1 00:00:03,040 --> 00:00:07,640 Speaker 1: Welcome to Shared Lunch, a podcast by Shares's. I'm Jackie Newman. 2 00:00:07,800 --> 00:00:12,760 Speaker 1: Today we're talking to the Australian Foundation Investment Company AFIC. 3 00:00:13,320 --> 00:00:17,959 Speaker 1: EPIC managers a portfolio of iconic Australian stocks for over 4 00:00:18,040 --> 00:00:22,599 Speaker 1: one hundred and fifty thousand shareholders. Today we're speaking to 5 00:00:22,680 --> 00:00:26,560 Speaker 1: Jeff Driver, AFICS general manager for business Development. 6 00:00:27,440 --> 00:00:30,040 Speaker 2: Investing involves the risk you might lose the money you 7 00:00:30,080 --> 00:00:33,360 Speaker 2: start with. We recommend talking to a licensed financial advisor. 8 00:00:34,120 --> 00:00:37,920 Speaker 2: We also recommend reading product disclosure documents before deciding to invest. 9 00:00:38,200 --> 00:00:40,599 Speaker 2: Everything you're about to see and here is current at 10 00:00:40,600 --> 00:00:41,400 Speaker 2: the time of recording. 11 00:00:41,600 --> 00:00:44,440 Speaker 1: Jeff, Welcome to Shared Lunch. It's great to have you on. 12 00:00:45,200 --> 00:00:48,839 Speaker 1: APIC has been a cornerstone of the Australian market for 13 00:00:48,920 --> 00:00:52,240 Speaker 1: almost a century. Now, could you tell us at a 14 00:00:52,360 --> 00:00:55,520 Speaker 1: very high level what is AFIC and what does it do? 15 00:00:55,720 --> 00:00:58,480 Speaker 3: Yeah, So EPICS Australian Foundation Investment company, as you said, 16 00:00:58,480 --> 00:00:59,240 Speaker 3: we started. 17 00:00:59,040 --> 00:00:59,800 Speaker 4: Ninety eight years ago. 18 00:00:59,880 --> 00:01:04,320 Speaker 3: Now that was really designed to give access to retail 19 00:01:04,360 --> 00:01:07,959 Speaker 3: investors to a diversify a portfolio in the market, even 20 00:01:08,040 --> 00:01:10,080 Speaker 3: back in the nineteen twenties. 21 00:01:10,160 --> 00:01:13,280 Speaker 4: And what it is is actually a company structure. 22 00:01:13,319 --> 00:01:17,480 Speaker 3: So basically we take money or capital the people give 23 00:01:17,520 --> 00:01:22,840 Speaker 3: to us through buying shares in our company and investing 24 00:01:22,840 --> 00:01:25,920 Speaker 3: it in our diversify port filio of Australia and New 25 00:01:26,000 --> 00:01:32,600 Speaker 3: Zealand equities now really to provide instant access to the 26 00:01:33,560 --> 00:01:36,080 Speaker 3: market but at a very low cost. So it was 27 00:01:36,080 --> 00:01:39,360 Speaker 3: always about delivering at a low cost. There's no external management 28 00:01:39,400 --> 00:01:43,840 Speaker 3: company running the portfolio that charges a one percent fee 29 00:01:43,880 --> 00:01:46,240 Speaker 3: for example, which a lot of fund managers do these days. 30 00:01:46,440 --> 00:01:50,080 Speaker 1: You mentioned the company structure. Can we take a step back, 31 00:01:50,320 --> 00:01:53,240 Speaker 1: I think is a listed investment that's right? Can you 32 00:01:53,320 --> 00:01:56,960 Speaker 1: explain for our audience what is a listed investment company 33 00:01:57,000 --> 00:01:59,480 Speaker 1: and how is it different from say an etre. 34 00:01:59,600 --> 00:02:05,000 Speaker 3: Yeah, so Ethic is just like BHP or WORSE or 35 00:02:05,080 --> 00:02:09,880 Speaker 3: Telstra listed on the Australian Stock Exchange. It has a 36 00:02:09,919 --> 00:02:12,400 Speaker 3: company structure which means it has set level of capital. 37 00:02:13,600 --> 00:02:16,080 Speaker 3: It has a border to independent board of directors that 38 00:02:16,360 --> 00:02:19,040 Speaker 3: provide very strong governance. If you invest in a company, 39 00:02:19,080 --> 00:02:22,160 Speaker 3: you buy shares on the market, as you would do 40 00:02:22,200 --> 00:02:24,720 Speaker 3: with BHP or a worse. If you want to invest 41 00:02:24,760 --> 00:02:28,080 Speaker 3: in after you buy the shares on the market and 42 00:02:28,160 --> 00:02:33,880 Speaker 3: those shares represent a portion of value of the company itself. 43 00:02:34,240 --> 00:02:37,840 Speaker 3: And in effics case the portfoilio of companies that we 44 00:02:37,919 --> 00:02:40,239 Speaker 3: own within the Australian New Zealand market. 45 00:02:40,360 --> 00:02:42,880 Speaker 4: So the advantage we think of a. 46 00:02:44,520 --> 00:02:48,040 Speaker 3: Listed investment company, which is often called a closed end 47 00:02:48,120 --> 00:02:50,400 Speaker 3: fund because money is not coming in and out as 48 00:02:50,400 --> 00:02:53,600 Speaker 3: it would with a saye, for example, ETF, as we've 49 00:02:53,600 --> 00:02:55,640 Speaker 3: got permanency of capital, so we've got a lot we 50 00:02:55,680 --> 00:02:58,720 Speaker 3: can actually invest for the very long term, so investment 51 00:02:58,760 --> 00:03:01,600 Speaker 3: style is not dictated by money coming in out of 52 00:03:01,639 --> 00:03:04,280 Speaker 3: the market as it would be with an ETF, because 53 00:03:04,320 --> 00:03:06,880 Speaker 3: an ETF is an open infrastructure and ETF has to 54 00:03:06,919 --> 00:03:09,760 Speaker 3: buy and sell shares at the wim of the market 55 00:03:09,960 --> 00:03:13,240 Speaker 3: because the market goes up and people want to invest 56 00:03:13,240 --> 00:03:16,560 Speaker 3: in ETF at buy shares as the market's going up 57 00:03:16,600 --> 00:03:19,959 Speaker 3: and buys indiscriminately across sector. 58 00:03:19,680 --> 00:03:20,680 Speaker 4: Holdings in the market. 59 00:03:20,800 --> 00:03:22,840 Speaker 3: So, for example, if you're buying an ETF at the 60 00:03:22,840 --> 00:03:25,600 Speaker 3: moment for this train market, do you end up buying 61 00:03:25,639 --> 00:03:27,720 Speaker 3: Comewealth Bank at one hundred and eighty dollars or one 62 00:03:27,760 --> 00:03:30,359 Speaker 3: hundred and seventy five dollars whatever it is today, which 63 00:03:30,400 --> 00:03:33,680 Speaker 3: would represent probably over ten percent of that particular portfolio. 64 00:03:34,160 --> 00:03:36,520 Speaker 3: With a listed investment company we have the discretion to 65 00:03:36,520 --> 00:03:39,000 Speaker 3: actually say how much we're willing to invest in and 66 00:03:39,040 --> 00:03:40,560 Speaker 3: the timing of those investments. 67 00:03:41,480 --> 00:03:45,440 Speaker 1: So you mentioned broad exposure across a number of companies 68 00:03:46,400 --> 00:03:49,480 Speaker 1: for investors, though, what would you say is the big 69 00:03:49,520 --> 00:03:53,280 Speaker 1: picture argument for investing in a link such as AFIIC 70 00:03:53,480 --> 00:03:57,200 Speaker 1: versus constructing a portfolio of stocks themselves. 71 00:03:57,640 --> 00:04:00,680 Speaker 3: Well, we actually are a fund manager, so to actively 72 00:04:00,720 --> 00:04:04,000 Speaker 3: manage the portfolio. So we have an investment team of 73 00:04:04,120 --> 00:04:07,600 Speaker 3: eleven people who research probably one hundred and fifty tw 74 00:04:07,640 --> 00:04:10,160 Speaker 3: hundred stocks within the market. They get a chance to 75 00:04:10,160 --> 00:04:13,560 Speaker 3: meet the companies, the management. We have an investment process 76 00:04:13,600 --> 00:04:16,400 Speaker 3: which really focuses on quality companies, so those that have 77 00:04:16,480 --> 00:04:21,479 Speaker 3: got good management, good balance sheets, and a lot of 78 00:04:21,520 --> 00:04:25,200 Speaker 3: debts so we're not concerned about them going broke. We 79 00:04:25,279 --> 00:04:28,960 Speaker 3: also like companies that have actually got have the ability 80 00:04:29,000 --> 00:04:31,560 Speaker 3: to reinvest back into their businesses. So in a sense, 81 00:04:32,040 --> 00:04:34,159 Speaker 3: if they can generate returns from the capital they re 82 00:04:34,600 --> 00:04:38,280 Speaker 3: invest back into the company themselves. That compound effect in 83 00:04:38,360 --> 00:04:41,160 Speaker 3: terms of those projects and businesses which they invest in 84 00:04:41,600 --> 00:04:45,440 Speaker 3: ultimately drives their profit, which ultimately drives share price. So 85 00:04:45,480 --> 00:04:48,039 Speaker 3: that's what we think from a perspective of being an 86 00:04:48,080 --> 00:04:51,360 Speaker 3: active fund manager. An active fund manager may sometimes have 87 00:04:51,400 --> 00:04:54,440 Speaker 3: an underperform the market because something's going in out of fashion, 88 00:04:54,800 --> 00:04:57,560 Speaker 3: and sometimes they will outperform over that period of time. 89 00:04:57,839 --> 00:05:00,400 Speaker 3: We think the list of investment company structure and just 90 00:05:00,440 --> 00:05:02,800 Speaker 3: re emphasizing gives us the ability to actually take that 91 00:05:02,920 --> 00:05:06,160 Speaker 3: long term view. For an investor to construct their own portfolio, 92 00:05:06,240 --> 00:05:09,080 Speaker 3: they've got to do a lot of research. They've got 93 00:05:09,120 --> 00:05:13,400 Speaker 3: to have brokerage costs in terms of buying those fundsho've 94 00:05:13,400 --> 00:05:16,240 Speaker 3: got to monitor those portfoilio all the time. They don't 95 00:05:16,240 --> 00:05:19,120 Speaker 3: get a chance to meet management, and obviously the investment 96 00:05:19,160 --> 00:05:22,680 Speaker 3: process we have really does delve down in deep down 97 00:05:22,720 --> 00:05:25,240 Speaker 3: into the competitive advantage and what makes them a good 98 00:05:25,240 --> 00:05:26,960 Speaker 3: company to have into the portfolio. 99 00:05:27,080 --> 00:05:31,040 Speaker 1: Can you talk me through where AFIC is currently invested, 100 00:05:31,120 --> 00:05:35,120 Speaker 1: what sectors and themes are you focused on, and where 101 00:05:35,120 --> 00:05:37,360 Speaker 1: perhaps are you a little bit more cautious at the moment. 102 00:05:37,800 --> 00:05:40,600 Speaker 3: Yeah, so, I guess just the first point is not 103 00:05:40,640 --> 00:05:42,880 Speaker 3: we're not a thematic investment. We're best to We're not 104 00:05:42,880 --> 00:05:45,159 Speaker 3: trying to second guess the market. We really are looking 105 00:05:45,200 --> 00:05:47,920 Speaker 3: for good quality companies, as I said earlier on who 106 00:05:47,920 --> 00:05:51,479 Speaker 3: are got to generate strong returns, strong profits that they're 107 00:05:51,480 --> 00:05:54,760 Speaker 3: great to grow their share prices over time. Ultimately, profits 108 00:05:54,760 --> 00:05:58,440 Speaker 3: should grow share prices. Now, sometimes at a frothy market, 109 00:05:58,480 --> 00:06:01,480 Speaker 3: you can see where profits are not necessarily going up, 110 00:06:01,480 --> 00:06:04,159 Speaker 3: but the share prices go up dramatically in a stock. 111 00:06:04,200 --> 00:06:05,760 Speaker 4: And that's because what happens is. 112 00:06:07,320 --> 00:06:10,760 Speaker 3: People put a high evaluation on those earning streams that 113 00:06:11,120 --> 00:06:14,880 Speaker 3: it's called the price earnings ratio, so they put a 114 00:06:14,960 --> 00:06:18,280 Speaker 3: higher price earning ratio on a stock. We look at 115 00:06:18,279 --> 00:06:20,560 Speaker 3: that and say, we don't want to really want to 116 00:06:20,560 --> 00:06:22,400 Speaker 3: be involved in that part of the market. 117 00:06:22,080 --> 00:06:24,080 Speaker 4: At this point in time. We think it's overpriced. 118 00:06:24,279 --> 00:06:27,640 Speaker 3: So we're not really trying to second guess market themes 119 00:06:27,720 --> 00:06:31,160 Speaker 3: or even macroeconomic trends for example, like the current. 120 00:06:30,880 --> 00:06:31,600 Speaker 4: War in Iran. 121 00:06:31,920 --> 00:06:36,200 Speaker 3: The market has been very strong recently in goal, so 122 00:06:36,200 --> 00:06:38,040 Speaker 3: that's not an area we invest in. We're not in 123 00:06:38,080 --> 00:06:41,520 Speaker 3: small MidCap resources, which again has run very strongly more recently, 124 00:06:42,400 --> 00:06:44,960 Speaker 3: because they can be very cyclical. Some of it is 125 00:06:45,040 --> 00:06:49,720 Speaker 3: basically been priced off the potential to produce the resources. 126 00:06:50,000 --> 00:06:55,040 Speaker 3: Minerals we've been more focused on, i say, growth industrial 127 00:06:55,040 --> 00:06:57,280 Speaker 3: companies at the moment, or have been over the last 128 00:06:57,279 --> 00:07:01,480 Speaker 3: few years. So an example of those would the car group, 129 00:07:01,960 --> 00:07:06,880 Speaker 3: which is obviously the classified car business, which has representational 130 00:07:06,880 --> 00:07:09,800 Speaker 3: over the globe real estate dot com And what you've 131 00:07:09,800 --> 00:07:12,200 Speaker 3: found more recently with those is because of the talk 132 00:07:12,200 --> 00:07:16,520 Speaker 3: around AI, they've come off dramatically. Their priceings ratios I 133 00:07:16,520 --> 00:07:19,720 Speaker 3: spoke earlier on have come down. Their business really hasn't changed. 134 00:07:20,000 --> 00:07:22,600 Speaker 3: There's obviously a concern about the threat to the business 135 00:07:22,600 --> 00:07:25,640 Speaker 3: from AI and that's what's driven the evaluations back down, 136 00:07:25,720 --> 00:07:29,040 Speaker 3: but ultimately their underlying business hasn't changed all that much. 137 00:07:29,040 --> 00:07:31,400 Speaker 3: And that's the area we're focusing on the moment in 138 00:07:31,480 --> 00:07:33,560 Speaker 3: terms of well we think value is actually better now 139 00:07:33,600 --> 00:07:37,440 Speaker 3: that was say twelve months ago. We're actually looking to 140 00:07:37,480 --> 00:07:39,640 Speaker 3: reinvest back into that part of the market as well. 141 00:07:39,760 --> 00:07:43,400 Speaker 1: I think has often highlighted the fact that many high 142 00:07:43,520 --> 00:07:47,960 Speaker 1: quality Australian companies are training at a discount to what 143 00:07:48,080 --> 00:07:53,000 Speaker 1: it would cost to replicate their businesses across the ASX. 144 00:07:53,400 --> 00:07:56,600 Speaker 1: Where are you seeing that hidden value at the moment 145 00:07:56,680 --> 00:07:59,520 Speaker 1: perhaps that the broader market might be missing, you. 146 00:07:59,480 --> 00:08:02,480 Speaker 3: Know in the smaller cap space Temple and Webster for example, 147 00:08:03,480 --> 00:08:07,400 Speaker 3: that got to a very high valuation. Again retailers because 148 00:08:07,440 --> 00:08:09,440 Speaker 3: of potentially increasing interest rates. 149 00:08:09,320 --> 00:08:11,520 Speaker 4: And what have you have come off a lot. 150 00:08:11,800 --> 00:08:13,880 Speaker 3: I suppose the point to make is that AFICS not 151 00:08:14,240 --> 00:08:17,440 Speaker 3: doesn't have a large turnover in the portfolio. So if 152 00:08:17,480 --> 00:08:19,120 Speaker 3: we buy a company, we want to buy a good 153 00:08:19,200 --> 00:08:22,080 Speaker 3: quality company at a good price and then let it run. 154 00:08:22,160 --> 00:08:23,280 Speaker 4: Let it run in terms of what. 155 00:08:23,280 --> 00:08:26,320 Speaker 3: It's trying to achieve through its business, it's business outcomes, 156 00:08:26,400 --> 00:08:31,520 Speaker 3: it's profitability, and we'll hopefully enjoy the share price returns 157 00:08:31,520 --> 00:08:34,320 Speaker 3: that give us over that five to ten year period. 158 00:08:34,360 --> 00:08:36,400 Speaker 3: It's really more focusing on the quality company and say 159 00:08:36,440 --> 00:08:38,720 Speaker 3: when's the time to buy those because that's when it 160 00:08:38,720 --> 00:08:40,760 Speaker 3: gets the best. That's when you get the best opportunities 161 00:08:40,760 --> 00:08:42,959 Speaker 3: for good returns for shareholders. 162 00:08:43,440 --> 00:08:48,040 Speaker 1: We're in an era of shifting interest rates, a constant 163 00:08:48,320 --> 00:08:53,120 Speaker 1: headline noise and volatility at the moment. In this environment, 164 00:08:53,120 --> 00:08:57,520 Speaker 1: can you talk us through how AFIC goes about identifying 165 00:08:57,679 --> 00:09:01,280 Speaker 1: resilient businesses. What are the some of the key features 166 00:09:01,320 --> 00:09:02,120 Speaker 1: that you look for. 167 00:09:02,480 --> 00:09:04,839 Speaker 3: I hate to sound really boring about this, but we 168 00:09:04,880 --> 00:09:08,079 Speaker 3: are really focused on companies which have good quality balance sheets. 169 00:09:08,120 --> 00:09:10,119 Speaker 4: So in a rising interest. 170 00:09:09,920 --> 00:09:12,720 Speaker 3: Rate market, the last thing you want is a company 171 00:09:12,760 --> 00:09:15,640 Speaker 3: has got higher levels of debt and leverage within their 172 00:09:15,640 --> 00:09:18,920 Speaker 3: balance sheets because we saw through I'm not saying we're 173 00:09:18,960 --> 00:09:21,920 Speaker 3: going through a GFC situation, but we saw back through 174 00:09:21,960 --> 00:09:26,160 Speaker 3: the Global Financial Crisis that a lot of balance sheets 175 00:09:26,160 --> 00:09:29,880 Speaker 3: were stretched and interest rates rising up, you know, ultimately 176 00:09:30,200 --> 00:09:34,680 Speaker 3: destroyed some of those companies. So we really are focused 177 00:09:34,720 --> 00:09:37,959 Speaker 3: on good quality companies with good balance sheets. 178 00:09:38,040 --> 00:09:41,199 Speaker 4: And so from that perspective, yes, rising interest. 179 00:09:40,960 --> 00:09:43,600 Speaker 3: Rates will lead into profitability, but they shouldn't be a 180 00:09:43,640 --> 00:09:47,640 Speaker 3: situation where they threatened actually underlying viability of companies, and 181 00:09:47,640 --> 00:09:51,559 Speaker 3: that's what we really focus on. So rising instur rates 182 00:09:51,559 --> 00:09:54,360 Speaker 3: and high gearing and not a great recipe for returns. 183 00:09:54,480 --> 00:09:55,439 Speaker 4: I don't think. 184 00:09:56,760 --> 00:10:01,480 Speaker 1: I want to touch on your international exposures. So Africa 185 00:10:01,480 --> 00:10:07,320 Speaker 1: has traditionally invested in predominantly Australian companies, but has recently 186 00:10:07,679 --> 00:10:12,560 Speaker 1: increased its exposure to international companies. Can you take us 187 00:10:12,600 --> 00:10:16,880 Speaker 1: through the approach and the thinking there and how perhaps 188 00:10:16,920 --> 00:10:20,800 Speaker 1: some of those companies complements your core ASX holdings. 189 00:10:21,640 --> 00:10:24,440 Speaker 3: So it's probably two part answers the question. Many of 190 00:10:24,480 --> 00:10:28,400 Speaker 3: the large Australian companies are international companies these days. I 191 00:10:28,400 --> 00:10:32,800 Speaker 3: mean we've got BHP in the portfolio, CSL within the portfolio, 192 00:10:33,040 --> 00:10:36,200 Speaker 3: James Hardy within the portfolio. So a lot of the 193 00:10:36,200 --> 00:10:39,760 Speaker 3: companies which we invest in already, who traditionally start off 194 00:10:39,760 --> 00:10:43,120 Speaker 3: as big Australian companies, have actually expanded overseas. The other 195 00:10:43,160 --> 00:10:46,120 Speaker 3: thing we did look at a lot of our shareholders 196 00:10:46,120 --> 00:10:50,040 Speaker 3: investors said can you think about setting up a separate 197 00:10:50,040 --> 00:10:54,600 Speaker 3: listed investment company which invests in international companies. So we 198 00:10:54,640 --> 00:10:56,480 Speaker 3: did look at it and we set up a sort 199 00:10:56,520 --> 00:11:01,079 Speaker 3: of an internal portfolio of international companies within AFIC. It's 200 00:11:01,080 --> 00:11:03,080 Speaker 3: about one and a half percent of the total value 201 00:11:03,559 --> 00:11:06,320 Speaker 3: of the AFFIC portfolio, so one hundred and fifty million 202 00:11:06,400 --> 00:11:12,160 Speaker 3: on a ten billion dollar portfolio. And what we've decided 203 00:11:12,160 --> 00:11:14,439 Speaker 3: is that at the market conditions as such as it's 204 00:11:14,480 --> 00:11:17,560 Speaker 3: too difficult to get a separate listed investment company off 205 00:11:17,600 --> 00:11:19,559 Speaker 3: the ground. So we're sort of taking a step back 206 00:11:19,600 --> 00:11:21,960 Speaker 3: and say, look, we still want exposure to some of 207 00:11:22,000 --> 00:11:25,000 Speaker 3: these companies that we've invested in. We still like the 208 00:11:25,040 --> 00:11:28,240 Speaker 3: idea of being able to research international companies and particularly 209 00:11:28,640 --> 00:11:32,920 Speaker 3: the implications that may have for domestic companies within the portfolio, 210 00:11:33,000 --> 00:11:35,320 Speaker 3: because if you think about it, you've got Coals and 211 00:11:35,320 --> 00:11:38,800 Speaker 3: Wilwors in the portfolio. What does Amazon mean in terms 212 00:11:38,840 --> 00:11:41,200 Speaker 3: of entering the Australian market. So what we've decided to 213 00:11:41,240 --> 00:11:45,440 Speaker 3: do is keep international exposure within the portfolio still at 214 00:11:45,480 --> 00:11:48,520 Speaker 3: about one hundred and fifty million. It may increase over time, 215 00:11:48,520 --> 00:11:51,440 Speaker 3: but reduce the number of stocks within the portfolio from 216 00:11:51,480 --> 00:11:53,679 Speaker 3: about forty five to about twenty five. So we're not 217 00:11:53,720 --> 00:11:57,240 Speaker 3: trying to outperform an index now, we're basically just trying 218 00:11:57,240 --> 00:12:00,600 Speaker 3: to look at good quality companies in the Internet sense 219 00:12:01,000 --> 00:12:03,520 Speaker 3: that actually can deliver value to affic shareholders in the 220 00:12:03,520 --> 00:12:04,320 Speaker 3: effic portfolio. 221 00:12:04,720 --> 00:12:08,960 Speaker 1: So the ASX is structurally defined by a heavy concentration 222 00:12:09,280 --> 00:12:14,400 Speaker 1: towards financials and the materials sector. From a fixed perspective, 223 00:12:14,559 --> 00:12:17,920 Speaker 1: what are the advantages of this SKU? Do you think? 224 00:12:18,559 --> 00:12:21,480 Speaker 1: Where are the gaps and where do you see I 225 00:12:21,480 --> 00:12:22,880 Speaker 1: guess the primary risks. 226 00:12:23,679 --> 00:12:25,640 Speaker 3: Look at other markets around the world that concentrate as well. 227 00:12:25,640 --> 00:12:28,200 Speaker 3: If you look at the different they're different ways. Look at 228 00:12:28,200 --> 00:12:30,880 Speaker 3: the US markets concentrated tech. These are good quality companies 229 00:12:30,880 --> 00:12:33,080 Speaker 3: as long as are they're bad companies. You've got the 230 00:12:33,160 --> 00:12:35,880 Speaker 3: banks who have got strong positions in the market and 231 00:12:35,960 --> 00:12:40,560 Speaker 3: generate great return or good returns and generate good dividends 232 00:12:40,559 --> 00:12:41,720 Speaker 3: for investors. 233 00:12:42,080 --> 00:12:44,280 Speaker 4: You've got the two resorts. You've got resources. 234 00:12:43,840 --> 00:12:46,160 Speaker 3: Companies, so the BHP and area would be the larger 235 00:12:46,200 --> 00:12:50,439 Speaker 3: and fortescue I guess to some extent the larger resource companies, 236 00:12:50,440 --> 00:12:54,160 Speaker 3: and they've got good businesses, low cost, they generate good 237 00:12:54,240 --> 00:12:59,160 Speaker 3: return on equity gain, pay reasonable dividends, So having concentration 238 00:12:59,640 --> 00:13:02,960 Speaker 3: risk in the market in those sort of companies is 239 00:13:03,000 --> 00:13:05,880 Speaker 3: not such necessarily a bad thing. The challenge it does 240 00:13:05,920 --> 00:13:08,920 Speaker 3: provide though, is clearly you don't want all your eggs 241 00:13:08,960 --> 00:13:12,920 Speaker 3: in one basket, and so what we pay attentions to 242 00:13:12,960 --> 00:13:16,360 Speaker 3: the index in terms of the way we structure the portfolio. 243 00:13:16,520 --> 00:13:19,800 Speaker 3: But we only have seventy stocks or sixty five seventy 244 00:13:19,840 --> 00:13:22,360 Speaker 3: stocks at the moment out of an AX two hundred index. 245 00:13:22,480 --> 00:13:24,760 Speaker 4: So we've still got to focus on. 246 00:13:26,880 --> 00:13:29,200 Speaker 3: Not being in certain companies which we don't feel fit 247 00:13:29,240 --> 00:13:33,120 Speaker 3: our investment criteria. And so from that perspective, the advantage 248 00:13:33,160 --> 00:13:35,920 Speaker 3: it adds to us so we can take bigger positions 249 00:13:36,559 --> 00:13:40,040 Speaker 3: in some smaller companies that are actually overweight, we can 250 00:13:40,080 --> 00:13:43,560 Speaker 3: overweight the index in those, so we're not dictated to 251 00:13:43,720 --> 00:13:44,400 Speaker 3: by the index. 252 00:13:44,679 --> 00:13:48,480 Speaker 1: In recent years, we've seen less IPOs and also a 253 00:13:48,559 --> 00:13:53,440 Speaker 1: number of blue chip companies being taken private. How do 254 00:13:53,559 --> 00:13:57,040 Speaker 1: you see the makeup or the landscape of the Australian 255 00:13:57,080 --> 00:14:01,000 Speaker 1: market evolving in the next five to ten years, and 256 00:14:01,520 --> 00:14:05,360 Speaker 1: how is that influencing your investment approach. 257 00:14:06,600 --> 00:14:09,360 Speaker 3: Yeah, so you're right, we have seen less IPOs come 258 00:14:09,400 --> 00:14:13,120 Speaker 3: to the market. We run we run another fund called 259 00:14:13,200 --> 00:14:15,600 Speaker 3: Mirror Booker, which is our small MidCap fund. So in 260 00:14:15,600 --> 00:14:20,200 Speaker 3: a since that provides some sort of a gateway entree 261 00:14:20,280 --> 00:14:22,680 Speaker 3: into that smaller MidCap sector of the market, which some 262 00:14:22,720 --> 00:14:26,160 Speaker 3: of those stocks can actually fee through the through the 263 00:14:26,200 --> 00:14:28,920 Speaker 3: APIC portfolio. Look, there is and you know, some of 264 00:14:28,920 --> 00:14:31,840 Speaker 3: our better companies were taken over, like Sydney Airports was 265 00:14:32,280 --> 00:14:34,760 Speaker 3: basically privatized with all that was a great asset. You've 266 00:14:34,760 --> 00:14:38,480 Speaker 3: seen other companies, I mean aria Jbhi Fi. You know 267 00:14:38,640 --> 00:14:40,520 Speaker 3: they've been around for a while, but they did start 268 00:14:40,520 --> 00:14:44,000 Speaker 3: off as IPOs ten fifteen years ago. So you often 269 00:14:44,440 --> 00:14:47,600 Speaker 3: can often see some of these good quality companies come 270 00:14:47,640 --> 00:14:50,200 Speaker 3: to the market if you're patient, but there is definitely 271 00:14:50,320 --> 00:14:53,440 Speaker 3: lesser them coming. I'd probably say. The other thing is 272 00:14:53,440 --> 00:14:58,360 Speaker 3: that I think directors are thinking twice about whether they're 273 00:14:58,680 --> 00:15:02,800 Speaker 3: bringing things to the market because there's regulatory issues, there's 274 00:15:02,840 --> 00:15:07,280 Speaker 3: liability issues. I'll arrange the different things governance issues. I 275 00:15:07,280 --> 00:15:09,560 Speaker 3: want I say issues, it's more about the amount of 276 00:15:11,200 --> 00:15:12,920 Speaker 3: red tape I guess, or something you want to call it, 277 00:15:12,960 --> 00:15:17,840 Speaker 3: that that is applied to listed companies. Look Having said that, though, 278 00:15:17,920 --> 00:15:21,520 Speaker 3: I think if you want to raise capital on a 279 00:15:21,560 --> 00:15:24,240 Speaker 3: regular basis, and you've got a good, good story and 280 00:15:24,280 --> 00:15:26,200 Speaker 3: you can grow your business, but you need that regular 281 00:15:26,240 --> 00:15:29,240 Speaker 3: supply capital, there will be companies will still come to 282 00:15:29,280 --> 00:15:32,160 Speaker 3: the market and look at Sigma for example, Chemists Warehouse, 283 00:15:32,160 --> 00:15:36,040 Speaker 3: which came via the backdoor listening through SIGNA. 284 00:15:36,120 --> 00:15:39,840 Speaker 1: So navigating market dynamics is one thing, but for most 285 00:15:39,960 --> 00:15:43,520 Speaker 1: investors it's all about the dollars in the account. Australia 286 00:15:43,560 --> 00:15:47,880 Speaker 1: has a strong dividend culture. Why do you think income 287 00:15:48,240 --> 00:15:50,920 Speaker 1: is such a central feature of our market and what 288 00:15:52,240 --> 00:15:55,360 Speaker 1: value does it play in terms of a long term portfolio? 289 00:15:55,920 --> 00:15:58,160 Speaker 3: I mean, you obviously got the franking system within Australia, 290 00:15:58,240 --> 00:16:01,280 Speaker 3: so obviously the offset tax the company pay as you 291 00:16:01,760 --> 00:16:04,480 Speaker 3: individual investor can offset that against their own tax return 292 00:16:05,200 --> 00:16:09,000 Speaker 3: from the distribution of fully franked dividends. So the structure 293 00:16:09,000 --> 00:16:12,120 Speaker 3: of the Australian market is such a the return of 294 00:16:12,320 --> 00:16:16,640 Speaker 3: value back to shareholders is waged to some extent through 295 00:16:17,080 --> 00:16:22,400 Speaker 3: fully franked dividend income. If you look at the US 296 00:16:22,440 --> 00:16:26,080 Speaker 3: market as an alternative or a different sort of measure, 297 00:16:26,800 --> 00:16:29,200 Speaker 3: they don't have that system. So they tend to have 298 00:16:29,240 --> 00:16:32,520 Speaker 3: a system where they buy back shares to try and 299 00:16:32,600 --> 00:16:35,520 Speaker 3: get the vay of the shares underlying shares up, and 300 00:16:35,560 --> 00:16:37,520 Speaker 3: they have to sell. People have to sell their shares 301 00:16:37,520 --> 00:16:40,120 Speaker 3: to actually generate some income if you want to call 302 00:16:40,120 --> 00:16:43,800 Speaker 3: it that from capital gains. So we think the Australian 303 00:16:43,840 --> 00:16:47,840 Speaker 3: system is a really good one. It's as said, we 304 00:16:47,840 --> 00:16:50,560 Speaker 3: think it's fair that if a company's paid tax, it 305 00:16:50,560 --> 00:16:53,600 Speaker 3: should be offset against in the hands of individual investors. 306 00:16:53,680 --> 00:16:56,120 Speaker 3: So and we thought long and hard when there was 307 00:16:56,200 --> 00:16:58,560 Speaker 3: some talk about changing the franking system many a few 308 00:16:58,640 --> 00:17:01,240 Speaker 3: years ago, back in two thousand and nine, now about 309 00:17:01,280 --> 00:17:04,919 Speaker 3: trying to maintain that system. If you look at the 310 00:17:04,920 --> 00:17:09,120 Speaker 3: structure of the investors that are in the market, you've 311 00:17:09,119 --> 00:17:11,440 Speaker 3: got self managed super funds, You've got. 312 00:17:12,760 --> 00:17:13,720 Speaker 4: People who can. 313 00:17:13,560 --> 00:17:18,520 Speaker 3: Actually develop their portfolios to take advantage of income. And 314 00:17:18,560 --> 00:17:23,040 Speaker 3: that's the way I think that the Australian market has developed. Also, 315 00:17:23,040 --> 00:17:24,800 Speaker 3: the other thing is you don't necessarily have to take 316 00:17:24,920 --> 00:17:27,680 Speaker 3: the income. You actually can reinvest back into the stares 317 00:17:28,160 --> 00:17:30,640 Speaker 3: through the dividend reinvestment plans and those sorts of things, 318 00:17:30,640 --> 00:17:33,520 Speaker 3: so you can actually build up continue to build up 319 00:17:33,560 --> 00:17:39,080 Speaker 3: your you're holding within a particular company through that sort 320 00:17:39,080 --> 00:17:42,000 Speaker 3: of activity and still get the benefit of franking credits. 321 00:17:42,200 --> 00:17:44,920 Speaker 3: If I get back to AFIC, I mean again getting 322 00:17:44,960 --> 00:17:48,520 Speaker 3: back to what their listed investment company is. Any tax 323 00:17:49,480 --> 00:17:53,040 Speaker 3: that we pay we can pass through as fully franked 324 00:17:53,359 --> 00:17:57,119 Speaker 3: dividends or fully franked income. Also, the franked incomes that 325 00:17:57,160 --> 00:17:59,560 Speaker 3: we receive from the dividends and companies that we hold 326 00:18:00,160 --> 00:18:02,800 Speaker 3: actually just flow straight through to the end investor through 327 00:18:03,680 --> 00:18:07,959 Speaker 3: through the dividends that we supply. We're very conscious of 328 00:18:08,200 --> 00:18:11,240 Speaker 3: the fact that franking is very valuable to our shareholders, 329 00:18:11,280 --> 00:18:17,280 Speaker 3: and the listed investment company structure allows you to reserve 330 00:18:17,800 --> 00:18:22,240 Speaker 3: not just only retain profits, but franking credits. So, for example, 331 00:18:23,280 --> 00:18:26,320 Speaker 3: through COVID, when the market cuts dividends by about twenty 332 00:18:26,320 --> 00:18:29,880 Speaker 3: five percent, AFRIC was able to maintain this dividends through 333 00:18:29,880 --> 00:18:32,879 Speaker 3: that period. If you think about the underlying investor, a 334 00:18:32,920 --> 00:18:35,199 Speaker 3: lot of the underlying investors who relied on the income 335 00:18:35,640 --> 00:18:38,719 Speaker 3: through that period of time, they didn't get a dividend cut. 336 00:18:38,960 --> 00:18:41,440 Speaker 3: If you invested in an exchange trade of fund which 337 00:18:41,600 --> 00:18:43,520 Speaker 3: replicated the index you've got to diven d cut a 338 00:18:43,600 --> 00:18:47,080 Speaker 3: twenty five percent. So the advantage for a listed investment 339 00:18:47,119 --> 00:18:52,880 Speaker 3: company around franking is really strong from that perspective. So 340 00:18:53,000 --> 00:18:56,440 Speaker 3: I think it's inherently that the tax system as such 341 00:18:57,040 --> 00:18:59,560 Speaker 3: has meant that dividends are very much part of the 342 00:18:59,600 --> 00:19:06,080 Speaker 3: Australian market, and good quality companies actually recognize that. Some 343 00:19:06,119 --> 00:19:08,760 Speaker 3: companies it takes a bit of convincing for them to 344 00:19:08,880 --> 00:19:13,439 Speaker 3: recognize that, and ultimately it's a balance for them about 345 00:19:14,359 --> 00:19:17,160 Speaker 3: whether they reinvest back in the business for their growth 346 00:19:17,760 --> 00:19:22,200 Speaker 3: story or to generate stronger returns, or whether they pay 347 00:19:22,200 --> 00:19:27,480 Speaker 3: it out as fully franked income. I think the other 348 00:19:27,520 --> 00:19:32,719 Speaker 3: point to make is that Australian investors are a lot 349 00:19:32,760 --> 00:19:36,120 Speaker 3: of retail investors, well most retail investors, I should say, 350 00:19:36,200 --> 00:19:41,560 Speaker 3: a reasonably sophisticated. If they get the dividends out to them, great. 351 00:19:42,080 --> 00:19:43,760 Speaker 3: If a company comes back to them and says we've 352 00:19:43,760 --> 00:19:45,560 Speaker 3: got this great idea or we want to take out 353 00:19:45,600 --> 00:19:49,520 Speaker 3: of his other company to actually do something, they're more 354 00:19:49,520 --> 00:19:51,719 Speaker 3: than happy to put the money back in because they 355 00:19:51,800 --> 00:19:54,639 Speaker 3: have that history of getting those good dividends and income 356 00:19:54,680 --> 00:19:56,800 Speaker 3: from their company over time. So they've given a vote 357 00:19:56,800 --> 00:19:58,800 Speaker 3: of confidence, and that's what you're looking for. I think 358 00:19:58,880 --> 00:20:02,760 Speaker 3: dividends also provide a level of capital discipline on companies 359 00:20:02,760 --> 00:20:03,160 Speaker 3: as well. 360 00:20:03,960 --> 00:20:08,640 Speaker 1: You mentioned the dividend reinvestment Afrik has a dividend substitution 361 00:20:09,520 --> 00:20:12,800 Speaker 1: share plan. Are you able to explain to us how 362 00:20:12,800 --> 00:20:13,720 Speaker 1: that works very. 363 00:20:13,560 --> 00:20:14,200 Speaker 4: Briefly, yes. 364 00:20:15,240 --> 00:20:21,520 Speaker 3: So with the normal dividend reinvestment plan, you obviously reinvest 365 00:20:21,560 --> 00:20:25,280 Speaker 3: the dividends you receive back into the affic shares at 366 00:20:25,320 --> 00:20:27,679 Speaker 3: a certain price at particular point of time, and you 367 00:20:27,760 --> 00:20:30,920 Speaker 3: get the benefit the franking credits flow to you through 368 00:20:30,960 --> 00:20:34,119 Speaker 3: those So people who can actually use the frame credits 369 00:20:34,160 --> 00:20:37,159 Speaker 3: within their tax returns were more likely to try and 370 00:20:37,200 --> 00:20:41,159 Speaker 3: take a dividend reinvestment plan, and that's typically people who've 371 00:20:41,160 --> 00:20:43,159 Speaker 3: got a tax pay of thirty percent or below. And 372 00:20:43,280 --> 00:20:46,199 Speaker 3: I should add I'm not giving tax advice here. A 373 00:20:46,200 --> 00:20:49,880 Speaker 3: dividend reinvestment plan is such that they actually don't get 374 00:20:49,920 --> 00:20:53,800 Speaker 3: the frame credits. It's considered as a reinvestment of the 375 00:20:53,800 --> 00:20:56,959 Speaker 3: capital that they've put back into the company, and so 376 00:20:57,040 --> 00:20:59,520 Speaker 3: they don't get the frame credits. But what they do 377 00:20:59,640 --> 00:21:02,320 Speaker 3: get is because it's not treated's income, they don't get 378 00:21:02,359 --> 00:21:06,640 Speaker 3: taxed at the time that the dividends are redistributed, so 379 00:21:07,160 --> 00:21:09,879 Speaker 3: are distributed should say, so in a taxi you if 380 00:21:09,920 --> 00:21:12,520 Speaker 3: you go through a DSSP as we call it, you 381 00:21:12,560 --> 00:21:15,080 Speaker 3: won't get taxed on an income. What it does do 382 00:21:15,359 --> 00:21:20,160 Speaker 3: it basically cost averages, so you get the average cost 383 00:21:20,240 --> 00:21:23,359 Speaker 3: over time of those reinvested shares are the cost base. 384 00:21:23,720 --> 00:21:25,600 Speaker 3: If you decide to show all those shares down the 385 00:21:25,600 --> 00:21:28,919 Speaker 3: track of what the cost base is, your capital gains 386 00:21:29,000 --> 00:21:31,680 Speaker 3: is assessed on. So it's a way of really deferring 387 00:21:31,760 --> 00:21:36,480 Speaker 3: tax and it's very popular. I would say for people 388 00:21:36,520 --> 00:21:39,040 Speaker 3: on a high tax bracket who can't use a full 389 00:21:39,080 --> 00:21:43,879 Speaker 3: benefit of franking and also and therefore don't don't want 390 00:21:43,920 --> 00:21:47,399 Speaker 3: their income tax through the year. And also minors gained 391 00:21:47,440 --> 00:21:49,399 Speaker 3: because they get taxed at a higher rate up to 392 00:21:49,400 --> 00:21:52,560 Speaker 3: a certain level. So a lot of people who invest 393 00:21:52,560 --> 00:21:55,440 Speaker 3: on behalf their children and grandchildren will use a dividend 394 00:21:55,840 --> 00:22:00,840 Speaker 3: substitution plan to reinvest those shares. So when the child 395 00:22:00,920 --> 00:22:03,200 Speaker 3: or grandchild gets to age or twenty one, they decide 396 00:22:03,200 --> 00:22:05,199 Speaker 3: to sell the shares to go overseas or travel or 397 00:22:05,200 --> 00:22:08,080 Speaker 3: buy a car. Yes, they pay capital gains tax, but 398 00:22:08,200 --> 00:22:09,800 Speaker 3: it's on the average over time. 399 00:22:09,960 --> 00:22:13,000 Speaker 1: I just want to talk about the leadership changes. AFIK 400 00:22:13,119 --> 00:22:16,919 Speaker 1: is going through a major leadership transition at the moment, 401 00:22:17,560 --> 00:22:22,080 Speaker 1: so veteran Mike Freeman is retiring and Alison Gibson is 402 00:22:22,119 --> 00:22:27,160 Speaker 1: stepping in. How does AFIC plan to maintain its investment 403 00:22:27,320 --> 00:22:31,439 Speaker 1: DNA and what can investors expect to see from the 404 00:22:31,480 --> 00:22:32,920 Speaker 1: new era with Allison. 405 00:22:33,200 --> 00:22:35,359 Speaker 4: The investment philosophy is not going to change at all. 406 00:22:35,880 --> 00:22:39,120 Speaker 3: The investment DNA is well defined within the business right 407 00:22:39,119 --> 00:22:43,679 Speaker 3: across the whole organization. Importantly, Allison used to work for 408 00:22:43,920 --> 00:22:49,040 Speaker 3: Australian Foundation and Investment Company a few years ago and 409 00:22:49,119 --> 00:22:52,360 Speaker 3: she had ten years with us, so she understands very 410 00:22:52,400 --> 00:22:55,480 Speaker 3: well the culture and the way we invest. Having said 411 00:22:55,480 --> 00:22:57,760 Speaker 3: that Allison will come with a different style, noted about 412 00:22:57,760 --> 00:23:01,320 Speaker 3: it and chain is often good certainly be used as 413 00:23:01,359 --> 00:23:03,800 Speaker 3: Mark was as a sounding board in terms of the 414 00:23:03,800 --> 00:23:06,760 Speaker 3: investment process and what's working and what's not. So we 415 00:23:06,840 --> 00:23:10,240 Speaker 3: think it's it all be a good outcome for for 416 00:23:10,320 --> 00:23:13,440 Speaker 3: shierholders that Allison is taking over, as I said, because 417 00:23:13,800 --> 00:23:15,159 Speaker 3: she understands. 418 00:23:14,600 --> 00:23:16,600 Speaker 4: And knows this very well, and her. 419 00:23:16,920 --> 00:23:20,720 Speaker 3: Investment style is very similar to the rest of the organization. 420 00:23:20,840 --> 00:23:23,399 Speaker 3: And she actually she actually did manage one of the 421 00:23:23,440 --> 00:23:26,040 Speaker 3: portfolios AMSEL, which is one of our other funds within 422 00:23:27,240 --> 00:23:29,320 Speaker 3: within the group, and she did a fantastic job and 423 00:23:29,400 --> 00:23:31,200 Speaker 3: managed that porfolio when she was with us. 424 00:23:31,280 --> 00:23:35,399 Speaker 1: So you recently released your half year results. Can you 425 00:23:35,440 --> 00:23:38,560 Speaker 1: take us through some of the highlights you met with 426 00:23:38,720 --> 00:23:41,679 Speaker 1: investors in recent days? What have been the key talking 427 00:23:41,720 --> 00:23:43,320 Speaker 1: points and focus areas well. 428 00:23:43,400 --> 00:23:45,720 Speaker 3: I think one of the highlights from the results themselves. 429 00:23:45,720 --> 00:23:50,080 Speaker 3: Our results was getting back to one of the earlier questions. 430 00:23:50,280 --> 00:23:52,320 Speaker 3: Because we've got such a level of fraanquds. We paid 431 00:23:52,480 --> 00:23:56,000 Speaker 3: a number of special dividends across both AFIC and AMSEL, 432 00:23:56,680 --> 00:24:00,320 Speaker 3: so we decided to distribute those to shareholders and particularly 433 00:24:00,320 --> 00:24:02,200 Speaker 3: an AFFIC. We announced we're going to pay another special 434 00:24:02,240 --> 00:24:04,960 Speaker 3: dividend at the end of the financial year, so that 435 00:24:05,080 --> 00:24:08,320 Speaker 3: was a positive from that perspective. Look the markets has 436 00:24:08,359 --> 00:24:10,600 Speaker 3: been One of the questions certainly came up at the 437 00:24:10,640 --> 00:24:15,959 Speaker 3: meeting was about performance and what we have seen in 438 00:24:16,000 --> 00:24:20,679 Speaker 3: a market where we've had gold small MidCap resources are 439 00:24:20,760 --> 00:24:24,120 Speaker 3: run very strongly. That's much more difficult market for us 440 00:24:24,160 --> 00:24:26,959 Speaker 3: because we typically don't invest in those sorts of sectors 441 00:24:27,000 --> 00:24:30,240 Speaker 3: of the market. We also had i'd say a rerating 442 00:24:30,280 --> 00:24:32,720 Speaker 3: of a number of companies within our portfolio. So we've 443 00:24:32,720 --> 00:24:35,440 Speaker 3: had a bit of a double whammy from that perspective. Clearly, 444 00:24:35,480 --> 00:24:37,640 Speaker 3: when you have sort of that discrepancy and performance, that's 445 00:24:37,640 --> 00:24:42,640 Speaker 3: where a lot of the questions. So that was one 446 00:24:42,680 --> 00:24:45,680 Speaker 3: of really the main area. The other area, interesting enough, 447 00:24:46,480 --> 00:24:49,280 Speaker 3: is that at the moment, a lot of our well 448 00:24:50,680 --> 00:24:53,000 Speaker 3: all of our listed investment companies are trading what they 449 00:24:53,040 --> 00:24:55,240 Speaker 3: call as a discount to net asset backing. 450 00:24:55,320 --> 00:24:56,000 Speaker 4: So the net. 451 00:24:55,800 --> 00:24:59,520 Speaker 3: Asset backing is basically the value of the portfolio divided 452 00:24:59,520 --> 00:25:03,600 Speaker 3: by the number shares on issue. And I guess when 453 00:25:03,640 --> 00:25:06,760 Speaker 3: you get supply and demand issues happening across the market, 454 00:25:07,240 --> 00:25:09,800 Speaker 3: sometimes our share price will trade at a higher level 455 00:25:09,800 --> 00:25:13,199 Speaker 3: if if demands very high, and sometimes we'll trade at 456 00:25:13,240 --> 00:25:16,160 Speaker 3: lower level than the NTA. And so we've been trading 457 00:25:16,200 --> 00:25:18,080 Speaker 3: at a lower level in the NJA for probably now 458 00:25:18,280 --> 00:25:22,840 Speaker 3: twelve months for AFFIC and so people are saying, what's 459 00:25:22,840 --> 00:25:25,600 Speaker 3: happening here? Is this a permanent shift in value? We 460 00:25:25,760 --> 00:25:27,680 Speaker 3: show them a thirty year chart which is going to 461 00:25:27,720 --> 00:25:30,720 Speaker 3: be difficult to me to describe, but you saw through 462 00:25:30,760 --> 00:25:33,960 Speaker 3: periods where there was a tech bubble. You saw through 463 00:25:33,960 --> 00:25:38,920 Speaker 3: the periods through the pre GFC, pre COVID. We traded 464 00:25:38,920 --> 00:25:41,960 Speaker 3: discounts as soon as we had the tech crash, as 465 00:25:42,000 --> 00:25:43,840 Speaker 3: soon as we had the GFC, as soon as we 466 00:25:43,840 --> 00:25:47,679 Speaker 3: had COVID, we went to a premium because there's greater 467 00:25:47,760 --> 00:25:52,040 Speaker 3: consistency of income. Our Portfoilio has probably got better quality 468 00:25:52,080 --> 00:25:55,480 Speaker 3: companies in it than the market overall, so people felt 469 00:25:55,480 --> 00:25:58,639 Speaker 3: more confident going back to a safer bet. 470 00:25:59,400 --> 00:26:01,760 Speaker 1: So what would you say is the key takeaway that 471 00:26:01,800 --> 00:26:05,840 Speaker 1: you would like to leave with investors given your recent results. 472 00:26:05,840 --> 00:26:09,480 Speaker 3: Sure, I mean AFIC is a patient investor. We invest 473 00:26:09,560 --> 00:26:12,920 Speaker 3: for the long term, so we invest in quality companies. 474 00:26:13,720 --> 00:26:16,119 Speaker 3: We're patient with our capital, we're patient when we actually 475 00:26:16,160 --> 00:26:20,800 Speaker 3: buy things, and we think that delivers good will deliver good, sound, 476 00:26:20,920 --> 00:26:24,600 Speaker 3: long term returns for investors. As I said earlier on 477 00:26:24,640 --> 00:26:26,600 Speaker 3: the worst thing we can do is try and chase 478 00:26:26,640 --> 00:26:29,399 Speaker 3: our tail and change the way we do things, because 479 00:26:29,440 --> 00:26:32,639 Speaker 3: we've known over the ninety eight year history of the 480 00:26:32,720 --> 00:26:37,639 Speaker 3: organization that typically taking that long term view will work 481 00:26:37,960 --> 00:26:42,320 Speaker 3: for investors and really enjoy the benefit of compound returns 482 00:26:42,320 --> 00:26:44,840 Speaker 3: you can get for investing in quality companies. 483 00:26:45,000 --> 00:26:49,120 Speaker 1: Love that slow burn philosophy. To wrap up, we've got 484 00:26:49,400 --> 00:26:53,480 Speaker 1: a round of rapid fire questions to get your take 485 00:26:53,600 --> 00:26:58,360 Speaker 1: on the big picture. Sure, what is one underappreciated strength 486 00:26:58,560 --> 00:26:59,720 Speaker 1: of the Australian market. 487 00:27:00,520 --> 00:27:04,000 Speaker 4: I think the franking system is like unique. 488 00:27:04,240 --> 00:27:06,120 Speaker 3: You know, we are very lucky to have it within 489 00:27:06,160 --> 00:27:09,200 Speaker 3: this in the market that we've got and I think, 490 00:27:09,320 --> 00:27:11,119 Speaker 3: you know, if you can take advantage of it, then 491 00:27:11,320 --> 00:27:13,119 Speaker 3: you should look to try and do so. 492 00:27:14,400 --> 00:27:18,679 Speaker 1: One company in the portfolio, which is the definition of 493 00:27:18,960 --> 00:27:21,679 Speaker 1: steady as she goes, you really need to take a 494 00:27:21,760 --> 00:27:22,560 Speaker 1: longer term view. 495 00:27:23,600 --> 00:27:27,200 Speaker 3: Look, I've got to take BHP for example, because there's 496 00:27:27,240 --> 00:27:31,600 Speaker 3: still a secure company, but it's got very good management, 497 00:27:31,680 --> 00:27:36,000 Speaker 3: great assets, and it's also the way it's slowly changed 498 00:27:36,000 --> 00:27:39,080 Speaker 3: this business profile over time. So traditionally iron aw now 499 00:27:39,119 --> 00:27:42,320 Speaker 3: pivoting more to copper and what's happening within the copper 500 00:27:42,359 --> 00:27:44,880 Speaker 3: market and resources are very cyclical. 501 00:27:45,320 --> 00:27:47,440 Speaker 4: So from that perspective, we think that's a good one. 502 00:27:48,320 --> 00:27:51,440 Speaker 1: One company in the portfolio where you've taken a bit 503 00:27:51,440 --> 00:27:52,840 Speaker 1: of a contrarian. 504 00:27:52,359 --> 00:27:56,879 Speaker 4: View Temple and Webster. So I'm going to talk more 505 00:27:56,920 --> 00:27:57,520 Speaker 4: about the. 506 00:27:57,560 --> 00:27:59,760 Speaker 3: Small Metcafe me a book that we've got, but it 507 00:27:59,760 --> 00:28:02,600 Speaker 3: has has actually then gone into the affic portfolio. So 508 00:28:03,080 --> 00:28:05,720 Speaker 3: mirror Book has bought this stock many many years ago. 509 00:28:06,200 --> 00:28:08,920 Speaker 3: It ran up quite strongly, we sold some along the way, 510 00:28:09,440 --> 00:28:12,720 Speaker 3: and now it's come back quite dramatically again because of 511 00:28:12,840 --> 00:28:17,400 Speaker 3: concern about consumers discretion spending. The result was a little 512 00:28:17,400 --> 00:28:19,960 Speaker 3: bit softer than that people expected last time, and it's 513 00:28:19,960 --> 00:28:22,719 Speaker 3: had a snipping a rerating and its price earnings ratio 514 00:28:23,520 --> 00:28:26,520 Speaker 3: mirror Book was brought back into that stock after selling it, 515 00:28:26,840 --> 00:28:30,560 Speaker 3: and now Affic's actually added to portfolio, so we've actually 516 00:28:30,640 --> 00:28:32,400 Speaker 3: been able to add what we think is a good 517 00:28:32,480 --> 00:28:35,320 Speaker 3: quality growth company at a really attractive price. 518 00:28:36,240 --> 00:28:40,840 Speaker 1: Pivoting to investor behavior and habits, What habit do you 519 00:28:40,880 --> 00:28:44,240 Speaker 1: think builds wealth over decades? One habit that. 520 00:28:44,320 --> 00:28:47,680 Speaker 3: Sound really boring patients, but I think you've got to 521 00:28:48,280 --> 00:28:52,440 Speaker 3: enjoy the benefit of compounding returns, whether they call the 522 00:28:52,440 --> 00:28:56,640 Speaker 3: eighth Wonder of the world. If you're in good quality things, 523 00:28:56,640 --> 00:28:59,560 Speaker 3: whether it's property or you know, shares, what have you, 524 00:28:59,600 --> 00:29:03,000 Speaker 3: and you can enjoy the benefit over time of reinvesting 525 00:29:03,160 --> 00:29:06,840 Speaker 3: and generating returns. And I think that's one thing I 526 00:29:06,840 --> 00:29:08,800 Speaker 3: certainly tell to my kids anyway. 527 00:29:08,840 --> 00:29:12,680 Speaker 1: So related to that, one common mistake you see new 528 00:29:12,720 --> 00:29:13,680 Speaker 1: investors make. 529 00:29:14,280 --> 00:29:16,840 Speaker 3: Don't try and chase short term themes or don't try 530 00:29:16,840 --> 00:29:19,320 Speaker 3: and chase things you've seen run and all of a 531 00:29:19,360 --> 00:29:21,320 Speaker 3: sudden you want to get on board. 532 00:29:21,320 --> 00:29:22,560 Speaker 4: I think you just need to look. 533 00:29:22,680 --> 00:29:24,479 Speaker 3: Sometimes that can work, so don't get me wrong, but 534 00:29:24,760 --> 00:29:27,000 Speaker 3: it's going to be a little bit cautious. Have your 535 00:29:27,040 --> 00:29:30,440 Speaker 3: own investment philosophy, what you are trying to achieve through 536 00:29:30,440 --> 00:29:32,440 Speaker 3: your investment at Don't chop and change all the time. 537 00:29:32,480 --> 00:29:33,840 Speaker 4: I think that'll throw you off. 538 00:29:34,280 --> 00:29:37,000 Speaker 1: Jeff, thank you for joining us. It's not often we 539 00:29:37,080 --> 00:29:41,720 Speaker 1: get to speak to someone representing a century of investment wisdom. 540 00:29:42,040 --> 00:29:43,320 Speaker 4: Thank you very much. Thanks for your time.