Buy or Sell: 10 stocks with Adam Keily & Owen Rask

Bryce: [00:00:15] Hey, equity mates, we are excited to bring you the next episode of Buy or Sell with Adam Keily. But before we jump in, just a reminder that while we are licensed, we are not aware of your personal circumstances. Any information on this show is for education and entertainment purposes only. Any advice is general.

Adam: [00:00:46] Hello and welcome, all. Welcome back to a little place we like to call the no holds barred. With me, Adam, host of Comedian Versus Economist podcast and widely regarded as one of the simplest minds in finance. Each week, I'm joined by an actual expert, though, to educate me and hopefully you on how they're thinking about stocks and the stocks they're thinking about. It's rapid fire, though, Buy or sell. We're going to rip through as many stocks as we can in the time we've got, and we'll put our money where our mouth is tracking each stock on the equity markets website so you can see how things pan out good, bad or otherwise. And a reminder, this isn't a deep dive, but hopefully it gets you thinking you can continue the journey on the equity markets website. There's plenty of resources there. You'll find the tracker for this show along with the Find a Company page where you can get more info on all of the companies that we cover on this show. So on with it. And today I am thrilled to be joined by Owen Rask, Founder and Chief Investment Officer at Rask Group. Welcome, Owen. 

Owen: [00:01:45] Thanks, Adam. Thanks for having me. My pleasure to be here. 

Adam: [00:01:47] Thrilled to have you here. Hey, before we get started, I want you to relax. Settle in. We are coming to you, of course, from the no holds barred, the most stocked bar in the world. And I'd like to offer you a drink from our phone map. Hey, what could I get for you? 

Owen: [00:02:04] Well, Human says you can't have a coffee after 1 p.m.. And it's at the time of recording. It's just before 1 p.m.. So I would sneak in a coffee. A snack would go as soy cappuccino saying that I'm from Melbourne. Hmm. I'm what, Nearly middle aged male in a sense that that's what I'd be doing. 

Adam: [00:02:21] I did see on your website, actually, you'd list your favourite coffee places all over Melbourne. So something tells me you're a bit of a coffee fanatic, perhaps? 

Owen: [00:02:29] Yeah, that's it. We've done a lot of interviews with coffee shop owners, roasters and things like this on some of our podcasts as well. From Melbourne we don't have much, so we go with sporting and coffee. And so you've got to pick one. And my bet always with finding the best coffee. So that's all available on the website. 

Adam: [00:02:47] Yeah, Excellent. All right. Let's get stuck into the show. We're going to get through as many stocks as we can. Keen to get your thoughts on all of them. Let's ease into it. We're going to start with the Vanguard Australian Shares Index ETF ASX VAS currently trading at $87.56. Owen, and is this a buy or sell for you?

Owen: [00:03:07] That's a definite buy for me, Adam, a combination of the ten companies and ETFs that we'll be talking about today. I would say go in the core or satellite allocation of a portfolio. So I'll try and make that clear as we go through it. Some people say, well, why not go with Betashares A200 or why not go with the eyes at an ETF from iShares? And you know, the list just goes on and on and on and the reality is it doesn't really matter too much which one you pick because all the studies show that just being invested is the most important thing. And what Bryce and Ren always talk about and they said it in their recent book, it's that's the important thing. And so I think for the most part with VAS, what you get is a low cost ETF. You get exposure for your core Aussie shares, post franking credits, all the bells and whistles and you can just sleep at night, I guess, knowing that that's in there. And then when we get to the other nine names, we can add a bit more spice and a bit more to what we're doing to keep us up.

Adam: [00:04:03] Right? We've got a solid foundation. I like that. I like anything I don't have to think too much about. Owen is right in my wheelhouse. Brilliant. All right. So that's a buy for you. All right. Next up, we are looking at Brainchip Holdings Ltd. ASX: BRN currently at $0.20. I don't know about you, Owen, but I am sick of spending literally seconds using my eyes like a lot of it to tell if an apple is rotten or not. A brain chip can do this in milliseconds. Yes. Oh and is bright brain chip. Is that a buy or sell for you to sell? 

Owen: [00:04:38] For me, it's quite a contentious one. I kind of thought of the most contentious one that I would be able to bring to the show today. And full disclosure, like I'm not much of a seller. I don't have a dog in this fight for or against. But what I would say is that a company that makes $27,000 in quarterly cash receipts, which is the most recent number I've got and has a $344 million market capitalisation. So basically translated to English. What that means is the company makes about $27,000 in the most recent quarter from customers, but it's losing because it's spending money to pay staff and these types of things. It's actually losing about $4 million out the door front with about $17 million of cash. You can do the maths on how many quarters are left. But basically, you know, I've always wished for the company's success and I've been pretty public about that, but I've also been quite public in that I. I think that at least former management, we're extremely promotional. And if a company is promotional, that's one thing. There's another company now less today that is promotional and they're coming out and saying wonderful things. That's great, but they've got to be able to back it up. And we haven't seen that yet from Brainchip. Now, Brainchip could go on and Tenix from here and do really well. And I hope that's the case for all shareholders who maybe were invested in $1.60 or 50 or all the way down. For me, though, I think if I could say anything, look, I'm not that good on saying when is the right time to sell. But what I would say is it's probably more of an a void for most investors unless you, you know, really go into the weeds on this. All right. 

Adam: [00:06:18] Excellent to sell for you. All right. Next up, we're looking at XERO Ltd. ASX: XRO currently trading at $101.24. Sorry if it was a dollar and one people would be screaming I'm sure zero accounting software. I'm no abacus, but you can count on me little hat tip to Jamie to their buy or sell for you, Owen. 

Owen: [00:06:39] If it was trading in the dollar, I'd put all my money into it. I'd say that much. So, yeah, it's a wonderful business. It's been going for a very long time now here in Australia, in New Zealand, across the pond is where it started with Roger, the founder, who's since moved on. So basically what you get with Zero is you get probably one of the highest quality Australian businesses. Now people might say, Well, what does that mean? Well, typically when you think about quality companies, what you get is you get things like growing revenue, you get wide profit margins, you get a product that people rave and rant about and say, How amazing is this? Like, I can't believe it. We made the switch. And one thing that you also tend to get for anyone that's looking for these businesses in the wild is you tend to get a lot of friction when these companies emerge. And so what that takes the form of is like everyone can remember when Afterpay came out and effectively what we had on one side of the fence was all the consumer groups saying how horrible this thing is. I think Barefoot Investor called it a gateway drug. And then you have all of the investors that were like, this thing's going to take off. And so you get friction. The basic principle of long term investing in growth style companies is that some people have to disagree with you with zero. Basically, what you get is a business that has created the most dominant accounting software in the country, and you can access it from anywhere. In fact, I was just on it before for my team. We use it. We've used it for a long time. We pay about 60 bucks a month. And to be honest, the time and effort that it saves me in paying super paying taxes, invoicing, all that stuff, I'd probably pay 600. I don't tell Xero that, but that's probably what I'd pay because it saves my accounting. It saves my account that much money, right? What you get is a business that's growing, doesn't have the profitability yet because it hasn't hit that point of inflection, we call it, but it's getting there. Profits are going up and especially under the current management. 

Adam: [00:08:31] So I think anyone that's been able to create a company that gets people excited about accounting, then that's a winner for sure. All right. Xero is a buy for you. Excellent. Accounts payable. All right. Next up, we're looking at ALTIUM (ASX: ALU). currently at $44.26. And I've got a joke for you on here. What do you get if you cross Altium with an equity mate? An ultimatum. Thank you. Thank you for laughing.

Owen: [00:09:02] I'll give you I'll give you a seven out of ten. Seven out of ten. That's good.

Adam: [00:09:08] I've got an ultimatum for you. Give me some more buys or I'll give you more bad jokes. Altium, Is it a buy or sell? 

Owen: [00:09:16] I'll give it a buy. Once again, all of these individual companies that we've mentioned so far would be out in that more satellite allocation that I have in a portfolio. So what we do at risk is basically we help the community to understand that you should probably have your core on one side and your satellite on the other. And the way you do that in practice is you have in your core portfolio, which is that boring stuff we mentioned, and you put that in one brokerage account and then another brokerage account and you have like your individual stocks, your more risky things. And Altium probably is still on that risky side. It's even a really high quality growth company. It sells software that engineers can use to design things called printed circuit boards. PCBs is what the industry jargon is and basically everything around you. You're listening to this on headphones inside those headphones. It would be a tiny little board. You listen to this and your phone, you're in your car. All of these different things need to be designed and have these kind of motherboards. Well, Altium designs the software that the engine is used to create, that it's at this intersection of what we call connected manufacturing, where someone at Bosch, which maxi the drills and, you know, power tools and that sort of stuff. Someone at Bosch might be sitting in California designing a new washing machine, and they've got the factory in China and they. Can from the moment that they're using the software in California is basically click build, and then it sends a message to the automated manufacturing floor. Now, we're not there yet for a lot of these tools. But Altium designer, which is core product, is moving towards that connected future. And it's also happening to be growing fast, but it's profitable. It pays a dividend. The management team has hundreds of millions of dollars of skin in the game. So you end up with this business that's kind of leading the industry. It's got some competitors, but it's in this kind of sweet spot of growth and it's really poorly understood. 

Adam: [00:11:08] So, all right, so it is a buy for you. All right. Next one we are looking at WASHINGTON H. SOUL PATTINSON Ltd. I'm glad they abbreviated the H there. Otherwise that name would be ridiculously long, wouldn't it? Buy or sell currently on the ASX, sorry. ASX: SOL currently $33.48. Buy yourself you. What do they do? 

Owen: [00:11:32] Yeah so I've got it as a buy. It's one of those companies that could fit in the core of the satellite portfolio. And basically it's a conglomerate I guess is the easiest way to think about it. So what's the conglomerate? A conglomerate. Is this when you put all things together and you just kind of see what happens. 

Adam: [00:11:49] That explains why their name is like 46 words long? That's everyone wanted to be represented in the name.

Owen: [00:11:56] So the name actually traces back to over 100 years ago when the business was founded as founded in New South Wales. And just getting off the top, my head is am I miss some of the facts, sorry to the Milner family, but basically you combined chemists, people would know the soul Pattinson chemists, the get around Louis Pattinson which is the the business holder and basically they came together and they started in pharmacy. But over time what happened is that as the family that still runs it today, you can trace that lineage through time to have a business that last decades. You can't just do one thing forever. Like the laws of capitalism. Say that if you make a really good coffee, I'm out getting a soy cappuccino. I say, How good is this cup of China? From Patricia Coffee Roasters in Melbourne. If anyone that knows that it's probably the best in the world. But you know what's going to happen is another burst is going to open up a shop right next door and try and copy them as best they can. So what so perhaps recognised is that, hey, we can just start other businesses or buy other businesses using our cash flow from the chemists. Fast forward to today. It's kind of sold off the chemist, funnily enough, but it actually owns a big chunk of brickworks, which is Austral bricks, if you know most paths as a matter of customer. It's got businesses involved in things like electrical engineering. It's got businesses involved in funds management. It's got all different types of businesses under the one hood because so that is a company structure. So meaning that when you buy it, you actually get shares. But when you buy vice, you get units of an ETF. There are different legal structures. The management of Sol Pat can buy companies that aren't public. So they don't have to buy and sell like an ETF every day to make sure that people can get in and out, they can buy and hold. And so they did that with many companies and they can buy businesses in private markets and then sell them ten years later if that's what they want to do. And so this is one of the only companies in Australia that has a track record of doing this over 50 plus years. And so you get a dividend and you get wonderful management and that's about all there is to it. 

Adam: [00:13:53] Brilliant buy for you. All right. Let's take a break here. Stick around. After the break, there's more stocks to come, including rocks, big coal. Well, come back here and buy or sell with me, Adam and I'm joined by Owen Rask hour and has your coffee and in it you need a top up. 

Owen: [00:14:13] Yeah good. I think I've had too many this morning. Yeah, think of that too.

Adam: [00:14:16] How many of you have it that you seem like an enthusiast? 

Owen: [00:14:19] I only do it for a day. Yeah. I think I've listened to too many podcasts that tell me I shouldn't have it after midday. So here we are. 

Adam: [00:14:27] Very good. All right. First up, we're going to look at Lovisa Holdings, ASX: LOV, currently 18.53. And before we hear your thesis, oh, and I want to play you another thesis on Lovisa I was given over the weekend. And then we can perhaps see if there's any similarities between the two. What do you like about Lovisa? 

Audio Clip: [00:14:49] You don't just get your ears pierced and just get earrings that he can get. Friendship, necklaces, a whole pack, heavy earring. Yeah. And there's also other silly statuary, like, well, was hair clips scrunchies. So you like shopping at Lovisa? Yes. I went there today. 

Adam: [00:15:12] That was my eight year old daughter, Emily, giving her thoughts on Lovisa. Very bullish. Fair to say, when thinking about investing in Lovisa, how much weight do you put on their ability to execute the hair clip and scrunchie strategy? 

Owen: [00:15:26] I think I should do up and just hand the reins over to her if she wants to come in and take over because her take on the visa is exactly all you need to know. Yeah, right. Has so many, like, passionate people, not just young boys and girls. It also has my wife, who's considerably older. It has grandmas and grandpas and all different people that go in there for presents. And the competitive advantage of the visa is that it can bring designs to market in a matter of days, sometimes weeks. Whereas you go to like, I don't know, one of the big box retailers. It could take a year before a product that's designed actually gets in the hands of a consumer. The core thesis is you could buy the visa today and it's a great business and it might exist for a few years in mediocrity. But there's a chance and it's not a huge chance, but say it's 30% probability. That's I'm just making it up that it is a success in either the USA or Europe and it store count goes from 800 today to 3000 in 5 years and that's effectively what you're betting on and that's the thesis. If that doesn't work, then you're not going to 3 or 4 actually money. 

Adam: [00:16:35] All right. Go long scrunchies. All right. Next up, we are looking at the VANGUARD AUSTRALIAN SHARES HIGH YIELD ETF (ASX: VHY) currently $66.25 high yield hour. And why are we mucking around with VIX when we could have high yield? That sounds better. This sounds like when they decided to keep Panadol on the market once they released Panadol. Rapid like Panadol Rapid. No thanks. I'd like this headache to linger for a bit longer. Why would we. Why would we buy the high. Why would we buy VAS when there's a high yield version? Is it the same thing? Just more money? 

Owen: [00:17:17] Well. Yeah, I guess in the end I say everything's just a toaster, isn't it? Yeah, right. But I mean. I mean with the high yield vh y, what you get is you get 70 to 80 stocks on average. It kind of fluctuates a little bit. But basically what you get is 70 to 80 stocks, not 300 with VAS. And you get companies that are expected to pay dividends in the future. It's very simple and elegant in what it does in that you take a standard, you know, blue chip shares in Australia, you get a list of those and then they basically plot that or match that against what analysts as a group expect a company to pay in dividends in the future. From those two lists, you combine them and whichever companies are out at the end, you buy securities, buy and hold those companies and then it rotates every now and again. There are about ten or so dividend ETFs, that's what they call them on the market. But this is my favourite by far because it has about 70 to 80 names. Most of the dividend ETFs and they have about 20 to 30. It's an intelligent ETF in that it uses the forecast of dividends. So some of the old style ETFs for dividends, what they did was I'd go, well, BHP paid a dividend last year, we'll put it in the portfolio this year and then BHP cuts its dividend, for example. And so that was what I would call a dumb ETF, whereas this is kind of forecasting ahead, doesn't get it right every time. I don't think anyone that's in their 20s that doesn't have a humongous portfolio they're living off in passive income should be considering this. I think you should go with this because in that instance you're going to get more growth. But for retirees that are Australian citizens, you get franking credits, get all those things. If you hold an ETF like VHY and it's pretty low cost, it's pretty easy to just swap in and out of a portfolio.

Adam: [00:18:55] Very good. It's a buy. All right. Next up, we're looking at bond, Laser bond, LASERBOND (ASX: LBL) currently $0.87.Owen is laser bond a buy for you?. 

Owen: [00:19:11] Yes, it is. I know that you had. I don't think he's drinking the bond style drinks. But Andrew Page, who had been on the show previously, he did mention lies. And when I listen to that episode he said he drank a gin and tonic, which is very Andrew of him. And he I guess he does have some appeal for a James Bond style enthusiast. Andrew is pretty charismatic. 

Adam: [00:19:33] How do you pull it off? Yeah, yeah. 

Owen: [00:19:34] He could probably pull it off. But yes, I like that Bond is, as Andrew would have said in that episode. In fact, he did is it's a surface engineering business. So don't let me, like, bamboozle the bejesus out of you. Basically what that means is it repairs machinery. That's as simple as you like. And so Laser has been doing this for many years. I was fortunate enough to interview the CEO, Wayne Hooper. And Wayne is part of the Hooper family who started the business. And here's an interesting thing. I believe, and Wayne could correct me if you're listening, Wayne, but I was the first person to ever interview him for running the business. I think that's the case. I could be wrong. 

Adam: [00:20:10] Ever? Yeah. As in. Yeah. Just ever. Ever. 

Owen: [00:20:13] He had some people rock up to the AGM one day, a friend, Luke Winchester, He rocked up to the AGM. It would be 5 to 10 years ago, and normally I'd just be a handful of them, you know, just the people that run the company, rocking up to the AGM, taking the minutes, doing all that stuff, and an investor walked in the door. They're like, What you doing here? And he said, I'm here for the AGM. Isn't there like a thing going on today? And so that gives you a sense of how small and hidden this company has been for a very long time. But why do I like it so Laser Bond It's a $100 million company. It's profitable, has been for a long time. It's growing compounding about 20% per year. It sells products to like mining services, businesses. You you walk in and you've got a gigantic Tonka truck wheel and you're like, Hey, I need this thing repaired. I go, Great, I'll do it. I'll have it back to you in a few weeks. But one of the things that's really interesting about Laserbond is it's actually now selling its laser bonding machines, if you like. So it's laser cutting machines and it's selling them overseas. And so basically it can earn a royalty without doing any of the work. So in ten years from today, I think that that could be something that's interesting, but it is high risk. I like the stock. 

Adam: [00:21:17] All right. Next up, we are looking at MACQUARIE GROUP (ASX: MQG) currently $167.42. Oh, and we're talking banking Macquarie Group. Is this a buy hold or sell for you? 

Owen: [00:21:31] I would buy it. People can walk away from this episode knowing that you know where to find your coffee and you can also have some silver doughnuts with that because that's what the Macquarie Group logo looks like. 

Adam: [00:21:44] Coffee and doughnuts. That's what they offer on this show. Really.

Owen: [00:21:47] Macquarie Group is another name other than like the silver doughnut. If you look at the logo on top of buildings is the Millionaire factory. Macquarie Group is an investment bank, so you can go to Macquarie and you can sell your company. So they'll have bankers that will help you sell it, finance it. A lot of the big mining companies use Macquarie for things like commodities trading and hedging the iron ore or the copper or whatever when they sell in a global marketplace. Now interestingly, this company, I believe off the top of my head, has been profitable for 50 years in a row. So it's got just about a stellar reputation as Washington hype cell. Pattinson Although it is completely different. However, during the GFC, Macquarie at the top of my head I think went from over $100 a share to below $30 a share. So imagine if you're sitting there and you're thinking, Oh, great, blue chip Company, Macquarie globally diversified and then, oh my Lord. So what they did after the GFC is basically they moved into traditional banking or what we call retail banking. So now you can go to Macquarie, you can get a great term deposit, no affiliation, you can get a home loan, no affiliation. 

Adam: [00:22:49] Link link in the show. 

Owen: [00:22:50] Link in the shownote. I know they make a great sponsor of Equity Mates. But yeah, so you can go and you can get that so stuff. And so what they've done is they transformed their business from just investment banking to now retail banking, and they're one of the fastest growing. You get all of that packaged up and it's got this self-fulfilling competitive advantage where everyone knows you can go there, you can get a great job and you can become a millionaire, hopefully. And then so what does that do? That attracts more talented people and more talented people and more talented people. And it just reinforces this culture and cycle of professionalism and excellence. 

Adam: [00:23:26] All right. It is time now for the big call. Owen, and tough to come up with gags about the S&P 500 ETF, but IVV currently $46.55. I got some of this one myself. See what I do there. Thank you. Does this have a buyer or seller for you? This is the big call. I'm guessing it's a buy. 

Owen: [00:23:52] It's a it's a buy. It's a big, big call to say probably one of the most boring things in the world. I didn't want to say it was. I know. Yeah, it's one of these ETFs that is just like it does everything in one. And so I think. For most folks who can't be bothered picking stocks and doing lots of stuff, this is the thing that you should be paying attention to. The reason why is it's pro USA. It's the world's most powerful economy. But I'll give you some interesting facts. So a lot of people look at this and they go, whoa, hey, mate, there's no you know, there's no emerging markets, there's no China, there's no none of this sort of stuff. But you know, what's inside it is you've got Apple that sells in China. You go Tesla that sells in China, you've got Starbucks. It's all around the world. You've got all of these wonderful American businesses that export their wares to the rest of the world right here in Australia. Recording on an Apple iMac, for example. And so you get all of that in this one ETF. It's all packaged up neatly for it's super low cost. And what reinforces my belief in IVV? Well, other than it being run by BlackRock, the other thing is the U.S. spends more on its military than the next ten countries combined. 

Adam: [00:24:57] Yeah. Wow. 

Owen: [00:24:58] And so if you think about what it's got going, it's five. It's got the world's most arable land. Basically, it's, you know, geographically it's away from the rest of the world where there's a lot of tension. It's got, you know, a huge amount of million migration. It's got some of the smartest people in the world. It's got a culture of innovation. And you get all of that bundled up for less than ten basis points of 0.01% less than that. I mean, it's a pretty good bet. 

Adam: [00:25:23] Is it a good time like we're sort of hearing about the end of inflation in the States. You know, the Fed chair has been out sort of talking encouragingly about inflation being done. Is it a good time? Is that part of your sort of thinking around IVV as well?

Owen: [00:25:39] There's IVV and then there's the equivalent that's currency hedged for the number one thing that you should be looking at if you're thinking about adding money to everyday is what's the currency going to do in the next few years. And you just want to make sure you're not buying or selling at extreme levels. And we could be close to an area where you could consider the currency extreme. So you can just go with the hedged option and it's just a little bit more. But basically what that means is it neutralises currency. And it's one of these things, Adam, where you can invest in it and you can buy and hold for very, very long periods of time. In that time, inflation is going to come and go. In that time, interest rates are going to come and go in. That time will probably experience more wars, will probably experience more recessions. But that's been happening for 150 years and over 150 years. On average, companies in the S&P 500 increase their profits between 6 and 7% a year. 

Adam: [00:26:27] So they all time in the market rather than timing the market. 

Owen: [00:26:29] Absolutely. Yeah.

Adam: [00:26:30] Brilliant. Hey Owen, big thanks for coming on the show today. I think it's been a really enjoyable show. Really appreciate you taking the time out to join me. Where can people find you if they'd like to hear more from you? 

Owen: [00:26:41] Yeah, sure. So for folks who aren't familiar, you can just head to rask.com.au. or the Australian Investors Podcast. 

Adam: [00:26:46] Brilliant. Excellent. And if you'd like to hear more from me, then there's a new episode of Comedian Versus Economist dropping every Wednesday. Wherever you get your pods. And don't forget, we would love to know what you think of the show. This is episode five of a six part series where we're really just sort of testing out the format. Hopefully I will be back bigger and even better next year. But we'd love to know what you think of the show, so send us an email contact@equitymates.com or leave a message on the Equity Mates Investing Podcast Discussion group on Facebook or Spotify reviews wherever you can, wherever you can write something about the show. We'd love to see it, but yeah, that is all for us for this week. We'll be back next week for the final show on the series with Andrew Brown. I hope you'll join me then, but for now, it is far from us.