So Lake Forest broke a track record yesterday at Pakenham. I drove up to Pakenham to watch it, to win a race, which was good. And. Cameron: that mean? Like a record for that horse or like for the whole track? Tony Kynaston: Yeah. Cameron: Wow Tony Kynaston: of different surfaces at Pakenham. They have the, a grass surface, which is what most race courses do, but they also have a, what’s called a poly [00:50:00] track, which is, uh, kind of a sand, rubber, synthetic mix, which, um, is an all-weather track. So, uh, you race there when it’s in winter and the grass tracks get muddy and bogged. Cameron: Right Tony Kynaston: So it set the poly track record for 1,000 meters at Pakenham yesterday, which was Cameron: Fantastic. Congratulations Tony Kynaston: Thanks. was fun. The trainers are the Galagatos brothers, and they were very emotional and all over me after the race. A lot of fun. it very passionately, which was, which is good to see. Cameron: Is that what you want? Tony Kynaston: Yeah. then Stars of Dom, a horse I have, uh, sharing with Steve Mabb, that ran second on Saturday. So it’s had two seconds first two starts. So, um, we’re hopeful it can the, take the prize, in the future. But two seconds isn’t a bad way to start a, a racing career. Cameron: Yeah. Tony Kynaston: Hmm Cameron: named after? Stars of Dom Tony Kynaston: Dom Perignon. Yeah. Uh, it’s a bit of a [00:51:00] pun. We didn’t name this one, but, um, Cameron: Right Tony Kynaston: uh, one of the managers at Lindsay Park, which is where it’s trained, is called Dom, Dom Roden. So Cameron: Uh Tony Kynaston: they kind of named it after him, but also after champagne. Yeah, so that was good. Good, good couple of days to be a horse owner. Cameron: Yeah, congrats. Very exciting Well, I watched the Colossus film that we talked about, Tony Kynaston: Mm-hmm. Cameron: um, after reading the book. Really enjoyed the film. Tony Kynaston: Oh Cameron: it was great. Yeah, really well done. Good sort of classic film. And a lot of, like, great, uh, appearances from stars. Um, Mrs. Cunningham from Happy Days was in it, very young version of her, Marion whatever her name was, Ross. Tony Kynaston: Mm-hmm. Cameron: And James, um, what’s his name? Um, Hong. James Hong. Um, the only Chinese American actor for the last 30 years in Hollywood who’s everything from, [00:52:00] um, Wayne’s World through to Everything Everywhere All at Once, and, uh, Big Trouble in Little China, and all those sorts of films. He– a very young James Hong was in it, which was great to see. He’s always one of my favorites. I think he had one line in the, in the film. Uh, yeah, no, really, really enjoyed it. Thought they did a good job. Changed it from the book a little bit, but pretty much the same story. I’m reading the second novel in that series now, which is interesting, where, um, Colossus. It’s fi- it takes place five years after the first one, and, uh, there’s a religious cult set up around Colossus now. He’s completely taken over everything. He, it. And, um, the human resistance gets contacted by some group that says they’re from Mars, and they’re, they’re building a, a counter system to have them. Tony Kynaston: from Mars. Yeah. Cameron: Yeah, yeah. Tony Kynaston: Right. Cameron: Um, Tony Kynaston: ruled by the Grok [00:53:00] AI on Cameron: Well, as I think I told you, Elon named his data center that runs Grok Colossus based on this book. so maybe he thinks this is what he’s gonna have to do when Colossus takes over, is get to Mars and build the counter Colossus. Tony Kynaston: Do you think, uh, do you think there’s a religion around AI at the moment? Cameron: Uh, there’s been a couple of Tony Kynaston: by the almighty AI Cameron: I think there’s a couple of, uh, actual people playing with the idea of AI-based religions already. But I do think it’s a thing that’s gonna happen. I mean, the way it plays out in the book makes total sense. Like a b- it’s, it’s the all-knowing master of everything that’s running everyone’s lives and has solved crime. There’s no more crime, there’s no more violence, there’s no more anything ’cause it sees everything. It– If you get arrested, you get tried and executed within 30 seconds ’cause it’s got all the facts and all the data and it just, you know, beheads you. So, uh, yeah, I can see that playing out. Tony Kynaston: Hmm. Cameron: Chrissy and I [00:54:00] also watched Poor Things. Tony Kynaston: Oh, that’s a great movie. I Cameron: Yeah. Yeah, yeah. Tony Kynaston: Willem Cameron: Trippy as all hell. Willem Dafoe, yeah, great in it. And, uh, now I wanna see the other one. I think the first one they did together, Kinds of Kindness with Jesse Plemons and Emma Stone and Willem Dafoe, which is, Tony Kynaston: I Cameron: Yorgos’ uh, go-to cast Tony Kynaston: Yeah Cameron: It’s his, um, his go-to people. Willem Dafoe’s always great, always well. Do you hear about this film that’s– There’s a film that’s showing. Where is it? Um, in Tasmania, I think. It’s, uh, the Dark Mofo, Tony Kynaston: Mm-hmm. Cameron: um, Festival that’s on at the moment. It’s a Willem Dafoe film that only 500 people have seen. One person is allowed to see it at a time in a cinema. You get, uh, a, a BMW picks you up, gives you, like, an army tag.[00:55:00] You get taken to a cinema that you, where you didn’t know where you’re going. You get taken to this place. You have to pr- pr- pr- provide your identification, and you sit in the cinema and you see this film by yourself. And oh, before– When you get in the car, there’s a recording by Willem Dafoe that, uh, is played to you that basically is sort of not– is sort of the intro to the film. He’s in character, and then when you get out of the film, there’s another thing that he says to you in a USB stick or something that’s given to you, and it’s a full experience that, yeah, only one person at a time is allowed to see. It’s, Tony Kynaston: has anyone divulged what the movie’s about? Cameron: Yeah, I read a review in The Guardian or something today where somebody saw it, a reviewer, and talked about it. I didn’t read it in detail. I was just skimming through them Tony Kynaston: I have seen a, Willem Dafoe movie set in Tasmania. Cameron: Hmm. Tony Kynaston: out in the last 10 years. I think it was called The Hunter or something like that. He– Cameron: Oh, yeah Tony Kynaston: It was very remote and moody, and he [00:56:00] played a hunter who was looking. I can’t recall if he was trying to find a Tasmanian tiger or he was trying to shoot, shoot one that had been found. I can’t recall now. It was a very, like it was, wasn’t much happening in the movie, but it was beautifully shot and great to watch. Very moody Cameron: Human sacrifices have been made. He had to go shoot Tasmanian tigers. Tony Kynaston: no, I don’t, don’t Cameron: Bob Katter called him up. And I just saw the trailer for the new Paolo Sorrentino film, Parthenope, which stars Gary Oldman. Tony Kynaston: Oh, wow. Okay Cameron: Yeah. Yeah, yeah. Check it out, Parthenope. You’ll love it. Um, looks great. Coming out soon. And then I’ve been listening to Aussie Crawl this morning because they’ve just announced a reunion, the surviving members of them. Yeah, the Raine brothers and some other guy. I thought, “Gee, I haven’t listened to Australian Crawl for decades,” so I pulled out Sirocco and started listening to that. Such a- some catchy riffs. Oh, thank you, baby. Tony Kynaston: Oh, Cameron: Da-da-da-da, da-da-da-da, da-da-da-da, da-da-da-da, da-da-da-da-da. Yeah. [00:57:00] Errol Tony Kynaston: And great lyrics. Beautiful people. Yeah. mean that, yep, where are those, you know, those cynical Aussie bands from the ’70s and ’80s were great. Just taking the piss all the time. Cameron: Che Tony Kynaston: Mm. Cameron: Well, that’s all I got for you, TK. Tony Kynaston: All right Cameron: Okay. Uh, happy hunting everybody. PREVIOUS PULLED PORKS Here’s the performance of the “pulled porks [https://docs.google.com/spreadsheets/d/16WHwMalQodhxUO9h1T-7suVtfwjrXq057fFHhcLXFWk/edit?gid=0#gid=0]” (eg deep dives) we’ve done on the show in the past.

Tobias Carlisle, Soldier Of Fortune: QAV America #56

QAV AM 56 [https://qavamerica.com/wp-content/uploads/2026/06/QAV-AU-923-art-optimised.jpg]   EPISODE OVERVIEW This week we sit down with Tobias Carlisle to dig into his new book, “Soldier of Fortune: Warren Buffett, Sun Tzu, and the Ancient Art of Risk-Taking.” Tobias walks us through three of Berkshire Hathaway’s most misunderstood deals (General Re, Burlington Northern Santa Fe, and the Japanese Sogo Shosha trades), explaining why each looked wrong at the time and turned out to be masterstrokes of defensive strategy. We also get into ADRs, the K-shaped US market, small cap value, and why Tobias and Tony both landed on “Quality At Value” as the sweet spot. TIMESTAMPS & SUBJECTS * [00:00:00] Intro and guest welcome, Tobias Carlisle’s new book “Soldier of Fortune” * [00:03:00] The three misunderstood Berkshire deals, starting with General Re * [00:10:00] Unpacking the General Re scrip deal, Coke dilution, and defensive strategy * [00:13:00] Via negativa, inversion, and the Charlie Munger checklist mindset * [00:16:00] Burlington Northern Santa Fe, railways as capital traps, and the coup d’oeil * [00:20:00] Accelerated depreciation, the tax carry trade inside Burlington Northern * [00:24:00] Wu Wei, mental flexibility, and breaking your own rules when the price is right * [00:29:00] Apple as the greatest trade of all time and why scale matters * [00:33:00] No master plan, Berkshire’s structural freedom versus niche-constrained investors * [00:36:00] The Japanese Sogo Shosha carry trade and zero percent yen-denominated notes * [00:43:00] Japan’s shareholder reform, Tokyo Stock Exchange pressure, and cultural resistance * [00:50:00] ADRs, the DRAM ETF, and why Americans avoid foreign-listed names * [00:53:00] Operating cash flow manipulation, property developers, and IFRS versus US GAAP * [00:55:00] Buffett on survival, risk of ruin, and the million-chamber revolver quote * [00:58:00] Profitless tech at all-time highs, the K-shaped market, and small cap value * [01:02:00] Northrim BanCorp (NRIM) as a real-world cheap-as-chips example * [01:04:00] The Acquirer’s Multiple today, quality minus junk, and where Tobias actually invests * [01:06:00] Quality At Value as the shared investing philosophy, wrap-up and book plug   Free Podcast Archives [/listen/] TRANSCRIPTION QAV AU 923 VIDEO [00:00:00] Cameron: Welcome back to QAV. welcoming back to the show our old friend Tobias Carlisle, who has a new book out, Soldier of Fortune: Warren Buffett, Sun Tzu, and the Ancient Art of Risk-Taking. And I’m just gonna start with this, and then I’m gonna throw to TK to ask some questions. But one of the blurbs, this is one of the blurbs. Check this out. “Soldier of Fortune is a brilliant synthesis decoding the genius of Warren Buffett through ancient eyes. The book reveals that Buffett’s unparalleled success comes not from following common Wall Street maxims, but rather from the profound, patient wisdom of a warrior philosopher. This book is a revelation, an indispensable guide to the timeless art of strategic risk-taking. Jim O’Shaughnessy, author of What Works on Wall Street.” How the hell did you get Jim to write a blurb for your book? We’re huge fans of Jim. Toby: blurbed a [00:01:00] few of my books. I, I, I, uh, have the good fortune to, uh, know him and have known him for, uh. He blurbed, I think he blurbed “Quantitative Value,” which came out in 2012. But I, I found him on, when he came on Twitter early on, he had, you know, like 100 followers, and I was, I was one of them. And I reached out to him, and I got to know him then, so I’ve stayed in good, I, I love Jim. He’s a good dude. Tony Kynaston: Wow. Can Cameron: We only discovered his book. Tony Kynaston: him on the show. Toby: Yeah, Cameron: Yeah. We’re Tony Kynaston: his chapters. Toby: I’m sure he’d do it. Cameron: We only discovered his book like four or five years ago, maybe less. And I, I think it was during COVID I read it and I was like, “Oh my God, this is just what we talk about to a T.” Like, he absolutely Toby: The Cameron: was way ahead. Yeah. Toby: Yeah. Cameron: Brilliant. Toby: I’ve re, I’ve got a few versions of it. So the. You know, in the original version, he said that the best value metric was price sales, and then in a later edition, he [00:02:00] said it’s EV/EBITDA, is where I get to too. there’s lots of reasons why price sales works well, and then he said not, not any one of them, use a combination is I think what he finally fell to. But that, that sound, like that’s pretty sensible advice, I think. There’s lots of reasons to use price sales. It’s not a bad metric. It’s just you can’t use anything in isolation, I think. Cameron: Well, Tony, I’ll throw it to you because you’ve got a list of questions that I don’t want you to miss out on. Why don’t you kick it off? Tony Kynaston: So congratulations on the book. It’s, it’s, I loved it. It’s fantastic. Love reading books on Warren Buffett and corporate strategy and strategy in general, so well done. Um, I Toby: you Tony Kynaston: wanna start uh, got. The book sort of focuses on three of Warren’s investments, excuse me, and they were large for Berkshire Hathaway and reasonably controversial in that they didn’t sort of fit the normal value investment mold, you know, cause I think when the [00:03:00] first one was probably done people were more used to Warren buying Coke or Amex and having a, you know, big moat around a consumer company that would go on forever throwing off cash. But there were some differences to these transactions. Um, but all the, all the three of them proved to be outstanding in hindsight. So maybe you could just uh take us through what the three transactions were first of all. Toby: These were, I was looking for a way to illustrate some of the ideas in the book, and I’ve written a lot about Buffett, so I didn’t wanna rehash all of the stuff that I had written previously. Uh, though I think that you could use a lot of that to illustrate those ideas. So I wanted to find, that I felt were misunderstood, certainly transactions that were misunderstood at the time that they were done. And I vividly remember all of these transactions. I was a Buffett watcher just in 1997, so I remember this transaction [00:04:00] coming through, and I remember being perplexed. Only, only perplexed in the sense that I knew that this was an insurance deal, and I knew that Berkshire was an insurer. And so it didn’t surprise me that he would do an insurance acquisition, but, uh, I didn’t really have the analytical experience at that time to understand the transaction. Particularly because there are a number of features of it that certainly seemed to go against the grain of what he had been preaching in his letters up to that point. You know, I’d just discovered him, but I’d gone and read all the, the letters and, um, tried to organize them. And I had the Lawrence Cunningham book where he’d sort of put them all into thematically rather than chronologically. So I, I felt like I had a pretty good handle on what he was doing, and then he did this General Re acquisition. So the features of the General Re acquisition that were a little bit unusual were, he did it in stock, and he’d been saying you never do it in stock. always prefers to pay cash. [00:05:00] The other thing that. It, it looked, it looked optically expensive as well. That was one of the other things that, that folks were talking about. And I think that they had anticipated that criticism somewhat by talking about the synergies that they were expecting from this acquisition. And you can go back and find Buffett pre-Gen Re talking about synergies, like never manifesting every single firm. Whoever does an acquisition and slightly overpays said, “Oh, it’s justified because there are gonna be synergies,” and they, they never manifest. And so here he was seeming to be contra, you know, going against what he had previously said that he would do. When you, with hindsight, the deal worked out really well. and I sort of have been investing for long enough now that I can sort of break it down and analyze it properly, which I couldn’t do at the time. But the things that really stand out. The reason he did the transaction, you have to [00:06:00] go back a little bit earlier. He’d, he’d done this deal with Coke very famously. With Coke, where similarly it looked like he’d, he’d overpaid. He was paying a lot for Coke. He’d never really paid up to that extent before. But it was a wild success. He put a third of the equity of the, of Berkshire into Coke, then it pretty quickly, it was like half the equity of Coke, and then it tripled. And by nine, by the late 1990. He so did it like the late 1980s, early 1990s. By the end of the 1990s, was, um, trading at like 60 times earnings. It was a giant part of Berkshire’s equity holdings. Berkshire on top of that, Buffett had been undiscovered, I think, up to that point, but he was well and truly well known by late 1990s. And uh, Berkshire itself was trading at three times what was probably already a pretty inflated valuation that included Coke. [00:07:00] So he can’t sell it because that incurs this huge capital gains tax. He’s also preached not selling, holding these things for the very long run. And he’s received a lot of criticism since then because Coke really hasn’t done much in the 26 years since they did this transaction. But I think that that’s because f, that criticism is, is a little bit unfair when you understand what happened with the, with the Gen Re transaction. And this was Christopher Bloomstran sort of alerted me to this. But in essence, what he did by using scrip, by using stock, he was able to dilute down the Berkshire holders their big holding in Coke, and he got probably a pretty good deal. He certainly paid less for Gen Re than he was giving up in, in the stock that he was to the Gen Re shareholders. So the transaction works like this. In a scrip for scrip transaction, Berkshire acquires Gen Re. The shareholders of Gen Re become shareholders in [00:08:00] Berkshire, and the combined entity ends up with a share of, the, the Berkshire shareholders remain, the Gen Re shareholders become Berkshire shareholders, diluted down a little bit. So the Gen Re shareholders certainly got the worse end of that deal. Berkshire ended up with the better end of that deal. But the essence of the transaction was that he diluted down the stock holding in Coke, he was then able to bring down the overall valuation of Berkshire Hathaway. And Gen Re had a, the synergies were real in the sense that Gen Re, most of its exposure was international or, and it was looking, and it was a little bit constrained by kind of quarterly earnings, so it fit well with, with Berkshire’s insurance book. So that gave him all of this, and their book was mostly bonds. So people who’ve followed Buffett will know that they tend to run with uh, insurance, uh, policies written to equity [00:09:00] holding or, or to, to underlying securities, those policies that they’ve written because they tend to run with equity, which can, which is more volatile but can perform a little better. Whereas Gen Re was running sort of more, in a more traditional sense. They were using bonds to back their policies, and the bonds don’t perform as well over the long run. But they do have this nice feature that when the market goes down, not always, this is, this is not, this is like a little bit of a, a received wisdom in the markets that bonds tend to rally when equity markets collapse, and that’s not true. If you go back far enough, you can see that they, sometimes they go to, sometimes they move together, sometimes they move differently. You can’t rely on it. It’s only in certain circumstances, and this was one of those because the equity market was so overvalued. Bonds were yielding pretty good, pretty well at that point. So the two thousand collapse actually happened, the bonds all rallied, which he was able to then sell down, and he was then able [00:10:00] to invest that long in really cheap equities at the beginning of t- the two thousand. That set them up for the sort of next decade plus, uh, for Berkshire to really outperform. So I thought it was a transformative deal. It was a little bit misunderstood at the time, and a good illustration of being more defensively minded and the power of being defensively minded and thinking about what happens next after the crash. Can you survive the crash? What happens after the crash? And I thought that was a pretty good illustration of one of the things at Sun Tzu, which is that you defend first, and then you think about, you secure yourself, and then you think about doing all the other things you’re gonna do. Tony Kynaston: Yeah. I mean I think from, from um your analysis what I took out of it was it was a, it was a masterstroke of strategy by Warren doing what he did for, for any number of reasons. I mean he realized the market was overvalued in the late nineties. He realized he had a large equity portfolio. He realized Berkshire Hathaway was trading on a to book [00:11:00] ratio which was way above what it normally did, so you know, quite rationally he could have said I’m gonna sell, I’m going to sell my equity portfolio, I’m going to diversify or whatever. But he had always said if I sell I pay taxes and that’s a friction on my earnings. So he didn’t want to do that. What else could he do? Well he could take that overvalued Berkshire scrip and he could use it to acquire Gen Re, even though he’s always said I don’t want to issue more scrip. Um, I don’t want to pay for things with scrip, I want to pay for them with cash. But he did, he broke that rule to I think a better outcome, which was he then diversified into bonds, that was the other interesting thing, is he’s you know always preached that um diversification is diversification but in that case he did diversify away from bonds. And then of course he um. And and Gen Re I think from memory was constrained, it could only invest in triple A securities or something like that to back up its insurance policy, so it it [00:12:00] had to own bonds. Uh so he got a lower price for Gen Re with the scrip bid than he would have otherwise gotten perhaps. And then of course he inherited the the um portfolio that Gen Re had and spent a lot of time unwinding those and coined the expression that derivatives are weapons of mass financial destruction, which was another interesting insight into it. So yeah. But but you raised a point there which I think brings us Toby: think Tony Kynaston: ahead. Toby: I was just gonna say, I think that he tipped his hand a little bit with that when he said that he discovered the, the. He gave the reasons for why he had done it, that it was this sort of defensive move, and then he, after the fact, discovered the, uh, the weapons of mass financial destruction. And he instructed them to unwind them really quickly, and I think they ended, it ended up costing them $400 million, and it sort of Tony Kynaston: Mmhmm. Toby: the them that even in a be, even in a benign market, two parties to the same transaction could both be carrying it in their books at a profit, which is, like, impossible because one [00:13:00] party has. is down and one party is up. And so unwinding it was quite difficult. He said it cost them $400 million, and he started warning about that. But that was well before all of those problems manifest for the other insurers in the great financial crisis, global financial crisis. Tony Kynaston: Exactly. And and that’s again I think a, an example of what you’re saying um about the defensive nature of the Sun Tzu strategy. It’s uh, it’s you know, to, to finish first, first you have to finish, type approach to it. And I think there was a a book written a couple of years ago which summed it up well which said that the art of winning is not losing. I think that was the title of it. It talked about you know if you’re a good tennis player you keep the ball in play. You don’t try and go for Toby: Right. Tony Kynaston: on every sort of stroke. So similar sort of approach. But um and I think that was summed up in your book by the term via negativa, or negativa, not sure how you pronounce that, but via negativa, which which uh Charlie talks about. So could you maybe [00:14:00] outline that and how it fits into these um acquisitions please. Toby: Via negativa is an idea that, it means by way of the negative. And y-y, the idea is that you, you go f, might not know what the right thing to do is, but you might have a pretty good idea what the wrong thing to do is. So you eliminate all of the things that are the wrong thing to do, and that might leave you with the solution to the problem. And that’s very much. it’s a Charlie Munger idea. And he, he says, “Invert, always invert,” which he gets from Carl Jacobi. But the idea is that just do exactly that. You don’t, you have a list of things that you don’t do, and so you could think of this as a checklist. Lots of investors do it this way. I, I like to do it this way. I like to exclude lots of things initially. takes a, takes the mental load down a little bit. You don’t waste time with things that you’re just never gonna do. And so that might be, for m- for me, it’s avoiding statistical earnings manipulation, statistical fraud, all these [00:15:00] sort of little things that have. it makes it very hard for you to fi, to, to be assured of the intrinsic value. So you just take away the donuts, take away the zeros, and invest in what remains and, that’s the, that’s the sort of simple application of it. Tony Kynaston: Yeah Um I think uh in your book you quote Charlie who says We try not to be stupid rather than try to be very intelligent I think was a good summation of it as well Yeah And um I remember hearing an interview with uh with Charlie um not long before he passed uh where he talked about came to him with an example of an investment he would always ask for the case where it didn’t work where it failed Under what circumstance does it fail And he’d start there and then work back into whether it was a good investment or not So the the their mindset is really around how do we avoid ruin um in what we do And you know that leads you to not taking on too much debt for example um you know and diversifying when you need to all that [00:16:00] kind of thing So that I thought that was very a very interesting mindset You also talk about another concept called Wu Wei Um can you tell me about that and how it applies Toby: Yeah, I think– let me, let me, let me talk about the next transaction Tony Kynaston: Mmhmm Toby: uh, Wu Wei into it. So the, the next one was the Burlington Northern Santa Fe, um, that happened in 2009. I remember it being announced. I remember people being absolutely perplexed because Buffett had been this advocate for capital light compounders that grow and throw off cash flow they grow. And here he is buying a railway, which is the exact opposite of that. It’s capital intensive, sucks up an enormous amount of capital. And for 100 years before he had done that deal, had just been where capital goes to die. the, the f- the very first, uh, security analysis is almost entirely about analyzing railway bonds because there [00:17:00] had been this mania for railways at one point where they were the tech stocks of the day that attracted a lot of capital. They’d overbuilt uh, there was no there there at the end of all of that. And so the next 20 or so years after that were people buying the bonds of bankrupt railways and getting control of the equity, through that method. And so, uh. And then they really hadn’t done much for most of the period after that they’re so capital intensive. And so when Buffett bought it, it was, uh, it was truly bizarre, uh, that he had, had bought this thing. But pretty quickly after that, in the few years after he had bought it, um, the, the price that he had paid up front was shown to be much, much lower than he actually had paid because it had a whole lot of excess capital on its balance sheet that he was able to pull out. And pretty quickly it was returning very substantial dividends. And [00:18:00] he li– I think he liked the fact, ’cause this was, this was during 2009, uh, interest rates were very low. Forward returns looked like they were very low too, and this was a way for them to get a regulated 10% the CapEx that they would require, which was very substantial. So it sort of committed them to these enormous capital expenditures inside Burlington Northern that gave them a regulated return on it, which was pretty substantial. And in addition to that, no one’s building new railways, no one’s overbuilding what they have. then I thought that there was this geographic distribution that the US was sort of shifting from primarily a relationship through the East Coast with Europe to relationship with Asia via the West Coast, and that was where Burlington Northern had, had its footprint. And so it gave them this, totally different, geographical distribution. Plus it had these pretty impressive tax, uh, tax [00:19:00] qualities that meant that they could write off a lot more tax than they would otherwise write off. So on a, a cash in, cash out basis and on a return on investment basis, it was, it was a, it was a great deal for Berkshire, even though initially it didn’t seem that way or optically it didn’t seem that way. So I use it as, it– I use it as primarily this, this idea of coup d’œil, which is, they say that the great generals have the coup d’œil, and Napoleon had the coup d’œil that you show up to. it means a stroke of the eye. And so w- uh, old Napoleon, he famously would show up at battlegrounds where one of his generals was doing something, and he would see something that the general hadn’t seen, and it might be the, uh, the enemy was all pushed up against the, lake with water behind them, and so couldn’t move, and they were all, uh, they were, they were, they were stopped. They weren’t doing anything. They were in a truce or something like that. And he would sort of immediately say, “You need to attack them right now,” because he had understood that they had this advantage that would– that could slip [00:20:00] away pretty quickly if they were allowed to get away. Buffett’s the same. He’s– He understands the tax, he understands the regulatory environment, understands the geographic location, and he understands that he can get this regulated return on this investment. And even though railways have been a terrible investment for so long, he sees all of these things, so he can just ignore the fact that railways have been a bad investment, and he can see that he can get this quite substantial return if they move quickly and, and buy Burlington Northern, which they end up doing. And since then, it’s been a, been a stunning success, and I track the sort of payments out of it in the book, which, um, have been extraordinary. Like, it seems to be the Buffett idea is that you make the investment and then the capital comes back. So even though it’s capital intensive, it’s had this great ROI for, Tony Kynaston: You fo you focused on the Toby: I, Tony Kynaston: okay we’ll come back to it But before you do um you focused on uh the tax It’s almost like a carry trade I guess um that [00:21:00] Burlington had for Buffett that he picked up on can you just explain that Cause I I found it a bit hard to follow in the book I don’t know if it’s a it’s a um a unique to US accounting standards but I can’t think of an example of it in Australia that uh matches it Toby: Yeah, sometimes in the States they have these, um, they allow you to write down 100% of an investment in the year that you make the investment. And so your tax in that year is reduced by the size of your investment. So an example for, uh, individuals in the States is if you buy a working– you buy a car that weighs more than 6,000 pounds, which is deemed to be like a truck or kind of working truck, you can depreciate 100% of it in the year that you buy it. it happens that like there’s a lot of luxury kind of SUVs that qualify because they’re very heavy, and so you can buy yourself a luxury SUV and write 100% of it off in the year that you buy it, and it comes off your tax. Just accelerated [00:22:00] depreciation Tony Kynaston: Right And how did that accelerated depreciation benefit Berkshire in this case Toby: Well, they’re, they’re able to write down. It– You, you’re able to make an investment and write down more of it initially the first year or so of, of making the investment, which just gives you more tax cover. So your, your earnings are reduced to the extent that you write down capital gains tax in a, in a, in any given year Tony Kynaston: the the I mean the hypothetically they could invest in Burlington and pay no tax It’s all going back to Burlington really Toby: I-internally in Burlington, they can, they can do that. I, I don’t think it would get. I don’t think they would ever get to the point where they were paying no tax, but you can reduce– You can make of dollars of investment in railway bridges and, and so on, and write them down. I forget the exact detail of, of it because I, uh, I wrote the book a little while ago now, but that the– You can, you can accelerate the depreciation, which is not uncommon for certain in certain industries, you’re allowed to accelerate your depre– [00:23:00] So oil and gas has a similar kind of idea. Tony Kynaston: Yep Toby: think that they’ve introduced something for some of the hyperscalers as well, where we’re able to write down what you have. And so you make a billion dollars of investment this year that has a useful life that might be five, 10, 15, 20 years, but you write it all down this year, and so it gives you some tax cover to the extent that you’ve written it down Tony Kynaston: Yeah right Because I I did wonder whether fact Berkshire may have underinvested in Burlington because they could they could hypothetically invest a lot get a tax benefit from it and I guess get a better offering for their customers and be more competitive have better margins longer term and and gain some kind of advantage which would allow them to scale the business quicker than if they couldn’t get that tax advantage Toby: I think that there’s some limit to how much scaling they can do because there’s not a lot of y- you know, it’s hard to build more railway, but you can certainly fix the bridges, Tony Kynaston: Yeah Toby: it’s, you know, [00:24:00] in pristine condition Tony Kynaston: Right But you you did use that example to talk about Wu Wei so I’ll come back to that maybe explain what that is and how it applies to the Burlington acquisition Toby: Wu Wei is this idea that, um, it’s– it– there’s lots of different interpretations of, of what it means. It’s kind of a nice term. I like the idea. I think it’s good for value investors who are naturally contrarians. Sometimes if you look at a business, the business, has these great tailwinds that, mean that it’s probably worth more than you would pay for something that h-has a headwind or has a permanent headwind. And so the idea is that, like, that you, you allow something to go on winning. Wu Wei is this sort of quality that means that it’s just going to. it’s, it’s effortless success or they, they sort of use it in a, in a, in a social setting. It’s like [00:25:00] sprezzatura or– which is this Italian word for, you know, just like ease of conversation, ease of dressing, like just, just being loose and, um, flexible in social situations or in an investment sense, it would be sort of being a little bit more flexible about the way that you consider an idea and looking at ways that it can, can win over time. I think it is a little– it’s a little bit woo, you know, the, the Wu Wei, I think is a little bit woo, and I’m, I’m not a particularly woo guy, but I’ll– I do like the idea of, um, just having that like mental flexibility in certain situations, just being a little bit looser. And I think that, I think that that w– is what allowed him to sort of break away from this idea that were where money goes to die, and that this was a situation where it sort of met all of his other criteria, did throw off cash. It was going to be this sort of not capital-like compounder, but it was– it sort of behaves that way [00:26:00] because they can invest, uh, with the capital gains tax, accelerated depreciation. They get all these sort of benefits out of it, plus the durability, plus the, uh, the distribution. All of these things together, sort of sum up to something that is a little bit more than the sum of its parts Tony Kynaston: I Cameron: Sorry, I just have to, the, I, I just have to jump in with the kung fu analogy of wu wei, Tony. It’s just too much to give up. Bruce Lee, big fan of wu wei. Anyone who’s ever read any of Bruce Lee’s stuff on kung fu, you pour water into a cup, it becomes the cup. That’s You pour water into a bottle, it becomes the bottle. You put it in a teapot, it becomes the teapot. Now, water can flow or it can crash. Be water, my friend. I do Wing Chun kung fu, uh, Tobias, and we talk about action through no action all the time, you know? Using your opponent’s energy against them, using their force against them. [00:27:00] You know, moving with the force. Don’t fight the force. Flow around the force. Yeah. Toby: Yeah. It’s, it’s, it’s a real, it’s a, it’s a central idea in martial arts, right? And I mean martial arts like Sun Tzu is, is, is the, the head of philosophy of martial arts, and then you find out it’s repeated, that idea of be like water, like that comes from Sun Tzu. He talks about, he talks about that repeatedly throughout the, throughout the text, and then you find it in other things like The Book of Five Rings, and you find it in Bruce Lee’s sayings, and it’s, it’s often taught, this idea that you use the energy of your opponent or use the energy of the thing, or to augment your own. Don’t fight it, sort of move with it Cameron: The famous line from Napoleon is, “Never interrupt your enemy when he’s making a mistake,” right? Toby: That’s a good one Cameron: Yeah. Tony Kynaston: Yeah I Cameron: Yeah, no, it’s a good one. It’s, Tony Kynaston: water Yep that’s that’s Cameron: be water Tony Kynaston: it It’s the water flowing around the rock idea not trying to move the [00:28:00] rock not trying to crush the rock around the rock It’s the way of Cameron: Yeah. Tony Kynaston: I Cameron: Yeah Tony Kynaston: good friend in Canada whose nickname is Wu cause he just goes with the flow and uh you know if you’re g generally calm yep always always smiling and happy doesn’t matter what’s going on with the flow Yeah Cameron: うん。う ん。 Tony Kynaston: you’ve taken that out of the transactions be and I think that’s a legitimate take out from these transactions oftentimes with these controversial transactions with um Berkshire Hathaway it’s almost like Warren said one thing for decades and then he’s just turned on a dime and done something different cause it suits him Yeah He’s flexible Exactly Toby: flexibility, like that’s, that is, that is part of it. You have to be mentally flexible, and I think it’s, it– there’s lots of different interpretations of it, but mental flexibility and also like looking at the thing. Some of these businesses have that tail– just have that natural tailwind to them. Some managers have that natural tailwind, and I think if you can [00:29:00] recognize it uh, you know, not fight it too much. Like fighting it might be insisting on too low a price before you do it, going with it might be just you can afford to pay up, and I think he did that with Coke. Um, certainly sort of paid up for it a little bit. Northern just being mentally flexible, and I think it also applies with the, uh, the Japanese conglomerates that I’m sure we’re gonna talk about shortly. Tony Kynaston: are yeah Cameron: we do that, you. Tony Kynaston: sorry go ahead Cameron: Sorry, before we do that, can we talk about Apple? You start the book talking about Apple, which you call the greatest trade of all time, and obviously that’s been one that I think for a lot of, uh, Buffett followers, they scratched their head when he bought into Apple after saying for decades that he didn’t understand technology stocks. Why is it the greatest trade of all time, in your opinion? Toby: Well, I also say that it’s a little bit in the eye of the beholder. It’s like modern art. You sort of– It speaks to you or it doesn’t. And I think that. But I, I, I have, I have– I think I have pretty good, pretty good reasoning. The– [00:30:00] When I say this, people often say, “Well, what about the, uh, Naspers doing the Tencent deal?” Like, that’s the one that everybody comes back to because they put in twenty million and it’s tens of billions of dollars and it’s. They’ve had to split it out from Naspers and it’s like totally misshapen the South African stock market. And then I say, “Well, this was the greatest trade ever because Buffett was a known quantity at the time. Apple was the most famous company in the world. Might’ve been the biggest company in the world at the time. could’ve done the deal. Anybody could’ve put that trade on. a few people did, even though we ha- we had, funnily enough, we’ve written about it a few times in Quantitative Value and other, in other books since as– ’cause it was the, the, the cheapest thing in the, in the screen at the time. It sort of– It used to have this, it doesn’t do this so much anymore, but it used to have this, uh, cycle where every time they issued a new iPhone, it’d run up and do really well, and then in the intervening period, it’d sort of fall back. So [00:31:00] in 2013, it got cheap and then it had a good run. 2016, got cheap and then had a good run. And same thing was happening in sort of the 2019, 2020. But I think it’s moved away from that a little bit. It doesn’t have that behavior so much anymore. I say he put in an enormous amount of money, I think it was forty billion dollars or something, in pretty short order. If you think about the entities that can do transactions on that scale, there aren’t very many of them. But I’m sure that, you know, maybe, uh, who’s the Japanese guy, uh, who. He’s the Japanese gunslinger. He w- he had a, he did a great– had a great run in 2000 and almost blew up, like went back ninety-nine percent, and then he’s had a great one more recently. Name’s just escaping me. He runs SoftBank. Cameron: Oh yeah Toby: Uh, Masa Son Cameron: Oh, Masa Son. Yeah, right. Toby: What’s this? Cameron: it’s n- Toby: Anyway, Masa. Masa– There aren’t very– Like, maybe big private [00:32:00] equity firms could have done that. Masa could have done that. aren’t very many folks who could have dropped a forty billion, but, like, they– I’m sure that they would all have loved to have had this insight and put the forty billion to work. Because pretty quickly, he’s three X’d, five X’d on an enormous sum of money, and then he’s sold that down enormously, and it’s given him a big part of that three hundred and seventy billion dollar war chest that they have now for a rainy day, if we ever see another rainy day, uh, for his– for Greg Abel, G- for Greg Abel to run. And he sold it down very significantly. It’s still one of their biggest holdings, but it’s not nowhere near as big as it could have been if they just in it and hold it. So I thought for all those reasons, he was a known quantity. It was a very big investment. It paid off very, very quickly, and it was a break from what he had done in the past. It just, again, it demonstrated that mental flexibility and, and it worked really well. And I’ve just thought in, in terms of the sheer scale of the return on the size of the investment, that distinguished [00:33:00] it from the Naspers investment, which was a smaller investment, and perhaps they got lucky. Like, if you, if you had to think about all of the made around the world on every stock market, and you had to go to the South African one and a Chinese, you know, to find something that was, like, equivalent, then I think it sort of illustrates the point that Buffett’s was a great investment. Tony Kynaston: yeah no just uh I guess talking about investments and what we were talking about before about opportunistic investments the link I think to the Japanese investment is is the quote you mentioned uh from Buffett that he talks about not having a master strategy or a corporate planning department and that acquisitions can seem haphazard So why do you think that’s an advantage for a company like Berkshire Toby: You could, you could compare it to. So Masa sort of is a technology investment, investor. So Masa is sort of constrained a little bit. Masa couldn’t go out and do Burlington Northern. That would just– people would say he’s lost his mind. That’s not a technology. He couldn’t do [00:34:00] Gen Re. Masa might have been able to do the Japanese conglomerates, but I don’t think so. Masa’s sort of constrained to tech. There are lots of other investors out there who are. They’re well known in their niche. They’re not really allowed to step outside their niche. By sort of saying at the outset, “We, we got, we got no plan. We, we.” You know, so what, what I think about the conglomerates like Constellation Software, they, they are– they may now step outside their niche, but they’ve historically been vertical VMS, vertical market software. you think about some of the conglomerates like Ropers or Danaher or those kind of. They’re allowed to do transactions in their niche, but they’re not allowed to step outside that. Berkshire has always said, “We’ll do whatever comes along that makes sense if it’s cheap enough.” And so they’ve given themselves that cover, that flexibility to do whatever they want. There’s no master plan. They’re not trying to build out the energy department necessarily. If something comes along, they would do it, but there’s no urgent need to, to take, you know, the, the cleanest dirty [00:35:00] shirt in any given industry, which is something that a lot of investors who are. I have friends who are healthcare investors or they’re constrained to. And so they’re trying to find the best thing, but the industry– if the industry is overvalued, then, um, uh, that’s sort of, that’s sort of bad luck. You have to do, you have to do the best deal that you can. So I, I, I think that it just gave him that. That mental flexibility is a big part of it. And I think that Sun Tzu says something similar where he’s, “Don’t, try and force it.” Again, this is like that Wu Wei idea. You’re looking for. They’re often trying to find the, the soft point or the weak point. So you test a little bit, you look at what’s cheap, you look at what’s moving away, moving down, and then that might be the place where, uh, that, that is the most interesting. So I, I didn’t, I didn’t use that necessarily for the Japanese, the Sogo Shoshas, but Sogo Shoshas, but we can, we can talk about that one Tony Kynaston: I think um before I leave the quote on the corporate planning department the other side of that coin is [00:36:00] that they don’t have the expense of a corporate department planning their strategies They don’t have all these people running around who have to justify their existence by buying something that probably wouldn’t buy Cause these transactions the big ones we’ve been talking about they come along once a decade on average for Berkshire They’re not out in the market every day know trying to find something So I think that’s a big advantage for them as well and that brings us to the Japanese conglomerate which is kind of this decade’s big transaction And it also is again a head scratcher for Berkshire followers because Buffett’s always said I’m gonna back Team USA I’m gonna back the US economy And then suddenly he’s a major investor in Japan again is another bit of woowah I guess But um but it’s also an aboutface from what he’s always said Toby: I think he had done He’s done Iskar, which is, which is Israeli. I think he might have done it personally. He’d done some Korean. I think maybe that was his personal capital. I don’t know if he put Berkshire into it, but he, he had gone and got the Korean [00:37:00] version of whatever the, you know, the just the guide, and you go, go through A to Z, and he’d just gone through A to Z and found a few net nets and bought them for himself. I think, I think Buffett has about a billion dollars outside of Berkshire that he’s just run his own capital and run it up to that sort of scale. That’s, that’s what I have heard. That’s what I understand. But the– I really like the Japanese deal. Again, anybody could have put this– Tony Kynaston: Mmhmm Toby: could have put one part of this transaction on. But the thing that makes it so was the carry part of the, the transaction. So the Japanese have these trading conglomerates that were set up during the Meiji era. And because Japan is a small island and it’s resource-constrained, they got these conglomerates which were supposed to go out to the world and find natural resources and bring them back to Japan. And the way that they’ve developed over the years is that they have become vertically integrated. So they go and find the, the resource in the first instance, and [00:38:00] then they, process the resource, and then they build it into these higher order goods until they’re, they’re making technology at the other end, and they’re selling cars and, and so on. And so there are five of these, uh, trading houses that sort of do this thing, and they, they are dominant in Japan. If you go to Japan and you wanna do business in Japan, it’s highly likely that you’re, you’re doing business with these guys. And I was in Japan last year and I met with, with one of them. I, I think it might have been Marubeni. a private equity group that does, that does of every size from the smallest to the biggest, and they, they have the Marubeni kind of stamp on everything that they do. They have this process. Peop– It’s, it’s a common way for folks to leave leave university, start an apprenticeship, and sort of grow inside these organizations. So finds them trading very cheaply. They’re like single-digit PEs. all pretty good dividend payers. Uh, like might have been, [00:39:00] dividend yields of sort of seven to nine percent, which is, which is very fat. At the same time, they– you can borrow in Japanese yen at virtually nothing because the Japanese yen has been so crushed for so long, or the BOJ has intervened in that market for so long. So they– You can– You could– I think anybody could get, uh, debt for sort of like half a point, half a percent, to a few percent. And so if you put these transactions on, and that’s what, that’s what Berkshire did. Berkshire actually had some zero percent notes that they were able to issue. So they paid no interest at all on these notes, then they invested that into these five conglomerates. So they’re reasonably safe because there’s– each one is a conglomerate already. They’ve got very diversified income streams, highly likely to keep on earning the way that they had. Highly diversified income streams globally across industries. Like they’ve, they, they l- they’re big mach- they’re big sort of enterprises that are [00:40:00] very stable and, and throw off cash pretty, pretty well. so he’s getting carried in these positions where the dividends coming back in the order of six or seven hundred million dollars a year, and their cost to finance this was, was virtually nothing. So he was immediately carried on this position. So it’s another sort of Buffett deal where the cash goes in and it’s almost immediately cash flow positive back to Berkshire. And so I just thought it was a, a great transaction that, as you say, had sort of been– was a little perplexing to folks because they expected him to be primarily a US investor, and he had said that he understood the US, he understood the regulatory en- environment, understood the, the cultural environment, and here he was making a big departure. And so I thought it was another like i- illustration of how mentally flexible he was. Tony Kynaston: Yeah it’s interesting I mean it’s another example of what what I think is one of the secret sources of Berkshire Hathaway It’s it’s being able to find sources of funding without doing a capital raise or without taking [00:41:00] on debt as you say the carry trade has from a you know again from hindsight was a nobrainer in the way of getting money back into Berkshire for the investment But um you know I guess other people have done it but no one on the scale that he has So he’s always good at finding these other ways of getting capital that he can then redeploy Toby: I also used it as an illustration of, um, there’s this idea in Sun Tzu that, um, you, you do the right thing, you get a reputation for doing the right thing, you do it for the right reasons. And then when you go to invest in these Japanese companies and he bought up to sort of the limit that he was allowed to take as an outside shareholder. then he goes to meet with them and his reputation is sterling, and so they, they welcome him with open arms because they know that he deals fairly. know the terms on which he deals, and so they increase their shareholding limits to allow him to buy more. then that turns into other synergies where there, there’s going to be ways for Berkshire to work with them sort of behind the scenes rather than [00:42:00] just being an equity shareholder Tony Kynaston: Question Cameron: And he did these deals, if I. Sorry, if I remember correctly, he started doing these deals during COVID, right? When the share prices had bottomed out, interest rates were next to nothing. He was able to just, you know, swoop in, borrow a lot of money at, like, 0.5 or 1% interest rates and Yeah just swoop in. Like, it was perfect timing Toby: Again, I think that lots of people around the world could have done these deals, and it’s just– it was still sort of shocking when he did it on the scale that he had done it, just sort of showed what a great investor he was, what a sort of whole worldview he has Cameron: And, you know, for years before that everyone had quoted Warren as, you know, you know, “You make money when there’s blood in the streets,” or whatever it is he had said. And he was literally doing it during COVID, literally what he’d been preaching for decades. And again, but, [00:43:00] uh, only Warren, not only Warren, but he’s one of the few people who’s prepared to go and buy, uh, during periods like that. When everyone else is running for the hills, he’s swooping in and doing deals Toby: Yeah. I think to be fair, he did initially, uh, balk a little bit and sold out of all of the airlines, which they, they had that little basket of airlines, and they probably got the lo- hit the low on punching out of those. But I, I don’t know. I think maybe they were concerned that there was, that, that it was gonna be something more perhaps than it was. That, know, if it’s like a, it’s like a 1916 Spanish flu, then that’s not good for the equity markets. But as it turns out, it wasn’t that bad, and so they were prepared for that kind of outcome, particularly because they’re insurers. They might have been, uh, they might have needed some capital there. But, uh, pretty quickly after that, I think that they announced the Japanese deals and that they were, you know, amazing deals as they always are Cameron: Hmm. Tony Kynaston: I remember reading about these Japanese conglomerates I’m gonna show my age here after the 1987 [00:44:00] uh bubble burst in the stock market and there was uh a couple of writeups I read about how I think there was a similar sort of structure in some German companies but certainly the Japanese ones were conglomerates But they’re different to conglomerates as you and I know them They also had a lot of crossholdings and so when the market crash happened they supported each other and there was no large selldown in their stocks and they rode out the market troughs pretty easily and they survived So that’s that was an interesting I think take on those two But question for you is um in the last sort of five years the Japanese stock market’s kind of waking up to more Western ideas of being more shareholderfriendly unwinding crossshareholdings Did Buffett know that was coming or did he or did he help agitate for change or was it just simply happening anyway Toby: Yeah, I think that they had been, uh, you know, they– s- the Japanese stock market topped out in 1992 or something like that, and it’s fallen pretty consistently since then and might [00:45:00] have been close to the all-time lows in the late early 2020s. And I think that they had realized that they needed to do something to attract international capital again. So uh, Shinzo Abe had begun these reforms and the Tokyo Stock Exchange was sort of actively trying to find some way to cause them to become more shareholder-friendly. We met with the Tokyo Stock Exchange when we were there about this time last year, a little bit earlier than this last year. And, you know, they have lots of, uh, they have lots of reforms that they’re trying to implement, including this one that most folks know about, which is that you have to get your price to book. You know, you have to get your price to book over one. Otherwise, they publish this list of Tony Kynaston: Yes Toby: at a discount to book. Tony Kynaston: That’s right Toby: sort of trying to get them to get rid of the, the cross-shareholdings because, [00:46:00] uh, it sort of prevents them from being taken over. It insulates the, the management team from sort of external forces. When we went there, uh, when I first got there and we sort of met with some of the private equity firms and the activists and including Murabeni, like they were telling us the ratios that they were paying for these companies, and I was ready to write it all down here and move to Japan and start doing this ’cause it was like, I thought it was like the US in the 1980s and it was gonna be. And I think that to some extent that has happened. But we pretty quickly cooled down when we actually met with some of these companies. When you talk to them, you sort of understand how difficult it is culturally to shift them because their rationale for the cross-shareholdings and also they all have, you know, they might. Uh, these numbers are wrong, but you know, they have huge cash holdings that are just disproportionate to the size of the market capitalization. And so once you back out the cash, you’re paying virtually nothing and then they’re, they’re pretty well earning. [00:47:00] But they have this view that they won’t be good partners to their, or to their customers rather, and their suppliers, if they don’t have that big cash buffer, that they could go out of business ’cause they could have a bad year or decade or something like that, and that might send them out of business. And so they were very unwilling to consider paying that cash out to shareholders. And in their sort of, you know, like a Porter’s five forces or if you think about the stakeholders in a Japanese firm, like it’s customers and suppliers and employees, regulator and shareholder, and shareholder was right at the bottom and last, and they had their obligations to all the other ones superseded those. So it was gonna be a very difficult lift, a real difficult process to get them to shift. I think that you look at the, you know, the thing that they had had, they had no inflation for so [00:48:00] long that it was really difficult to put up prices and it was considered, you know, it was like, uh, it was socially unacceptable to put up prices. So over the, the last, even the last 12 months, maybe slightly longer than that, the, um, inflation has now started to pick up in Japan pretty significantly, and it’s meant that they’ve seen this quite significant rise in the yields on, uh, Japanese bonds, Japanese government debt. Inflation is sort of there. The yields are coming up. That means that, uh, the, the fire may have been lit and they may have to start raising prices and, and moving and doing things. So Japan, uh, probably that, that difficulty in shifting it means that it’s going to take a decade or two decades to sort of resolve the issue, but they’re probably moving in that direction now. And it’s one of the great world’s great economies. They’ve got incredible, um, technology. So I think it’s, it’s probably gonna be a good place to invest for, [00:49:00] for the next few decades. Having said that, you know, folks had the same view about a decade ago, and a lot of people went and bought Japanese net nets, and so I think they worked out okay, but they didn’t sort of work out anywhere to the extent that people thought they were going to. But, you know, this time’s different. Tony Kynaston: Yeah. Um, interesting, interesting change in Japan. I think, don’t they have a concept now with a VIP club for shares trading above book value, where you get access to a special rate on debt and things like that, you get benefits from doing the right thing? Toby: Yeah, they were trying to shame for not going through with these things. And, uh, and we would say, you know, because they, they gave them like a two-year grace period to get themselves sorted out, and we would say, “What happens if, you know, they don’t do that?” And they’d say, “Oh, they’ll be shamed.” I’m like, “Oh, well then, and then what?” Tony Kynaston: Mmhmm Cameron: Have to commit harakiri. Toby: There’s, that’s it. There’s no enforcement mechanism. It’s just Cameron: I apologize to my ancestors. We talked about that about a year ago, [00:50:00] Tony, on the US show when we talked about Orix Corporation. I remember us talking about all these deals. By the way, Orix is up about 90% since we talked about it in June last year, so it’s been all right. Yeah. Tony Kynaston: Tobias Cameron: did well Tony Kynaston: um I’m gonna wrap up my discussion around the book. It’s a wonderful book and I recommend it to anyone who likes reading about Buffett like I do. But I had some questions about just generally investing in the US because in the last year Cam and I have been doing a value investing US show and there’s a couple of concepts which we’ve puzzled over and you might be able to help us out. Um, the first one is ADR. So a lot of the value we’re seeing in the US market comes from overseas companies who have a listing in the US. Is there a reason why as a class they might trade below what say a local competitor might trade at in the US? Toby: Yeah, it’s not, again, it’s cultural. It’s not no [00:51:00] tax reason that it would do that. And there’s, I can give you a, a funny story about the ADRs. So Americans can invest in the ADRs of these Korean chip makers. Um, but they have sort of resisted doing it because they’re ADRs. And so there’s an ETF run by some friends of mine, Roundhill, called DRAM, D-R-A-M. It’s the fastest-growing ETF launch in history. They’ve raised something like. Last time I checked, it was thirteen point eight billion dollars, and that was a few ago, so the number could easily be over that now because every time I check, it’s so much higher. The underlying stocks have done really well too because they’re really AI Tony Kynaston: Mmhmm Toby: kind of names. But the big innovation that that ETF had, were investing through the Korean ETF because it gave them access to these two chip makers. And DRAM just showed up and said, “We’ll give you a.” [00:52:00] You know, DRAM is the memory. “We’ll give you access to these two Korean names, pretty concentrated, and some other chip makers.” And the, the, money has flooded in because you can now invest through an ETF into these Korean names when they, previously, you could have done that through an ADR, but the aversion to ADRs seems to be so great that they wanted to do it through a dedicated ETF and now it’s been a great success for those guys. Tony Kynaston: Yeah. I find that strange. Is it, is it a bit of Peter Lynch that people wanna be able to walk up the street and see what they’re buying? Or is there like an extra commission in there cause it’s an ADR? You know it just seems really strange to me. Toby: I don’t think so. It might be a foreign exchange, it’s possible that it’s hard to invest through some brokerage accounts. If you have an Interactive Brokers account, I think it’s pretty easy. I think most brokerage accounts allow you to do it Tony Kynaston: Yeah Toby: simply. It might be that. I, I just think it’s a, I just think it’s an aversion to, to doing anything. It, they look, it just looks a little bit weird in your brokerage account, and [00:53:00] I think that that’s been the main reason they haven’t done it. Tony Kynaston: Well maybe Berkshire Hathaway will scoop them all up because they tend to try to discount to similar listings in the US. Yeah. Yeah. And the other question I’ve got for you is that um, you know we focus on operating cash flow when we’re looking at investments. Um, operating cash flow is my preferred metric rather than price to earnings because of the ability to manipulate earnings. But um, we are coming across companies that seem to be putting investing cash flows in the operating cash flows. We had a property development company we looked at and when they flipped a transaction the income went through the operating cash flow statement. Have you noticed any difference between US accounting standards and Australian ones that would cause that? Or know any other reason you can think of why it would happen? Toby: Well, I, I grew up in the IFRS system, and I did accounting at, at [00:54:00] university and, and learned IFRS when I did that. I think it was just being implemented at that time. Uh, IFRS has a, has a local implementation all around the world. So Canadian IFRS is slightly different to Tony Kynaston: Mmhmm Toby: but pretty, pretty similar. When I moved to the States, I had to get my head around that, and I, there are some subtle differences between the two, but they’re really not that significant. They’re, they’re pretty similar. What you’re talking about might be a specific thing to REITs, like a, but I don’t know why a sale of a building, is that what it was? Tony Kynaston: No. So this company in particular and we’ve seen other examples but this guy was a property developer. They go and buy, they go and have a land bank and then they develop it. They put a syndicate together um and use the last land bank sale to fund the next one. But that sale was going through operating cash flow rather than being an investment cash flow entry. Toby: Maybe that’s their business and so they have to do it that way. I don’t know. Off the top of my head, I don’t know. I don’t invest in REITs, so I don’t see, [00:55:00] don’t really have to think about that problem. Tony Kynaston: Yeah. Okay. All right, I think that’s my list. Cameron: Yeah, the suit Tony Kynaston: questions Cameron: Oh, not, well, not a question as such. Just a couple of quotes from the book that we’ve sort of touched on. We, you were talking before about, um, not doing anything stupid. It was in chapter five, you mentioned that Buffett’s fundamental goal is survival, and this really resonated with me. Um, a couple of quotes that you got that I just thought were worth reading out. “Buffett explained his view on the risk of ruin in these terms. ‘Even in 1965, perhaps we could have judged there to be a 99% probability that the higher leverage would lead to nothing but good. Correspondingly, we might have seen only a 1% chance that some shock factor, external or internal, would cause a conventional debt ratio to produce a result falling somewhere between temporary anguish and default. We wouldn’t have liked those 99 to one odds and never will. [00:56:00] A small chance of distress or disgrace cannot, in our view, be offset by a large chance of extreme returns.'” Then later on in the chapter you say, it’s got a quote for him, I think at a University of Florida School of Business in the late ’90s. “If you risk something that is important to you for something that is unimportant to you, it just does not make any sense. I don’t care whether the odds are 100 to one that you succeed or 1,000 to one that you succeed. If you hand me a gun with a million chambers in it, and there’s one bullet in the chamber, and you said, ‘Put it up to your temple. How much do you want to be paid to pull it once?’ I’m not gonna pull it. You can name any sum you want, but it doesn’t do anything for me on the upside, and I think the downside is fairly clear. I’m not interested in that kind of game.” And, you know, I think about that a lot, uh, whether it’s, you know, uh, uh, Bitcoin, people saying, “Yeah, buy Bitcoin,” or it’s Mag Seven stocks and all this [00:57:00] kind of stuff. And it’s just this, this idea that I’ve learned from Tony over the last six or seven years we’ve been doing this show. It’s about just the philosophy of investing, risk versus reward, not getting sucked into doing stupid shit. Um, you know, following a thesis that is rational and logical and is relatively risk averse, and just following it day in, day out, ignoring the hype, ignoring the noise. And with that, uh, can you get me into the SpaceX IPO? Because, uh, I’m super excited about Elon getting us all to Mars. Toby: Yeah. I, I, I think that’s, that’s, it’s a real shift that you have to make in your mind, and not, maybe not everybody’s built that way. Not everybody. I, I sort of think the more experience you get, the more you, the more times you get burned with something that doesn’t work, the less willing you are to do it. And [00:58:00] so you get used to, like, looking at the downside first and seeing why, of these. You can have a look at the, the US stock market right now. Like, just ignoring even the SpaceX IPO, the, the Goldman Sachs tracks this index called Profitless Tech, which is exactly what it sounds like. In ’21 it ran up to these all-time highs, and then they all collapsed, as you’d imagine, through ’22, ’23, ’24. But they’ve all run back up again to all-time highs. They’re almost where they were in 2021, probably get there before the whole thing’s said and done. I don’t really wanna play that game. I, I think that you could pick out some of these names, and they will probably be pretty good returners over the long term, but I don’t know which ones they are, and I think that there’s plenty of chances that there’s a lot of landmines in there. And I, I think that the more you do it, the more you get burned by the downside. When I started, I [00:59:00] started investing in 2000, walked into that recession, depression. Fortunately, value did really well through there, so I got entirely the wrong message about how you just be a value investor and never worry about drawdowns in your life. 2007, eight, nine came along, value got smoked along with everything else then. Um, so that taught me a lesson that even value gets smoked in most drawdowns. So I, I just, I don’t wanna, don’t wanna do things that don’t work, so I try to avoid stocks that have shitty business models, too much debt, crazy people running them. Unproven business models, there’s a lot of that around now. You look through the Russell 2000, the top names in the Russell 2000, they’re all things that they’ve got no revenue. They’ve got, they’re science experiments. They’ve got an idea to do something. They will perform really well ’cause the idea is really compelling. It’s a great idea. Like, one of these guys is gonna build nuclear reactors in the States. Great idea. I think the, the US needs nuclear reactors, but they don’t have one yet, and it’s hard to build a nuclear reactor, so probably [01:00:00] let that one go through to the keeper. Tony Kynaston: What’s your Cameron: we, Tony Kynaston: at the Cameron: yeah, that was gonna be my question. Yeah. Tony Kynaston: like it’s AI, the market, and then Main Street is tanking. Uh, does that worry you at all? What’s your feeling and prognostication for that situation? Toby: Yeah. So, so does it worry me? I mean, it’s irritating in the short term. I don’t like underperforming, and I’ve been doing that a lot recently. So I’ve been doing that a lot since I launched the funds, but I’ve been doing it particularly recently. But I think that the forward returns for small value are exceptionally good right now. There’s this K-shaped market you– that everybody talks about, and I posted this chart today on Twitter, where it shows that basically every industry except for tech thinks that it’s going through a pretty substantial drawdown. Like everything’s down thirty or forty percent except for tech, which is, which is off to the races and sort of covering over, uh, the gaps in the market. For everybody [01:01:00] else, it’s a, it’s

Anchored Down in Anchorage: NRIM – QAV America #55

QAV AM 55 [https://qavamerica.com/wp-content/uploads/2026/06/QAV-AMERICA-55-art-optimised-1.jpg] This week we dig into why our US portfolios have taken a hit over the past month, with oil and shipping stocks giving back their war-premium gains as Middle East ceasefire hopes bleed the disruption out of the market. We also take a hard look at the US economy, the AI bubble eating 45% of the S&P’s market cap, and the arrival of Kevin Warsh at the Fed. Then Cameron does a Pulled Pork on Northrim BanCorp (NRIM), a quietly profitable community bank that is basically the financial backbone of Alaska, with a surprisingly juicy factoring business tucked inside it.   This week’s full episode is for QAV Club members only. The free episode is available below. Also check out our podcast archives link and our pages on Apple Podcasts or Spotify or watch clips on TikTok [https://www.tiktok.com/@qavinvesting]. Or visit our homepage [https://qavamerica.com/home/] to learn more about QAV and how it works as a value investing system that you can learn and apply to beat the market. Free Podcast Archives [/listen/] TRANSCRIPTION QAV AMERICA 55 CLUB VIDEO [00:00:00] Cameron: Well, welcome back to QAV America, Tony, episode 55. It is the 2nd of June, 2026. Tony Kynaston: And the Cameron: Tony, Tony Kynaston: are open Cameron: no they’re not. no. In fact, I Tony Kynaston: on Cameron: read this Tony Kynaston: and Cameron: I read this morning that the Iranian negotiators have walked away from the table in, uh, Pakistan. Um, Tony Kynaston: Entitled Cameron: ” This is a waste of time.” Yeah. And the same day in The New York Times, Trump said they’re very, very close to a deal and it’s all going terrific, and the Iranians are basically can’t wait to do a deal. And then in somewhere else, BBC I think, it said the Iranians had walked away from the table Tony Kynaston: Well I saw a headline last week that Trump was about to go into the situation room to make a final determination Cameron: Yes Tony Kynaston: must have been to put out a tweet Finally [00:01:00] determined to put out another tweet Cameron: Apparently he forgot to notify the Iranians that, uh, he was making a final determination because they’re not interested. Who he’s negotiating with remains to be seen because I also see the President Pezeshkian is offering to resign because he can’t get anything done because the hardliners from the IRGC are sort of running things. So anyway, it’s a, it’s a bit of a mess. Um, well before we get into my Pulled Pork, Tony, I just wanted to talk about some, uh, market news from the US and also go over our portfolios, ’cause our US portfolios have taken a big hit in the last three weeks, four weeks. And I did some analysis last night trying to figure out why. Not that they’re doing badly, but they’re not doing as well as they were doing. So I’ll start with the light portfolio, which we started in late December last [00:02:00] year. It’s currently up about 6.5% versus the S&P up 10.5%. We were up 12% versus seven on the 6th of May. So we’ve lost half of our gains since then. Tony Kynaston: Mm-hmm Cameron: And, um, I had a look at the stocks and which ones had gone backwards and which ones hadn’t, and it’s b- I think it’s basically all, uh, oil related, was my final analysis. Um, giving back some war premiums. Um, you know, the, the bit of froth that the portfolio had. Like it was up 10% after four or five months, and a lot of that. Uh, we have a fairly high concentration in the light portfolio of oil related stocks because that’s what was showing up on the buy list, Tony Kynaston: Yeah Cameron: over the last five months, so that’s what we bought. Tony Kynaston: Yep Cameron: And obviously the oil pr- the oil price took a big hit in [00:03:00] May as Trump, uh, teased us with this idea that there was gonna be peace in the Middle East and the Strait of Hormuz was gonna open. I think, uh, WTI finished the month down like 17, 19%, something like that. $87 I think it finished May. Brent was down to 91. They were both off about sort of 20% from their 2026 high. And our portfolio’s about 43% invested in energy stocks, so they’ve all come back as a result Tony Kynaston: Mm-hmm Cameron: But as I said, they’re still up and, you know, obviously it’s not over yet. So they could go, those stocks could go back up 20%, uh, tomorrow the way things are going, so. But it’s interesting because we’re so concentrated in energy stocks, the market is hitting records. [00:04:00] S&P hit records north of 7,500, ninth straight up week, uh, despite the fact that the US economy looks like it’s heading towards stagflation. I’ll get to that in a minute. But so our stuff fell while the broader market rallied. Cheaper oil everyone got excited about, uh, but not good for our stocks. So look at BWLP, the LPG company that I added a couple of weeks ago, was actually the worst of the lot, down 4.5% yesterday. Cord Energy, EcoPetrol, Neighbors, Murphy Oil, all oil and gas names were down. The tankers not offshore and BWLP again as a sort of a second layer for them. When Hormuz was shut, freight rates spiked, as we talked about when we did, um, the LPG company, because everyone had to reroute. If it, if it reopens, that spike normalizes and ships are already repositioning across the Atlantic apparently [00:05:00] to take advantage of the strait opening. And there are. I have heard rumors that the US Navy have, have been, um, shepherding ships through the strait, but I don’t know if that’s real or if that’s just more fake news from the region. But anyway, Tony Kynaston: numbers even Cameron: tanker analysts. No, I mean, I’m talking, you know, handfuls of ships. There’s still mines that have to be cleared up and all that kind of stuff. Tanker analysts are still split as far as I can tell on whether reopening sinks rates or supercharges them. So there’s still a lot of flux to go on in this space and no one knows where oil’s going. No one knows what’s happening. The, the ceasefire seems to be held together with sticky tape if, if it is in fact still there. And Israel seems to have continued to be bombing the hell out of Lebanon. I see Trump today said that he’s got some sort of agreement from Israel that they’re gonna cut it out, but, you know, that’s worth the, uh, [00:06:00] paper that it’s written on as we know, so Tony Kynaston: Sure we’ll cut about Sure Yeah Cameron: Yeah. So that’s the light portfolio. The dummy portfolio, uh, for all time is, uh, which, you know, we started it in, uh, September 2023. It is currently up 94% versus the S&P up 71%. So we’re outperforming quite well, but we were up 130% a couple of weeks ago, a few weeks ago, uh, versus the S&P which was up 63. So we’ve gone from double market down to being up 20 points or something like that. So this is a bit of a different animal. Uh, again, it’s sort of froth coming off a high, not damage to the portfolio, and half the book here just in recent weeks is still green. But I think some of this one is profit taking. So we have shipping. [00:07:00] Four of the stocks that are down are shipping companies. Again, you know, we’re sort of heavily invested in shipping and financials is basically the split of this portfolio. So the shipping one again connects to the oil story, but it’s broader than oil. I think the Middle East potentially calming down is bleeding the disruption premium out of all shipping, not just tankers, ’cause we know that, you know, it’s been, um, not just for oil tankers a problem with the Strait of Hormuz, but then you also have tankers that, uh, are charging premiums to get stuff around the place. It’s been a heyday for shipping companies of all sorts in the last, um, four months, five months because they’re having to take longer routes for stuff. Tony Kynaston: Yeah Cameron: So our four carriers, Tsakos, we’re all tankers, StealthGas who are gas carriers, uh, carriers, not [00:08:00] offshore. Um, same Strait of Hormuz story as the ones in the light portfolio. And then the container one, Euroseas, is off about 2.3%. Different waterway, but the same logic. The Red Sea and the Suez are reopening. Ships go back to the short route and all that capacity coming back has shoved long term container contract rates down to the lowest before the whole Red Sea crisis kicked off, which is, uh, different to the Hormuz crisis, but it seems to be opening up as well. So peace is bad for business if your business is getting paid to sail ships the long way around essentially Tony Kynaston: Yeah it’s interesting Cam because Cameron: The other Tony Kynaston: all of what you said is true but one thing that’s still in the back of my mind is we haven’t seen the figures yet on what the mo what what the shipping down what the shipping clog has meant to their profit So you know I [00:09:00] think people who are selling now maybe they are doing the right thing and taking a profit but they’re we haven’t seen the numbers yet I mean there’s gonna be outsized profits I would’ve Cameron: Yeah Tony Kynaston: this half from those companies as well and and does that change people’s minds Cameron: Yeah, so when those numbers come out, these things could get a tick up again, you’re saying? Tony Kynaston: Yeah Cameron: That’s a good point The other story with our dummy portfolio is, uh, RenaissanceRe, RNR. Nothing to do with oil. This one’s an insurance company. And the 1st of June is the big midyear reinsurance renewal date, and the renewals came in soft. Apparently, property catastrophe rates are down 15 to 20% in the US. Florida’s down closer to 20%, which is the sharpest fall since 2014. Apparently, uh, too much capital has flooded into the sector, turning it into a buyer’s market, and that’s affected reinsurers’ pricing power. So different driver from the, from the war related [00:10:00] stuff, insurance based. Um, Willis Lease is down 3%, and I can’t find any underlying reasons for that. These are the, um, aircraft engine leasing guys. I think that’s– We know they’ve been up, like, 300% at one point. They’re currently up 260% since we bought them. So I, I do think there’s a bit of profit taking maybe in that. Um, and the lenders and the banks that we hold, Anova, Regional Management, UBS, and Jackson are all up. So they’re doing well despite all of this So that’s sort of the portfolio story. Um, the US economy, as we know, it’s a one-trick pony over there at the moment. Um, sort of Nasdaq was up 8% in May, but if you strip out all of the AI names out, the whole thing’s basically gone nowhere [00:11:00] since February. AI stocks are now 45% of the S&P’s entire market cap, Tony Kynaston: Wow Cameron: which is just insane. So when people say the market, when, you know, Trump says the market’s at all-time highs, there’s a dozen companies that are propping the whole thing up and, uh, the rest of it’s basically along for the ride and not doing that great. You know, the, there’s a lot of problems in the economy over there. Uh, uh, when Anthropic and OpenAI float, which is sort of happening at the moment, they’re going through the process of getting ready for that. I’m sure that’ll be another sort of hysterical bump in that end of the market, but, um, stagflation is where I think things are going over there, uh, and it sort of doesn’t hit with the everything’s going great narrative that the Trump administration like to push. Inflation’s running at double the Fed’s 2% target, [00:12:00] and the jobs market seems to have stalled. The latest numbers from April was 115,000 jobs, um, and it seems to be going backward. Payroll, they were– I think those were job ads. Payrolls have basically gone nowhere for a year. February went backwards. Unemployment’s at 4.3%. Hiring is down. Um, so we’ve got slower growth, faster inflation, and now Powell’s out. Kevin Warsh is in, who was sworn in on the 22nd. Confirmed 54 to 45, which apparently is the narrowest margin in the history of the job. And I read up on him a little bit more. Apparently, he’s traditionally been an inflation hawk. Tony Kynaston: Hmm Cameron: So, uh, apparently his first stint at the Fed, he left over quantitative easing, thought it was the wrong play. He’s, um. And Trump’s brought him in obviously to [00:13:00] cut interest rates at a time when the economy is slowing down. So it’s gonna be interesting to see how that plays out. Got any thoughts on that? Tony Kynaston: Oh uh I think you summarized it very well It’s It’ll be interesting to see what happens to Warsh because he’s a bit like J.D. Vance They’ve become They’ve come from being Trump critics to being Trump acolytes um perhaps just to get a job I don’t know what Warsh’s re uh motivations are But yeah if he cuts rates now he’ll be at odds with all the published uh all he’s published in the past Maybe he’s had an epiphany But um yeah Uh I mean to There’s an argument to say that they should be raising interest rates because inflation is up Um that will make unemployment go up So there’s a lot of moving parts to go through in the States but I would have thought the last thing they need is an interest rate cut over [00:14:00] there Um the AI front I think uh it’s you know it I’ve thought it’s been in the bubble for a long time now as you’re saying if it’s forty-five percent of the market when that bubble bursts and who knows when that will be it’s gonna be a it’s gonna be a big downturn in the US uh stock market which will be you know I hate to use the word but devastating for um for the index And as we talked about in the Australian show just recently their dotcom bubble um wiped out a lot of companies and and saw big downturns in stock markets and this is starting to smell exactly like a dotcom bubble to me Um I don’t know what the percentage of the stock market dotcom companies were but um know having having even one sector forty-five percent of your market is concentrating yourself into into a corner really And as soon as that side even if if it’s a bubble it doesn’t burst As soon as it stops growing the US market’s in big [00:15:00] trouble Cameron: I did some analysis on the P/Es of the Mag Seven a week or two ago, ’cause I was looking, um, I was comparing it to when I worked at Microsoft before the bubble burst, dot-com bubble. Microsoft’s P/E in late ’99 was running at, I think it was about 75. Um, when I looked at the Mag Seven today, most of them are sort of in the 28 to 50, 55 range. So not as high as Microsoft was back in the day. And, oh, a- and Tesla’s the outlier. Tesla, when I looked at it, was a P/E of 355. So Tony Kynaston: Mm-hmm Cameron: leaving that one out, the rest of them aren’t as bad as Microsoft was. And, you know, Microsoft wasn’t a bad business in 2000. It was, it was a great business, and it continued to be a great business, continues to be a great business. Was making money, market share dominance, all this [00:16:00] kind of stuff. Uh, so it’s. But it’s not. But their share price collapsed and took, I think, 15 years to get back to where it was, not because it wasn’t a good business, not because it wasn’t making money, because it was overvalued at the time, regardless of, you know, what kind of a good business it was. So, uh, you know, I think that these companies that are behind the AI boom, some of them at least will continue to do well. They’re good businesses. They make money. Google’s not going away. Microsoft’s not going away. Meta probably not going away. But the point is, are the, are they, can they justify the sort of valuations that they have, Tony Kynaston: Correct Cameron: and you know, how they will hold up? So Tony Kynaston: And there are s I mean there are all there are articles all the time in the paper these days saying that uh are starting to question the value they’re getting out of paying for AI Um [00:17:00] local area communities are trying to block data centers from being built So it it’s not gonna be smooth sailing for the Mag Seven going forward I wouldn’t have thought and it’s usually a couple of speed bumps which derail high PEs and bring them back to a more reasonable level and they could be close Cameron: And I still think, you know, China’s gonna catch up and, um, I don’t know if we’ve talked about this on the show, but there was a story when Trump was meeting with Xi a couple of weeks ago. Um, Jensen Huang from NVIDIA went over along with all the other tech CEOs, and there was a story how, you know, the Biden administration banned China from buying NVIDIA’s H200s. And Trump, when he got in, uh, got rid of that ban and allowed China to buy them. Jensen Huang convinced him that it was, for some reason, better for the US if China was using American chips rather than Chinese chips. And no Chinese company has bought them, even though they can buy them, because Xi told them all, “No, we don’t wanna be relying on American chips. Uh, build our own.” So there’s been a huge amount of focus and investment in China to catch up to NVIDIA. I don’t think they’re there yet. They probably won’t be there for a while, but I feel pretty confident they’ll get pretty close pretty quickly. So Tony Kynaston: All Cameron: yeah Tony Kynaston: do is buy one chip then just go out and mass-produce it themselves Cameron: Yeah. So anyway, the other thing that’s, uh, happening over there is the tariff bill, I think, is coming due. Manufactur- you know, the, the tariffs were gonna bring manufacturing back to the US. Um, manufacturing is apparently shedding jobs. Had somebody say to me a couple of weeks ago, “Oh, everyone’s onshoring manufacturing again.” I, I tried to find evidence for that and I couldn’t. In fact, I found the opposite. Every study I saw said that manufacturing in the US is still shedding jobs. Small businesses are wearing the, uh, the cost of the tariffs the [00:19:00] worst. They’ve been losing jobs for 13 months straight because of the impact of tariffs on their business, and tariffs have worked out to roughly a $1,500 a year tax on the average American household. So, it’s a great day in America. Make America great again. It’s going so great. Tony Kynaston: You Cameron: So great Tony Kynaston: dollar bill with Trump’s face on it now for um $100 probably I don’t know what they’re charging for it but yeah Cameron: And a f- Tony Kynaston: can go along to the 250th Cameron: phone Tony Kynaston: hear Cameron: and a watch. He started selling, started selling Trump watches too, so you can tell what time and time it is and how great it’s going by your watch Tony Kynaston: to the nearest next uh bubble burst Yeah look I I hate to predict Cameron: They Tony Kynaston: I remember in the dotcom boom days that the boom went for probably a good two years after everyone thought it was silly Um but people kept buying Cameron: Yeah Tony Kynaston: Uh there’s It uh Cameron: [00:20:00] Che Tony Kynaston: years Who knows But um yeah Cameron: Yeah Tony Kynaston: disconnect both in the stock market and the economy between AI and the rest of the place And the rest of the place I think is struggling Cameron: Well, speaking of struggling, uh, I’ll get into my Pulled Pork for the week and I struggled to find something. Um, I went through a bunch of companies trying to find something to talk about this week. There’s a lot of companies on the buy list, Tony Kynaston: Mm-hmm Cameron: but all the top ones were either ADRs or they had these weird look. They were financial services companies with these weird looking Pr/OpCafs we’ve seen crop up lately, where they’ve brought in a bunch of capital and it’s ended up in operating cash flow for some reason, or they’ve sold off something that’s turned up in operating cash flow. So this one that I’m gonna talk about is about a third of the way down my list. That’s how far I had to go down, like 30 stocks before I could find something to talk about. It’s a company called Northrim BanCorp. Ticker code is NRIM. They’re on the Nasdaq. [00:21:00] And, uh, you heard of these guys before, Tony? Tony Kynaston: I have not no North Rim Cameron: You ever, you ever lived in Alaska, Tony? Tony Kynaston: Alaska I have not been to Alaska no I did Cameron: You lived close to Alaska, but not in Alaska. Tony Kynaston: set in Alaska That was a good series That’s as close as I’ve come Cameron: Well, those characters, those characters in that, at that Jodie Foster series would’ve probably known who Northrim were. They’re basically the bank of Alaska these days. Um, they are, are very boring, Tony. Um, boring, boring, boring business and, you know, we l- we like boring. We like boring businesses. Tony Kynaston: don’t have to decide whether AI’s gonna burst or not with a boring business do you Keep it simple Cameron: Yeah. And banks are boring enough, but this is a bank in Alaska, so it’s about as boring as you can get, I think. No disrespect to people living in Alaska. Tony Kynaston: No Cameron: I’m sure it’s [00:22:00] very beautiful the three weeks a year you have sunshine. Um, Tony Kynaston: Which lasts Cameron: so Tony Kynaston: day The Cameron: yeah. Yeah. Tony Kynaston: yeah Cameron: That’s right. Um, now I, I do want to point out before I start that it is a Josephine today. It dropped about 70 cents overnight. Wasn’t yesterday when I added it to our portfolio, but it is today. Um, market cap of about 550 million US dollars, so relatively small by US standards. Share price is around about 24 bucks today. They opened in Anchorage in December 1990, so they’re only about 35, 36 years old, and they were set up to be a local alternative for Alaskans. Alaska’s banking up until that point had been dominated from the banks down in the mainland part of the USA, which Alaskan banks call Outside banks with a capital O, [00:23:00] apparently. And Northrim’s whole deal is, “We’re local people.” Sorry, were you gonna say something? Tony Kynaston: I was just gonna say it sounds like Far North Queensland doesn’t it The other Cameron: It does a bit, yeah. Tony Kynaston: Mm-hmm Cameron: Yeah. Do you ever watch that, uh, League of Extraordinary Gentlemen British sitcom series that Mark Gatiss was part of? Tony Kynaston: Yep Cameron: They were, they were– The u- the undercurrent was they were all cannibals eating the tourists that came to town. The butcher shop was selling, like, uh, at the back room selling tourist meat to the locals, and they were like, “This is a local shop for local people.” Anyway, uh, that’s what these guys are. So they, they, they’re the local bank with local people, and they will lend to Alaskans that the big banks from the rest of the US won’t lend to, essentially. Tony Kynaston: I think some of the big Cameron: so for those- Tony Kynaston: but what I saw their niche was also they [00:24:00] understand the local marketplace So it’s I know we did a pulled pork on Bank of Queensland here they had a bit of a a niche because they were operating in Queensland so they understood the local industries which were basically agriculture But I think the the the proposition for this particular bank is that it understands um you know the oil fields in Alaska and the other Alaskan businesses up there and can pr can provide local services to businesses that really help them Cameron: The h- how to survive with vampires and zombies in the, um, six months of night that you have. Shout out to, uh, uh, my old mate who was the artist for the comic book 30 Days of Night, which was set in Alaska, Ben Templesmith. He lives in America these days, but he’s from Perth originally. Great comic book, great art. He, the, sees a picture on my wall he did as a custom for me. You can’t see it unless I turn [00:25:00] my phone. I’m not gonna do that. So, um, okay. So a little bit of, uh, Alaskan history for people. I know we have a bunch of Australians that listen to this show, s- so f- excuse me if you’re an American and you know all about this, but for the rest of us, it only became a US state in 19. No. Yes, 1959? No, that can’t be right. 1959? 1859. No, 1959 must be right. Is it really 1959? Just before Hawaii. When did Hawaii become a state? I guess they were, they were a, uh, a territory before that of some sort. Uh, bought off the Russians in 1867 for $7.2 million. Seward’s Folly, they called it, after the Secretary of State who did the deal, who is, uh, related to my good friend Michael Seward’s, uh, down in Melbourne. He’s the CEO of, uh, the bus company that takes you from the airport to the city. [00:26:00] Uh, shout out to Michael if he’s listening. Then the Americans found gold and oil in Alaska, so didn’t look like it was a folly anymore. Turned out to be a pretty good deal. The whole Alaskan economy basically rides on two things, oil and money flowing up from the federal government. And hold that thought because it, it matters later on. So the core business of Northrim, the three basic engines. Engine one, the big one, is basically community bank. Takes deposits from Alaskan households, fishing operators, oil services, contractors, small businesses, et cetera, then lends it back out. Core banking business. About 77% of their profit comes from that. Net interest margin’s about 4.77%, which is pretty good because the average little American bank gets about 3.5%. So Tony Kynaston: Mm-hmm Cameron: [00:27:00] they’re earning a full percentage point plus because I guess they’re locals for local people. They’re able to. And they’re up in the darkness, and they’re able to charge more. It’s too dark. People can’t see what they’re agreeing to on the forms in the middle of the night. Tony Kynaston: They turn the heating down Cameron: Yeah. Tony Kynaston: you make you deposit Cameron: Too cold to read the forms. Tony Kynaston: can leave Yeah Cameron: And e- engine number two is home loans. Uh, they write the mortgage and then usually sell it on within weeks, keep the right to service it, collect the monthly payment, take a little clip. That’s a pretty good little business. They’re servicing about $1.6 billion in loans. The most interesting part of the business, though, is the third part. In late 2004, they bought a business called Sallyport Commercial Finance for about [00:28:00] 54 million, and Sallyport does something called factoring. You know what factoring is, Tony? Tony Kynaston: Yeah So if you have a lot of trade receivables you uh you bundle them up and sell them to the bank and they pay you usually pretty high like eighty-five ninety percent for that receivables you you you get guaranteed cash flow if you run a small business that needs factoring and then the bank goes and tries to collect all the money back and make a margin on and what it gave you uh from your receivables That’s factoring Cameron: Yeah. So it reminds me of like a debt collection business, but it’s not Tony Kynaston: much Cameron: debts, it’s just, but it’s just, yeah, um, outstanding terms, long-term receivables. Tony Kynaston: Hmm Cameron: Uh, now the yields on this business are 27 to 36%, apparently. So it’s a profitable little business. Um, the flip side is they write off more of it, apparently. Tony Kynaston: Mm-hmm Cameron: And [00:29:00] they operate this one, though, across the US, Canada, and the UK. So Sallyport went from a $1.8 million profit in the year that they bought it to over $10 million in the following year. So I guess they bought it and then expanded it right across their operations and across a couple of different, uh, countries. Um, profit was up 75% for the company from 2024 to 2025. This is, this is for the whole business, not just Sallyport. It’s sort of the headline for this. Net profit jumped from 37 million in 2024 to 64.6 million in 2025. Now, this is partly a one-off. In the third quarter of 2025, they sold off some assets of a wealth advisory business that they had and booked a $14 million gain for that. Uh, if you [00:30:00] strip that out though, the real earnings power is about $2.38 per share, which is actually the normalized EPS that you’ll see in Stockopedia, so that checks out. But the proceeds from the sale didn’t end up in the Pr/OpCaf like we’ve seen with other businesses, like I think it was TriMas, TRS, that we looked at a few weeks ago. Uh, they put this through on the investing line, not on, uh, the, um, operating line. So the operating cash flow that you see in Stockopedia is ridgy didge, which is an Australian term for real. Sorry, Americans. Um, it’s not a fake Pr/OpCaf number. The real. There’s a couple of risks though with these guys. Uh, the credit side of things is starting to wobble. Bad loans crept up from 0.35% to 0.6%, and their team is flagging the loans business as risky. The actual losses are still tiny, but they’re forecasting that they could get bigger [00:31:00] over the next 12 months. I guess for the same reasons we were talking about before, the US economy is starting to struggle unless you’re an AI company. And I think they’re sort of flagging that it could be, you know, they could see losses increase in the next year or two if things go awry, if inflation keeps going up and the economy keeps stagnating Tony Kynaston: The banks in Australia are starting to write up their provisions for bad debts Um and part of it is Cameron: Right Tony Kynaston: rate rises which haven’t happened in the US yet So if they all if they do get interest rate rises on top of other things which are affecting the economy oil prices tariffs whatever yeah it could be a um an increase in bad debts for these companies Cameron: Typically they make more money off the loan book though, don’t they, when interest rates go up? Tony Kynaston: So typically banks do well in a high interest rate environment just just simply because they’re making more dollars out of the same margin as the as the um [00:32:00] numbers numerically go up for the the percentage But yeah they do face increasing bad debts because of that as well Cameron: Right. So that’s just how they manage it really, at the end of the day Tony Kynaston: No exactly Oftentimes the best time to buy a bank is when it’s decreasing provisions on its loan book cause that’s just writing back cash um without having to sell one more loan So that’s a good thing this is kind of the reverse We have to balance the fact that the banks will do better in a high interest rate environment with the fact that they’re increasing their provisions for bad debt which is like writing profit to their own balance sheet rather than paying it out as dividends or reusing it to expand the bank So it’s a a bit of an anchor on performance Cameron: Mm-hmm. Or bit of an anchorage on performance even in, in the case of these guys Tony Kynaston: an anchor in an anchorage What was that song Tied Down no Anchored Down in Anchorage Yeah Cameron: Beats me. Tony Kynaston: Okay Cameron: be a title, could be a title in there somewhere for the, for the episode. Um, but you know, what [00:33:00] happens to the economy in the future is outside of my remit. I’m, I’m not gonna that or how the bank reacts to it. The other risk is, gets back to something I said earlier, the whole bank is Alaska, basically. Um, and Alaska is oil plus federal money. So if oil tanks, which it has been, uh, that could have an impact on the Alaskan economy and therefore the prospects of Northrim. And if Washington tightens the tap on how much money they’re giving to Alaska for whatever reason, that could m- make it difficult. Apparently they get a lot of federal funding and, hey, you know what, uh, the Trump administration’s like, it’s, uh, fly by the seat of your pants what’s happening one day to the next, so nobody knows. But they’re all things that require future predictions and as I said in the last [00:34:00] show, Philip Tetlock pointed out in his book on forecasting, even experts don’t know what’s gonna happen in the future, so I’m not gonna try and predict. Tony Kynaston: Yeah You wonder if Cameron: We’ll just look at the numbers as they are today Tony Kynaston: should it be especially experts don’t know what’s gonna happen in the future Cameron: Yeah. Monkeys throwing darts at a dartboard. Tony Kynaston: Yeah Cameron: So a couple of notes on the management before I go. The founding era chairman, Joe Shearhorn, retired at the end of last year after 35 years. The CEO and the CFO continued on, though. CEO is a guy called Mike Houston. CFO is a guy called Jed Ballard. They have been buying shares in the company in the last few months, which is good to see, but they’re not huge amounts. We’re talking tens of thousands of dollars. Neither of them nor Shearhorn holds, holds a major stake in the company. I think they’re all way less than 1% of the company, which is interesting. For a company this young, I expected it to have sort [00:35:00] of big founder shareholders, but, um, I couldn’t find anything So that’s it. Um, who’s Michelle Shocked, Tony? Tony Kynaston: Well she’s the singer who sang But you know you’re in the largest state in the union when you’re anchored down in Anchorage Anchored down in Cameron: Thought she was telling me she was a senior executive or a major shareholder in the bank or something there. And I’m like, “Oh, I missed her name.” Tony Kynaston: all her money in there Cameron: I’ve never heard of Ms. Shocked. Tony Kynaston: You haven’t Oh okay Cameron: No. Uh, so that’s it, basically. I’ve got the scorecard to go through, but I don’t, I, I couldn’t find anything really exciting or interesting. They’re just a boring, boring bank in Alaska that’s coming up quite cheap for some reason on our buy list. Probably because they’re a boring, boring bank in Alaska Tony Kynaston: couple of things I noticed when I had a look at it Um uh y I wondered whether it was a monopoly but it’s not But it does certainly have a um lot of a lot of k monopoly-like [00:36:00] characteristics because uh the Alaskans do like to bank with a local company a local bank funnily enough Wells Fargo did have the biggest share in Alaska so people are also interested in getting the best price I guess too they also face competition This bank faces competition from credit unions so it’s like that kind of local flavor to people uh in the North They wanna bank with with locally owned businesses Um yeah but uh a as as my analysis said like yours the factoring business was the surprising one for me that had grown so quickly and also the business banking side of things I think is their their sort of secret sauce that they can the local businesses with um local knowledge to back it up And that that allows them to be better at writing loans to oil drillers or fishing companies and that kind of thing cause they know the industry much more intimately than someone who hasn’t grown up in Alaska [00:37:00] and and worked with it all their lives Two key advantages Cameron: Well, um, just to get into the numbers, Tony Kynaston: wow it’s just started raining really hard here Can you hear that Cameron: I can hear it. Yeah Tony Kynaston: Coming down now Cameron: These guys have, uh, a quality rank on Stockopedia of 75, so I scored them for that. Their stock rank is 92, so I scored them for that. Their, uh, F score is a seven out of nine, so they got a score for that. Their price is above our IV number one, but below our IV number two. The price is not less than book or less than book plus 30, so I couldn’t score them for those. Book value growth is positive. They do not have a new three-point upturn. Their PE is not less than the yield. The yield is not greater than the bank [00:38:00] debt. The yield is 2.59%, by the way. Um, their forecast IV is not greater than twice the price, but they do have positive sentiment, of course, or they wouldn’t be on the list. Well, they’re slightly below the, um, uh, Josephine cutoff today, but they’re doing okay apart from that. So they ended up with a QAV quality score of 75%, which makes them sort of in the sweet spot for us, and a QAV score of 0.20. Price to operating cash flow, I forgot to mention, was 3.66, so that’s the key one, so quite a low Pr/OpCaf for us. And, um, again, I couldn’t really, you know, couldn’t really figure out why the market was shying away from them. There was nothing, no scandals, no sort of. Nothing that untoward that I could see, so I don’t [00:39:00] know. It’s just a deal, I think, Tony. Got any more thoughts? Tony Kynaston: or you can put your money in SpaceX instead of putting it into a profitable bank Cameron: Sure Tony Kynaston: a monopoly-like characteristic about it in a big state Yeah Or you can watch it burn Cameron: And if, and if you look at Elon’s never going to Mars. The Mars thing is a pipe dream as far as I can tell. Uh, if you look at their chart though, like the share price has been going up pretty consistently since middle of 2023. Uh, so it’s, it’s been on a tear for nearly three years now, um, from like about $9.50, I think, in 2023, up to 24 bucks. Cameron: So the market tends to agree with us, tends to think that it’s been a good investment for the last couple of years. Good luck to anyone who got in it back in middle of 2023. But still coming up as a good quality buy for us, [00:40:00] despite the fact that there’s already a lot of, uh, been a lot of growth in the share price. So we’ll see how it goes, Tony. I have added it to our light portfolio, and we’ll keep an eye on it Tony Kynaston: Good Well I’ve just queued up Michelle Shocked sing Anchorage which I’ll listen to after this Cameron: Right. I’m gonna– Tony Kynaston: You Cameron: I’ll listen to that on my way to kung fu Tony Kynaston: this Cameron: with Fox this afternoon Tony Kynaston: I said Captain I said What It’s Ruddy believe you haven’t heard it Cameron: Look at you bringing, bringing back all the classics. It’s a shame we can’t play music on the show like I used to on my old podcast. That’d be fun. We could have a singalong. All right. Well, um, thank you Tony. Have a good week. Glad to have you back, and, uh, happy hunting everyone Tony Kynaston: Okay I’m good to see you again Talk to you next week PREVIOUS PULLED PORKS Here’s the performance of the “pulled porks [https://docs.google.com/spreadsheets/d/16WHwMalQodhxUO9h1T-7suVtfwjrXq057fFHhcLXFWk/edit?gid=0#gid=0]” (eg deep dives) we’ve done on the show in the past.

Straw Mattress to Steel Bumper (MGA): QAV America #54

QAV AM 54 [https://qavamerica.com/wp-content/uploads/2026/05/QAV-AMERICA-54-art-optimised.jpg] This week Cameron (with guest co-host Phil Muscatello from Shares For Beginners [https://www.sharesforbeginners.com/])  runs a full QAV deep dive on Magna International (MGA), the Canadian-born automotive giant that quietly makes everything from your car door to the entire vehicle itself. He covers the wild founder story of Frank “Straw Mattress” Stronach, the EV overreach that cost the company over a billion dollars in writedowns, the tariff headache courtesy of Trump, and why the numbers are now looking good enough to add to the portfolio. Plus a quick look back at how previous stock picks from the show have performed, with NBR up 31% leading the charge.   This week’s full episode is for QAV Club members only. The free episode is available below. Also check out our podcast archives link and our pages on Apple Podcasts or Spotify or watch clips on TikTok [https://www.tiktok.com/@qavinvesting]. Or visit our homepage [https://qavamerica.com/home/] to learn more about QAV and how it works as a value investing system that you can learn and apply to beat the market. Free Podcast Archives [/listen/] TRANSCRIPTION QAV AMERICA 54 – MGA 2 [00:00:00] Corrected Cam-PC-01 (1): Today, Cameron from QAV America joins me to unpack MGA Magna International, a major Canadian-based global automotive supplier and mobility technology company founded in 1957 and headquartered in Aurora, Ontario. It ranks amongst the world’s largest tier one suppliers, I don’t even know what a tier one supplier is, but with 156,000 employees across 28 countries and 327 manufacturing assembly facilities. And do you think I can get a headlamp that will work in my car, Cameron? Not for any longer than about eight weeks is my experience, and then you have to replace them again. Yeah, yeah, that’s right. So hi, Cameron. How are you? Good, Phil. Machinations of Magna, is that the title? The Magna Machinations. Is that what you’re doing- Yeah. Yeah, that sounds good-. to me today? I like that. Yeah, yeah. Yeah. Is it machinations or machinations? I don’t know. Uh, whichever you choose. Um, and a tier one supplier is a company that supplies lots of tier ones, I think, Phil. They just. They have like a, a, a [00:01:00] warehouse stacked full of tier ones. Um, what does Magna mean in Greek, Phil? You’re, you’re an erudite, uh, educated, literate person. Uh, great, isn’t it? The great, yes. Yeah. Like, uh, Magnus Carlsen is the greatest chess player of all time, and that’s why he has that name. He lived up to his name. Mm-hmm. Um- And, um, who was the, um, Roman history, who was the enemy of Caesar? Uh, Pompey the- Pompey the Great. Yeah, Pompey the Great. Yeah. Pompey, Pompeius Magnus. Yeah, good one. MGA Magna International: So, uh, Phil, Corrected Cam-PC-01 (1): uh, I thought before we get into this week’s deep dive, uh, I, I just went back and had a look at some of the others that we’ve done on the show over the last few months. Do you ever go back and look at how they’re performing, all the stocks that you talk about, or you have your guests talk about on the show? No, no, I haven’t, haven’t done that. Uh, just, um, are, are, are we going to have one of those, um, um, snapping your braces with pride moments? Uh, well, some of them have done very well. Couple haven’t, but that’s normal. You know, [00:02:00] Tony and I always talk about having a 60% success rate, which I think is what Buffett, uh, aims for as well. So I think we’ve done five stocks on your show over the last few months, and three are up and two are down. So the three that are up are NBR, Nabors Industries. It’s up 31% since we did it a couple of months ago. I think, like, early March we talked about NBR. 31% in a couple of months isn’t bad. EC, Ecopetrol is up 18%. DB, Deutsche, which we did last time, I think, is up 8% since we talked about it. The two that haven’t done so well are PAGS, PagSeguro. They’re down 13%. And SHG, Korean energy company, I think. They’re down 7%. So three good ones, two not good ones. Eh, it’s about what you expect, you know. Things happen in the market. Wars happen. Tariffs happen. Can’t predict the future. It’s worth, it’s worth noting though, isn’t it, that it’s a, it’s a numbers game as well. It’s [00:03:00] not, you’re not gonna get everything right, you know? Um, we, we- Well, that’s why I said, like, a 60% success rate. Yeah. And it’s why we have rules to sell the ones that go the wrong way. You know, uh, we don’t stick around and wait to see what happens. We have hard rules to sell them and keep the winners. Anyway. Yeah. What’s that, what’s that old- I thought that was- what’s that old joke, you know? Uh, yeah, sudden- a short-term trade which suddenly becomes a long-term holding. Right. Yeah. Yeah, that’s, uh, I take the same approach to stocks that I did to my first few marriages. Like, you cut your losses and you keep going until you find the winners, and then you stick with the winners. A trail of broken hearts. MGA Magna International: Oh, Corrected Cam-PC-01 (1): well, I hope not. I hope they’re all doing very well. Anyway, let’s talk about Magna. Uh, so as you said, company’s been around for nearly 70 years, market cap of roughly 18 billion US dollars, 156,000 employees. MGA Magna International: Well, as Corrected Cam-PC-01 (1): as you said, one of the biggest auto parts suppliers, but, uh, I also read that they like to call themselves a mobility technology company, which I think sounds way sexier. Uh, I think [00:04:00] their, their share price went up, like, 10%. Uh, it sounds sexier than auto parts supplier really, doesn’t it? Mobil- no, no, no, we’re a mobility technology company. Oh, okay. Sure. Right I don’t know. I was thinking, I was thinking old people on mobility scooters. Oh, yeah. Yeah. It’s not as sexy. Well, unless you’re into that kind of thing. Who knows? Um, like lots of companies that appear on our buy list, particularly in our US buy list, by the very nature of value investing, it’s a bit of a turnaround story. It’s had a couple of rough years, bit of a founder scandal going on. I don’t think that’s affecting the business at all ’cause he’s been out of the business for some time. But it’s sort of a classic value stock in it’s a brand that most people have never heard of because they’re behind the scenes, but they’re running a great business. Been around a long time, very deeply embedded in their industry, which is part of the reason they had a rough couple of years. We’ll get into that. Listed on New York Stock Exchange and also the Toronto [00:05:00] Stock Exchange. Price today is around about $64.58 US. That’s on the New York Stock Exchange. Founded in Canada, as you said, Aurora, Ontario, sort of north of Toronto. So Tony. It’s a shame Tony’s not, uh, with us today. He, there’s a couple of things he’d like about this. One, he lived in Toronto for, I think, five or six years. Uh, he probably knows Aurora well. Probably might even know Magna. Uh, maybe he MGA Magna International: played Corrected Cam-PC-01 (1): golf with people from there. I don’t know. But, uh, also the, uh, founder of this is into thoroughbred horse breeding and, uh, Tony’s not with me this week because he’s buying and selling horses on the Gold Coast. According to their website, Magna is one of the world’s largest automotive suppliers and a trusted partner to automakers in the industry’s most critical markets, North America, Europe and China, with a global team and footprint spanning 28 countries MGA Magna International: So Corrected Cam-PC-01 (1): So they’re a big deal. The founder [00:06:00] is a guy called Frank Stronach. MGA Magna International: Now, he Corrected Cam-PC-01 (1): he was born Franz Strosack. MGA Magna International: How’s your, how’s Corrected Cam-PC-01 (1): how’s your German? I know your Italian’s pretty good, Phil. Not very good, no, no. How’s your German? No. We don’t like Germans in Italy. Well, my wife, uh, speaks German. She tells me that Strosack means straw sack in German, which is what people used to live on, like a sack full of straw. So his name is literally straw mattress. Have to imagine that somewhere in his genealogy there was a, the local guy in the village that made beds for people. He was born in 1932 in- And, and I just wanna, and I just do wanna. I do love Germans, okay? I do love- Oh, okay. Nice backpedaling there, Phil. Born in 1932. Well, we know, you know, Mussolini and Hitler got along famously for a little while anyway. Long, long history- Yeah. of the Italians and the Germans getting along. Born in 1932 in a little village called Kleines [00:07:00] Semmering in the Austrian province of Styria MGA Magna International: Working Corrected Cam-PC-01 (1): class family, left school at 14 to become an apprentice tool and die maker. Precision metalworking. You make the metal molds, cutting tools factories use to stamp out metal parts at high speed. Incredibly skilled work, and stood him in good stead when, in 1954, 22 years old, he moved to Canada, arrived in Montreal, gets on a bus to Kitchener, Ontario, gets a job as a dishwasher. Nothing to do with making metal parts at first, but built his first company from a rented garage in Toronto only two years later, 1956. He’s 24 years old. Company was called Multimatic Investments. Slept on a cot in the corner of the shop. Classic Silicon Valley startup story, but [00:08:00] in Ontario, not Silicon Valley. Gets his f- In, in, in greasy overalls. yeah. Gets his first automotive parts contract in 1969, so takes a, takes a while to get to automotive parts. Then he merged with a company that he had a contract relationship with, I think called Magna Electronics, and in 1973 the whole thing gets renamed Magna International. MGA Magna International: So he Corrected Cam-PC-01 (1): So he was making actual metal parts in his garage and selling them to car companies. And what’s fascinating, among many things about this guy, is real- like it’s a real classic sort of, uh, story of a guy who built an enormous business. Still alive, by the way, in his 90s. He, his management philosophy is what he called fair enterprise. He was a bit of a commie, I think, by the sounds of it, very suspicious about how companies treated their workers, so he built a formal system in [00:09:00] 1971 where a fixed percentage of profits every year was pre-allocated to employees, management, investors, and social causes. 1971 MGA Magna International: it’s Corrected Cam-PC-01 (1): It’s written into the corporate charter, 10% of profits go to employees every year before anyone else gets their cut. MGA Magna International: And Corrected Cam-PC-01 (1): And this was the thing that made Magna different, because employees and management had skin in the game. They produced better parts. They worked harder. They had more incentive. There was less waste, less industrial action, and it turned into a $40 billion company. So MGA Magna International: Based on that Corrected Cam-PC-01 (1): on that- So you can do, you can do good and make money? Yeah, that’s what I was gonna say, but wait till we get to the sex scandals before you, uh, pass judgment on how much good MGA Magna International: he Corrected Cam-PC-01 (1): he did. Um, still going through the courts, uh, as it turns out. But the m- anyway, the, the [00:10:00] mechanism of how the employees get paid seem to be changing. I tried to figure out where it’s at. It’s, it’s a little bit murky. So 10% of pre-tax profits, pre-tax too, to, uh, to employees, still technically embedded in Magna’s corporate constitution. It can’t be changed without management and shareholders and employees all coming to a consensus about the change, so it’s pretty interesting. You weren’t here. Um, oh, we haven’t done the show about Germany, speaking of Germany. I don’t think you and I did that. No. Tony and I. Oh, well, I, I did a, an American show, uh, a couple of weeks ago. We were talking about Deutsche Bank. Oh, we did do Deutsche Bank. No, we, we, we- So it must have been Deutsche Bank. we’ve done Deutsche Bank. Yeah, that was the last one. We did do Deutsche Bank. Yeah. Yeah. Mm. Remember they have that system in place where the, there’s two boards, and the employees get to vote for one of the boards? Yeah, that’s right. Well, this is a bit, bit like that, but different. Um, so they, they, they have to all agree, uh, if they’re gonna change this, uh, structure for how the, the profits get divvied out. The full original formula was 10% to employees, [00:11:00] 7% to management, and a minimum of 20% of net profits returned to shareholders as dividends. MGA Magna International: And Corrected Cam-PC-01 (1): And because changing it requires employee consent, it makes it quite hard to just unilaterally remove as the company started doing well. Still in the corporate constitution, but how it plays out in practice is a little bit hard to figure out. So it’s like there’s deferred remuneration and shares and a share structure and all this kind of stuff. I really didn’t have time to break it all apart. But I did note in one of their corporate documents that they crow about the fact that for eight consecutive years they’ve been named one of Fortune’s World’s Most Admired Companies, and for four consecutive years, one of Ethisphere’s World’s Most Ethical Companies. So they’re doing something right, however it works. I also like this, talking about management. There’s a statement in this, one of the corporate, uh, reports I read. “We believe it is [00:12:00] important that each director be economically aligned with shareholders. We try to achieve such alignment in two principal ways. Equity maintenance requirement. Each director at large is required to hold a minimum of $825,000 of Magna common shares and/or deferred share units, DSUs, within five years of joining the board. Each committee chair is required to hold a minimum of 900,000 of Magna common shares and/or DSUs within five years. The board chair is required to hold a minimum of 1.5 million of Magna common shares within three years of becoming chair.” MGA Magna International: So Corrected Cam-PC-01 (1): So we like to see skin in the game. When we do our Australian checklist, we actually score companies based on how much of the company the board holds. The owner/founder metric we call it. Um, Warren Buffett’s always been a big fan of seeing directors have skin in the game. Uh, we don’t do it in our American show because it’s hard to get that number programmatically out of Stockopedia, but it’s something I am [00:13:00] planning on MGA Magna International: coding Corrected Cam-PC-01 (1): into my process at some point. I didn’t actually get a number on these guys at the end of the day, how much of the stock their s- their sh- directors own, but at least they’ve got the right policy in place. MGA Magna International: A Corrected Cam-PC-01 (1): A couple of things on Stronach, straw mattress. Um, so he became extremely rich and also extremely controversial. He, uh, by the early 2000s, he had a dual class structure in place, Rupert Murdoch-esque, uh, classic founder king succession style thing where there were Class A shares, which the, uh, general public could buy, and then a special share class that he controlled that gave him dramatically more power in the voting than his economic interests warranted. In 2010, shareholders pushed back hard enough that the dual class shares were eliminated. He got a massive payout in compensation, billions of dollars, and stepped away from operational [00:14:00] control of the business MGA Magna International: So Corrected Cam-PC-01 (1): So he’s been gone for, mm, decade and a half. MGA Magna International: um, and Corrected Cam-PC-01 (1): and has had quite a complicated later life. As of right now, May 2026, he’s 93 years old. MGA Magna International: He’s Corrected Cam-PC-01 (1): mid-trial in Toronto on sexual assault charges, 12 counts involving seven women, allegations going back to the ’80s and ’90s. He pled not guilty. Verdict is expected in the next couple of months, and then there’s a second trial after that which has been delayed to 2027. MGA Magna International: Uh, Corrected Cam-PC-01 (1): another sexual, uh, assault allegation. So, um, not great. You don’t wanna be going through that ever, especially in your early 90s. MGA Magna International: But Corrected Cam-PC-01 (1): he’s been away from the company, as I said, for a long time, so has no impact really on the business, but just part of the, uh, messy story surrounding Mr. Straw [00:15:00] Mattress. MGA Magna International: So, Corrected Cam-PC-01 (1): uh, this is a MGA Magna International: very Corrected Cam-PC-01 (1): very interesting business in terms of the shareholding. There’s no controlling shareholder. Pren- Pe- uh, no, Pzena, P-Z-E-N-A, Pzena Investment Management’s a value investor. They own about 10%. Vanguard own about 9.8%, but it’s broadly held. There’s no single, uh, person or company now that owns a controlling interest in the company. Aside from all that, as I mentioned earlier, Stronach is into thoroughbred horse racing, which Tony would love. Uh, breeding and racing. Started a business decades ago with his daughter MGA Magna International: And Corrected Cam-PC-01 (1): And then ended up suing her for mismanagement. So, you know, there’s all of that kind of Succession-esque stuff. Did you watch Succession, Phil? No, I never, no, I was never into Succession, I gotta say. Oh. Yeah. Great show I should give it a go, but I’m just, I don’t know, I’m just not trying not to spend my evenings, um, you know, sitting in front of the idiot box too much. Yeah, no, it’s ’cause you’re doing kung fu and reading annual reports. No, [00:16:00] wait, that’s me. Um, so four divisions of the company. So imagine you’re a car company, um, BMW, Ford, Stellantis, whoever. Every year you decide you’re gonna build a new vehicle model. You design it, and then you go to Magna and say, “Build this for me.” That’s basically it. Um, either the parts or in some cases the entire car. They basically go, “Yep, we can make everything that you need for your car.” So a lot of times these companies, these car companies don’t actually make their own cars anymore. They just design it and then outsource the manufacture of it to somebody else. MGA Magna International: Uh, we’ve Corrected Cam-PC-01 (1): we’ve seen that a lot on this show over the last couple of years. It’s sort of the very common business model. You do the marketing, uh, you, you own the brand, but you outsource the manufacture or the maintenance, whatever it is, uh, the underlying hardware part of the business to people who specialize in doing that.[00:17:00] So they’ve got- However, however- Hmm. on that point, um, I believe that companies like Tesla, um, do all of their own manufacturing in-house. They don’t outsource anything, and that could possibly be a risk in the future of, uh, car manufacturing in this business. Yeah, I think, you know, Elon’s big on getting efficiencies from. He does it with SpaceX too. I think he has vertically integrated all of that side of stuff too. He’s MGA Magna International: a Corrected Cam-PC-01 (1): A different cut, as we know, as, as a businessman and as a human being. How many kids has he got? 14? He likes to vertically integrate population control as well. Just do it all myself. I can’t wait for other people to do it for me. So they have a couple of, about four different divisions essentially. Body exteriors and structures, that’s the biggest division, does about $16, $17 billion a year. Everything on the outside of the car, so door panels, bumpers, hoods, the structural pillar that goes up beside the windscreen. If you bump a shopping [00:18:00] cart into a car door, you’re probably bumping into something that Magna made. This is the bread and butter side of the business. Margins are about 6.7%. They were in Q1 2026 anyway, from what I could tell from the report, so solid little business. The second biggest is power and vision. Uh, good David Bowie, uh, album from the mid to late ’80s, I think it was. Uh, no, that was Sound and Vision. Sound and Vision. Yes. Sound and Vision. Close. Close. It was a compilation really of stuff from, uh, the Berlin albums, I think, wasn’t it? And some other stuff. Yeah. Yeah. Anyway, uh, this is about $15 to $16 billion a year. This is where it gets more interesting. They have cameras, driver monitoring systems, mirrors, also transmission systems and eDrive systems. That’s the electric motor and gearbox combinations in EVs. They also used to get into the lighting business, but as I’ll come to in a minute, they [00:19:00] sold or they’re in the process of selling the lighting bit off. Margins for this division jumped from 3.4% to 6.5% in the last year, which is a big improvement. The, the current CEO’s been doing a lot of work to, uh, streamline the business. But this is also a division that caused them a lot of pain and angst over the last few years, so I’ll get to that soon, too. MGA Magna International: The Corrected Cam-PC-01 (1): The third division is seating systems, about $5.5 billion a year. Seats, that’s basically it. They, they make seat asse- full seat assemblies delivered just in time to a car assembly line. That division was losing money a year ago, but now it’s back to positive, so that’s good story. And then the fourth division is complete vehicles, about $4.5 billion a year. This is the weirdest one. This is where they actually assemble entire cars, soup to nuts. MGA Magna International: You Corrected Cam-PC-01 (1): You say, “Hey, uh, got this BMW we wanna make. Can’t be bothered. Volumes aren’t big enough for us to get involved in any aspect of it. Just make the whole thing for me.” “Sure, no problem. Can do it.” And that’s what [00:20:00] they do. So bit like, MGA Magna International: I don’t Corrected Cam-PC-01 (1): I don’t know, who’s, who’s a company that doesn’t make stuff? Coca-Cola just outsourcing the manufacturing of all of their Coke to somebody else, and they just own the brand. So that’s it. Total revenue for the first quarter of 2026 was about 10.4 billion annualized, doing sort of $41 to $43 billion. Guidance for the full year is 41.5 to 43.1 in fact. So why are they a value buy? Well, the share price has dropped a lot, uh, in the last four or five years. I think it went from like 98, 99 bucks in 2021 down to 33 by April last year. So that’s a haircut and a half. MGA Magna International: And Corrected Cam-PC-01 (1): And it’s doubled though in the last year because it’s sort of in a turnaround. So I mentioned the part of the business where [00:21:00] they do, uh, power and vision, the David Bowie division. MGA Magna International: You know, Corrected Cam-PC-01 (1): You know, the, MGA Magna International: everyone, all Corrected Cam-PC-01 (1): all the car manufacturers got excited about EVs, uh, four or five years ago and, you know, I think Tesla put a fire underneath them and they all decided that was the future. So ’21, ’22, ’23, everyone was in a frenzy, “Oh, we’re gonna need all these EVs. We’re gonna be selling all EVs.” So Magna went and spent a ton of money building out EV manufacturing capability, battery enclosures, electronics for EVs, e-drive systems. And MGA Magna International: as Corrected Cam-PC-01 (1): as you can probably guess, we actually. I don’t think we’ve done Ford on your show, but Tony and I did a thing on Ford a while back, maybe a year ago now, and the same thing happened with Ford. They built out a huge EV division and then they took a multi-billion dollar haircut on it. These guys, same thing. The EV programs ended up getting canceled or deferred or scaled back. [00:22:00] Ford pulled back, GM pulled back. They went, “Oh, you know what? People aren’t actually buying EVs. They want big petrol drill baby drill trucks.” MGA Magna International: And Magna was Corrected Cam-PC-01 (1): was left sitting on a pile of EV manufacturing assets that weren’t gonna return them the, or generate the returns that they had hoped. MGA Magna International: So in Corrected Cam-PC-01 (1): in 2025, they took a $591 million writedown. That’s US dollars, real money. And then, uh, then Q1 2026 last month, they took another writedown of $485 million, this time on the lighting and rooftop business that they’re selling off. So in the last 18 months, they’ve written off over a billion dollars of asset value. Then MGA Magna International: President, uh, Donald Corrected Cam-PC-01 (1): Jesus Trump came into power and, uh, whacked tariffs on a- anything coming in from Canada and Mexico, and guess where all of their [00:23:00] stuff gets made? Oh, Canada and Mexico. So big tariff hit on them. It was like 25% tariffs on everything that they were, uh, manufacturing that had to go to America. So that knocked them around a lot. I think the $33 low in April 2025 sort of aligns perfectly with peak tariff uncertainty and madness. As we know, though, the Supreme Court has told Trump, “No, uh, you can’t do that. You have no authority. Roll them all back. Pay them all back.” Not sure how that’s going, but that’s probably corresponded with a little bit of an uptick in their business, apart from the fact that they’re selling off some of these divisions and done some major write-offs. Uh, interestingly, no major executive turnover as a result of all of this loss, but the CEO, Swamy Kotagiri, been there for decades. He’s an [00:24:00] engineer by background. He took over as chair in 2021, right at the peak of EV frenzy, and he’s the guy cleaning it up now. MGA Magna International: So the Corrected Cam-PC-01 (1): the Q1 results actually show the business is running better than it has in years. Uh, the EBIT was up 58% year on year. Margins are expanding, as I mentioned earlier. So the operational business is recovering strongly. Balance sheet is still absorbing the costs of the EV disasters. But, um, you know, it, it’s a business that’s getting back to core focus and seems to be run as well as it’s always been run. I think at heart, it’s a very good business. A lot of really big, well-entrenched customers. They’re dominant in their space, MGA Magna International: and they Corrected Cam-PC-01 (1): they just, MGA Magna International: uh, you know, had a Corrected Cam-PC-01 (1): had a bad run with this EV/uh, tariff stuff in the last four or five years. So I told you they’re selling off, uh, the lighting and rooftop [00:25:00] stuff. That’s bringing in about $1.1 billion, MGA Magna International: which they Corrected Cam-PC-01 (1): they can use to, uh, run the business or pay off debt or whatever they wanna do. Um, that’s basically all I have to tell you. It reminds me of some of the other companies that we’ve talked about on the American show over the last couple of years. The most, uh, common, or the most obvious one is one that I didn’t do with you, but I did with Tony. A company called Commercial Vehicle Group, CVGI. They make inside parts for truck cabs. I called them the, uh, the sausage in the truck bun, I think. Um, so you make a truck. It’s basically a, a hotdog bun, and these guys make all the stuff that goes in. It’s just like it’s an empty template until they come in and they put the very, very plush seats. And, and apparently truck cabs are like MGA Magna International: Uh, deluxe, Corrected Cam-PC-01 (1): uh, rock and roll- Yeah. The Hilton. The Hilton on the Gold Coast Yeah. Hotel suites. Yeah. Uh, but I, I talked about them on our show, [00:26:00] uh, at the beginning of April, uh, this year, and they’re up 40% then. So, uh, fingers crossed they continue to do well. MGA Magna International: So, Corrected Cam-PC-01 (1): uh, the scorecard, let me get into that. I’m gonna scroll down my notes here ’cause I think it’s down the bottom. Here it is. MGA Magna International: So Corrected Cam-PC-01 (1): So as you know, and as people have heard me talk on your show before know, the way that QAV works is Tony built a, a spreadsheet checklist. Over 30 years he’s been refining it, and we take all of their fundamental data and we run it through this checklist, and it provides a bunch of scores for us. And- It’s all about the published numbers as released in, uh, reports MGA Magna International: Yeah. We d- Corrected Cam-PC-01 (1): We d- we don’t really care much about the story. We don’t try and predict the future. We do look a little bit at, you know, what analysts are saying about future EPS and that kind of stuff. It’s a score and a whole suite of scores, but we’re looking historically. The, the questions that we’re trying to [00:27:00] answer really are, does this seem to be a business that’s being run well? Is it generating cash? And do we think we can get it at a discount to its intrinsic valuation? And we have a number of ways that we create intrinsic valuations. We have a current IV, we have a future IV, and we have a, a bunch of other metrics that we score it on. Then we add up all the scores, and the stocks with the highest score are the ones that we tend to look at buying. MGA Magna International: So Corrected Cam-PC-01 (1): So these guys, when I did my analysis on them a couple of days ago, share price was about $64.58. Average daily trade, by the way, is about $120 million, so big enough for most of us to buy, even Tony. MGA Magna International: Uh, Stockopedia Corrected Cam-PC-01 (1): stock ranks 99, which is pretty good. Stockopedia quality rank was 86, which is pretty good. The Piotroski F-score measure of financial health was seven, which is pretty good. MGA Magna International: Their Corrected Cam-PC-01 (1): Their price was not less than our IV number [00:28:00] one, so I couldn’t score it on that, but it was less than our IV number two, our future IV, so I could score it for that. The price wasn’t less than the book value or book value plus 30, so I couldn’t score them for that. Their price to operating cash flow was 4.22. That’s really quite good. We, we won’t buy anything that has a price to operating cash flow over seven. We, we use that instead of PE for new, uh, listeners. Um, we think price to operating cash flow is a cleaner metric than price to earnings because earnings can be toyed with and manipulated a little bit more easily than operating cash flow. So 4.22 is good. Basically means you’re gonna get your money back in about four years if you just look at operating cash flow. So that’s a reasonable amount of time to expect your money back. Um, the yield, their dividend yield is about 3%. It’s not better than the bank rate in the US, so I couldn’t score it for that.[00:29:00] They do have a new three-point upturn, so we look at sentiment charting, and if a stock has recently turned around since its last financial reporting, we’ll score it for that because we think that’s a good early indicator that the market might be getting behind it. And it does have positive book value growth, so we could score it for that MGA Magna International: So all Corrected Cam-PC-01 (1): all in all, I gave it a QAV quality score of 76.92%, and we really like anything over 75%, so it got over that benchmark, and a final QAV score of.182. We look at anything over.10. So it wasn’t at the top of my list, but it was not too far. I think it was in, like, the top 10, and I checked it again before we came on the show this morning. It’s still in buy territory for us. Current price is $65.20 this morning, so it’s up a little bit since I d- did my analysis on [00:30:00] Monday. MGA Magna International: And Corrected Cam-PC-01 (1): that’s it. I’m gonna add it to our portfolio this week, and we’ll see how it goes. PREVIOUS PULLED PORKS Here’s the performance of the “pulled porks [https://docs.google.com/spreadsheets/d/16WHwMalQodhxUO9h1T-7suVtfwjrXq057fFHhcLXFWk/edit?gid=0#gid=0]” (eg deep dives) we’ve done on the show in the past.

The Gas That Moves the World: BWLP – QAV America #53

QAV AM 52 [https://qavamerica.com/wp-content/uploads/2026/05/QAV-America-53-art-optimised.jpg] This week we do a full deep dive on BWLPG (ticker: BWLP), one of the world’s biggest LPG shippers, and why the Strait of Hormuz closure is sending their spot charter rates into the stratosphere. We also cover the bond market’s grim verdict on Trump’s economic record, oil heading toward $140 a barrel, and the fascinating story of Y.K. Pao, the banking clerk who built the largest privately held shipping fleet in history.   This week’s full episode is for QAV Club members only. The free episode is available below. Also check out our podcast archives link and our pages on Apple Podcasts or Spotify or watch clips on TikTok [https://www.tiktok.com/@qavinvesting]. Or visit our homepage [https://qavamerica.com/home/] to learn more about QAV and how it works as a value investing system that you can learn and apply to beat the market. Free Podcast Archives [/listen/] TRANSCRIPTION [00:00:00] Cameron: Ba-dum-bum. Welcome to QAV America, Tony, episode 53. It’s the 19th of May, 2026. Trump went to China, Tony. Tony Kynaston: He did. Cameron: with a nice T-shirt and some knockoff Nikes, and that’s about it. Tony Kynaston: He was, he was flogging, uh, copies of Art of the Deal in, uh, Tiananmen Square. Cameron: Yeah. Um, it sounds like it was a bit of a nothing meeting. They had nothing really to announce. A few sort of minor things, but nothing about opening the Strait of Hormuz, nothing really about, uh, trade deals. Trump’s g- I think China’s gonna, excuse me, China’s gonna buy some more beef, US beef. Uh, I think that was it, really. Tony Kynaston: my read on it was between the lines was that Xi Jinping said, “Hey, [00:01:00] gonna take over Taiwan at some stage. Don’t get involved.” And Trump said, “Hey, sounds good if you can help us get the Straits of Hormuz open.” And they wouldn’t that formally either of those two things, I wouldn’t think. Cameron: No. But, you know, technically speaking, Taiwan is already part of China. Everyone agrees to that. Tony Kynaston: road Cameron: Everyone agrees to that, including the US, including Australia. It’s the One China policy. Everyone’s always agreed to that since the ’70s. Tony Kynaston: Mm-hmm Cameron: agrees with that. They just think they run China. They think they’re the– They just believe they’re the real Chinese government. Tony Kynaston: Uh-huh Cameron: Anyway, um, it, it– You know, it was sort of a bizarre trip, like the leaders of the two major economies meet in secret and really have nothing to announce afterwards. Tony Kynaston: Yeah So that leads me to think [00:02:00] something was going on behind the scenes that they can’t announce So I Cameron: Or nothing, or they reach no agreements on anything. Tony Kynaston: yes that of course that’s possible But it’s still it’s good to see the two leaders get together They’re not sniping at each other from across the Pacific Ocean Cameron: Yes. Tony Kynaston: thing What did Trump say He said uh I like it here I could I could live here for a long time here It’s great Cameron: He might have to, depending on how things play out. Tony Kynaston: That’s what I thought I thought I’m glad Chinese food Cameron: Mm. Like Latin American dictators, after they got kicked out of their countries, had to go to Florida, the guy from Florida might have to go to Beijing to live. Uh, you know, it was– I, like, I don’t know what went on, but reading between the lines for me, he went there to try and get support to get Iran to bow down, and they went, “No.” And, you know- reach a deal and cut it out because this is annoying [00:03:00] and, Tony Kynaston: I I thought like You want that Have a look over here at Taiwan You know Don’t get involved Cameron: Yeah, maybe. I, again, I, I don’t think they need to worry about Taiwan. I think Taiwan’s just gonna, you know, knock on their door and ask to be part of it the way things are going, but we’ll see. Uh Tony Kynaston: a bit like Cuba knocking on the door and wanting to be part of the US Cameron: no, not like that at all, no. No, but, uh, you know, the– Taiwan, like every country, they’re gonna need to pick a side at some point. They’re gonna need to decide where their future is best placed. Is it by an alliance with the United States or an alliance with China? Tony Kynaston: I I’m not sure alliances with the US are worth much at the moment so Hmm Cameron: Yeah. So anyway, um, we talked briefly about this on the last show, the, the Australian show, but, uh, the, it’s more appropriate to talk about it here. So the bond [00:04:00] market in the US is going through some friction at the moment. The US 30-year yield went above 5% for the first time since 2007. You know, Trump, in his campaign for his, uh, second term, promised to fix the economy, eliminate the debt, crush inflation, no wars, peace everywhere. He’s 16 months in, Tony Kynaston: He Cameron: growth has slowed, debt has grown by $4 trillion, inflation is rising, manufacturing has shrunk. The Supreme Court has thrown out his tariffs that were going to bring in so much money that America wouldn’t know what to do with. His economic approval rating is the worst of his career, down to 30%, so going about as well as you would expect when you put a reality TV star in charge of the world’s leading economy. But Tony Kynaston: A and I think [00:05:00] Amazon are looking at rebooting The Apprentice starring one of the Trump boys so the succession the succession plan’s in place Cameron: yeah. Tony Kynaston: But anyway like the bond market’s having nothing of it isn’t it That’s the that’s the real important thing for investors Cameron: well, you know, on one hand, the S&P is booming. On the other– although it’s back a bit over the last few days. But, uh, on the other hand, the bond market is pricing in the reality of the long-term picture, which isn’t pretty. Tony Kynaston: No Uh uh including the fact that uh US debt’s up um no sign of it being reined in But also the oil price is gonna be higher for longer I think than people are are factoring at the moment too Except for the bond market they can see it or at least they’re guarding against it happening But um yeah the the bond market rules the roost really If if interest rates on or or if yields on bonds keep going up [00:06:00] that raises the cost of borrowing for corporate America and and so the growth slows Uh yeah if the problems aren’t fixed by the government then it just leads to a collapse somewhere down the track And Cameron: And Warsh has now been confirmed as the new Federal Reserve chairman. Jay Powell is on his way out or is out. Not exactly sure what the timeline is on that. But y- you know, there is, there was this expectation that Warsh was gonna come in and cut interest rates. But with inflation going up Tony Kynaston: Yeah Cameron: to 4% now, and people think it’ll go over 4%. Apparently, historically, when US inflation crosses 4%, the S&P falls 4% over the next three months, and then 7% over six months. But maybe this time it’s different, Tony. ‘Cause AI. Tony Kynaston: three of the three of the most [00:07:00] unreliable words in the English language time it’s different Cameron: It’s four words, but yeah. Um, there’s, uh, uh, Helima. Look, e- every economist I’ve read in the last month or six weeks has said even if the Strait opened tomorrow, we’re gonna see at least six months of higher oil prices. Uh, there’s a lady called Helima Croft, who runs commodities for RBC Capital Markets. It’s the Royal Bank of Canada. Used to work at the CIA on Middle East stuff. She reckons oil is heading to $140 Tony Kynaston: Hmm Cameron: the way it’s going. There’s no sign that the Strait’s gonna be open anytime soon. It’s still nacho. Uh, Trump did say today that he was going to authorize more bombing of Iran this week, but then didn’t again because he claims Middle Eastern countries asked him not to, and negotiations with Iran are going tremendously well, better than, better than any [00:08:00] negotiations have ever gone in the history of negotiations. You wouldn’t believe how great these negotiations are going. US Treasury Secretary Bessent called this. Yeah. Instead of Taco Tuesday. Yeah, Nacho Monday. S- Bessent called this inflation transient, which apparently is the same word Powell used in 2021 coming out of COVID, but it turned out not to be transient, so apparently it’s the T word. Markets reacted badly to the T word being used, which I thought was Trump, but it’s the other T word. It’s transient. Tony Kynaston: wasn’t Taco It’s Cameron: So many T words Tony Kynaston: Yeah Cameron: Well, I was looking for a stock to– I don’t really have any company news this week. I was looking for a stock to do a deep dive on and to add to our portfolio this week, and it was tough. I went through 20 stocks at the top of the buy list, and everything was having a down day when I was looking at [00:09:00] them on s- uh, Sunday, Monday. Until I finally found the company that I am gonna talk about today, which is, uh, BWLP is the ticker, BWLPG Limited. And, uh, you know, it’s kind of a interesting story. Again, it’s sort of a pretty boring, classic value investing stock, I think, in many ways. The numbers are a little bit, uh, interesting, but we’ll, we’ll get into the whys and wherefores. Nothing as complicated as some of the ones I’ve looked at in the last couple of weeks. By the way, there were some more of those when I was trying to find a company. A lot of financial services companies on the buy list in the US this week, but a lot of them just had massive dumps of new capital, which is affecting their operating cash flow, and we [00:10:00] decided to put the kibosh on those. But BWLPG, as you might be able to tell from the name, is an LPG company. They ship gas. Uh, we always say we’re looking for mass, not gas, in terms of investing, but well, they have mass and gas. Tony Kynaston: Yeah Cameron: Their gas brings the mass. Uh, they’re on the New York Stock Exchange, also listed in Oslo as BWLPG. Tony Kynaston: And Cameron: they specific. Tony Kynaston: It’s a Cameron: Yeah. Tony Kynaston: a very transglobal company Cameron: Yes, very interesting. We’ll get into the history of why that is shortly. But, uh, they specifically ship LPG, propane and butane, as opposed to LNG, methane. I had to remind myself, uh, what the difference is between the two. So for people out there who don’t know their gases, LPG, easier to liquefy, [00:11:00] 42 degrees, minus 42 degrees Celsius, or moderate pressure at room temperature. Used for cooking, heating, auto gas, petrochemical feedstock. LNG, much harder to liquefy, 160, minus 162 degrees Celsius, cryogenic. It’s used for power generation, city gas grids, industrial applications, industrial level heat, that sort of thing. So BWLP ships the LPG stuff, similar to a company that we already hold in the dummy portfolio, GASS, G-A-S-S, that we have held for quite a while. Let me just remind myself. GASS, um, transaction. When did I buy GASS? Added GASS back in October 2023, one of the first stocks I added [00:12:00] to our US portfolio. It is up. Hmm? Tony Kynaston: does that make it classical gas if you’ve had it for that long Cameron: Wow. It’s a, it’s a ’70s joke. Is that a ’70s classical GASS? How does it go? You wanna sing it? Tony Kynaston: Well you can’t sing it It’s uh instrumental Cameron: Instrumental. You can sing an instrumental. For. Okay. I’ve been l- You should have prepared for this. You should have pulled your guitar out and been able to play. Uh, GASS is up about 100%, uh, since I added it October ’23, so it’s had a good run. Tony Kynaston: good yeah Cameron: Yeah. Um, but these guys are much, much, much bigger. Same industry, different pond. Um, they both transport LPG by sea, but in different parts of the country and different philosophies. So to give you an example, GASS [00:13:00] has 29 ships across three smaller classes. BWLP has 50 VLGCs. A VLGC is a very large gas carrier. Uh, GASS mostly deals around Europe, Mediterranean, intra-Asia, that kind of thing. Uh, BWLP does US Gulf to Asia and Middle East to Asia long haul. Market cap wise, GASS is about 375 million US. BWLP is about $3 billion US. So these guys are really, really big, as are the ships that they have. A VLGC, very large gas carrier, is about 230 meters long, Tony Kynaston: Wow Cameron: and they carry about 44 to [00:14:00] 47,000 tons of LPG, which is chilled down to minus 42 degrees Celsius down in the hull so it stays liquid Anyway, that’s what they do. Um, been listed on the New York Stock Exchange only since April 2024, so only two years on the NYSE, but listed in Oslo since 2013, which is the primary listing. Not an ADR in the US, I checked that. They have common share trades on both exchanges. And as you said, they’re Singapore incorporated. They moved their domicile from Bermuda to Singapore in July of 2024, and they report in US dollars. Tony Kynaston: So they liked head offices in low tax environments Cameron: That’s got nothing to do with it, Tony, at all. Purely, purely, purely coincidental that those things would be happening, I’m sure. So what do they do? Well, imagine you’re a Korean utility or a Japanese petrochemical company. [00:15:00] You burn propane as fuel, or you use it as feedstocks to make plastics and chemicals. You buy it from a trader. That trader has bought it from a producer in the US Gulf or from Qatar or from Iran. You have to get it from the place that manufactures it to your facility, and you do that on a really big ship. I was gonna say boat, but I know they’re not boats, they’re ships. And so you can hire a ship from BWLP. How do you say, how would you. BWLP? Bullop, bullop. That’s what I’m gonna call them, bullop. You can hire a ship from Bullop to do that. Tony Kynaston: White LP Cameron: Oh, yeah. Good. Yeah, yeah. The Bullop. It takes about 40 days from the US Gulf to Japan via the Panama Canal or the US Canal. The American Canal as it sh- the Trump Canal as it will be by the time he’s finished. Tony Kynaston: Well Cameron: About Tony Kynaston: it the [00:16:00] Hormuz, Hormuz Canal so then Trump can say Hey I’ve opened the strait Cameron: yeah. That’s clever. Good thinking. Yeah. Or about 18 days from the Middle East to India. And there’s basically two ways that Bullop, uh, rent out these vehicles. The first is spot charters, where you hire a ship for a single voyage at the going market rate quoted in dollars per ton or dollars per day, and that price bounces around enormously. Particularly high at the moment for some strange reason. And purely coincidental. Or, uh, the second is time charters, where you have a fixed period, six months, two years, five years, at a fixed daily rate. And these guys are roughly 50/50. You know, they, they kind of have a balance of the two strategic, for strategic reasons. Right now, getting [00:17:00] back to the spot charters, the Houston to Chiba, uh, named after Sonny Chiba in Japan, voyage is in the region of about 300 US dollars per metric ton, which converts to about 170,000 US dollars per day. And that’s a record. Um, the lows are more like 15 to $20,000 per day. Tony Kynaston: Right Cameron: that’s a it’s a big, that’s a big hike in the cost of getting gas moved around because you can’t move it through the strait, and so you’re having to get it from other parts of the world, takes longer to get to there from the US and there is less ships available, et cetera, et cetera. Supply and demand kicks in. Tony Kynaston: mean it’s um more oil has to is being exported by the US now cause it can’t come from the Middle East So Cameron: Gas. Tony Kynaston: on oil gas it’s it’s all [00:18:00] interrelated Cameron: It’s all all. It’s all oil. All oil. Petrochemical and byproducts, yeah. Tony Kynaston: backed up Needs to Cameron: really? Tony Kynaston: of prunes yeah Cameron: Needs an enema? Yeah. Tony Kynaston: yeah so much uh Cameron: Did I tell you about my back, my constipation story? Tony Kynaston: Luckily no Cameron: Well, you know, I’ve been. You know, I’m hardcore with my diet and my smoothies. I got a little bit overzealous with the, uh, the fiber, the chia seeds and the psyllium husk that I was having. I was like, “Well, if, you know, 10 grams a day is good, 50 grams is gonna be excellent.” So I, uh, and I had a very uncomfortable two hours, Tony Kynaston: Oh dear Cameron: c- couple of months ago Tony Kynaston: Ugh Cameron: Thought I was gonna die. Anywho, uh, the relevant performance measure for these guys is something called TCE, time charter equivalent income. [00:19:00] It’s the revenue from chartering the ship minus the voyage costs, fuel, port charges, brokerage expressed per day, and that normalizes across spot and time charter mixes. So at the end of the day, what you’re looking at is TCE. BW’s full year 2025 TCE income per available day was just over $45,000 across the fleet. Q4 2025 specifically was $50,270 per available day. So running hotter than the full year average because the spot market accelerated in the back half of the year. And the numbers that we’re using are their full financial year numbers, uh, and I’ve got their quarterly numbers as well, but none of. The, the strait didn’t close until March, so it hasn’t really flowed through to their reported numbers yet. Tony Kynaston: [00:20:00] Right Cameron: with Iran when the US and Israel were bombing Iran in the middle of last year, so that flowed into the 2025 numbers. But there was also tariff wars and all of that kind of stuff going on. I, I read the CEO’s, um, opening to the annual report and, you know, for guys like this, obviously it’s been a very tricky year. A lot of, lot of geopolitical conflicts and, uh, things to have to navigate. Uh, for comparison, the prior FY 2024 figure was 48,300. So the full year 2025 was 45,000. It was down about 7% year over year. But the fleet grew. They bought a bunch of ships, so their total earnings grew. Q4 2025 alone was up 33% over Q4 2024, even though rates [00:21:00] were down, so that shows you how much they grew the fleet. Um, for full year 2025, only about 28% of the fleet days were on fixed time charters, not really 50/50. The rest were on the spot curve. But that changed by Q4 to 44% as they locked in more at higher rates. Um, so the, it’s roughly, what’s that? 56/44 now, as of Q4 anyway. Uh, so they also have another division which I found interesting. They have a separate trading division called Product Services, which is actually in competition with the people who supply the LPG. It’s a physical LPG trading business that they run in-house. They buy LPG cargoes themselves at one port, then move the cargo across the ocean, usually on their own ships, sometimes on other people’s ships, but usually on their own ships, sell the cargo at the other port and [00:22:00] hedge the price exposure with derivatives. So yeah, we, we’ve talked about this before in a lot of these shows, people looking at share of wallet. Well, you know, we’re already in the LPG business. Why not have a. I think they bought these, they bought this trading arm from another company a couple of years ago. But, uh, so that’s, that’s basically the business. Renting out ships either at spot rates or long-term rates and they also have a trading arm. Trading arm’s not huge. Made about, in 2024 it made about $145 million in gross profit. In 2025 it made $16 million gross profit, which is a lot less than 145 million if I’ve done my maths correctly. Uh, most of that was mark to market on the unrealized derivatives book. Basically, value of their hedges moved against them year on year. But it’ll wash out over time, I think. So the company itself, um, hasn’t been listed that long and is [00:23:00] only about 12 years old as a separately listed entity, but goes back to one of the great shipping fortunes of the 20th century. Two businesses came together to make the BW Group, Pao’s Worldwide Shipping and Bergesen d.y., which is a Norwegian shipping business founded in 1935 by a chap named Sigvald Bergesen the Younger. I think that’s what the d.y., de younger, actually means. Um, I’m being serious. Uh, he had a falling out with his father, Bergesen the Elder, and set up his own shipping company. Uh, so but that, you know, the, that had been around since 1935. Worldwide Shipping was founded in Hong Kong in 1955 by Sir Y.K. Pao, Y.K. Pao, who ended up one of the richest guys in Hong [00:24:00] Kong. He had come to Hong Kong from China in 1949 during the Chinese Civil War, much like my grand master’s master, Ip Man. You ever seen any of the Ip Man films, Tony? Donnie Yen as Ip Man? Ah. Should watch it. Tony Kynaston: All right Cameron: went to Hong Kong and started teaching Wing Chun Kung Fu. Y.K. Pao went there and set up a shipping empire. He’d been a banking clerk in Shanghai, went to Hong Kong with nothing more than the shirt on his back, and then ended up building one of the. Well, not one, the largest privately held shipping fleet in the world by 1979. 202 ships, 20.5 million deadweight tons. Yeah, sorry. Tony Kynaston: story So as as I read today when I was preparing for the the um podcast Uh I think he When he went to [00:25:00] Hong Kong he was struggling to find career He was working in the bank but he was also to import things after World War II into Hong Kong sort of led him to to buy his first ship because he was an importer And then he expanded a little bit But um he he locked in long-term low rate contracts with the Japanese and that was the making of him because the shipping companies by and large were run by the Greek tycoons at that stage the Onassises and people like that And they were the reverse They were a bit like what you were describing before They were trying to maximize their margins and charge spot prices and you know uh control the market all that kind of thing um Pao said No if I just if I slow and steady wins the race If I can get long-term contracts which benefit the customers I make a little bit of money and then they’ll give me more work and I can expand my fleet and I’ll make a lot of money out of a little [00:26:00] bit of money on each ship eventually after a couple of decades he just dominated the shipping lanes Cameron: Wow. Tony Kynaston: Hmm Cameron: Slow and steady wins the race. Bit like the, um, Ray Kroc story. Just look after your customers, look after your suppliers. Good for him. He got knighted by Queen Elizabeth in 1978, was personal friends with Ronald Reagan and Margaret Thatcher. Newsweek magazine put him on its front cover in 1976 with the headline, “King of the Sea.” I think that makes him Aquaman or The Deep, if you’re watching Yeah. Had less sex with octopuses, but apart from that, he was just like The Deep. Tony Kynaston: I’m just trying to find He had a If I can find it quickly He had a quote Here it is here When he passed away in 1991 he lived his entire life by an unyielding personal motto Exercise persistently use [00:27:00] sparingly work diligently That was his motto Cameron: Yeah. Say that again. Exercised persistently. Tony Kynaston: Use sparingly and work diligently Cameron: Oh Pretty good. Yeah. Um, so Bergesen, I mentioned, um, comes out of Norway, another sort of, uh, large shipping enterprise. They combined in 2004. Owned at the time 93% by the Schullman family and 7% by HSBC. Schullman is from Helmut Schullman. He’s an Austrian lawyer and businessman, or was in Hong Kong. Was chairman of the BW Group and a Hong Kong lawyer, uh, or legislator and lawyer. And he comes into the picture because he married Pao’s eldest daughter, Anna Pao Hing [00:28:00] Pao, and, uh, ended up sort of taking over the, the family business. He stayed at the helm until 2014 when he handed over to his son, Andreas Schullman Pao. He’s got a double-barreled last name for both of his grandparents, I think. And, um, one of the reasons they did the NYSE listing in 2024, I think, is that the buyer base for LPG shipping equities is largely American institutional money. Most LPG demand growth is in Asia, but the production growth is in the United States, particularly the Permian Basin in Texas and the Bakken in North Dakota that we talked about back on the Cord episode, which we did a while back. And Cord is in our light portfolio and doing okay. Doing okay. It’s up [00:29:00] 56.6% since we added it in January. That’s not bad for a few months. Tony Kynaston: just before the war Cameron: Just before the war, that’s right. Tony Kynaston: I’m shocked that an oil company went up in value after the Straits of Hormuz closed or Cameron: Gas. Tony Kynaston: US Is Cord gas or is it Cameron: No, I think they’re oil. I think you’re right, yeah. So when natural gas comes out of the ground, propane and butane come with it, which is why the US has become the dominant LPG exporter over the last decade. Tony Kynaston: Mm-hmm Cameron: Uh, so there’s a couple of things to talk about with these guys that is interesting. Um, August 2024, they announced they were buying 12 VLGCs from a Norwegian competitor called Avance Gas for about a billion dollars. Um, and they, it [00:30:00] wasn’t an all cash deal. It was sort of cash and stock deal. So Avance ended up with a big chunk of BW stock. And then they also got a CEO in the process. Um, so the guy who was the CEO of Avance Gas, Christian Sorensen, um, just before this deal went down, had moved from Avance to become the deputy CEO and then the CEO later on at BW. So yeah, you get our CEO, we, we, we get your CEO, we get your ships, you get some stock. I don’t really know, um, how that works, but, uh, it’s not really a, not really a merger, but sort of a, kind of a combining of forces. Anyway, they increased the size of their fleet from 51 [00:31:00] VLGCs to 53 as a result. You know, 53 doesn’t sound like a lot of ships, but apparently it is, uh, a big, a big deal. Interesting too, 22 of their ships are LPG dual fuel, which means they can burn LPG cargo as the ship fuel instead of heavy fuel oil or HFO. So load it and burn it. Apparently it’s a much cleaner ship. Apparently HFO is like one of the worst things, Tony Kynaston: Yeah it’s like below diesel in the in the and um it’s sludge really Yeah Cameron: So these ships, uh, can burn LPG instead, which is interesting. Anyway, uh, there was another guy that came over as part of this deal. Uh, John Fredriksen’s Hemne Holding ended up owning 9.4% of BW. He was the controlling shareholder of Avance Gas, so he got some of the [00:32:00] shares in the deal. I don’t know, it’s all very convoluted, but, um, he’s, I think, the second largest shareholder now. The Schullman-Pao family own 32%. Fredriksen family owns 9.4%. So these are two of the great Norwegian Asian shipping dynasties of the 20th century who now together own about 41% of BW LPG. This is, um, another interesting component of the business. They have a 100% of shipping NPAT dividend policy. Tony Kynaston: Hmm Cameron: The annual report says shipping NPAT is calculated as profit attributable to equity holders of BWLPG minus BWLPG’s share of BWPS’s net profit loss after tax. So the yield numbers look good. They pay out a pretty big dividend. Um, depends on the, you know, the yield depends on the share price [00:33:00] obviously, but at the time of the Q4 release in early March, the annualized yield was about 12.5%. Tony Kynaston: Wow Cameron: pretty strong. Tony Kynaston: Yeah And if the um if the latest oil prices haven’t rolled through in terms of shipping income anyway the next quarter will be even higher Cameron: Depending on the share price, yeah, Tony Kynaston: Hmm Cameron: happens with them. But yeah, the dividend will be higher. Um, so yeah, that’s, it’s directly tied to the spot market and, um, at the moment that’s going bonkers through the roof. The other interesting point about this is about 18% of the group income comes from a division called BWLPG India. So these are Indian flagged, Indian operated, qualifying under India’s self-reliant India [00:34:00] preferential cargo scheme. It’s eight ships, but it means those eight ships can transit Hormuz Tony Kynaston: Ah Cameron: because India, uh, has a friendly deal with Iran. whereas the rest of BW ships are Singapore flagged and don’t get that privilege. So they still have some ships that are able to. I don’t know how they navigate the mines, but, uh. Oh. how do you get around the the mines? Like apparently the strait’s full of mines, so I don’t even know if you’ve. Like do the Iranians know where the mines are? I guess they might have some idea. but yeah, I don’t know. Do, do they– I guess they know where they are. They have them on a map somewhere. They have Apple Maps telling them where they are. Tony Kynaston: They put air tags on them Cameron: Yeah. Tony Kynaston: And they call up Find My Sea Mine It’s an app on their iPhones Cameron: [00:35:00] uh, the flip side of this is they don’t own all of BWLPG India. Um, there’s another company called Mass Capital Shipping that holds about 42% and a residual third party. But they own about 48% of them that it flows through. So what’s going on in the market right now? Uh, as we said, spot rates are crazy, about $300 US per ton for the Houston to Chiba route. Um, hard to know exactly what impact the Hormuz closure is having on BWLPG. As I said, most of their fleet is Singapore flagged. Um, but, you know, some of the things that I could figure out is that the closure forces Asian buyers to source LPG from the US Gulf instead of from the Middle East. So that long haul from the Pacific via the Panama Canal. Canal? Why did I say it like that? Canal. Connect. Now I’m in my head. [00:36:00] Panama Canal is, uh, takes longer, right? So from the Middle East, going from Saudi Arabia to Japan is about, uh, 18 days, I think. To get it from Houston is about 40 days. So you’ve got less ships. It takes more than twice as long to transport it, which is more than double the day rates. Plus you’re paying more expensive day rates. Shipping industry calls this ton miles, total cargo volume times distance. So you’re doubling the length of the voyage and the day rates because there are less ships going through the roof. Yeah, it’s a, it’s a economic nightmare for everybody involved. Tony Kynaston: And Cameron: good though, if you’re the guy selling the ships. Tony Kynaston: the Cameron: Hmm. Tony Kynaston: the export ports for the Gulf are obviously on on the Gulf of America side the Gulf of Mexico side which is the Atlantic Cameron: [00:37:00] Okay. Tony Kynaston: the moment trying to get oil ships and gas ships through you’re forced to go around the um the bottom of South America if you can’t um If you if you’re the hundredth ship in line for the Panama Canal and it’s quicker to go around the you do that But I don’t know if that’s figured into your 40 days but it’s got to add extra days to the trip too Cameron: Just pick him up and carry him. That was your plan for getting across, uh, Saudi Arabia, wasn’t it? Just sort or, Tony Kynaston: Correct Cameron: Just pick him up and carry him. Tony Kynaston: Yeah Cameron: yeah. Easy. Uh, so. Tony Kynaston: Well if if they’re two hundred meters long you just line them up end to end fifty-five of them through you know through the Panama Canal and then you just roll the barrels down from one end to the other Cameron: Like a slippery slide. Why, why, why doesn’t Elon put them on rockets? That’s what I wanna know. He could just put them on BFR rockets and fly them over. Actually, that would be [00:38:00] cool. His rockets are reusable. They can land. Just have a fleet of rockets flying fuel around. Tony Kynaston: That’s that’s entirely feasible yeah Cameron: get Elon on the phone. He’s probably not having a good day since he lost his lawsuit. Tony Kynaston: What do you mean statutes of Cameron: Ah. Tony Kynaston: you Cameron: Yeah. Yeah, Grok told me that was fine. Um, so I went down a little bit of a rabbit hole on LPG because I read their annual report and they s- they, they say, “Cleaner fuels for a better world.” Tony Kynaston: It’s all Cameron: So I. It is all relative. That’s pretty much it. Yes, yes, yes. Um, and it is. You know, LPG is cleaner than a wood stove or HFO ship fuel or the coal-fired industry. Tony Kynaston: Mm-hmm Cameron: clean compared to LNG or renewables or electrification, [00:39:00] but, you know, it’s clean-ish, I guess. Uh, depends on what you’re comparing it to. But a lot of the developing world, Asia, is using much dirtier sources of fuel, so I guess they can get away with it. It’s not really greenwashing. That’s basically it, Tony. That’s, uh, the, the backstory of the business. Nothing more to tell you. I can tell you about how I scored them. Uh, they got a QAV score of 0.16. As I said, it was fairly low down on the list. I had to go down 20, 30 stocks to find it. Luckily, there’s a lot of companies on the list. But, uh, everything else that I looked at, uh, was having a, a bad day. Quality rank is 89, scored for that. Stock rank is 99, scored for that. F score is seven, scored for that. Uh, our IV1 came out at $6.36, and the price was about $21 when I looked at it, so well and truly above our IV1. However, our IV2, our forecast IV, was $26.78, [00:40:00] so scored it for that. Uh, price was not less than book or book plus 30. Did obviously have a three-point uptrend. Also had a new three-point uptrend, so that’s good. We’re catching it as it’s, uh, turning up. Growth over PE was about 0.1, so couldn’t score it for that. But book value growth was positive. It’s about 7.4% year over year for three years. Yield, uh, is definitely, uh, greater than bank deposit rates. The average yield over the last year is about 7%. So not the 12% for the last quarter, but still comfortably above the bank rates, so could score it for that. And, uh, forecast intrinsic value is not greater than twice the price. As I said, it’s, like, 26 bucks, so couldn’t score it for that. Um, and the Pr/OpCaf was 5.41, so not the lowest we’ve seen, but lower than the [00:41:00] seven that we look for. So we ended up with nine out of 13, uh, for our quality score and, uh, yeah, as I said, quality score was 84.6% from our end and came in with a QAV score of 0.16. So their next AGM is on the 28th of May. They’re gonna be voting on a share buyback mandate of up to 10% of the issued shares, which we like to see. That’d be about 334 million at the current price. Good to know that that’s on the table. But that’s basically it, Tony. It’s a relatively, uh, cheap company that has been doing it for a long time in one way, shape, or form. They’re shipping gas around. I don’t think that’s going anywhere. Tony Kynaston: No Cameron: one of the biggest in the biz and, uh, they’re making money. Tony Kynaston: Yeah that they’ve got a high yield I mean that was the thing that came out of my analysis Even when you know you go back over the [00:42:00] years when there wasn’t um problems with the Straits of Hormuz there was still a high yielding stock It’s sort of seven type yield Cameron: Hmm. Tony Kynaston: and they have that payout ratio of a hundred percent of shipping profits So that says to me they think they’ve maximized their fleet They’re not gonna capital to you double the flipping the the shipping fleet which is kind of interesting too I thought Um I guess if they need to raise capital they’ll just go into the market and raise it if they have a, you know, acquisition opportunity or something. But, um, yeah, just interesting that most companies would keep something aside for growth, but this is kind of suggesting that they’re maxed out. Cameron: Or like the Advanced Gas deal, they did it with stock. Tony Kynaston: Yeah. Cameron: cash and stock, but they were able to do a lot of it with stock, so maybe they figure that they can buy stuff with stock if need be. But yeah, if you look at their revenue, 2020, 800 [00:43:00] mil, uh, up to 3.6 billion in, uh, 2025. For some reason, Stockopedia says their 2026 estimate is only 958 million. I didn’t really drill into why that is, but their operating profit, hmm? Tony Kynaston: Sorry. I, I mean, like with all of these stocks at the moment, they, all– it depends what your forecast is for the price of oil really, or, or gas, which Cameron: Yeah, but how’s it gonna go from 3.6 billion to 958 million in the current climate? Tony Kynaston: Es-especially since if they open the straits tomorrow, it’s gonna take months and months and months for the re- the world to return to normal. Cameron: Yeah. Tony Kynaston: Mm. Cameron: I didn’t really drill into why that is. But, um, their operating profit has gone from 282 million in 2020 up to 348 in 2025. Their net profit is about the same actually. It did go up quite a bit in 2023, but it was [00:44:00] 244 million in 2020 and 242 in 2025. Interestingly, that’s forecast as being 400 million next year, but with the revenue dropping by 70%. So that makes no sense. Hmm. Hmm. Uh, but anyway, the numbers look good. There’s nothing really strange or bizarre or worrisome about it. They just are a company that have a lot of big ships and move gas around. So kind of boring, kind of cheap, and, uh, they’re not AI. Uh, that’s probably why they’re cheap. No AI in there whatsoever, but, uh, I added them to our live portfolio yesterday and we’ll see how they go. Tony Kynaston: Very good. Interesting story too if anyone wants to go and read about Mr. Pao. Great, uh, great founder story. Cameron: Yeah. One of the, one of the behemoths of the Hong Kong story in the late 20th century. Tony Kynaston: One of the things I saw was that, uh, [00:45:00] when oil glut happened in the 1970s, I guess it was, um, 1980s, late ’70s, early ’80s, he, um, he sort of sensed it coming and, uh, sold off a lot of his tankers and paid down debt and was really well positioned to, to go through that downturn in the industry. And he started buying up, uh, physical companies on land in Hong Kong and became a big player in Hong Kong and the first Chinese director and eventually vice chairman of the Hong Kong and Shanghai Banking Corporation, HSBC. Cameron: Right. Tony Kynaston: Yeah. Cameron: Who ended up having a big stake in BW. Tony Kynaston: Oh, Cameron: Interesting. Yeah. Okay. I didn’t make that connection. Yeah, I’ve, I’ve read a bit in the past about both Hong Kong and Singapore’s rise in, you know, the last 50 years of the 20th century. Both amazing stories. Like [00:46:00] China’s rise since 2000. You know, the last 25 years of China’s growth is amazing and different scale and all that kind of stuff, obviously. But Hong Kong and Singapore went from these tiny little fishing port backwaters of nothing to incredibly rich and successful islands. Tony Kynaston: Yeah, and largely on the back of one or two people or a family, um, and on the back of setting themselves up as financial hubs, uh, with low tax rates Cameron: Hmm. Tony Kynaston: Because as you say, it could have been Malaysia, it could have been, um, India, it could have been any number of probably a hundred areas in that Asian that, uh, could have gone ahead as mu– like Hong Kong and India did, uh, and sorry, um, Singapore did, they did it. Cameron: And Singapore did it basically as a, under a dictatorship Tony Kynaston: Hmm. Cameron: run by a single guy [00:47:00] who the West loved. He was adored around the West, even though he ran a pretty fierce, you know, not taking any prisoners dictatorship in Singapore. But as, uh, Hyman Roth says in The Godfather Part II, “Hyman Roth always made money for his partners.” Tony Kynaston: Yeah, well, I had a– I’ve had a number of people who went across to Singapore for work, um, with Shell and with other companies. Uh, yeah, that’s pretty true. They made money in Singapore, largely for tax reasons, but was a, a Western trading hub in that Asian region, region. Cameron: Mm. Tony Kynaston: they had good lifestyles. I’d, I’d ask them, “What do you think of the, of the family running things?” And they’d say, “Don’t have much to do with them. They stay out of our way. We stay out of their way. But hey, the place is clean and tidy and there’s no, no lawlessness, so it’s great.” Cameron: [00:48:00] Mm. I read a good book by Graham Allison a few years ago. He, um, did a lot of interviews with Lee Kuan Yew and, um, you know, wrote a couple of books about him and his style actually. And he, Graham Allison, funnily enough, is getting a lot of attention this week because he’s the guy that coined the term, uh, that’s been getting a lot of media since Trump met with, um, Tony Kynaston: Is Cameron: Jinping this week. The, um, what’s it, the Athenian general, um, term? Tony Kynaston: Peloponnesian, uh, Cameron: Yeah. Tony Kynaston: uh, not Thermopolis. Thru- Cameron: Thucydides trap. Yeah, the Thucydides trap. It was Graham Allison that coined that term, and I think he coined it, um, based on [00:49:00] something that Lee Kuan Yew said about China’s rise and how America would eventually react to China’s rise as a challenging power. Um, but anyway, yeah, really. But just the, the, reading about Lee Kuan Yew and his admiration for China, and particularly, you know, the way that China ran things for thousands of years by getting the smartest people in the country and ge- and putting them in the government. So you w- you had a government run by the smartest, not the most charismatic, um- And then after Deng Xiaoping took over China, he went and met with Lee Kuan Yew and figured out how China should relearn those lessons Tony Kynaston: Yep. Cameron: back from Singapore. So it went backwards and forwards, the intellectual trading, I guess, of how to quickly build a [00:50:00] very, very successful country. Tony Kynaston: right. Pity we couldn’t do that here. Cameron: Isn’t it? Yeah. Yeah. What are you saying? All right. That’s it for QAV America this week, Tony. Have a good week. Tony Kynaston: Thank you. You too. PREVIOUS PULLED PORKS Here’s the performance of the “pulled porks [https://docs.google.com/spreadsheets/d/16WHwMalQodhxUO9h1T-7suVtfwjrXq057fFHhcLXFWk/edit?gid=0#gid=0]” (eg deep dives) we’ve done on the show in the past.