Basics: How To Buy Shares

Bryce: [00:01:38] Hello, Equity Mates, and welcome to episode number four. [00:01:40][2.5]

Alec: [00:01:43] Thanks for speaking with us. [00:01:45][2.1]

Bryce: [00:01:45] We're going to kick off straight into some news. I guess the big news of today was that the ASX Australian Stock Exchange went down one point six per cent on ninety point one basis points, which is the first time in 161 days we've seen the stock market fall over one percent. Now, this is pretty big news. It's a pretty big drop. They say that the reason that it occurred is because of what went on in the US markets overnight. We saw a pretty big drop in the US stocks around about the same in terms of percentage one and a half percent. And that came from the political atmosphere at the moment. Trump and his inaction, a lot of chatter about the FBI getting getting involved [00:02:24][39.1]

Alec: [00:02:25] in the chances of his health care reforms are going to go through. Interest rates went up, which we'll touch on in a little bit. We should explain. So when we started, the market fell one point six percent. Essentially, what that means is that the total value of all the share prices on the market fell to one point six percent. Yeah. So whenever we talk about something falling, a percentage, that that's what I mean. [00:02:42][17.4]

Bryce: [00:02:43] So, yeah, the heavyweights lost value today. [00:02:46][2.9]

Alec: [00:02:46] So quickly. What does that mean? Like why should we care? [00:02:49][2.3]

Bryce: [00:02:49] Well, firstly, it's an indication that there's a bit of uncertainty in the market at the moment [00:02:53][4.3]

Alec: [00:02:54] and we've had a great run that might be coming [00:02:56][1.8]

Bryce: [00:02:56] to an end. Yes. And this plays into what a lot of people are starting to say about the market being overvalued. And this could be the beginning of what we see trend in downhill. It's also a good opportunity to start taking a look at some stocks that you might be interested that were a bit expensive, but now could be coming to the table. [00:03:15][18.5]

Alec: [00:03:15] Yeah, and one day that doesn't mean that a trend it's just one day like it might pick up tomorrow, but it's something to keep an eye on. What else is on the news? As we just said before, interest rates in America went up, so they went up to one percent. It's still extremely low for those just to give a very basic definition of interest rates are the amount of extra money that you pay them, like a loan or money from the bank. And banks get their money from a central bank. In America, it's the Federal Reserve. In Australia, it's the RBA, the Reserve Bank of Australia, and they pay interest on those rates. So the rate that banks borrow that one up to one percent in America, in Australia, interest rates stayed flat at one 1/2 percent. [00:04:00][44.5]

Bryce: [00:04:01] So was that a concern or is it a concern if the interest rates go? [00:04:04][3.5]

Alec: [00:04:04] So it's not it's not a huge concern. It just does change what's happening. So for the last five to eight years, we've had over eight years, we've had historically low interest rates in Europe and Japan even have negative interest rates. So that's why they're so desperate to get money into the economy that the central bank pays the banks to borrow money from them, to pump money into the economy and try and stimulate demand in Australia. And America will not have negative interest rates, but we're at historic lows. That's quite bad for the banks balance sheets. It's tough for banks to make money in such a low interest rate environment, but it's great for homeowners. We've got cheap mortgages and what it also does is it makes money really cheap to borrow. So you say companies take on a lot of debt and interest rates environment that the low interest rate environment and you say investors take out a loan to invest in the market. And that's part of the reason why we have such a bubble in equities or in shares at the moment. [00:04:55][50.4]

Bryce: [00:04:55] Yeah, it's good to know as well that the Federal Reserve in America have indicated that there are going to be a number four interest rate hikes this year. Yeah, so that's going to be interesting to see what effect that has to their economy and also for our economy. [00:05:09][13.6]

Alec: [00:05:09] So I guess just quickly, two things that you should worry about with interest rates. First of all, the cost of housing that will change as interest rates change. So if an investor has a mortgage or getting a mortgage, as the interest rates changes the price you pay, your repayments will change. So I started kicking off. But secondly, for says, it means that companies will get more expensive to service. So, you know, that high three percent interest rate on that debt and all of a sudden the interest rate, that's just more money out of their pocket. So that gets more expensive. Companies with a lot of debt suddenly might struggle to pay that back. [00:05:42][32.7]

Bryce: [00:05:43] Awesome. I guess in the news, there's been a lot about Australia's energy crisis. We're running out of energy. So I say, yeah, so what does this mean? [00:05:52][9.1]

Alec: [00:05:53] So not too much for investors at the moment. It obviously there'll be some winners and losers. And everyone's known that the transition from fossil fuels to renewable energies would produce winners and losers. The obvious losers would be the traditional miners and the traditional power companies are the winners, obviously, would be the you know, the renewable energy companies, the testers of the world and the like. What these energy prices mean for investors isn't a whole lot these days unless you're invested in some of these renewables companies or you're invested in lithium ion. Is lithium being the component in batteries? Don't worry about too much. We're hoping here at Equity Mates that Tesla comes out to Australia and we get to get to get on board. I got to say. Close and personal, but at this stage, just something interesting to keep an eye on, to see the transition and the winners and losers that emerge from it. [00:06:45][52.5]

Bryce: [00:06:45] Yes, a little like agriculture and good little growth industry. [00:06:48][2.6]

Alec: [00:06:49] Yeah, definitely. [00:06:49][0.4]

Bryce: [00:06:50] So got on on that. Also, trade related. There was talk between Australia and Indonesia in terms of a new trade deal. Yeah. And so this is actually pretty significant for Australia. We're pretty well positioned geographically in the Asian Asian region. But this especially being Australia, being an agricultural country and contributing quite significantly to our GDP, this trade deal is quite significant. [00:07:21][31.1]

Alec: [00:07:22] Australia and Indonesia obviously are extremely close and a lot of Australian investors are looking at agriculture as the next big boon for Australia. You know, there's talk of Australia becoming a food bowl of Asia. And we've seen a huge number of really like big money Australians. You know, that Gina Rinehart, the Kerry Stokes, the Gerry Harvey of the world, all buying a lot of agricultural assets, especially in the north of Australia, which are in great position to export to Asia. What this Australia Indonesia trade deal means is a little bit more certainty for investors, especially in the cattle industry. So we saw a couple of years ago when Julia Gillard was in power, the ban on live cattle exports. That wasn't great news for Australian cattle exporters as you'd imagine this Australia Indonesia trade deal, which is just in principle, in principle agreement at the moment, we're hoping to get a trade deal done by the end of the year. It should mean good news for agricultural exporters. We've already seen sugar tariffs dropped from eight to five percent. Tariffs are essentially a tax on imports to a country. So Indonesian distributors that want to sell Australian sugar have to pay 8% tax to because it was Australian sugar, now only Afterpay five per cent below the tariff, the better it is for Australian agriculture. So that's another thing to keep an eye on. Keep your ear to the ground about Joko Widodo and Malcolm Turnbull meeting again and have a look at how that affects agricultural stocks. [00:08:48][85.5]

Bryce: [00:08:48] Yeah, very interesting. And finish news of the week. We have a little fun piece for us. We found that there's been a huge surge in bee related theft in New Zealand. [00:08:57][8.6]

Alec: [00:08:57] Yeah, and that's the strange one. Who wants to steal bees that sting. So why does this relate to investing? I guess is the question. And the reason that people are now stealing bees is because Chinese demand for honey and especially Manuka honey. So Manuka honey has tripled in value since 2012 and now it goes for one hundred and thirty five dollars a kilo in China. It's crazy. New Zealand exports three hundred fifteen million dollars a year of it to China. So if you're an enterprising thief out there, you're looking to make a quick buck. Go find a beehive. [00:09:30][32.9]

Bryce: [00:09:31] I guess you can invest in Manuka Honey as well. Last year it had its run in a big way, so I would look carefully at investing in that company. At the moment, we're seeing a lot of companies related to Chinese demand go down. The Gold Coast are worth having a look just to see how it's trended. But be very careful. [00:09:48][17.7]

Alec: [00:09:49] The department intended the honey producer in Australia is Capilano. Yeah, I've got a great run with the share price recently, but they don't have Australian honey market. So I mean, they don't want to go down if you are interested in honey. But yeah, not not the best. [00:10:05][15.7]

Bryce: [00:10:05] Awesome. So moving on from the news, we're going to jump into our Basics 101, we've had some feedback since our last episodes. That's something that we should discuss and that you guys have wanted us to discuss is how to actually buy a share. And, you know, it didn't slip our minds for a bit when we thought about how we're going to do these segments. So that's what this is about. How can you buy a share? What steps are involved in buying a share? Who do you buy it through? Does it cost anything? [00:10:37][32.5]

Alec: [00:10:38] Now, forget all those movie images of people on a trading floor yelling into phones and holding their hands up. We've got the Internet now. We don't have to worry about it. [00:10:46][7.8]

Bryce: [00:10:47] Yeah, it's I guess the first point that I want to make is it is surprisingly easy to buy stocks. There's nothing that there's nothing really complicated about it. Once you understand the process, once you get your broker or your brokerage platform set up and established with a bit of cash in, that it's as easy as online shopping. [00:11:07][20.2]

Alec: [00:11:08] Yeah, yeah. So let's let's start at the very beginning back to the very basics. You find a company that you're person that was the first in the [00:11:16][8.7]

Bryce: [00:11:17] world to buy a stock. I need to know what the company's code is. So every company has usually a three letter card attached to them on the ASX. So, for example, if I was to buy one or one to buy Commonwealth Bank, it has a code CBA. [00:11:31][13.8]

[00:11:32] Or if you want to buy Australian Agricultural Company, AAC. I would say so if you don't know what the code is, all those Google company name ASX and you'll be able to say [00:11:42][10.5]

Bryce: [00:11:42] very straightforward. So once you've got the code, you then three brokerage platform type [00:11:48][5.5]

Alec: [00:11:48] in the code. Now let's just let's explain the brokerage portfolio. [00:11:52][3.5]

Bryce: [00:11:53] OK, so you need to be able to buy your shares through someone you don't directly go to the company and send them an email or log on to their website and say, hey, here's 500 bucks. I'd like to buy one hundred of your of your shares. [00:12:05][12.6]

Alec: [00:12:05] Well, you don't find someone who already owns the shares and ask them if you can buy some of their shares. Know what these brokerage platforms do is do that for you. They enter the market of buyers and sellers and they take your order and match you with a seller and execute the order for them. You don't need to worry too much about the ins and outs of how that happens. All you need to know is that there are a bunch of different brokerage platforms out there, all with the different pros and cons and all the different prices. [00:12:32][26.4]

Bryce: [00:12:32] Yeah. So the major consideration with brokerage platforms is usually the cost of brokerage. Every time you buy a stock and sell a stock, you are going to have to pay some sort of commission or brokerage fee depending on the value of your purchase. So, for example, brokerage platforms come from places like Commonwealth Bank, ANZ, Macquarie, all the big four banks offer a brokerage platform. CommBank is CommSec, NAB is NAB trade, ANZ is ETrade, although it's now going to become Sansei. And then Westpac have an online trading platform as well. There are a number of other smaller financial firms that offer brokerage platforms. The main thing to look at is the brokerage fees. For example, CommSec charged nineteen ninety five for every transaction that you do, whereas exaggerating charges Dollars. [00:13:24][51.6]

Alec: [00:13:24] Yeah, yeah. So that's what you've got to be a discerning investor because you know, if we're investing in five hundred or a thousand dollar amounts, the difference between those brokerage and nineteen point ninety five brokerage, I mean, it's significant adds up. It does. [00:13:37][12.6]

Bryce: [00:13:38] And that's one of the main goals of investing, is to get your frictional costs low. You don't want to lose money. 20 Dollars here, 40 Dollars the 60 votes. All of a sudden you spent 200 bucks on brokerage, [00:13:47][9.3]

Alec: [00:13:48] because if you're investing with CommSec and you buy any amount of shit, you instantly got to make that brokerage back just to get back to level. So insane that ironically enough, I actually do use CommSec. I just for me, it was easier with the Commonwealth Bank customer. I like being able to instantly transfer money into my investing account, instantly transfer out dividends. So that convenience is what attracted me to it. I mean, in hindsight, I don't know if I'd make the same decision again. But now, I mean, it's yeah. [00:14:17][29.5]

Bryce: [00:14:18] Interestingly, I also am with CommSec for different reasons to Ren and we'll discuss those reasons in a later episode. But I would encourage you guys to think strongly about who you brokerage broke through purely based on their brokerage cost, because if you're not doing high volume trades, it's it really adds up. So once you've found your brokerage platform and we encourage you to sign up to as many of these platforms, they're free to sign up for you to sign up. [00:14:45][26.8]

Alec: [00:14:45] You don't have to trade. [00:14:45][0.4]

Bryce: [00:14:46] You don't have to trade. You can play around. You can stop creating watch lists. I give you an amount of research as well [00:14:52][6.8]

Alec: [00:14:53] as nails, and they all have different things that they tout. So that concept is pretty proud of the advice that it gives. And part me, we don't get to do it now, but it's partnered with a group that gives share recommendations Sansei say or you know, they're pretty. Barnes bought his brokerage, so it just depends what sort of appeals to you, what's most convenient for you, but really, at the end of the day, all of them trade on the same market. Like what are you trading the same say or Comsec, the buyers and sellers of the shares that you're going to be buying and selling from and which are going to be the same people. They're all paper trading on the ASX. It doesn't really matter for your broker. That won't make a difference in terms of the actual price you get or anything like that. [00:15:32][39.7]

Bryce: [00:15:33] So I've got my Commsec account. I know that I want to buy it. Commonwealth Bank with the ASX code CBA. So I log on type in CBA that pop up and take me to the page where it's going to show me the current price of the share. Now I know what budget I have so I can either put in that I want to buy a quantity of shares or I can either tell the system that I want to spend a thousand dollars and the system will work out either. OK, Bryce, you have a thousand dollars, you can buy X amount of shares or Bryce you want to buy 100 shares. It's going to cost you X amount of dollars the way that you buy because you can either buy a market price, which is set exactly as the name suggests by the market. You have no real control over the price at which you buy it because it is determined by how many sellers are out there and the demand, which we will discuss later. The other way you can purchase it by setting a market price. So let's say, for example, Commonwealth eighty four point eighty five cents. I can talk and I want to buy one hundred Commonwealth, eighty four point eighty five, and then that water will sit in there. There's no guarantee that you will buy the stock at eighty four point eighty five. You will only get those shares if there is someone out there willing to sell a hundred CBA shares at eighty four. [00:16:50][77.3]

Alec: [00:16:51] How many or how [00:16:52][1.0]

Bryce: [00:16:52] many should you want? I want to buy will execute. It's also very important to note that if you put an order in, it's not necessarily guaranteed that you will get all of your shares at that price. As soon as you click the button, you still need people there willing to sell. So I could put an order in for a thousand shares at eight dollars and I might get eight hundred shares that I Dollars. But the next 200 I might get eight dollars and two cents. So that's just something to be aware of. Don't freak out if you say that on your trading account, because that's just the nature of the market and the nature of retailing investing at this level. So that's pretty much it in a nutshell. Once you put the order through, obviously it will then go into portfolio. These brokerage platforms have a beautiful way of presenting your portfolio to you. They show you your property green. I say how much you've lost in Ren very easy to determine, very easy to log on every day, either celebrate your wins or freak out about your losses. [00:17:46][53.8]

Alec: [00:17:46] So although and although it is easy, I would highly recommend you don't do that. I don't know. It's not worth worrying about how much money you might jump on every day. Yeah. Like, oh my God, I've made three hundred bucks today. Oh no I lost four hundred. [00:18:01][14.7]

Bryce: [00:18:01] Yeah. Yeah. Oh my [00:18:02][1.0]

Alec: [00:18:02] God. I made three bucks. Yeah, yeah. It's all you'll do is just lose your hair and get the stressed out about it. Like I am a firm believer and you know, let let the market run its course, wait it out if you mind. If you pick the right stocks or you backing in the right investment funds over the long term, you should do it right. So don't worry about it. If a week after you bought your first shares, let down the share price is down a dollar like you're in it for the long haul, this isn't the way to make a quick buck. If you want to make a quick buck, buy a lottery ticket. Oh, just just wait it out. [00:18:34][31.2]

Bryce: [00:18:34] So I hope that covers the basics of how to actually buy a stock. As we say, jump on line. If you with Commonwealth, if you're with one of the big four's, it's probably easy. Easiest just to start with then, because it'll be linked to you day to day account and you can transfer a bit of money easily if you want and you will already be signed up with them in terms of your ID and that sort of stuff. Otherwise, very simple process for all of them. Won't take take it very long. They're all free. A lot of them do have signed up bonuses and that sort of stuff. So have a look at that as well. But yeah, jump in and have a look. It's it's not rocket science. It's very easy. And it's definitely something that you're going to need to do if you want to start investing so. [00:19:11][37.5]

Alec: [00:19:12] Well, yeah, it's not it's the way everyone invests every retail investor, you know, people like us who just want to double invest these days. Don't don't worry about private brokers. Don't worry about anything like that. You seriously don't need to. Once again, technology has come in and just made it super easy for us to get it going. Yeah. [00:19:32][19.7]

Bryce: [00:19:32] So if you have any questions around that, then please have to stop. This came from one of our listeners. Now, I'm very interested in understanding one of this basic one and one. Next week we'll be discussing where to find stocks or just information or just information about stocks, which is another question that we've had from some of our listeners. So hit us up. We're very keen to know what you guys think and would like to hear. [00:19:55][22.6]

Alec: [00:21:51] All right. Well, hope you all got something out of that basics one on one. We're going to be bringing you more of them in coming weeks, so make sure you stay tuned. But now, as always, we're going to do our Stock of the Week, the big stuff, and we're putting our money where our mouth is and literally [00:22:05][14.2]

Bryce: [00:22:10] eating money, you [00:22:11][0.7]

Alec: [00:22:11] know, invested in trouble because [00:22:17][5.6]

Bryce: [00:22:17] of a big put out. [00:22:18][1.0]

Alec: [00:22:19] Yeah, but not just leave it here. So the Stock of the week is called PM Capital Global Opportunities Fund, ASX Code PGF. [00:22:28][8.8]

Bryce: [00:22:29] Yeah, the three letter ASX code [00:22:31][1.5]

Alec: [00:22:31] for the ASX code, as we just discussed so far, [00:22:33][2.3]

Bryce: [00:22:33] and type that in commsec. I'll talk to PGF and up will pop on Capital Global Opportunities Fund [00:22:39][5.9]

Alec: [00:22:40] and their current price now where we're reporting this on the 22nd of March and their current share price is 98 cents. So that's the price. We're going to lock in on our website, make sure we're going to check it out. We've got our first stock up that gateway. It's up six cents, so we're off to a good start. All right. But if so, why is it so? It is a listed investment company. Now, if you want to get a bit more understanding about what this investment companies are, listen to Episode The of Equity Mates. We talked a bit about Elyse's ETFs index funds, but essentially in a nutshell, it listed investment company is essentially a company that takes all of its money and invests them in shares. And so you can buy this company as you would by any other company. And that business operation is investing in the market as Qantas's business operation is flying planes or Commonwealth banks and business operation is being a bank. So they make money from the back, the rising share price and from dividends. And I knew as an investor make money from the profits that that listed investment company makes. [00:23:49][69.4]

Bryce: [00:23:50] Yeah, they also are the way we would make money as investors, not only through the capital growth of our stocks, but fortunately he also pay a little dividend. Yeah. So for every stock that you own that we own, we get paid a proportion of their profits and that comes to us in the form of cash or it can get reinvested back into some stock. So it's a nice little bump every six months that they pay us. So something to consider if you are looking at prices that they do pay a dividend. [00:24:21][31.0]

Alec: [00:24:22] Yeah, a lot of a lot of Australian companies do pay a dividend. We'll do a basic one on dividends, what to look for, what they are, why you get them. So I guess the first thing we should talk about when we're talking about this stock is why we chose it. [00:24:35][13.5]

Bryce: [00:24:35] Well, the reason we chose it was because when we first did our interview series, we interviewed Andrew Brown, who was the executive director of East Seventy Two, which is a listed investment company. And one of his hot stock tips to us was PGF. [00:24:53][17.2]

Alec: [00:24:53] Yeah. Now you can listen to that full interview in your podcast provider right now. It should be released. We've made it a two parter because it's a pretty long interview. So check out episodes five and six of Equity Mates. It should be released at the same time as this one, but that's all the stuff we wanted to say. So there's definitely pride to be taken in doing your own research and picking your own winning stocks. Don't get too strong. We take a lot of pride in picking our own stocks. And, you know, you get a little bit of elation when you were right. Yeah, but at the end of the day, investing is a results business. We worry about is the amount of money that we've made and the amount of our superannuation has increased. It doesn't matter how we found those ideas. It doesn't matter who we heard those stock tips from. At the end of the day, all you want to do is just make the right calls. And that's all we really care about. Yeah, we're not in competition with anybody. [00:25:50][57.0]

Bryce: [00:25:51] So we're trying to if we're embarrassed about the fact that we've taken a stock pick from someone else or if we're claiming that this stock because our own just so we can be highly Piemonte egotistic about it, then we're doing it for the wrong reasons. So there's nothing bad about taking these tips from other people. And then the next step, though, is to actually look at these stocks, that you might get tips from other people or read in the newspaper or see online. And then you need to make your own decision about the stock, which is what we have done Deep Dive. We've taken what Andrew has said and we've applied it to our circumstance. And we think that it's something that we want to add to our portfolio, [00:26:30][39.3]

Alec: [00:26:31] because at the end of the day, just as I was saying, no one cares how we found our stocks. No, we can't also blame anyone else. If PGF tanks and we lose all our money, there's no use turning around and saying, well, Andrew Brown told us about it, so blame him. Or all that really matters is that we lost all our money. So we like we will take information from anyone and anyone and everyone. There's just too much information out there for us to read it all ourselves. We don't want to dedicate that much of our time to trying to write everything as well. So which way we'll take information from everyone will take advice from everyone. But at the end of the day, the decision has to be yours and has to be ours because we're the ones who are investing for our futures and there's no one to blame but yourself. So get as much information as you can from as many sources as you can, but then prosecute vigorously yourself and come to your own conclusions about [00:27:21][50.1]

Bryce: [00:27:21] it, which is what we've done a little bit about the company. As Ren said, it's a listed investment company and that means that it has invested funds across the world. It's got an exposure of around 40 international companies, and it also gives you exposure to currency as well, most likely will predominantly in the US currency and the euro. So if you want a bit of exposure, it's a good way to do a few notable, notable industries that they invest in are global brewing, domestic banking, gaming, pharmaceuticals and some service monopolies. So it's a really good way of getting access to a number of industries without increasing your exposure. So that's one reason we like PGF Ren. What's another? [00:28:08][46.9]

Alec: [00:28:09] So another reason why this company is that it's trading below net tangible asset value, which is why now net tangible asset value, it's an important metric of value investing is essentially what it means is that when you look at company and you just look at the tangible assets it holds, so you know that things like its stock on hand, its buildings, whatever equipment, equipment, whatever physical goods it has, what that value is less all of its debts and other liabilities. So essentially what you're left with is the figure of if this company stopped doing business today and sold everything it owned, what would the investors get back now for a listed investment company like this? All of its net, all its tangible assets are shares in other companies. So essentially what that means is that you look at the amount of shares it holds based on their current market value and then minus any of its debts. And then what you're left with is its net tangible asset value. And then what we've done here is you divide that per share. And so, as we said before, we're buying a share for 98 cents. That's what it's currently trading at. That's its market. That's its market value. But its net tangible asset value is a dollar and nine cents. Yeah. So what that means is if you wanted to get all the shares that this listed investment company held on the market, you wouldn't have to pay a dollar, nine cents a share for Dollars. But if you buy the listed investment company, you've got it for 99 cents. [00:29:35][85.1]

Bryce: [00:29:35] So you're essentially saying that based on net tangible asset value of the company, we can buy this company at a discount to its value? Exactly, yeah. So the market is valuing it at ninety eight cents, but we can buy it at a discount [00:29:49][14.0]

Alec: [00:29:50] to what [00:29:50][0.1]

Bryce: [00:29:51] the book or the national asset [00:29:53][1.9]

Alec: [00:29:53] value. So I guess I guess a good analogy for this would be let's take a company that everyone understands and get rid of all of the intangible assets that's like that trademark and intellectual property that could get rid of all of that. All right. Let's say that. One hundred million dollars worth of planes and they own these planes, that physical and that's all the assets, same one hundred million dollars worth of planes that have ten million dollars in debt. And so you subtract that that makes them less tangible. Asset value is 19 million dollars, because if the company stopped operation tomorrow, they just stopped flying. Stop taking passengers and they sold all those planes. Then the tide of the debt, what would be left is 90 million dollars to be distributed to shareholders. Now, let's say that they had 10 million, 10 million shares. And so if you divide the 90 million dollars in net net tangible assets by the 10 million shares, that means net tangible assets per share is nine dollars. Now, if that if Qantas is trading at eight Dollars, that means you can pay those to get a share in Qantas. And if they fold it tomorrow, you would get nine dollars back. So essentially, you're getting a discount on what the companies want. And so that's a really important metric for value investors to look at a company and see if they can get a discount. [00:30:58][65.1]

Bryce: [00:30:59] One thing to remember or to consider with net tangible asset value and comparing it to the market value is that there's still no guarantee that your share price will reach. Oh, absolutely. Net tangible asset value. So we might sit back and say that, OK, so net tangible asset is a dollar twenty eight per share and we can buy it for 90 cents and I think that's a great bargain. Let's jump in. I'm going to make X amount of money when the stock goes up. That's not how it works. It's just a really good way for us to value a company so that we can make a much more informed decision about what we're willing to pay for that company. So just keep that in mind. [00:31:37][38.0]

Alec: [00:31:37] So that's one reason we like it. But this is a problem, an important point to stress that most listed investment companies trade below their net tangible asset value. So that's not a that's not enough of a reason alone to like it. Now, the reason most of them traded below their net tangible asset value is that you have no you have no say as a shareholder over when they sell the shares. So it's all organelle. Well, to say right now, we pay 98 cents a share and we get a dollar and nine a dollar nine with a value back. But we have no say when they sell those shares. So if the market takes the share, the net tangible asset value will go down. Ways investors can't be like selling. Give us the money. So the other reason and the really important reason we like to share is because we like the people running the fund. [00:32:21][44.1]

Bryce: [00:32:22] Management is very important when it comes to buying into listed investment companies because at the end of the day, you're putting your money in the trust that the people running the show are one smarter than you are and have more expertise and knowledge than what you have in investing. And to that, they can then allocate your capital in ways that are going to maximise the return, hopefully above what the market can do. So you need to look quite closely at the management and how they run the company, both both in terms of distribution of capital and profits and dividend payments and also in terms of their investment strategy. A lot of these listed investment companies hold different investment strategies because it's their way of selling themselves to the market so that they can get your money in. So if you are a value based investor, then obviously we suggest trying to find ways to invest in companies that hold the same philosophy so that you can at least understand what drives them to purchase stock in companies that, you know, there's growth based on this small cap, large cap index, that sort of stuff. So have a look at the management and their style is something. And that's and and that's why we like Piguet. [00:33:33][70.4]

Alec: [00:33:33] And on their website, they have they'll always have, like, investor presentations. A lot of them will do monthly reports or at least quarterly or half yearly reports. So you can get a heap of information on the philosophy philosophy. A lot of them will talk about some of the stocks they hold and some of the ones that they make money on, obviously take it with a grain of salt like that. They put that information up there, a lot of it up there to sell you on their funds. But it's a really good starting point to learn about them, their philosophies and their ideas. Now, the reason we like Paul Moore in particular is because he has a really strong track record as a value investor. His whole philosophy is trying to find undervalued companies and buy as much of them as you can before the market realises that value. That's something that we think has a lot of merit as you're investing strategy. Now, the one caveat is doing to be up for the long term value investing isn't a strategy that's going to pay off by the end of the year. [00:34:28][54.4]

Bryce: [00:34:28] Know what he said on the website? And if you were to invest directly into that fund, then they suggest that it's a minimum seven year holding period. That just gives you an idea that if you were to invest in these guys at market level, then, you know, you shouldn't be expecting huge returns within 12, 24, 36 months. If this is this style of investing and investing in these companies is a very long term investment strategy. And right back at the start of this whole podcast series, I said that I had started my investing with a company called Bacani, which is a listing investment company. I still hold them today, almost 10 years later. And they have been one of my best performance because over time they do do well. Yeah, so. That's in a nutshell. Have a look online also, it's a we chose this because it's a good way to introduce the idea of listed investment companies and the concept of net tangible assets. So have a bit of a read online jump on to our Web site, as well as a bit of a clustering opens up about PGT. But think about what you might think your investing style would be and try and have a play around with some companies that sort of follow that investment style, as well as a really good way of learning about what stocks these sort of companies look for. And I can give you an idea of some stocks to sort of start researching yourself. [00:35:42][73.6]

Alec: [00:35:43] So that almost does it for this episode of Equity Mates. Yeah. Before we go, we just want to talk to you about what else we've released alongside this episode. Yeah, and we've referenced a couple of times throughout the show tonight, but we sat down with a really accomplished investor, someone who's worked in investing in London, in New York, and he's now based in Sydney, who runs his own listed investment company. It's called East 72 Holdings. Give it a Google. He's absolutely crushed the market this year. He's already made 50 percent returns in this financial year alone. So he's someone who is really knowledgeable and we really appreciate him giving us the time. His name is Andrew Brown. And what we've done for you all is we've split the interview up into two parts. The first half of the interview, episode five, Crossfade is talked about his investing journey, some advice he would have the new investors. And it's a great way to sort of get some more information from people who are just starting their journey and looking to learn. And then episode six in the podcast Feed, we have a chat to him about some of the things, some of his thoughts on them, on the Australian market and international markets. Currently, he talks about some of the positions he holds, including a massive short position on Apple. So if you own an iPhone, are you're interested in how Apple is going? An interesting thing to listen to his take on the company and where they're going. But, yeah, look, we hope to bring more of these episodes in the future where we talk to some accomplished investors, you know, a lot more than us and can break down the world of investing a bit better than us. But give it a listen and we really enjoy it. [00:37:23][99.6]

Bryce: [00:37:23] Yeah, it's a great opportunity for all of it was the level of investors who are listening to the show to at least get something out of it. He addresses those that have even started and then give some tips for those that are well and truly in. He lets us know some of his favourite books. He gives us some hot tips of what stocks he has on his radar. So just a fantastic interview. We really encourage you to listen to the whole thing. It should it will be up at the same time as as these episodes are. So, yeah, we encourage you to get around it. Also, two things we also want to mention is that we had some feedback come through that a lot of the terminology that we're using is going over some people's heads, which is totally understandable. And so what we've done is we've created a glossary on our website that if you do hear of a term, then most likely we've put it on to our story so you can jump on and have a look and have a better understanding of what we're talking about. [00:38:11][48.3]

Alec: [00:38:12] And if we use a term or you read a term when you're doing your own research that isn't in the glossary, send us message on Facebook, Twitter, our email. However, get in contact with us and we'll put it up and do our best to define it for you. [00:38:24][11.9]

Bryce: [00:38:24] Yeah. So to wrap up excited for this one to say a massive thanks to everyone as well for giving us both positive and constructive feedback from our launch almost over two weeks ago. Now, we've had some really positive and, as I said, constructive feedback, and it's really given us the confidence and motivation to continue forward. So keep that up. We really love knowing that you guys are there behind us. [00:38:49][24.9]

Bryce: [00:38:56] but yeah, please subscribe online, get some comments and write us as well. It really helps us. And hopefully in the end, it will help you guys as well. Yeah. So that's a wrap, guys. Thanks for listening. And as I said, jump on. Listen to Andrew Brown, episode five and six, and we will talk to you soon. [00:38:56][0.0]

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