the call: Monday 1 June

[MUSIC PLAYING] The call is brought to you by Centuria, an ASX-listed property fund manager with $21 billion in assets under management. Want to diversify beyond equities? Explore the Centuria Sydney CBD Prime Office fund at centuria.com.au. [MUSIC PLAYING] [MUSIC PLAYING] Well, hello, and a very warm welcome to the call on this Monday afternoon. Lovely to be here with you. The first of June, the first day of winter officially, little chilly here in Sydney. But the sun is shining. So we've also got the local market just looking mildly positive at this time. So let's find out if the stocks that have been nominated by you get a buy hold or sell rating from my two expert guests over the next 60 minutes. Our two experts on today show Kaicheng, who's joining us from NPC markets here in studio. Nice to see Kaai, also Andrew Coleman, who is joining us from team invest, a wolf, and sheep's clothing behind you. That is quite dramatic. I like it. Look, in from tech today, Kaai. Smashing it out of the ballpark record highs for the tech sector on Wall Street on Friday. And there is actually some news associated with this stuff. So one day, does not-- what is that? Does not a summer meet? Yeah, no, we caught it a couple months back. I think the whole SaaS Pockelix thing was a bit overblown. And really, it's taken a bit of a turn for the better. So especially in the US, we're seeing a lot of the big name stocks, Palo Alto, CrowdStrike, plenty of other semiconductor chips really making a rebound. So yeah, and it's all looking pretty positive. OK. And Andrew, what about value investing in these times, where we're up one day down the next-- up one day down the next, and the merry go round keeps going? Yes, like being a kid in the candy store right now for a value investor, isn't it? Right? I mean, there's all these amazing businesses that Mr. Market is just being completely insane about. One day up 15%, the next day down 15%, I wish my local willies went on special quite as frequently and with quite as big a discount, though perhaps willies might argue they were, even if the court system disagreed. Yeah, right. Well, Cole's put it in there as well. All right, so guys, let's begin this hour then by talking about the stock of the day. As we tend to do here daily, and the stock of the day is pro-medicates. I think, "Pokepostor Child," I suppose, for everything that was just aforementioned, it has said that it's got another $5-year, $28 million contract renewal with Allickany Health in the US. It's also signed a $7-year, $16 million contract with Title Health in the US, saying that its pipeline remains strong and spans all market segments with growing interest in its three-core, visage products. So another day, and for their contract wins for pro-medicates and being rewarded on market up by 9%, at least just past noon here in Sydney, so Kai, this is one of the fallen angels, although still on a very elevated PE. Do you think today's move is an indicator that if you were looking to get in, you might have missed your mark? Yeah, no, I think it's still actually relatively cheap. Compared to where it was trading just about a year ago. So there's a lot of things going for a pro-medicates. They do have a very good mode. And the reason why it fell was people were thinking that AI would be a challenger to the product where you'd have competing products. But I think this is incorrect. It's actually an answer. And again, talking about the mode that these businesses have, it's actually the contracts and also the proprietary data that they have behind. So in terms of pro-medicates, their contracts are extremely sticky. They go on for a long, long time. And it's recurring revenue. So they are actually doing really, really well in the US. So in terms of the large hospitals, I think they've got about 11 of the 20 largest hospitals in the US. So obviously, their bizarge software is top of line for the industry. And it helps improve the efficiency and productivity of the radiologists that use it. So yeah, no, it's all very positive. They've got great margins as well. So being a SaaS product, the margins are actually fairly high. So around 30%. So yeah, I think has it all going for it, pro-medicates. It's still out of cheap valuation. This is your chance. OK, so that's bye. Andrew, I mean, today is 9% rise. Takes a little bit of the cream off the top. But for people who have been looking for a chance to get into Prometheus, I mean, you could be waiting forever if you were waiting for a more significant fall, don't you think? Well, it's down 70%. Since it was a year ago. So from that point of view, big falls do happen. I think guys, hit on a really good point down. Pro-medicates is a wonderful company. It's one of the top handful of companies on the ASX. And we at Team Invest, now membership, have been covering Prometheus and invested to some degree in Prometheus since, as long as it goes, 2009. But I think a bit that the market gets wrong about Prometheus is always two things. The first is whenever there's the whiff of fear, markets overreact in the same way as when there's the whiff of greed, markets overreact in the other direction. And whilst this is a wonderful company growing at 25%, 30% per annum with a high degree of stability, super high return on equity and return on capital in the 40%. It was on a PE prior to today of 198 times. And now after the 10% rise, it must be back to a PE of over 100. And if you've been following us on the call for a long time, or on our show together, and indeed, of course, wealthy and wise, you know what I'm about to say next, which is at some point, gravity is going to reassert itself. It temporarily did for Prometheus dropping it down, but I don't think it dropped anywhere near enough. And I think we should expect that whilst Prometheus's earnings are going to continue to rise, and the whole SESPoccalist stuff was junk and we've spoken about that before. A PE of 100 still means it's a wonderful business, but not probably a very good investment. So we would be saying, hold or sell depending on how long you want to be an investor for, but I think PEs of 100 are almost certainly in the cell category for me and our members. - Okay, so there we go. We are often running difference in opinion to get it going, always makes for good viewing. Let's find out what the next five companies are that we'll be talking about. And that is JB Hi-Fi for Alex and Deva Group for Jake, Baby Bunting in the smaller end, and Retail as well, Tyro and the Australian Foundation Investment Company for two viewers, Joseph and Perdence, everybody, thank you for writing in, Osbus.co/callpix. If you have a stock that you would like to be covered on this program. Now, let's get to the first one. JB Hi-Fi, this one's for Alex. I don't know if Alex already owns it or is looking to get into it, but again, this is one of those companies that was at record heights and it has pulled back some say for good reason. Although others point to end a financial year coming, lots of people will be upgrading for AI. Is it good value now? - Yeah, no, it's interesting, question. I think, well, JB Hi-Fi in terms of within the retail sector, it is definitely one of the highest quality stocks that you can buy. And when it was at a market-dialing status a while ago, just kept going up. And I think it was a little bit outstretched in terms of valuations. But for me, it's just not the right time in the sector to be really allocating to JB Hi-Fi. I think consumer sentiment as well as business sentiment has been incredibly low. Obviously, we've seen a lot of changes with the budget, cost of living, inflation. So those things don't really well bowed well for the retail sector. As a company, we really like JB Hi-Fi. I think if we had to pick a retail stock, it'll, JB Hi-Fi will definitely be one of the top three stocks that would be considering. In terms of PE, at the moment, it's about at 17. So it's about smack bang in the middle. So I'll say it's roughly around fair value at the moment. Return on equity really high, about 28%. So it's really well-run company, but just not the right time in the cycle for me. - Yeah, so you are not afraid to perhaps miss out on a little bit of upside, you're going to wait for the cycle to turn for retailers. - Absolutely. - Got it. So that is a, well, I guess that would be a sell. - Yeah. Andrew, do you think blanket across sectors like that as well? I mean, or is it starting to look really good value at 17 times for you? - Yeah, I think it's nice and fun to talk macro, but you make your money micro. So from our point of view, we're happy to talk sectors and talk industries, but it doesn't affect our investment decisions because at the end of the day, you're buying a share of a business, not a share of a sector. So from that point of view, I think you answered your question, no, we're not interested in sectors per se. What I would say though, if you want to look at retailers, JB Hi-Fi is probably one of the worlds. Well, he's definitely one of the worlds top handful in terms of sales and growth profit per square foot, which is an incredible achievement coming from Australia where we are not known to dominate the world in retail and particularly in the category of IT retail. So that's an incredible result. And you see that there in JB High Fies numbers. You know, consistently delivering north of 20% return on equity and return on capital with very little debt, all while being able to grow that sales and earnings in double digits, you know, north of 10% per annum with a very high degree of stability. And over the years, we've run over 20 deep dives with our members since 2010 on JB High Fies. And throughout that period, which is now at 16 years, it has been one of our long-term wealth winners. So to Christ Point, the PE of 17 times need a particularly fearful nor greedy. It's not cheap, it's not super expensive. So I'm going to put it as a buy because when you can get a wonderful business that you can own for the kind of time you can, like JB High Fies, on market average, that's almost always going to end up well for you. Though, obviously, before backing up the truck, you'd want the market to be a little more generous and offer a deeper discount. So it's a buy, but certainly not a, you know, throw everything out at buy. Okay, we're not going all in again, but a disagreement. Let's see what the next stock brings. And that is Endeavor Group. And Jake says, and I like what you've done here, Jake, buying the dip or staying dry. Okay, Endeavor Group, last week, guys, you know, did say that it would be putting some vineyards up to sale because it's been doing the strategic review of the business. It's tougher, I think, out there than, obviously, Endeavor would like it to be in terms of sales. Is there something that the market's missing? Would you be looking for sort of the hotels business, looking for, I guess, some of the silver lining in Endeavor Group? Yeah, no, it's very interesting because I mean, Endeavor's been undervalued for quite a long time. And I do think there's a structural element to it. So, you know, if we look at consumer bay VR, especially in young people, you know, alcohol consumption has been a lot lower, right? So that's the majority of the business. I know they own hotel segments as well. But, you know, as focusing on the liquor segment, you know, they do have the majority of the portfolio in BWS or Dan Murphy's. And, you know, like, they've been doing a bit of restructure and change of strategies. The CEOs comes out, came out and basically, they're doing a reset in terms of Dan Murphy. You know, Dan Murphy is known for having the lowest price liquor in pretty much all of Australia. And then, you know, they pivoted away from that and they're coming back to the call and saying, you know, we're going to become the cheapest alcohol retailer. And, but the issue is that just, you know, not as many people buying. So the demand for alcohol is, you know, slumping. But, yeah, so that's why the device, is trying to diversify their wind vineyards, which hasn't been very good. So they are taking the right steps to restructure them. I think it is undervalued at the moment where it stands. But I'll just like to have a bit more safety in terms of getting in. If you're really hold it, it's very cheap. I'll hold it. But I'm not really in a rush to buy in Debra. OK. And again, that speaks to your strategy, right? See the proof in the pudding before you go all in. All right. Andrew and Debra Group, do you reckon there is some good value there if it can sort of turn the ship around, which, as we know, can often be a difficult task? I didn't ever to find something better. And if you want to keep going with puns, I think you need some pretty deep beer goggles to see value in it at the moment. Now, that's not to say that they can't turn the ship around. And one day you start growing materially faster than inflation. But in the five years that, indeed, has been listed, there has been zero, and I mean zero growth in earnings and sales, despite the very large amount of inflation that this sector has had. So effectively, in real terms, endeavor has been going backwards at a pretty rapid click. As a result, it's absolutely going into be in our members and my too hard basket. If you're looking at it from a yield point of view, which may be an argument that someone might want to make with retailers, I'm never particularly excited by that, but I've heard it said plenty of times, then the yield at 14 times per year is just no any good enough. So my comment, and I think our members would say, put your money elsewhere with somewhere at a company that's going to give you far better return with far less risk. And if you want to be in a retailer, perhaps use JV High Five, which we just spoke about. Yeah, okay. So bringing it back, closing that loop, so to speak. Hi, Andrew here. Did you know you can get your stoppicks straight to the front of the queue and to the guests you choose if you become an Osbus contributor? It's our small way of saying thanks for your support. The link is in the show notes. And while I've got you, we'd love it if you could leave us a review. Thanks for listening. Let's get on to the next question. This one is for Tyler. This is Baby Bunting, BBN. So we're back to the retailers. Andrew, I might start with you on this one because Baby Bunting has done a strategic refresh. It does have new shop experience because I think there was a recognition that you want something some reason for people to go in store rather than just finding the cheapest price online at your competitors, right? So do you think the strategy's working for Baby Bunting? Well, 10 years ago, Baby Bunting made $9.6 million in profit. And last year with the number of strategic resets they've had, they made $9.3 million in profit. So I don't think it's working yet. And similarly, it's a company here with low growth, very high debt, 150% plus debt to equity thanks to leases. And yet, we talked about before with ProMedicus, you know, the way the market can swing so rapidly. At one point, the market was prepared to pay $6.65 a share, equivalent to a market cap of $850 million at a P of over 100 times. So look, I suppose you could say it's nice to see the market being a little bit more realistic now, having brought the share price down from those stratospheric heights, but less than $10 million of profit in a competitive sector. That doesn't really sound like a business. It sounds like a hobby. So definitely not the hallmarks of something that are exciting. That's it. Okay, so that's a sell or an avoid if you're not in it. Look, we haven't heard a lot from the company really since the last reporting season in this sector, which I know you guys don't like. If you haven't heard from a retailer updates on sales or anything else, is that sort of a little bit of a perhaps a warning sign as well? - Yeah, well, it's just stagnant, right? I think they really haven't brought much to the table, as Andrew said. I think with baby bunting, well, the thing is they are trying. So looking at how they are trying to restructure and their plan of attack is basically, they have changed to online sales. About 24% of the sales do come from online, which is a good thing. As we all see, e-commerce has become such a massive part of the retail landscape. So it's good that they recognize that and they are selling more through that. One good thing is that they are improving their margins in a way. So they've had record gross margins, which means basically they're taking more out of what they sell. So that's at 41%. New Zealand's doing pretty good. Actually, it's actually quite surprising. Like a lot of these retailers in New Zealand, they're doing a lot better and it's actually growing quite a lot more than the Australian segment. Just an interesting thing that I've seen across a lot of the retailers. And from obviously the net profit figure, as I just said before, it hasn't grown substantially. So it's a bit lackluster. I know you can see that the company is trying to pivot in the right way. But from an investor standpoint, is a worth taking that risk. It's really hard to justify. If you have it, I'll just hold it. But of course, I think there's probably better places for sure if you're looking for growth to put your money. Yeah, all right. So baby bunting. Not getting a lot of love here today. That one's for Tyler. Let's get to stock number four on the list. And this is Tyro Payments. Tyro CEO was actually a guest on another program that we host here on Auschwitz, which was Peter Switzer show, Switzerland TV. Look, Tyro Payments, it has not had the best run, really. So what is the best outcome for Tyro Payments? Do you think that it's undervalued again, even though investors have really suffered over the past few years? Do you think that maybe it's got a turnaround story in it? I don't think so. I don't think there's going to be substantial change. In fact, I think there's actually some changes, which are going to be detrimental to Tyro Payments. So it's a competitive landscape. They have massive competitors, square. You've got Stripe. You've got a lot of other, basically, payment systems out there as competition. But also the thing that was released by the RBA, they're going to stop surcharges on these credit card payments in October. So that's, I think, in a way detrimental, because it constrains their way to charge additional fees. Having said that from a company standpoint, they look all right. They're pretty solid. I mean, their margins look pretty healthy, et cetera. But I just think that it's a very competitive landscape. And basically, the profit after tax is not that much. It's about 17 million. So there's nothing to be super excited about. For me, it's not a place that I want to be in at the moment. I think just from a regulatory perspective, there may be potentially more headwinds on the way. Something that wants to get scrutinized, does it affect the business model, how does it change it? So I'm answered questions. So for me, it's-- It's not exciting. - Yeah, so that's a sell. I'll call that a sell. - Yeah. - Andrew, when you look at Tyro, like do you think that its motes are strong enough, particularly, I know that you think that this SAS apocalypse has been overdone, but it would be a lot easier for a competitor to get up and running for Tyro these days. - Yeah, I'm unsure of Tyro has any motes. I mean, that may be a little unfair to Tyro, it's not a company I know in a huge amount of detail, but looking at it, its payments platform manager, there's hundreds of them around the world. The value there would probably be in the relationships with the banks and the banking system, and again, there are lots of them with already incumbent positions. So I think this is another company that an IPO managed to do one of the great things about the stock market, which was part fools from their wealth. Now down 80, what's that almost 80% since its peak, and a PE of 19, it at least looks more reasonably priced in a 19 is around the market average, and it's probably a pretty average company from everything I can see, but I would come similar to Kice Point and say why I own this when you have better options with less regulatory risk, and so I'd be a sell. - That is a sell for Tyro, pretty simple equation being made there. Let's get to number five on the list, and this one we have a bit of context coming from our viewers, which I do love your under no obligation to give us too much information, but I do like sort of knowing where the thinking is coming from, and this is the Australian Foundation Investment Company. AFI is the ticker code. So Joseph writes, please provide a brief analysis of the Australian Foundation Investment Company, focusing on the current share price relative to its pre-tax and post-tax NTA. So is AFI trading at a discount or premium, and how does this compare with historical liberals, and is now a good time to buy prudence always says, or also says, hello to the Ausbus team, love your work. Thank you, prudence. She says, my parents recently downsized, sold the house, and are looking to build an income portfolio. What do you think of AFI, especially given that it's trading below its NTA by a wide margin, is it a solid dividend stock to build the portfolio around really good context, Andrew, I'll start with you. It's funny. You mentioned the Wolfen Sheets clothing, if I just swing that way. You can see the question you have to ask, whenever you've got a liquor or a fund manager, is it a fund manager or fund damage? Because at the end of the day, what you're doing when you buy a lick's shares, of course, is you're abrogating the investment decision. You're saying you want someone else to manage the money for you, which if you're someone like us, you know, as a professional in the market, or our team investment members who manage their own money themselves, probably means immediately, it's not attractive. Now, for Joseph Prudence, by assumption here, as you're looking at this for one of two reasons, either you're looking to find a fund manager, someone who's got a track record of managing money that is better than yours, and so you'd like to use them, which is a very valid question, and we can look at it through that lens, or alternatively, you're trying to arbitrage the value gap. You know, it's trading at a discount to its NTA. So is that discount attractive enough to mean that you want to trade this stock, which again, there's not something we do, but you know, you could maybe come in buy it for a discount sell at later when the discount closes. For both of those two questions, therefore, this is a very personal one, and it's not one, therefore, that I think I can particularly answer, because I can only really talk in general terms without knowing your personal circumstances. But I think the questions I would ask is in the first case, if you're looking at them as a fund manager, in other words, you want them to manage your money for the long term by buying their shares and seeing how they do, have a look at their track record and compare that to how you think you would do with the money yourself, because at the end, that's the choice. Manage yourself or give it to a fund manager and these are one of the options. On the other hand, if you're looking at it from an arbitrage, a short term trading point of view, and here I'll probably defer to Kai, because this is much more his area than mine, but I would say a discount of 14.5% to the pre-tax NTA is probably not enough to excite me. You know, the risk of trading is always you get it wrong, and here the upside is relatively limited. You know, the odds of it going up, but above its NTA in the short term are pretty low. So you're talking about taking risk to get a maximum return of around 14, 15%, that's not enough to excite me around members. But because of the specifics of the question, I'm going to avoid giving a buy seller hold, because I think it's up to you guys watching at home. Is this a better fund manager than you are at managing your own money? Have a look at their track record and determine that for yourself. And then secondly, is 14.5% enough. If you are a trader to excite you, neither of those are questions I'm really qualified to answer for you. Yeah, all right. Well, thanks for your honesty. Always the best policy. Let's go to Kai Chen. So A and A, there's a couple of things. You know, is it good value right now considering its NTA? And then would this be a pretty good income stock as a core portfolio holding? Yeah, no, it's a very interesting proposition, because it is trading at about 50% to NTA. And going back to my previous life as a bonds trader, we do a lot of these arbitrage spreads where you're buying something and you're selling something. So it comes to always the conundrum where if it's undervalued, are you putting on the hedge leg, which means if you're buying this company, you're selling a representation of the same exposure on the other sides, or shorting the other side. Because the tricky bit is basically like you don't know whether the market will keep falling. And the other question is also, is this structural? Because from an instrument standpoint, right? There's just the reason why it's out of discount is because, traditionally they've had fund managers to represent an index, but obviously today's day and age, you have ETFs, brilliant ETFs out there, which are extremely low cost, that some of them do pay out the dividend as well. So the question is, is this still a legitimate structure? And that's why we're really seeing a bit of our flow from these LIC structures. So that's why the discount really exists in there. I think from our standpoint, yes, it's cheap, but from a 15% standpoint, you still have market risk in there as well. So if you don't put on the hedge leg, basically if you're trying to capture the arbitrage, you still have market exposure. So that's one factor to consider. That's fairly thin premium, say, for example, reverts back to historical averages about 5% to 8% on discount. There's only about a 7% spread to capture. So it's not really warrant the risk for me, in my opinion. I think there's a lot of better ways to actually represent this. If you want to be just long be indexed, for us at MPC, we do a lot of structure products. And there's a lot better ways to actually find the same returns. So the old argument with passive investing and active investing, I think we all realize that ETFs have been a great tool in the market, and passive generally wins out over the long run. But the question now that we're trying to solve is, can we actually do it in a better way in the smarter way? And the answer is yes. OK, so that is looking to void, I think, for both of my guests for AFI. All right, we are at the halfway mark. Let me just review what we've learned thus far. And that is pro-medicist. So saw it pretty differently. Kai says that even after today's rally, it's still looking cheap. Historically speaking, it's got a good moat, got a lot going for it. It's a buy for him. Andrew says, take some profits or hold it. P's still around 100 times. And gravity will reassert itself. He's not going to be buying it today. JB Hi-Fi. It's a buy for Andrew. So he really focuses on the micro. And he likes it. It has very little debt. It is a little buy, not all in, because he reckons-- it's fair value. Like, you could get it cheaper potentially, but he really loves the operator. And it's a sell for Kai. Does not like the retail sector right now. And sees it as fair value, not a lot upside right now. Endeavour, it is a sell. Andrew says, Endeavour, for something better, it's just too hard. Kai does recognize that it's undervalued. If you already have it, you can hold it. It is taking some good steps to rectify the path. Baby bunting, it is a hold. It hasn't been growing. Questions whether it's worth the risk, says Kai. It's just very stagnant. But if you're in it, you could hold it. And it's a sell. So a retailer that's a sell for Andrew Low Growth, very high debt, not interesting at all. Tyro, both of my guests do agree that you'd be selling this one. And AFI, you heard what Andrew just said. And Kai, Kai would be avoiding this one in favor of structured products and Andrew reckons. You got to consider whether you could do better yourself. All right, so that is the first half of the program. Now, tonight, let's just say tonight, we're late this afternoon, early evening. We will be releasing the latest edition of the Investment Committee. So just about 415, 420 today, it will go live. We'll get it up online shortly after that. If you'd like to have a listen or look, you can do so via our website. Just go to the series link at the top of the page. So when you take a look at it today, keep in mind, the fund is up by 30-- well, roughly 33% since we started tracking it back on March 2022. Double buys from this program get sent to the Investment Committee for consideration. Although nothing from this, the first, of June. Alright, let's get across the next companies on your list and also just a reminder that this is just information. It's not financial advice. We don't know your personal circumstances and so you must get advice or do your own research before making decisions based on anything you hear here. Alright, let's get to a regular viewer less asking about Ensel, Ramsey Healthcare for Grace, SRG Global, A Motive and Southern Cross Electrical. Alright, let's get to stock number six. That's Ensel. This one is for less. So Kai, when you look at Ensel, what do you see? Do you see sort of a study as you go boring but beautiful type stock or just a waste of space in a portfolio? Oh, it's definitely boring. I think it's definitely in the defensive issue category. It's just runs, I mean, it's been a solid perform. What, it hasn't grown but it's just been stacking for a long time. It does have a small amount, you know, a decent amount dead about 1.5 times net debt to EBITDA. But you know, these guys have been around long time. They do operate fine. Their margins are not great. So, you know, it's fairly thin about 15 percent or so. So it doesn't really have a lot going for it. And it was in some way exposed to the US tariffs that were going on in terms of some manufacturing. So, you know, one plus, I guess, is that they acquired KBU, so it can be clocked in the US. And that has generated some synergies, about $2 million per tax. So, you know, they're integrating something new but it's certainly not a growth stock. It's certainly not something that I'm very excited about. Like, yeah, if we go on the argument of utilizing your cap room more efficiently, I'd probably sell and sell to buy something else. Yeah, okay, so that's a sell. I was just reading a bit of commentary from Ords about Ansel, broker sees potential upside of about 20 percent on a 12-month view. However, risks remain and that includes potentially higher input costs, some materials, and demand questions over some of its key markets. It's got an accumulate rating on the stock, but that doesn't sound like a ringing endorsement does it, Andrew? Would you agree or disagree? Yeah, I think the next five companies starting with Ansel are all really good examples of what I've just talked about in my new book, "Wealth Winners and Capital Killers," which has the tagline growth is not the goal compounding is, because in all five, what we're going to find is a train off between growth in the short term and compounding in the long term. And if you're a long term value investor and you understand the power of compounding over that 5, 10, 15, 20 year horizon, that's really the question you have to answer with each of these. Are these businesses that are going to have fast growth or slow growth in the short term? Sure, that's the traders question, but are these businesses that can compound for decades? Because if you're going to own them for decades, that compounding power will far outweigh any short term ups and downs. Now, in the case of Ansel, it is often called defensive, which is probably true in terms of both their investment profile, you know, earnings and sales growing just faster than inflation, reasonable, but not particularly low-dead ROE and ROC and mid to high single digits. That's defensive, but it's also true in terms of the products they make. I mean, they're providing barrier products, whether that's as gloves or prophylactics, right? And so as a result, just like their products, only Ansel is unlikely to give you a particularly nasty surprise or a wonderful gain, but if you combine at the right price, that compounding power growing just a little bit faster than inflation for decades at a time, with relatively low risk, that anything is going to materially change as a business, can be a wonderful investment. So the question now is just simply as a PE of 19.4, enough to give you that compounding gain, and I would say probably not yet. So hold if you have it, if not, there are better options. But a business like Ansel can make wonderful returns for the long term investor, provided you take advantage of when Mr Market is excited about growth and not compounding and take the other side of that trade. Okay, great. Thank you. That's Ansel. Let's get to the next on the list. And that was number six. Let me see. I think I've skipped one here. Number seven being Ramsey Healthcare. This one is for grace. So selling that sense of business in France. It's got a lot of property behind it, but healthcare Andrew has just been so battered and bruised and infertile. Ramsey Healthcare is sort of the master of some of its own mistakes as well. What do you make of it now where it sits? I think the healthcare sector has a lot of really good buys it at the moment. Ramsey is not one of them. It's highly leveraged and theemic return on equity and return on capital earnings falling, mistake after mistake as they tried to chase growth, not compounding, as we were talking about before. And if you didn't sell it around $80 a share, I reckon take the loss now because even if this patient may not be terminal yet, there's plenty more surgery ahead before you'd be prepared to say it's in remission. All right. I see what you're doing there. Loving the puns. Let's get to your review. Okay, on Ramsey Health. Yeah. Not to just similar. I think you're exactly right. There's actually a lot of opportunities available in the healthcare sector at the moment. For Ramsey, I mean, they are divesting their UK arm of the business. There's a lot of things that's gone wrong over there and I think it's just hard for healthcare in the UK at the moment. So they've done the right choice to try to divest that segment of the business. And actually going back to Andrew's point on compounding, it's true because over the long run, if you really look at how it works, it's actually quite staggering because I think most people and investors think on linear terms, whereas compounding, it is exponential, right? So it grows on itself. On 100K a different between 10% and 16%, it's about half a million dollars difference in 15 years. So it's quite substantial, but it's really a choice of what type of message you are, whether you are looking for that outperformer, so you've gone for slow and steady. And both are valid methods of investment. But I think you just got to choose right vehicle. And this certainly is not at the moment a growth stock. I think, yeah, if you, it does have merits potentially over the longer term. It is not super overvalued, but it's not something that I'll be looking at at the moment. Okay, thank you. Now just for the record, Morgan says a hold city neutral or it's light and you be as neutral Morgan Stanley underway for McCory is the one outperform at forecast revenue growth of around 8% and FY26 ahead of industry benefits growth of approximately 7.5%. And it's expecting a major private health insurance contract renewal in the second half. So that's what makes a market though, isn't it? All right, let's get to the next on the list. And this one is SRG Global. It's for Rachel Blake. So Rachel writes that she's held two parcels. One, she's done a thousand percent profit. The second parcel is already at 600 percent up. How much more growth does this have in it? She asks, she's considering taking profits on that parcel that's lifted by a thousand percent and putting it into energy. At Blake writes, I don't own the stock. However, I'm looking to add a small holding. Andrew is buying SRG Global now worth it. Look, I think firstly, well done, Rachel, on timing the market to perfection because to get those kind of returns you must have paid at or near its historic low for SRG and with that kind of local skill, I don't want to take it away from you. Maybe it's skill. It's the kind of return we practitioner can only dream of in a short period of time. So a huge pet on the back. In terms of from here low, SRG has certainly risen the recent uptick in construction and mining services pretty well with return on equity and return on capital for the first time now around double digits and sales and earnings growing quite rapidly through that growth part of the cycle. But it is now on a PE of 36 and a half, which is very high for a construction and mining services business. And it's there right at the point where I think most of us think the cycle in that part of the industry is likely approaching its peak. So if I was in your shoes and clearly I'm not because I wouldn't have bought it in the first place, but I'd probably thank Mr Market and lock in that wonderful return before either Mr Market or Mr Charmers decides to take an increasing share of it away from you. Peas that higher unsustainable, particularly in cyclical businesses and whilst it's a pretty well run business, there's nothing that says to me this is one that's going to compound for 10, 20 or 30 years and as such that PE is going to be the undoing. But you've done incredibly well. So I get and enjoy it. Yeah and so for Blake, you're not, you wouldn't be putting fresh money in clearly if you're telling Rachel the ticker profits. Yeah, I would definitely not be doing that. I think the only other comment I'd make is Rachel asked the question about going into energy. I think energy has the same issue in terms of timing in the cycle. It's not really an industry that I cover a huge amount, despite having once in the past being an energy and resources analyst. I got out of it for a good reason. I think there are much better opportunities out there and just to both Blake and Rachel, well done if you've made money out of this, but take that money and compound it somewhere else. All right, Kai, I guess the counter to that argument is that as SRG Global is not really just a mining services company, is it? I mean, it's got technology, arm, it's got drones, it's got dam, anchoring and monitoring, it's got AI modeling, like it's really working across sectors. It's sort of infrastructure services, I think, is what it calls itself. So what do you make of SRG Global, first of all, would you be willing to take profits? I mean, it's kind of a general question if you're ever up that much. Should you start taking profits? It's the Alcanundrum, you know, value versus momentum and growth. So yeah, no, it's a really interesting question because, you know, if you really look at the business, there's a reason why they price, forward price so much valuation into it because 80% of the revenues actually are recurring. So it's a very steady income. If they continue to grow, the revenue line is very steady. So people get excited about that. I'm not saying that this is not past valuation because when, as we see with a lot of these stocks, when they go on a hard streak, when it goes on a run, it is insane. And, you know, when you look at, when you look at a stock price, you really have to think about the split of whether it's fundamental or it's just speculative. You know, there's always an element of that. And that's just the nature of the market. You know, economists think that there's efficient markets and it's price effectively. And I can tell you from, you know, trading on the very short term, this is definitely not the case. Right. So, you know, I'm not saying that it can't go up. And we do tend to see this momentum stocks really go and continue to grow. And I'm not saying that it can't go up. We do tend to see this momentum stocks really go and continue to go up. But there's risks in there and you've got to be mindful of what your timeframe that you're investing in. If you're in there for a short term opportunity, you can take, you know, you can take a little bit more risk. But if you're gone in there for a 10 year horizon, I'll say it's actually overvalued at the moment. So, you know, you've done really well. What I'll do is basically I'll take a little bit of profit or average out or have a tight stop to basically eliminate the risk of it spiraling away. Yeah. Would you be putting fresh money into our SOG at these levels? Not. I wouldn't be super confident putting a new capital in this. I think there is, you know, it is out of 35 PE. Yeah. So it's a tricky one. I don't really have a high conviction on that. Yeah. Okay. Well, I hope you found that useful. I always do. And this one is a motive. This one's for Adam. He's also written in, boy, you guys have been good this week. He says, I am a long-term owner, excuse me, of a motive back when it was GUD. So many of you will remember GUD. However, in the last six months, the share prices dropped considerably due to slowing revenue and it cost his consumer. Looking at the longer term, can this bounce back considering the take up of EVs? And presumably the spend that will be associated with this. This one's for Adam. Kai. Thanks. This is a tricky sector at the moment. Basically, they handle the distribution of a lot of these four-wheel drive accessories and car parts and et cetera. So we've seen across the whole industry at the moment say, "ARB, it had a hot street. Get the moment who's correcting itself at the moment." So we've seen demands kind of soften a little bit. So I wouldn't say at the moment this is a screaming buy in terms of valuations. It's kind of, again, somewhere in the middle. It does provide a 5.5 percent yield. But again, it really depends on what you're buying this stock for. So you've got to have a bit more clarity in terms of why you're holding this stock. So I don't think the growth story will play out for this for a while. It's not a hot sector at the moment. So for me, I'd be a little bit cautious. I'd either be holding it for the yield or I would be putting it somewhere else. All right. Andrew, is it always a bad sign when the company changes its name? It's never a great sign. You would think, "Look, I'm not a marketing person. There may be good reasons." I think coming back to our point around, the difference between growth and compounding a motive grows just slightly faster than inflation and has for the last 10 years with not particularly high stability. It's dead at 80 percent of equity is high, but not stratospheric. And it's returned on equity and returned on capital is around 5 percent, which really tells you it was a long-term investor. But this is going to give you about a 5 percent return, which is where the yield currently is. As a result, that's what you look at about an average return for an average company on an average per year, 18 times. So there's nothing about ammo to that really gets a long-term value investor like we are at team investor. Now, members are excited. If you like the space though Adam, because you've been in it for a long time, ARB certainly looks the more attractive one. It's got about double the return on equity and capital, double the growth rate, much higher stability and is available on the same PE. So I don't know why you own ammo to it. Maybe there's a very good personal reason and connection with the brand in which case, obviously that's a personal choice. But if it's because you like what they do, I would be getting out of amateur an inter ARB because you can effectively get double the underlying fundamental compounding metrics for the same price per share or per dollar of earnings right now. Yeah, do you like ARB? Hi. Question without notice? Oh, no, no, I think I'm on the same line of thought as Andrew. I think if there was a preference between the two, I'd go ARB as well. Yeah, all right. Adam, we do hope that that helps. Don't forget information on the not personal financial advice. Let's get to the lucky last on the list. And this is Southern cross electrical. So what I mean, if SRG global had the mention behind it, Southern cross electrical certainly has momentum behind it. It's also got the massive thematic. You know, the data centers, the AI builds, but there is AI pushback happening. Its day of reckoning has arrived in the States, perhaps not so much here. So does that complicate things for Southern cross electrical? I don't think so. I know Andrew is going to hate this. Because in terms of valuation, they do look at, oh, I mean, the P is not too bad, but it's certainly growing quite a bit. But yeah, the main theme is really the data center play behind Southern cross electrical. I mean, it's doing a lot of the infrastructure build for next DC and a lot of the other infrastructures as well. You know, the question is, is the AI, I guess, is the AI data center build ending? I will definitely say no. I think, I don't know, just looking in our company, like the use of tokens has grown substantially, the cost of tokens has increased substantially. I think we need more capacity. I don't think we're anywhere near the end of that AI thematic. So I'm pretty bullish long run the AI theme. In terms of Southern cross electrical, they have done incredibly well. I mean, they've increased their revenue by about 45% over the last year. So it's quite stellar. They are doing the right things in the right space, capturing that theme. So it's definitely a stock that's super interesting. And I look at the stock about half a year ago. Oh my god, I'm like, it has got more and it's basically doubled in price. So again, going back to the short term run, when these things go on on momentum run, it goes really hard. So yeah, I don't know if I'll be putting fresh capital, but I would certainly be holding it at the moment and taking bits and pieces off for profit. Yeah, okay. Interesting. So Momo, it's the momentum version of FOMO, Andrew. But I know that you've got some concerns about the data center build out, but this is sort of a more nuts and bolts way to play that both thematic, not investing in next DC. Instead, investing in those that next DC has to hire to make it all happen. What do you think is Southern cross electrical? Well, if my choice is to own Southern cross electrical or next DC, it's Southern cross electrical or hands down because next DC's never made a profit and doesn't look like they ever will. Whereas at least Southern cross electrical is profitable and growing that profit at double digit rates. So it's a no-brainer. I think the challenge is they're coming back to how I opened this section with that sort of tagline from my new book, Growth is not the goal for a long-term investor compounding years. And the question you have to ask is, what is it that Southern cross electrical engineering does that are going to let them compound that earnings growth for the next decade as opposed to just being, as I think you both put it in exactly the right place at the right time. So from that point of view, it comes down to what are the modes of the business, what are the risks and how long can we see that continuing. And so it's actually a company we spent a bit of time on with our membership over the last sort of 12 to 18 months, right? Because you know, the number starting to look really good, the growth is clearly there. The stability actually has been over the last few years as well. There's little or no debt. So it's got all those fundamental basic requirements of being a wonderful long-term investment. The bit that it doesn't have at least in our 700 members view it and I would agree with them is it doesn't have the modes. It's benefiting right now simply because the rising tide is lifting all boats in the providers to these data centers. The data center rollout is happening. It's happening quick. Shell of a business or shell of a building with nothing in it. is worthless so the price to get the things inside, whether that's the GPUs, the wiring, the cable, the racks, they are all going through the roof and the providers of those picks and shovels have a unique current position where they're able to charge an outsized margin. The problem is going to be at some point that tide will turn and when it does the question will be are they swimming naked or does this business have something to protect it and unfortunately for any holder of Southern Cross Electrical I don't see those modes and neither do our members, perhaps we're wrong, perhaps they're there but therefore that's a risk we can't take and as such it would be an avoid not on the numbers but on that second quantitative question around the wisdom of the crowd, the modes and the risks. Any comments on the modes because arguably even if it is winning all these contracts, even if it does do, it's work better than others are not saying that it does but this is a very competitive area and it's very dependent on price and really I mean there's one guy going to do I don't know, I absolutely and I've actually got quite a few friends in the construction industry right so going back to why it's sticky for Southern Cross it's all relationship based and with these contract wins like you're picking out the quality builders to implement these types of projects and you know basically they go out to Tender and they usually pick the ones who have the strongest skills to implement this so obviously Southern Cross has come out and they've delivered the work in a good you know with good results so I think it's reputational where these guys are strong implementers and that's why they're winning all these contracts at Tender. So it's relationship based I think there is somewhat of a mode I know the argument basically like why couldn't someone else come in another engineering firm and tried to take over these contract but I do think there's a bit of stickiness in the relationships between the different you know say next DC with Southern Cross it's going to take a contender a bit more effort to kind of despise them. All right well agreed to just ground that one okay let's get to a bit of a review of what we've learned. Ansel it's a sell boring defensive but yeah just opportunity cost I think it's a hold it this is a compounding story for long term investors says Andrew Ramsay healthcare that was a sell for you wasn't it kind yeah sell for both of my guests um look it's it's made some mistakes it's um chased growth Andrew says and it's not worked out for it. It's our G global it is it can go up further Kai says but he'd be looking to take a bit of profit it's on a 35 times PE it's a sell or take profits that's another way to look at it um says Andrew uh so yeah lock in your your profits. A motive it's a hold it'd be very cautious 5.5 percent yield but it's just not a screaming by says Kai they both would prefer ARB actually in that space it's a sell for Andrew and Southern Cross you heard what they had to say a hold maybe take a little bit of cream off the top says Kai but he reckons it's still got more to run and avoid for Andrew Coleman from team invest to my guests a very big thank you for joining us on this Monday afternoon and Coleman team invest Kai 10 from NPC markets really great to have your clear and concise take on all of these stocks thank you for watching and for sending in your stock requests osbus.com/callpix stay with us we'll bring you more news and views next the call is brought to you by Centuria an ASX listed property fund manager with $21 billion in assets under management want to diversify beyond decudees explore the centuria Sydney CBD Prime Office fund at centuria.com.au