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Friday Beers with Marc & Stuart: Enough with these lockdowns already!
August 27, 2021
Afterpay, APT, Brainchip, BRN, NEU, Neuren, video, WiseTech, WTC
This week in Friday Beers with Marc & Stuart:
0.36 The AfterPay story in a book
2.38 Welcome to the revolution … BrainChip (ASX:BRN)
4.00 Not Wise to short WiseTech (ASX:WTC)
4.40 Taking profits on Neuren (ASX:NEU)
7.00 Good Cop, Bad Cop on Lock Ups … errr .. Lock Downs
12.57 Remembering Charlie Watts
15.18 Great Divide Pale Ale … Fruity and Floral ??
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Stuart: Hello and welcome to “Friday Beers” with Marc and Stuart. I’m Stuart Roberts.
Marc: Marc Kennis.
Stuart: And we’re the founders of Australia’s greatest investment publication of all time, Stocks Down Under, 12 great ideas every week, 4 editions a week, and 3 ideas every edition. And Marc, there’s not a stock in the market under $40 million that we don’t know something about. One that we know a lot about is Afterpay. And there’s a book that actually mentions our expertise in the subject that just hit the streets compliments of a couple of guys at the AFR.
Marc: Yeah, definitely. So, Afterpay had their numbers up this week. I was talking to the journalist at the AFR, James Hughes. And last week, we actually mentioned that this book, they published that. So James and, here we go, Jonathan Shapiro at AFR published this book just before Square came out with that takeover proposal. And so, the timing was perfect on their part. And he said, “We quoted you a few times as well.” So, I had a look at it, it’s pretty good quotes, and it talks about the valuation before Afterpay went mainstream, so to speak where we said, “Look, as this gets more popular with investors, you know, EV to revenue multiples, that sort of stuff, will start to increase as well.” And that happened before. So yeah, we’re pretty happy with it. Have a look. I haven’t read it completely yet but I’ll finish it by the weekend, I think. But yeah, we’re pretty stoked with that.
Stuart: All right. So some third-party validation that we’re actually ahead of the curve on the Afterpay phenomenon.
Marc: Yeah. So it’s a pity that it will be acquired.
Stuart: Right. Nick Molnar never stopped to thank us.
Marc: What’s that?
Stuart: Nick Molnar and his colleagues never stopped to thank us.
Marc: Yeah. We never got flowers for that. So, if you look at the numbers this week they published, it’s clear that they need a bit of help on the funding side because marketing costs are incredibly high right now. So, the numbers were a mixed bag. You know, Australia’s growth this year is, sort of, you know, coming off the boil and luckily, in the U.S., yeah, that’s where all the money is. Obviously, that growth there was pretty good. I think it’s a good thing that Square’s stepping in on how to help out with funding longer term.
Stuart: Look, it’s not the first time that a company had a pretty strong growth rate until it got acquired. And then suddenly the growth slowed down. We’ve seen that story played before.
Marc: Happened before. Yeah. Well, Let’s talk about a company where growth is still, you know, at the infancy. We published a big report on BrainChip last week and, you know, BrainChip divides people, including the AFR. If you read what they’re writing about BrainChip and the previous CEO, you know, it’s there. It’s not all good. But if you look at the investors, the people on HotCopper and other fora on Facebook, for instance, they all love it. So, we’ve published quite a big report on BrainChip last week. I think it’s 45 pages.
Stuart: It’s our longest report yet, Marc. We’re getting pretty comprehensive in terms of [inaudible 00:03:11.848] research at Pitt Street Research.
Marc: Yeah. Yeah. I think so. And it talks about the whole thing, the technology, the application areas where BrainChip really shines. And the chip, Akida, where that really shines, which is extremely low-power consumption, no use for internet connections. And so, there’s a couple of things that are applied, very low latency. So you can actually put this in a self-driving vehicle and not have to worry about how fast the response time is gonna be if a pedestrian or a child crosses the road unexpectedly. So, there’s a lot of application. So have a look at that report. It’s freely downloadable at pittstreetresearch.com, Stuart.
Stuart: Yeah. So, another interesting story this week is WiseTech foiling a heavy shorting campaign. What do we think about that story?
Marc: Yeah. I like WiseTech. We’ve always liked WiseTech even when…What’s the firm that put out that crushing report? Something with a J. But the J curve, basically, blew up in their face because share price yesterday or day before yesterday exploded based on the numbers that are reported. So, yeah, there was a lot of shortage in WiseTech and I think most of them will probably have been squeezed out. I think [inaudible 00:04:24.214] was trading at 50% at some point. So, yeah, that will kill off the shorts for sure.
Marc: They’re not happy. Earlier this week, Stuart, we took Neuren off the topics list at Stocks Down Under. So, we’ve got a topics list, for people that don’t know that, where we condense everything that we research and write about into the best eight picks on the ASX as far as we’re concerned. One of those stocks was Neuren that we included early March and we’ve done almost 80% in the last 5 months, Stuart, so there’s still something, you know, about to happen later this year, but talk us, sort of, through why we’re taking Neuren off that list.
Stuart: Look, you never go broke by taking a profit. Neuren is a company focused on neurodegenerative disorders. Their lead compound is trofinetide for the treatment of Rett syndrome. You’ve probably never heard of Rett syndrome. Well, sorry, you have because been hearing me talk about Neuren now for years.
Marc: You can’t shut up about it, Stuart.
Stuart: So, Rett syndrome is the most serious of the autism spectrum disorders. Only affects females. Generally, those people don’t live very long and experience severely challenging learning difficulties amongst other issues. And there’s no treatment. Wayne Rooney has long been an advocate for Rett syndrome. His wife’s sister was a Rett syndrome girl who has since passed away. That’s about the only celebrity I could find was associated with the condition. So, here’s little Neuren based in Melbourne with a pretty good drug which can treat some of the underlying pathologies of Rett syndrome. They’ve licensed it to a large NASDAQ-listed biotech called Acadia. Acadia are running the phase three trials. Now, they’ll read out data before the year is out. I’ve been around life sciences long enough to know not every phase three trial works. On average, you’ve got a 50/50 chance of success. Now, I’m optimistic one of these days Neuren will get through this hurdle and end up as a billion-dollar company. Now, in the meantime, investors probably would take some money off the table. So the risk of some ambiguous data coming out of that phase three is reduced somewhat.
Marc: Yeah. Look, 80% performance in 5 months is nothing to sneeze at. Right? So, if you annualize that, it is looking pretty good, I think, so. All right. So, yeah, then one of my favorite topics, good cop, bad cop. Here we go. This week, we’ve got a topic that is very divisive. Is that the right word…the best way to put it?
Stuart: People will be in two minds about what we have to say. What are we debating here?
Marc: Well, basically, if the strict lockdowns that we’re seeing around Sydney…
Stuart: And Australia generally.
Marc: Yeah. But I think probably in Sydney, it’s probably stricter than elsewhere. I’m not sure, by the way, maybe Melbourne’s got some strict stuff too. But yeah, we’ve seen lockdowns everywhere, obviously. But what’s your position in this one, Stu? Because we need to have a good cop and a bad cop. Right? So…
Stuart: Okay. Okay. All right. So, I’m the bad cop. I hate lockdowns. Lockdowns are the worst possible way to manage the kind of pandemic that we’re that we’ve been going through. The best possible way is get everyone vaccinated and then let us all get back to normal. As it is, relatively few of us were vaccinated when the most recent COVID outbreak happened. Melbourne’s up to its sixth lockdown, we’re on our second here in Sydney. It shows up in the economic statistics when people can’t do things like go to the restaurants or cafes or cinemas that they normally go to. But there’s a hidden aspect to it too. Its productivity. You just can’t sometimes get productivity out of people who are locked away at home with screaming kids or they’re isolated so they’ve gone nuts so they just can’t work properly. That doesn’t show up in the GDP but it shows up day-to-day for people like us trying to build a business. How many businesses have taken a really serious productivity hit as a result of this lockdown when it was possible to very quickly get the whole population vaccinated?
Marc: It’s fair to say you don’t agree with the labor stance on this.
Stuart: Look, I’m so angry. I’m switching my vote. I’m not gonna vote liberal.
Marc: I set the L word. It could be liberal, it could be labor too.
Stuart: Both the major parties seem to like lockdowns. Well, I’m not voting for either of the major parties. Now, you know me, I’m just to the right of Genghis Kahn in terms of most of my views and ordinarily, I’d vote for the liberals. Well, they just lost my vote, federal and state. There is no way I’m voting for the reelection of either of these incompetent governments.
Marc: [inaudible 00:09:28.612] for the labor then next time or what?
Stuart: Well, look, I’m half tempted to give the workies my vote, and then, you know, once the market crashes badly as a result of labor [inaudible 00:09:38.622], there’ll be a whole lot of bargains left for savvy investors like us to pick up. But it would send a message to our political leaders if we actually switch governments. You know, don’t mess with people’s freedom of movement, get everyone vaccinated, get us back to normal.
Marc: But you do recognize, you do see that if you vote for labor, you’re fighting for even stricter stuff. So, I’m supposed to take the flip side of this, which I’m struggling with. I even wore my pink shirt to do this.
Stuart: Well. Yeah. I’ve always said you’re a bit of a pinko. Is that a hammer and sickle I can see there on your lapel by the way?
Marc: Yeah. No. But I’ve got a Stalin shirt underneath this one.
Stuart: All right. Tell me why I should like lockdown, you immigrant pinko importing your advanced more liberal ways.
Marc: Yeah. Look, okay, so what’s the argument here? Because we’re not all vaccinated, right, if you should let the virus loose right now, or even two months ago, or even maybe next month…
Stuart: Yep. You’ll kill a whole lot of dumb people. Right? Which is good.
Marc: Yeah. Well…I like that.
Stuart: The dumb people who didn’t get vaccinated will die, which is good, right?
Marc: Yeah. The problem is there’s a whole bunch of people that want to get vaccinated that haven’t had a chance yet or only had one shot. And so, what probably will happen is that you get a whole lot of people, sort of, you know, with COVID flooding the medical system, the hospitals, etc. And you end up with scenes like in India not too long ago. That’s the flip side of it. That’s why you could argue, okay, keep these lockdowns in place for a little while longer until we at least have some sort of minimum level of vaccination, which is what they’re doing now and then, you know, you can open up. And so, by the way, that’s as far as I will go because I’ve heard that our good friend Mark McGowan in WA say, “Even when we hit 80%, we’ll still keep, you know, lockdowns in place.” And so, I think the guy should be fired on the spot for that, but that’s just me.
Stuart: Look, I think…I suspect Mark McGowan’s got a hit list of people he’s never gonna let into the state again because they’ve said nasty things about the premier. So, I’ll get off the plane ultimately in Western Australia and they’ll arrest me and take me to some reeducation camp out near Kalgoorlie or something. That’s what I’m concerned about.
Marc: As a pinko, I highly recommend labor camps, yeah, and reeducation camps. Can we call them that?
Stuart: Look, the trouble with you, Marc, is you can’t actually agree with any of this pinko nonsense you’re spouting at me, right?
Marc: Is it that obvious? We have to have a bad cop so I’m happy to play that role.
Man: Three hours later…
Stuart: Marc, why don’t you like the lockdowns that I’m proposing? It’s keeping everyone safe, right?
Marc: Lockdowns are a ridiculous theory. Lockdowns are crazy. You know, people are going nuts. There’s a lot of undiagnosed diseases going on that…
Stuart: Are you a fascist or something? Do you like Donald Trump all of a sudden?
Marc: I think Donald is the best thing ever invented. I love Donald. Biden, that’s [inaudible 00:13:00.366]. This is actually pretty sad news. Well, I wouldn’t say good friend, Charlie Watts from the Stones just died.
Stuart: Yeah. Look, I mean there’s been a lot of insane things said about the great Charlie, but I wanna pay tribute to the Charlie Watts not many of us knew. So, you’d be aware from the obituaries, Charlie Watts started as a jazz drummer back in the ’60s before he switched over to rock. And, obviously, financially that proved to be…and career-wise that was an excellent decision. But he never left jazz behind. So, when I discovered modern jazz, it was the early ’90s, no mid-’90s, and a good friend of mine who I used to work with named Gavin Went [SP] put into my hands a copy called Charlie Watts Quintet, “Tribute to Charlie Parker with Strings.” Now, if you know Charlie Parker, he was one of the pioneers of bebop back in the ’40s. And blow me down if the same guy who belted out “Can’t Get No Satisfaction” is also providing some really exciting polyrhythms behind “Relaxin’ at Camarillo.” So, he was an inspiration to me just to get more deeply into jazz music. So, yeah, I hope Charlie’s looking down from jazz drummer heaven and having a good time in the place he’s gone to.
Marc: Yeah. Hope so. I saw the Stone’s live a long time ago, but it is probably one of the best concerts that I’ve ever seen.
Marc: So there’s always…
Stuart: That’s part of your sympathy with the devil, right?
Marc: Somehow you have to bring that [inaudible 00:14:31.434] twist in there, right? You can’t just have a good “Friday Beers” without bringing the Lord in there. Anyway. No, so I was gonna say there was back…and this is before my time, actually, but I recall the old-timers saying there was always…back in the day in the ’60s, there was always these two camps, you know, the Stones versus the Beatles. If I’d lived in those days, I definitely would’ve been a Stones fan. I actually think the Beatles, the music is a bit too tame for me.
Stuart: Well, and not only that, they couldn’t keep it going. They all hated each other by the end of the ’60s and the band was no more. The Rolling Stones just kept going and going. Charlie was playing with the rest of the band up until a few years ago. So God bless him for that too.
Marc: I heard he did have an alcohol problem sometime in the ’80s. So, that brings me to our final topic, Stu, beer.
Stuart: Yeah. Beer. So, I’ve revisited an old favorite. This is a Monteith’s, which is a Kiwi brewer that I’ve had on the show before. Wasn’t able to go to New Zealand this year because of these stupid lockdowns. Like, it’s not just Australian politicians that do stupid lockdowns, it’s the Kiwis as well. This is the Great Divide Pale Ale, only 4.5% on the alcohol. But they’ve chosen a hops that give it a light, kind of, zesty feel. So, you don’t feel the usual fruit punch that a lot of brewers these days like to get. It still tastes like beer, but it’s lighter than usual. So, as usual, Monteith’s has not disappointed. Every time I get this outta the cool room, it always pleases.
Marc: Did you just use the word fruit punch in relation to beer?
Stuart: Well, yeah, because in the tasting notes, people are always trying to tell you this taste like pineapple, or this tastes like stone fruit, or something like that.
Marc: People don’t try to tell me that.
Stuart: Hops can do all sorts of things. You know, you can get a grassy kind of feel out of a hop or it can just be nothing. I mean, hops were put in there originally just to, you know, preserve the beer on the long trip out to India from the U.K. But that was a good back-to-basics beer where they weren’t trying to get too floral or fruity in the whole thing. So…
Marc: That’s a good thing, I guess, not too fruity, not too floral. That’s all. We’re middle-aged white guys, so…
Stuart: And that’s all we have time for here at “Friday Beers.” So, if you haven’t subscribed to Stocks Down Under, then do yourselves a favor, and more importantly, do your portfolio a favor…I pointed a little too early. Let me do that again. Do yourself a favor, and more importantly, do your portfolio a favor and subscribe to Stocks Down Under.
Marc: See you next time.