EM Portfolio is back and 2 small caps Uncovered

Bryce: [00:00:13] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. If you are joining us for the first time, welcome and thank you for becoming an Equity Mates. If you're still getting up to speed with the basics, you can check out our Get Started Investing podcast. But let's crack on. My name is Bryce. And as always, I'm joined by my equity buddy, Ren. How you going?

Alec: [00:00:40] Oh, I'm very good. Bryce very excited for this episode. We're bringing back one of our favourite segments that we had to stop. Yes, but we don't have to anymore. And then we are launching a new segment towards the end of the show uncovered. We'll get to that though, before we do a couple of bits of housekeeping. The Equity Mates Listener survey has one day to go. If you want to help us shape the direction of what segments we should bring back or what segments we should launch, new shows, new concepts. This is your chance to shape the future of Equity Mates. Tell us what you think. Please go and fill it out. We've had over a thousand responses, but we're always looking for more. One day to go help us out. 

Bryce: [00:01:24] Place Link is in the show notes and by filling it out you will automatically go in the draw to win $500 or FinFest tickets for 2023. So please take the 10 minutes to fill it out. We really do appreciate hearing from you. Ren, you alluded to a segment that we're going to get stuck into, and that is the EM Portfolio. 

Alec: [00:01:42] Yes, we're bringing back our portfolio.

Bryce: [00:01:45] Yeah, we stopped it in mid to late 2020 when it became clear that we may have been brushing up against the guidelines of general advice. 

Alec: [00:01:55] Yeah. 

Bryce: [00:01:56] And throughout 2021 and 2022, we worked with our SEC to get a license, which does give us the flexibility now to talk more freely about stocks. You know, in a regulated environment. 

Alec: [00:02:09] It is important to stress that nothing we talk about here is personal advice. We don't know if this stock is suitable for your personal situation, but we're keen to talk about stocks generally. 

Bryce: [00:02:21] Yes. And if you are joining us for the first time and have no idea what we're talking about, the Equity Mates portfolio was a series that we did throughout 2020 where we compiled a hypothetical portfolio of stocks that were just really interesting to read. And I, we had community members pitching stocks, we had experts pitching stocks, and it was just a great way for us to track everyone's grand ideas to see how we went. We weren't actually buying anything, but it was just a way for us to track some pretty interesting ideas. 

Alec: [00:02:52] Now, unfortunately, I don't think we can get listeners pitching stocks again. If you're a listener who has FSL, you can come on and pitch us stuff. 

Bryce: [00:03:00] We can pitch it on the community's behalf. 

Alec: [00:03:02] Oh yeah, yeah, yeah. 

Bryce: [00:03:04] If you want to send us a stock idea for us to have a look into or perhaps even speak to a guest about, please do hit us up at contact@equitymates.com to throw a stock in the mix and we'll make sure we do it. But we're just going to bring this in in some of our Monday chats throughout 2023, throw up some ideas and just generally track how they were going. 

Alec: [00:03:23] I think last year we spent a lot of time talking about our core portfolio. Yeah, so much so that someone on Reddit called us eighth May. It's fair to take it. But I think, you know, the core portfolio stuff, I feel like I'm in a really good position with that. And if people want to relive the journey that we went on to really sort out our core portfolio of ETFs, that content's all available on the fade and on the Get Started Investing feed especially. But now what I'm really excited to do is to really get stuck into individual stocks, researching new companies, discovering what's out there, and especially in an environment where the stock market was down last year. If you listen to the talking heads, they expect it to be down this year potentially, which means there's bargains to be had, which means there's opportunity. I missed out on 2008. I wasn't investing. I missed out on 2020. That a big dip because it all happened so quickly and it rebounded so quickly as well. I don't want to miss out on 2023.

Bryce: [00:04:30] You've already missed it. It was last year. The market's rip since September last year. 

Alec: [00:04:35] You missed that that's not going to come back to you. Right, Mr.. 

Bryce: [00:04:41] Rip, if you weren't. 

Alec: [00:04:42] In the S&P 500 was up, what, 7% in January. Yeah it's now only up 4% for the year.

Bryce: [00:04:49] Doesn't matter. What has been up since September of last year? Yeah. 

Alec: [00:04:52] Uh, 9%. 10%. Yeah. 

Bryce: [00:04:56] And this is actually an interesting episode because we've just come off an interview with Charlie Viola, who is going to be released this Thursday. And he's one of Australia's sort of top rated advisors, and it was great to get his view on how as young adults we can think about buying into the market and. Typically through times of volatility like this. He does talk about concentration of portfolios. And it was a good sort of thought starter for us around how many sort of positions you should think about taking if you have small amounts of debt. 

Alec: [00:05:30] But we're not going to adhere to that with the Equity Mates portfolio. We're going to we're going to there'll be a lot of ideas flying around. 

Bryce: [00:05:37] Yeah, Yeah. Well, we've just come off Stock of the year, so I've got another one that I want to add to the mix for our portfolio. 

Alec: [00:05:43] But company was. 

Bryce: [00:05:45] Yeah, company wise. 

Alec: [00:05:46] Another one implies that there's already one in there. 

Bryce: [00:05:49] That's true. Well, surely both of our stocks of the year going there are yours. 

Alec: [00:05:55] Although exciting news for me. Really exciting news. Someone hit us up. Contact@equitymates.com won't share their name, but they said they work in Australian law enforcement. They do use ASMs a platform and they reckon it would. So it would be almost impossible to switch because there's so much evidence obviously on there. You're saying how that is a platform for the platform allows civilians to upload content. So if you have CCTV that you need to upload or you've got something on your phone like the cops can let you upload that there's all these different like upsells that they do throughout the process is just like, sounds like it's a pretty sticky platform. 

Bryce: [00:06:38] Yeah, well, let's just be clear here. A lot of the companies that you pitch are not bad companies. It just turns out the year you catch them, they say. 

Alec: [00:06:47] Well. 

Bryce: [00:06:48] Yeah so Tencent, great company. Yeah, I say crack. COSTELLO Yeah, No. So are we firstly going to say that put them in. 

Alec: [00:06:59] Yeah man. 

Bryce: [00:07:02] They've got to go in. So that then rings off at the start of this week. I don't know how it came up, but I started talking about Airbnb. 

Alec: [00:07:11] Yeah, you were like, I want to put in.

Bryce: [00:07:13] I want it. Yeah. Well I just thought it was a I still think it's a great company. Full disclosure, I am a shareholder of Airbnb, so we're both shareholders. Great. And I said, I want to, I want to throw it in. And, and you suggested that there was some commentary out there that I guess would be on the contrary, Yeah. 

Alec: [00:07:32] So I wouldn't I want you because for context, Airbnb had a bumper report. Yeah, they announced their first annual profit and I think that what, they're up 50% for the year or something. Yeah. Yeah. 

Bryce: [00:07:45] So. Yeah, you're stealing half of my pitch. 

Alec: [00:07:47] Well, no, no, but the pitch isn't based on the share price movement this year. 

Bryce: [00:07:51] Why not? 

Alec: [00:07:52] Well, because. Come on, you better or not. So Airbnb a lot on people's mind and. But there is a undercurrent of dissatisfaction with Airbnb at the moment, so I reckon. Hit us with your, um. Hit us with your pitch. And then I've, I've asked our producer Sasha to clip some of that up and I want to get your reaction to it. 

Bryce: [00:08:19] So we're in the pitch is pretty simple for me and that is I it's been beaten down and it feels like it's a good opportunity. Mind you, I'm down on the stock I think I bought it at its IPO or something very close to it. So I've been just averaging into it. 

Alec: [00:08:34] Catching the falling, not catching. 

Bryce: [00:08:35] The falling knife. Yeah. So you're right. For the first time ever, they posted an annual profit of about $1.9 billion. Now, just to give it a perspective on how their revenue has been growing, 2017 2.5 billion in revenue. 2018 3.6 2019 4.8 Covid hit. They dropped to 3.4. Then LA 2021 they bounced for 5.9 and then last year 2020 to 8.4. So despite Covid where they sort of had a significant hit and I think they lost about $4.5 billion during that year, despite that, they have had compound annual growth, revenue growth over the last five years of 27%. 

Alec: [00:09:23] Not bad. 

Bryce: [00:09:24] You got you love to see those. 

Alec: [00:09:26] I do. 

Bryce: [00:09:27] Yeah. So great revenue growth. The stock was down 48% last year. It is up 55% this year. 

Alec: [00:09:33] And we should remind everyone that if a stock falls 48%, it needs to rise what, 96%? Yeah. To get back to a long. 

Bryce: [00:09:40] Way to go. Great horizons, great Horizon. But for me they it's always been about their path to profitability. They very much seem like they are on that now. They lost $352 million last year, but they just posted a profit of 1.9. 

Alec: [00:09:55] It's funny, but they don't do things in half measures, do they? Like a lot of these tech companies, it's like, you know, we're trying to be profitable. We're trying to be profitable in the first year. Multibillion dollar profit. 

Bryce: [00:10:04] Yeah, well, 2022, I mean, it was Covid. But you're right, they went from a four and a half billion dollar loss to 352 million if you take out Covid. Yeah, if you take out Covid. And you look at their numbers, revenue growing loss getting less and less. So they were very much on their path. Yeah. 

Alec: [00:10:21] It probably helps that they, like a lot of other people, probably had a round of layoffs and stuff like yeah, 2022 was. 

Bryce: [00:10:29] Well, it's funny you say that this year though. They're hiring. They've come out and said, we are hiring. We need people coming on board, which is in total contrast to what you're saying across the board in tech. You're saying some of the biggest tech companies around the world are laying off thousands of staff. And Evan, they are coming out and saying we are going to hire at a judicious pace. But that was quote. But what I mean, for me, it's quite simple. There's no there's nothing crazy about this. There is pent up demand still from travel. We're seeing it in the airline industry. We're seeing it in the travel industry. People are getting back out. People are travelling to major cities around the world. And Airbnb is still the number one brand when it comes to this sort of short term holiday rental. And they've had big success and also a concentrated effort, as you know from the ads that we've been doing on the show over the last 12 months or so of getting more hosts onto the platform. The more hosts on the platform, the more options there are for guests. They've got a much larger range now of options for people, and it's a pretty simple equation for me. More people getting back out, off to travel and more options for guests. The other thing that I think may play into Airbnb's hands is as we go into an environment where people are looking for additional income, it's not that hard to get up and list the spare bedroom in your house or list your property to get a bit of extra cash flow. So we may start to see that play out over the next 12 to 18 months as people look for additional income. But it's pretty simple for me rent that I just think it's well positioned. It's if it can remain profitable, reinvest back into the business. People are out there travelling like it's it's not a it's not a complex equation. 

Alec: [00:12:17] Oh, I completely agree with you that people are out there and travelling. But this. Yeah, this is where I think you've got a blindspot. 

Bryce: [00:12:24] What is it? 

Alec: [00:12:25] So Airbnb's original proposition was we're going to be a cheaper, more hospitable and more like localised integrated in the community experience than hotels where coming for the hotel industry where an asset light peer to peer model that's going to give people a better experience at a lower cost. 

Bryce: [00:12:49] Yeah, they are asset light still obviously.

Alec: [00:12:52] That's not the thing. 

Bryce: [00:12:54] That's not going to change. 

Alec: [00:12:55] And you're right that people are travelling, but have you considered this price. Look at the hotels stocks for 2023 Hilton up 15% a core, up 26% higher, up 27%. Marriott up 15%. Choice hotels which owns like the comfort in and stuff like that, up 9%. 

Bryce: [00:13:18] Airbnb up 55%. 

Alec: [00:13:22] Next question to you want to know so what do you want to know why the hotel stocks are doing Well. 

Bryce: [00:13:28] Yeah, because people are getting out and about. 

Alec: [00:13:30] It's because Airbnb and Bust is the movement afoot and I've got something to play for. I know. 

Bryce: [00:13:38] What you.

Audio Clip: [00:13:40] Next up, the battle over Airbnb fees. This week, the Wall Street Journal reported on the backlash against excessive cleaning fees and the chore list. But some Airbnb owners insist people follow. 

Audio Clip: [00:13:51] Renting an Airbnb used to be a more affordable and many times roomier alternative to a hotel room. But now rents are saying that burdens like extensive lists of chores and also cleaning fees are making the service much less enticing. And Airbnb hosts have been asking their guests who literally pay them to stay at their rental to do more chores in addition to paying expensive cleaning fees.

Alec: [00:14:13] We know that you don't keep up with main culture, but it's been a big meme over the past few months about comparing the absolute simplicity and bliss of checking into a hotel with the nightmarish chore list with a cleaning fee that comes when you sign up, when you stay at an Airbnb leading to the Airbnb and bust movement. 

Bryce: [00:14:38] It's just a squeaky wheel squeaky room. It's probably such a small percentage of the people that are using the platform. Where's the next time the guys golf trip is going to be checking into the Hilton? That's not gonna happen. 

Alec: [00:14:49] To hold, you know, I mean, they hire us first. 

Bryce: [00:14:53] It's just not going to happen. And I understand that and I get it. And I'm pretty sure you're going to have to fact check me on this. But Airbnb have been doing stuff about this. They've changed some of the rules around the linen requirements. And I think they're not going to be deaf to this, you know what I mean? Like, they're they're going to I mean, we've all felt it. We've seen the cleaning fees become. Ridiculous and those sorts of things. 

Alec: [00:15:16] But I actually have no problem with the cleaning fee. I have a problem with the chore list. 

Bryce: [00:15:21] Yeah. 

Alec: [00:15:22] Like, yeah, well, give me a choice. 

Bryce: [00:15:25] Clean or. Sure. 

Alec: [00:15:26] Yeah. Yeah. Oh, don't pay or do the chores. Yeah. 

Bryce: [00:15:29] Fair. So I understand all of that. Is it enough to bring down air pay in Vegas? I don't think so. It's something that they need to be aware of and I'm sure that they will address that. But does it just always risks with investments? 

Alec: [00:15:44] It doesn't change your thesis at all. 

Bryce: [00:15:45] It doesn't change my thesis. Now, I think of the range of people that use Airbnb and the range of people that are making those complaints specifically. Then switching to hotels is probably quite small. 

Alec: [00:15:58] Mhm. Yeah. Yeah. No I mean I am still an Airbnb owner. Personally I tend to agree because thinking about personally, as much as it annoys me, I still start all of my holiday searches with searching on Airbnb. Yeah, yeah, yeah. 

Bryce: [00:16:15] Me too. 

Alec: [00:16:15] Very sticky. 

Bryce: [00:16:16] So is it in, is it in or what? Yeah. 

Alec: [00:16:18] Have you put it in I think. Um. Yeah.

Bryce: [00:16:21] Nice. Alright. It's in its third stock on Equity Mates portfolio because we've got both of our stock of the Year and they're. 

Alec: [00:16:30] All, you know, an Indian stock to US stocks. Yeah. Yeah. All with global footprints though.

Bryce: [00:16:36] Great. We've got a I guess a list of contenders that could go into the portfolio that over the next few weeks or so we'll, we'll dig into a bit more to that I want to bring to the table one is an absolute spec and that is Latin resources lithium how. 

Alec: [00:16:55] We are doing spec in this area. I it's maybe. 

Bryce: [00:16:59] One that I think I mentioned in stock of the year that I wouldn't mind getting in there just so I can keep track of it. This year's flutter I just want to say here goes. 

Alec: [00:17:07] Tough to buy as a retail investor though. 

Bryce: [00:17:10] It is. Yeah, that's fair. That's a fair point. 

Alec: [00:17:13] I mean, it shouldn't stop us. This is all hypothetical. Yeah. Oh, yeah. By the way, if we weren't clear, we're not actually buying those stocks. 

Bryce: [00:17:19] No, we're not just tracking them. 

Alec: [00:17:20] Yeah, we will disclose if we are in the know. 

Bryce: [00:17:23] Yeah. Flutter. And I'm going to throw another random one there. It's one of Japan's leading skincare companies and we know Japan are big on skincare. It's called Do It. Yeah. Shiseido So I'm going to track that. 

Alec: [00:17:38] Okay. No, I've never.

Bryce: [00:17:39] Heard of South Korea and Japan. 

Alec: [00:17:41] But not only have I heard of South Korea, I went to a South Korean mud festival to celebrate the mud that South Korea exports to beauty clinics around the world. So you have and I broke my leg. This is a story for another story for another day. All right. No. So there are a few good names, a couple that I'll bring to the table. We're not putting in the portfolio, but just a theme that I've been thinking about or tracking. There was this trope when Amazon was running in the 20 tens that it was never cheap. Amazon always trades at a 60 pay, but it just kept growing and then investors would keep buying 60 pay. And you can never you can never buy Amazon at like a 20 pay probably these days. But that was like a thing that did the rounds on investing podcasts over the last decade. And there's probably a collection of stocks in Australia that you could give a similar label to just like never actually that cheap. And like the one that really stands out for me is REA Group. It's currently at a 45 pay and you just probably would. It'll never you wouldn't think I'll never be cheap. It's just like a really high quality business that just keeps on doing its thing. Yeah. And it's like what are the next generation of just never cheap, high quality businesses? And three names that I have to that are actually profitable yet one that is Pro Medicus. 

Bryce: [00:19:06] Yeah.

Alec: [00:19:07] And then Audinate which when we were doing all these bids that got a lot of buzz since we stopped doing all those bids. Oh it's pretty flat since we stopped doing those bids. I was going to say we should have bought it and then Xero I think will probably fall into that list as well. So that's something that I'm thinking about. What is it like? What are the super just quality? Like, what are those businesses? Nice? Yeah. 

Bryce: [00:19:30] Never cheap. 

Alec: [00:19:31] Never check. Always quality, always quality. 

Bryce: [00:19:34] All right. 

Alec: [00:19:34] Well, so they're not like Amazon was true. Amazon is still pretty good. 

Bryce: [00:19:39] So if you'd like to suggest some stocks for us to throw into the mix or have a chat with an expert about place to hit us up a contact at equitymates.com and over 2023 we will continue adding to refining and tracking some of the stocks that go into this portfolio.

Alec: [00:19:57] One other one that I should have mentioned was WiseTech. Never cheap. 

Bryce: [00:20:01] Never cheap/. 

Alec: [00:20:02] 98. Pay a shame. 

Bryce: [00:20:05] Good quality company though. Anyway, on the other side of this break, we are going to dive into another new concept that we're working on here at Equity Mates called Uncovered. About the opportunities in the small cap market. But before we do, we're just going to take a quick break to hear from our sponsors. Well, welcome back. One quick reminder that if you are interested in upskilling and learning more about valuation and how to apply that to your investing journey, then Ren and I currently have $100 off our Value Investor program, which was an online course that we developed in conjunction with Owen Raszkiewiz from Rask, Australia. It will take you through everything that you need to know about valuation. It is comprehensive but simple to understand digestible jargon free. There is a lot of good content in there to help you start building out models and understanding how to value a company. So if you're interested in that, head to the link in the show notes. It is on sale now. You can use code mates at checkout for $100 off link will be in the show notes. 

Alec: [00:21:05] Alright, Bryce. Let's get into this. We're talking Uncovered, which is a new concept that we've been kicking around for a while behind the scenes, but we're excited to get it off the ground. And the concept is quite simple that there's a lot of companies that get a lot of analyst and media coverage. The top end of the market is covered by all the major brokers, all the major investment banks, and the media focuses on them as well. We've all heard of these companies and you know, you get it, it's covered too much to keep explaining it. Yeah, yeah. But there's a whole massive chunk of the market. The majority of the market remains uncovered. Yes. Investment banking analysts don't cover the stocks. Brokers don't write broker reports on the stocks and the media don't pay attention to them either. And we want to uncover the uncovered. Yeah. 

Bryce: [00:21:59] So the purpose of this series, which you'll find in our email every Monday, we send out an email and in some of those we're going to be highlighting some of these companies. So make sure you sign up to that. 

Alec: [00:22:10] And on our website.

Bryce: [00:22:11] And on our website you will find an uncovered section to say the write up that we do in these companies. But what we're going to be doing is finding some interesting small cap companies and really doing nothing more than just having a look at the story and what they do. We're not here to say if it's a good investment or a bad investment, we're going to allow you guys to make that decision. But it's just a stepping stone for you to find information on interesting companies. Far too often, Ren and I are trying to find a nice list or database of the interesting companies at the small end of the market, and there's often not a lot of good quality information out there. 

Alec: [00:22:45] Yeah, well, I actually think every company is interesting. Like every company, even the species of spec e companies has collected money, has convinced people to invest in it or banks to fund it, to learn of money, and has collected a group of people who could all be doing other things to pursue whatever it is. I think every company is has an interesting story and most of them aren't told. And I love learning about companies that I just haven't heard of before. So I think we're going to be talking about a lot of companies that a lot of people haven't heard of before. And we started with one that I certainly didn't know anything about. Abalone. 

Bryce: [00:23:27] The company is not abalone. 

Alec: [00:23:28] Well, know that abalone is a seafood.

Bryce: [00:23:31] Abalone is a seafood. 

Alec: [00:23:33] So I was saying I don't know anything about abalone. 

Bryce: [00:23:36] The first company in the uncovered series is Rare Foods Australia. The ticker is RFA and it is listed on the Australian Stock Exchange with a market cap of only $14.5 million. It is a tiny company. 

Alec: [00:23:50] So have you had abalone before?

Bryce: [00:23:52] I think I've had it once. Yeah, once. Have you? 

Alec: [00:23:58] Well, I actually wonder if I'd be allergic to it. 

Bryce: [00:24:00] You're allergic to shellfish. 

Alec: [00:24:02] Shellfish. So I can't. I can't eat lobster, crab prawns, oyster killer oysters I'm okay with. 

Bryce: [00:24:08] I feel like oysters are more aligned with abalone. 

Alec: [00:24:10] Yeah, as well. Oysters. Molluscs. 

Bryce: [00:24:14] Like you're, you're asking the wrong person. 

Alec: [00:24:18] Always chat GPT when you need it. Are oysters molluscs? 

Bryce: [00:24:21] You're asking the wrong person. 

Alec: [00:24:23] Oysters, I think, are molluscs, not shells. 

Bryce: [00:24:25] So you're in the clear and you're probably in the clear with rare food. So let's talk. 

Alec: [00:24:29] About this company. Let's talk about the company. Until last year, it was called Ocean Grown Abalone. 

Bryce: [00:24:34] Pretty simple name.

Alec: [00:24:36] Says what it does on the tin. Yes. Now it's called Rare Foods Australia. And that's because they're looking to expand into new business areas. We'll get to that. But its key business is farming abalone in it's World First Sea Ranch. 

Bryce: [00:24:51] Hotel for abalone. 

Alec: [00:24:54] So it's an art. It they build artificial reefs and then they grow the abalone on these reefs and it's literally like divers going down, checking on them takes about 2 to 3 years for them to grow to sellable size and then they sell them all around the world. Majority of abalone is consumed in Asia. About three quarters of rare food's abalone goes to Asia. And I think a lot of. Goes to Hong Kong and China. But I didn't realise that it was such a valuable seafood. Yeah. And so as part of this uncovered write up, I actually had a look at what's the most expensive seafood.

Bryce: [00:25:34] I would have said caviar.

Alec: [00:25:35] That's number two.

Bryce: [00:25:36] Yeah. 

Alec: [00:25:38] Bluefin tuna. There you go. Number one, abalone. Number six. Lobster ten. There you go. Yeah, Baby eel coming in on the podium. Finish number three. Surprising cause I. Oh, no, I wouldn't have had baby before. 

Bryce: [00:25:52] It's highly sought after and making it one of the most expensive for people wanting to purchase a premium variety of abalone. And this is going to really test those people that are in the abalone market, such as the green lip or black lip abalone. You're looking at about $100 a kilo wild abalone as opposed to the farmed abalone that we are speaking about here can reach prices of up to $500 a kilo.

Alec: [00:26:17] Rare foods actually sell both now. Oh, yeah, yeah, yeah. Anyway, long story. You would get into it in the article. Massive industry in abalone crime.

Bryce: [00:26:29] Yeah. Abalone mafia. 

Alec: [00:26:31] Yeah, yeah, yeah. South Africa. A big abalone producer produces about 5000 tonnes of abalone a year, according to South African authorities. Nearly half of that 5000 tonnes is poached. 

Bryce: [00:26:44] Poached abalone. 

Alec: [00:26:45] Yeah. Not cooked. Yeah, yeah, yeah. Like stolen. 

Bryce: [00:26:50] Oh, I got my bloody fake coat.

Alec: [00:26:53] Estimates put the South African illegal abalone trade at between US 60 and $120 million. A lot of that goes to China and Hong Kong because that's where a lot of it is eaten. But don't assume that abalone crime is a purely South African problem. I didn't expect to hear that. Centres on equity. The Australian Institute of Criminology estimates that one of Australia's most well known abalone poachers makes more than $1,000,000 a year. 

Bryce: [00:27:22] Wow. That's it. Yeah. Okay. 

Alec: [00:27:24] I got to say, that's not a lot of money. 

Bryce: [00:27:26] Well, I feel like for the effort that it would go to to poach abalone, I think it's quite a difficult task to rip these little suckers off the bottom of the ocean. 

Alec: [00:27:34] I'll try. 

Bryce: [00:27:36] Anyway. Why is it so valuable.

Alec: [00:27:38] To find a match? And namely, it's a wild abalone is close to going extinct. I think there's, like, six different types of it that are on the International Union for the Conservation of Nature, the endangered or critically endangered list governments around the world, including here in Australia, police, overfishing. And that's why farming has become the way that most abalone is produced. Yeah, and a lot of the demand comes from China because abalone is associated with power and wealth.

Bryce: [00:28:13] Yeah, right. Well, that brings us to Rare Foods Australia, who, as you said, have set up the sea ranch or a massive, I guess, artificial reef for farming abalone. So they have 5000 separate concrete abalone habitat units hosting up to 400 abalone each. They're about 300 kilometres south of Perth in a place called Augusta. And over in Western Australia. And they let these abalone grow for about 2 to 3 years before they reach an appropriate size, rip them off, sell them to market, and the process starts again. It's pretty straightforward. 

Alec: [00:28:52] That's about it. So in the write up we did, we're going to do a section for everyone, covered the numbers that matter we talk about. We pulled some data from tickers, talked about their revenue numbers and looked at how much they were harvesting and looked at what they were selling per kilo. So you can have a look in the write up. We'll include the link in the show notes or you can just go to equitymates.com. But yeah, as we said, Bryce even these small companies that don't get much coverage. Fascinating stories.

Bryce: [00:29:23] And before we just close out on that, you did say that they've changed their name to Rare Foods. 

Alec: [00:29:28] Oh, yeah. 

Bryce: [00:29:28] What is the reason from Ocean farmed Abalone? 

Alec: [00:29:32] Well, they are now doing something ocean selling wine. Okay. So I think there was a ship that sunk and there was a whole bunch of champagne that was discovered recently on a ship that sunk ages ago. And I think it was in really good neck, like really good condition. Okay. And so now a few companies have started selling different types of wine on the ocean floor. So ocean grown abalone really realising they had a competitive advantage in diving and putting things and managing things under water, decided we're going to get into this as well. And they partnered with a number of vineyards in the Margaret River region and ocean cellars. That wine. Wow. Yeah. 

Bryce: [00:30:19] So they're moving it. More into how they can play in the really rare, weird food space, not just apple abalone. 

Alec: [00:30:28] Or just like, what other stuff can we make? I mean, I don't know if it makes the wine better, to be honest. Yeah.

Bryce: [00:30:38] Yeah, well, maybe we can reach out to them asking if they can send us some tasting notes. But if you're interested to find out more about Rare Foods Australia in a bit more detail, you can head to our website equitymates.com and you'll find a proper one right up there. Similarly, make sure you subscribe to our thought starters that goes out every Monday and we will be doing more episodes of Uncovered throughout 2020 through Ren. You did mention ticker there, which is our favourite data source T-I-K-R for information on global stocks. It's an amazing resource. They are giving the Equity Mates community now actually 15% off an annual membership. If you use the code MATES15 and head to tikr.com/equitymates, we'll put a link in the show notes, but it is well worth it. Absolutely well worth. 

Alec: [00:31:19] It. So Bryce a second company that we've had a look at for our uncovered series is a company called Unith ASX to get UNT. Now this was actually suggested on our Facebook group and a couple of the guys in the office have been quite big fans of it. And I think this is it's a very interesting use case. Okay. It's a company that illustrates something quite important when we're talking about small caps and micro caps. Yes, because when a company is uncovered and there's not a lot of attention on it, misinformation can be rife. And there was misinformation flowing at the Equity Mates office. As two of our team members, we won't name and shame them. 

Bryce: [00:32:07] But we can.

Alec: [00:32:08] Okay. Elf and Darcy were getting very excited about this company because they were telling us it was going to use AI to create virtual chat bots of celebrities.

Bryce: [00:32:23] Okay. So deep fake stuff. 

Alec: [00:32:25] Kind of. Yes. So it's like you want to speak to your favourite celebrity, You wanna speak to Snoop Dogg, you want to speak to George Washington, You want to speak to someone inside celebrity, You want to talk to Bryce Leske. Unith Will They'll be creating celebrity chat bots that you can speak to. Now Alf and Darcy went too far off the mark? But they were off the mark. Okay. There's no celebrity angle to this, at least as far as I could tell. 

Bryce: [00:32:53] Okay, nice. Based on our due diligence. 

Alec: [00:32:55] So what units are doing? They're creating virtual chat bots rather than the pop up popping up on the bottom right hand corner of your screen. When you're on a website and you're typing to someone all like a sales lead capture form for sales where it says that you put your details in and then someone will be in touch with you. Or like employee onboarding where you just do a course and you like taking boxes. Those sort of use cases, they say a world where they're virtual. I will actually be talking to the potential lead or the new employee and answering their questions and talking to them and having a conversation just on. 

Bryce: [00:33:35] The laptop. 

Alec: [00:33:36] Or desktop. Yeah. Or phone even. 

Bryce: [00:33:38] Yeah. No, no, no hologram vibe. Yeah. 

Alec: [00:33:41] Well, that might be on that roadmap, but I don't think that technology exists yet. That's their play. 

Bryce: [00:33:46] Okay. And have they rolled anything out? 

Alec: [00:33:48] They have. And I don't know how this is going to translate over audio, but we included a video that they produced for Valentine's Day this year. So pretty recent. We included it in the ride up, so you can watch it there. But Bryce, I'll let you watch it. And I want to get your reaction and people can listen to the chat, but until you tell me what you think. 

Audio Clip: [00:34:08] Roses are red, violets are blue. I'm in a digital world and I've found you. In business or entertainment. Converse in real time. With any head in any language. We can even rhyme. Happy Valentine's Day from us all here at Eunice. 

Bryce: [00:34:25] I mean, it's okay. It's pretty weird. 

Alec: [00:34:29] It's pretty.

Bryce: [00:34:29] It's pretty weird. Yeah. The visualisations aren't quite there for me. 

Alec: [00:34:34] In the write up. We spoke about the uncanny valley, and I think this is the really interesting conversation in a point in a book with a company like this. And for people unfamiliar, the uncanny valley is when something doesn't look human at all. Humans are very comfortable with it. So a robot that looks like a Roomba, we're all gone. But as a robot gets more and more human looking, we get quite uncomfortable with it. And that's the uncanny valley that you've got to cross. And then when something looks like a human, then we're comfortable with it again. And I think these guys are right in the middle of traversing the uncanny valley. Yeah, it looks quite human, but not. 

Bryce: [00:35:18] Quite. Not human enough. Yeah, the lips didn't sync with the audio. That for me is a no do. 

Alec: [00:35:23] Yeah, yeah, yeah.

Bryce: [00:35:25] So I guess the question from this is where to for Eunice. And given what's going on in the A.I. landscape at the moment and Microsoft investing billions in chat JPT it feels like this is a that's a play for them gets snapped up by one of these larger tech companies. 

Alec: [00:35:41] I don't even know like if I was. Mike So to be clear, these guys plug in to chat or JPT. JP Tape three Oh, right. Yeah. 

Bryce: [00:35:51] What have they been doing prior to ChatGPT? 

Alec: [00:35:54] It's like Wizard of Oz where someone's behind the curtain. I don't know. 

Bryce: [00:35:59] What you're going to say, I imagine, is that Microsoft can just do it themselves. 

Alec: [00:36:03] Well, I think it's worth noting that Microsoft have a massive video game division where they create very beautiful games and well-designed games. It feels like it's something Microsoft could do. Yeah, it feels like it's something Alphabet could do. But I mean, that's the beauty of business. If units can do it better or if they can sell better, focus on this one little niche application rather than Microsoft and Google trying to do like being bought and whatever Google are going to do with board for search, you know, maybe they're not going to focus on this use case of chat bots. And then a smaller company can love to say an Australian do it. Based on your reaction earlier. They got their work but got a.

Bryce: [00:36:46] They've got a aLot of work ahead of them. 

Alec: [00:36:47] But again, this is interesting. Like these are the companies that no one else is.

Bryce: [00:36:51] Yes, you're right. And that is a great way to kick off uncovered here at Equity Mates Refuge Australia and Eunice. Both ride ups are available on the website, so head over there. If you would like to find out more detail about each of those companies. And we will continue to uncover small caps here in Australia and from around the world on this podcast. 

Alec: [00:37:10] And we're not going to talk about all of the ones that we write up on the podcast, so we'll share them on our socials and we'll publish them on the website, the Mail and also via email. We thought our thought starters mailing list. 

Bryce: [00:37:23] That's it. Yeah. All right. Well, don't forget the Ross courses. There's $100 off and TIKR 15% off if you want an annual membership. Deals everywhere.

Alec: [00:37:31] So much Going on.

Bryce: [00:37:31] Equity Mates. It's great. Show notes. Sorry, links will be in show notes. Codes were being shown for a sort of hour. 

Alec: [00:37:37] Long show notes today. 

Bryce: [00:37:37] And one more thing, if you could leave us a five star review, that would be really, really appreciated. Leave us a review. If you're listening on Apple or Spotify, it does help us get in front of new Equity Mates on the chart, so we would really appreciate it. But Ren, as always, it's just. 

Alec: [00:37:56] One more thing. All right. 

Bryce: [00:37:58] But Ren, it's great to chat stocks as always. Charlie Viola on Thursday. Awesome interview and we will be back with Equity Mates chat next Monday. 

Alec: [00:38:06] Sounds good.