Friday Beers with Marc & Stuart: 13 seconds of fame

This week in Friday Beers with Marc & Stuart:

0.30    15 seconds…err 13 seconds of fame
2.15    Silver is better than gold
4.22    Roxy doesn’t like FMG anymore
6.00    Conan plays the bongos
8.22    Forget Schrodinger, this is Marc’s cat!
9.42    Don’t say the C word

 

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Transcription

 

Stuart: It’s Friday afternoon in Sydney. And that means it’s time for “Friday Beers With Mark and Stuart.” I’m Stuart Roberts.

Marc: Marc Kennis here

Stuart: And we’re the founders of “Stocks Down Under,” Australia’s leading investment publication four times a week, three great ideas in every edition and still maintaining our enthusiasm for that publication even after several weeks in lockdown here at boring old Sydney. Mark, give us something to cheer us all up, namely, Afterpay, which was your genius call.

Marc: Yeah. Well, everyone has seen the announcement on Afterpay, so yeah, that’s pretty good. We were pretty close with the valuation where we did the Beer report last year in August.

Stuart: Where is your beer, Mark? It’s Friday Beers after all.

Marc: Oh, what is it?

Stuart: This is the Colonial IPA, which I’ll talk about a little later.

Marc: All right.

Stuart: But you are being sober for Friday Beers, right?

Marc: Well, I like your can, by the way. Nice and yellow.

Stuart: All right. Keep going.

Marc: Yeah, [inaudible 00:01:01.433] Afterpay. We actually had Seven News come by for some comments that were shown in the evening news. So that was actually quite interesting. So we’ll show you a bit of that here.

I think it’s timing. So at the right place at the right time. And don’t forget, Afterpay is a marketing machine. If they had to do on their own, what Square has already done, it would’ve taken many years and probably, yeah, many millions of dollars.

And yeah, so Afterpay, that’s played out quite nicely. And I think if you look at consolidation, it’s now sort of kicked off, you could say at the very large end of town, so it will probably be speeding up consolidation in the mid-end of town. Is that an expression, mid-end of town? Let’s say midtown. So you’re talking about Zip, for instance, that could be one in play at a certain point. And we think that’s got a lot of leg still.

Stuart: Right. My favorite in this whole situation is Hum because Hum really hasn’t hummed, even though buy now pay later is kicking along quite nicely. And business is profitable and they’re growing at the usual topsy turvy rates of buy now pay later. This could be an interesting one.

Marc: Yeah. So there’s more candidates out there. Yeah, absolutely. But talking about good opportunities, we published a report on Thompson Resources this week. It’s all about silver, I guess. Silver price is better than gold is what the report title was, but take us through that one, Stuart.

Stuart: Yeah. So many of you who follow us at Stock Down Under and Pitt Street Research will know I’m a big gold bug. I believe gold is going to $10,000 US an ounce, ultimately, from the current roughly $1,800 an ounce level. The thing about silver, silver is often regarded as a proxy for gold. So there’s a relationship between the two historically over time. On average for the last 30 years, it’s been about 66 to one, in terms of the average, but it jumps around a lot. And the reason is, in addition to being an investment metal, there’s also a lot of industrial uses and specifically 21st-century type industrial uses, namely electronics and solar panels. So this is a metal where the industrial demand in the new economy is going to be rising quite strongly, particularly all the silver that’s going to be going into electric vehicles. So you leverage to that plus increases in the price of gold improves silver’s investability. Now’s a good time to be Thomson Resources. They’ve spent the last nine months or so aggregating five different silver-rich projects in the New England fold belt region of Northern New South Wales and Southern Queensland. They’re going after a hundred million ounces of silver equivalent. I reckon they’re about three-quarters of the way there, based on the resources that have previously been described for those particular deposits. They’re now proving them all up to [inaudible 00:03:47.199] 2012, and then they’ll work towards a scoping study on a potential hub and spoke model to develop them.

Marc: Download the report on our website. And speaking of silver, by the way. Stuart, what do you think of my parrot?

Stuart: It looks like the devil is sitting on your left-hand shoulder telling you to do all sorts of bad things.

Marc: So what do you mean devil? It’s just a nice little bird.

Stuart: Well, the scripture teaches that Satan himself comes on as an angel of light every now and then.

Marc: As a parrot.

Stuart: Now, Mark we had another call from Roxy, from Port Headland a little while ago. So let’s switch over to being the love doctors.

Marc: All right. So tell us about Roxy, Stu.

Stuart: Yeah. So you recall that Roxy from Port Headland was having some trouble with her girlfriend, Ellen, down in Perth. And she’d sent Ellen some flowers and Ellen said, “I want some FMG shares instead. Have you seen what the dividend is on that one?” And we advised her, yeah, the dividend yield was pretty good, but she needed to be careful because the iron ore price was probably headed down. So I said, “So Roxy, what did you do?” “Well, I sent her the FMG shares and they went up, even when iron ore started to go down again. So I was feeling pretty good after that. But I’ve seen that FMG stock has since come down again. I’m wondering, should I send flowers this time around?” But Marc, what do you think?

Marc: Look, it’s probably a good idea. There’s a big dividend coming, right. I’m not sure what the payout date is.

Stuart: A big “dividend.”

Marc: Yeah. It’s a big one. And so I think it’s still like 15% overall, so I think we’re still waiting for that. But yeah, with iron ore I think it’s around 1…what is it? Below 170 for sure.

Stuart: It’s gone to 166 and a half on the most recent stuff. So the bear market that we called back in May is well and truly on.

Marc: Yeah. And I think it’s really logical that FMG shares will fall at a certain point, probably after the dividend payment.

Stuart: Right. Which brings me to a segment we like to run at this show called Conan The Contrarian. So Mark, in an environment where iron ore is always headed down heavily, you’d think that to be pushing iron ore in stock would be a bit foolhardy, right?

Marc: Yeah, probably.

Stuart: Okay. Well, I want to draw your attention to Genmin, ASX:GEN. Now, Genmin have staked out a significant iron ore deposit in the West African nation of Gabon, Gabon, I think, is the way it’s pronounced.

Marc: Why did you say Gabon?

Stuart: Marc, I’m surprised you don’t know more about Gabon as a country. Its president for many years was Omar Bongo.

Marc: Bongo.

Stuart: And, his son Ali Bongo is now the president so…

Marc: Ali Bongo. You’re making stuff up as we go. Right, Stu?

Stuart: It’s true. It’s true. He took office in 2009.

Marc: Hang on. I’ve got two bongos right here.

Stuart: There you go. Omar and Ali, right there. Okay. So turns out that Gabon is one of the eighth leading oil producers in Africa. And they’re also a big producer of manganese. To a lesser extent, they’ve got some iron ore resources. Gigantic train line right across the country, and a couple of large iron ore deposits right near the beginning point of that train line belonged to this little ASX listed company called Genmin. Now, why am I calling them a contrarian winner here? Well, one of the reasons why iron was probably headed back to $50 or $60 a ton is because China doesn’t want to pay as much as they’ve been paying lately for iron ore. So they’re going to be staking a lot of countries where they have good diplomatic relations to develop iron ore projects in that country. We’ve seen a bit of that sort of activity in various places and Gabon is going to be one of those countries. So what Joe Ariti, CEO of Genmin is saying is there’s gonna be some substantial amounts of foreign investment, probably from China, in order to build out the iron ore wealth of that country and he stands to be a beneficiary. They’re doing feasibility work on that project at the moment. The stock’s down a bit from the IPO level earlier this year and you can read about it in an article we wrote about in Stocks Down Under back in May. But given the fact the world seems [inaudible 00:08:19.612] iron ore

Marc: If you’re wondering why I’m looking around all the time, we recently moved into a new place and they’re still doing some work on it. And our two cats who are still acclimatizing to the new place are locked up in my room right now.

Stuart: Right.

Marc: There’s this cat running around here all the time for the people that are not subscribing to “Stocks Down Under,” we did a webinar on Wednesday, I think it was. And some people, some subscribers actually commented on Facebook.

Stuart: Oh, it was the scraping sound.

Marc: A scraping sound, which was a little box, but also a distinct meowing, or, you know, this crying from this cat. And he couldn’t figure out where it came from. Turns out it was our webinar.

…that one. Let’s see what happens. If it goes up, you know, it might become too expensive. If it goes down it could become attractive again. If you look at…

So that’s the reason I’m just looking around, because you might keep [inaudible 00:09:13.621] some stuff. Anyway.

Stuart: Never say that we don’t keep it real here at “Stocks Down Under.”

Marc: Absolutely.

Stuart: Yeah. So if you look at our coverage on Genmin, the stock’s down slightly, but not anywhere near as much as you’d think, given the fact that the iron ore bear market is on it. And I’m thinking that this could be a contrarian winner out of that. So take a look at our coverage on Genmin.

Marc: All right. When did we…we wrote about that one I think in May?

Stuart: Yeah, 6th of May. Genmin on the 6th of May. Go take a look.

Marc: Sounds good.

Stuart: Which brings me to the beer. I’ve been drinking Colonial IPA, 6.5% brew from the Colonial Brewing Company over in Western Australia. Now I discovered this beer middle of last year, you recall the world went woke for a while. And amongst other things, someone wanted to ban Colonial beer from the shops.

Marc: You had a beer from Colonial a little while ago?

Stuart: Well, I’m still drinking it because the wokies wanted to ban the beer because it had the word Colonial in the title.

Marc: I think we had a beer from Colonial a couple of months ago, actually.

Stuart: All right, well I’m still liking it. And I bought this early this week from my local and they clearly have not changed their name. So it tastes just as good as it did a year ago. We’ve got some…I mean, look, I don’t think they’ve been too adventurous in the hops, just the usual stuff that would get the tropical flavors out there. But easy on the malt as well. So a very dependable drink. I’m so glad that they got through this crisis and business is good.

Marc: It depends again, what dependable means is in this context. Dependable drinking.

Stuart: Dependable is you drink it every time. And you don’t have to wrinkle up your nose thinking, “Yeah, this is like eating granola for breakfast.”

Marc: Right.

Stuart: If drinking a beer is like, you’re doing it just so you can look good in front of other people but it doesn’t actually please your taste buds, that’s not dependable.

Mark: Right. Okay. So that’s the definition of dependable then, we got that now. By the way, I got some new clocks as well. See, I always know what time it is now. Let’s go to New York, London, just like Flavor Flav from Public Enemy.

Man: Yeah, boy.

Marc: You know, that guy?

Stuart: Never seen that, but we’ll put on the video to close it out. Mark, that’s all we have time for here at “Stocks Down Under.” Folks, if you haven’t subscribed to Australia’s leading investment publication, then can I urge you as I always to do yourself a favor and more importantly, do your portfolio a favor and subscribe to “Stocks Down Under.”