the COB: lost spring

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1:04Mayhem too often because it becomes a bit of a cliche. But today is certainly a big day of selling as we kickstart the month of October. Let's have a look at where the C.O.200 is tracking and I'll give you an update as well on the S&P ASX200. Wow, down by 2% there on the C.O.200 as we head into matchup. The S&P ASX200 as I mentioned at its lowest level since mid-June. It is down almost 2% as well. 167.8622, which is a new 50 day low. It is very hard to find a bright spot. You've got energy stocks down 3%, reats, consumer staples, all down by more than 2%. All of this coming as well after US bond yields touched new highs overnight causing late selling to end the September quarter in the US as well. A bit of a negative tone to kickstart the new month, the last quarter of the year and bringing that thought into a lost spring.

2:06The market has certainly lost its spring and its step and what actually happened to spring itself hasn't really shown its face yet in Sydney at least. Meteoric rise, we had a very big jump coming through from Meteoric resources on a take over offer from Linus. I'll give you more details on that in a moment. And search age no more or at least allegedly the RBAs man on credit card and debit card search charges coming into force from today. But if you like me, you probably noticed that you're already paying for things. Costs of goods seem to have already gone up in anticipation. There doesn't seem to be any way that businesses are going to not pass these costs on to consumers. You also are starting to see the likes of things like frequent fire points or cheap credit card or free credit card now starting to have fees. Earlier Andrew caught up with Steve Hway from the I fly flat flight club to unpack who will ultimately bear the cost of this ban. Yeah, because all the businesses have all these fees that they still have to absorb.

3:06So therefore, while not all businesses might increase the prices today, they're going to take the next month or two to work out all the increases that they've absorbed today, including all the fees that their supply chain needs to pass on. So while everyone may not have worked exactly what their fees are today, but they can only use also much before they increase the fees. So they're going to increase the fees to the next new rounded amount. So a free dollar coffee is not going to go to $3 in 12 cents. So that's weird. You have to go to $20, $30. Like another round number that's practically you can use for. I wonder where Steve's getting $3 coffee from to start with, but anyway, let's have a look. Certainly not the CBD here in Sydney. Let's have a look at those energy stocks. I mentioned these rising oil prices, rising bond yields, all of that really suffering in terms of some of the big moves are seen in energy players. Woodside, Karoon, wowed down by 5% ampoule and beach energy under pressure as well.

4:07We often call healthcare defensive in a situation like this, but with the exception of Fisher and Piper all moving lower today, CSL down 3.5% consumer staples there too. And I think another one to really note today, particularly when you're looking at these bond yields, is what's happening in the REIT sector. So the A REIT sector is down by more than 2%, 2.3% in fact, making it the second worst performing sector today. Let's get into some of the corporate news Linus Rare Earths. Well, it looks like people think that maybe it paid too much for me to. Alright, because shares are down by 8.4%. It has agreed to acquire meteoric for $968 million, adding the Caldera Rare Earths project in Brazil. That sort of meteoric, have a meteoric rise. Ampoule on the other side, it is a little lower. It's agreed to buy the EV charging operator EV networks for $225 million, adding more than a thousand charging bays. Suncorp also under pressure, it denied takeover talks with Tokyo Marine

5:09after a sharp share price rise, which prompted and query from the ASX. And data three they're surging after forecasting more than 15% gross profit growth and over 40% growth in pre-tax profit. Let's welcome our guest to the COB, Andrew Coleman, from Team Invest. Great to see you, Andrew. I guess I just wanted to start more broadly with the sell-off and this big slump that we've seen, and I think that's a lot of concern out there, particularly when you look at what's happening in T-Bills. Yeah, I think gravity has started to re-adcert itself. I mean, we've talked about a lot on Ospreys over the last sort of year, and I think you and I actually started the year with the COB episode on the fact that if Bond yields, that interest rates rise in a time of rising inflation and global uncertainty was always likely to cause Bond yields to rise. Then so too should the value of all long data assets fall. So, I think that's a few years on equity stock markets around the world with effectively cheap money, free money in some cuts of the world.

6:10And at some point, gravity and the mean was always going to revert itself. I think that maybe what we're seeing now, I think the challenges, as is always, the case when things come down, it comes down across the board, and that creates huge opportunities for value investors like us who can buy the dip on the companies that are likely to benefit from this environment when everyone else is panicking that will be permanently damaged by cost of capital being positive. So what's on your shopping list when you say a day like this, it down almost 2%. Yeah, it's a great question. Look, I think it's the same company we always speak about. So what we're always looking for at Team Invest and what I think any value investor is looking for is a wonderful business that you know over the next five to ten years is going to be virtually certain to have increased its earnings per share. And then you want to wait for days like today, when PE ratios contract, then you can buy that wonderful business and a discount. It's the same as buying a new jacket, right? You don't want to go and pay full price. It's much nicer when you can get it at a discount. The question of course is, you have to have done your research in advance because you can't just walk past the shopping center and get lucky.

7:12All right, fair enough. Well, let's go stock specific. I did speak to Daddy Coleman, that sounds a bit weird saying that, but I spoke to you on the call today. So I know Team Invest view on Linus on Meteoric, but for those who weren't watching, just tell us where you're at because Meteoric has gone up Linus has gone down. Yeah, look, I think in general, as a value investor, owning speculative mining companies is always a challenge because it's very hard to be virtually certain what the earnings are going to be in five or ten years' time. When you have both huge risk around the price that you can get for the commodity you dig out of the ground, but also huge execution risk. However, I do think amusingly, if I put my value investing out of sight and I look at this in the old M&A banker, Andrew Coleman, rather than Howard Coleman, I actually think this is quite a good deal for both Meteoric and Linus on the basis that for Meteoric shareholders, they're receiving a 50 to 70% premium to what they were trading at, which is a pretty nice free kick, and they're getting rid of all the execution risk.

8:12It no longer becomes their problem and their wallet that has to fund the development of these projects. And I think from Linus's perspective, weirdly, I think this is a win too, because Linus at the moment, of course, has been trading on an astronomically high-peer, you know, over 60 times earnings for a miner is just insanity. And so finding someone who's going to give you a reasonable asset for paper that is probably worth a lot less than it appears, sounds like a win-win, give away your free paper for an asset of some value. What about data three? I mean, you talk there about wanting a company that has strong earnings projection and growth that looks like the market thinks that this one does. It's done very well on a down day. Yeah, look, data three is a wonderful company. We've spoken about it at Noorsium, right? But you know, earnings per share, going 15 to 20% per annum for the last 20 years, over 50% return on equity and return on capital, which is just astronomical, and a really strong management team that has changed a number of times over that 20 years. In other words, it's not a key man risk dependent business.

9:13This is a business that has been systemised and run really well. And they're in the right space at the right time, you know, selling hardware and software to big government and corporate users. I've got a huge tailwind in it because of two letters that apparently changed today from AI to SI. So from that point of view, you know, they're really in the right place at the right time. But having said that data three growing its earnings are between 15 and 40%, whilst the 40 would be a bit new and surprising. The 15 is, that's an old. This is a company that's done that through market cycles for the last 20 years with great regularity. And so, you know, from that point of view, it's always been a very big holding amongst down there. Membership and our funds. We are in the top 10 in aggregate shareholders of data three. And I think that it's very nice that the market is rewarding our patients. But I don't expect this to be the last time data three upgrades because when you are a dominant player with strong votes, low risks in an industry with big tailwinds, life's pretty easy. Yeah. All right. Look at those charts. They look amazing. So sort of coming full circle when we talk about those higher energy prices,

10:13everybody's now moving to EVs. You need to charge your EVs. Ampole is moving into that space with a big contract here. What do you think about the Ampole story? I think it's a wonderful strategic move. I just think they may have overpaid a little bit. But time will tell from that. So why do I say I think it's a wonderful strategic move? I think that we have the most green president in history in the White House. Not because of what he says or why he says it, but because of his actions. In effect, Donald Trump has pushed the world to move off the internal combustion engine. Because with these all prices and petrol prices where they are, it's created the greatest incentive to switch towards electric vehicles that we've ever had. And I think that if you are Ampole and you are in their shoes and you run the dominant petrol station market in this country, you must be sitting there wondering where does your growth and future lie if what you're doing is providing less and less diesel and petrol to less and less customers. So I think it's a smart move from Ampole to look at how they can use their existing

11:13petrol station footprint to get into charging vehicles for road users. So they still provide the same service. It's just a different product and they still bring you into their convenience store and sell you overpriced pringles. So from that point of view, I think this is a really smart move. I do question though the need to pay 11 times EV. So 11 times EV, which is a very big multiple for what is effectively things that they're already rolling out themselves. To me, that smacks a little bit of desperation trying to do a land grain before it's too late. I think they probably could have ended up with the same number of charging stations for a lot less dollars using their existing footprint. But time will tell, you know, I think this is one of those M&A ones where the strategy is good. Is the price right or not, you know, five years from now will know I think it looks high. But you know, we'll find out in time. Yeah, we will indeed. Andrew, always good to chat. Enjoy the rest of your day. Thank you so much. Great to see you. And you. And you. And then I'm going to ask you to come in there from team invest. Well, the stock of the day was Linus Rare Earths.

12:14And I also spoke to Howard Coleman from team invest and also Grady Wall from Bell Direct. The thing about NDPR prices are expected to continue growing and demand is increasing as well because it's in EV motors. So not necessarily like you've got lithium and the salt or the sodium story right now where batteries are kind of being taken over as different ideas of different batteries coming online. Nothing's going to really replace NDPR in the motors of EVs. So it's kind of this unique commodity place. So I do like it. I'd probably say a buy rating because of its position in the market. And then it's obviously down today. So it's kind of an opportunity to capitalize on this outlook potential. If the company was growing its earnings every year, I'd say well, a decent, it's a proven great business. But it isn't. So I'm very happy too. As I said jokingly before we can put a line through Linus team invest members

13:15would look at these numbers and say why don't we want to invest in it? It's low return on equity. It's earnings all over the place. Well, you heard there from two of our experts on Osbezin. And we know that AI can give us information. But investing is about understanding the thinking behind it. And that is where Osbezin plus comes in. So it's real people like Howard and Grady. You just saw verified experts their ideas analysis and insights connected by AI to what you are interested in. So it's not AI replacing the experts. It's AI helping you find the expertise that matters to you. That is Osbezin plus powered by people matched by AI and tuned to what you like. There is a free seven day trial. No credit card required. Osbezin.co slash free seven. Let's have a look at the market leaders. If there are any on a very down day today, we know data three is up the top there. Up by an impressive 14%.

14:15But then the next stock doing anything remotely positive is only out 4%, which was predictive discovery, 14 medical code and and Len Lee's continuing to add to yesterday's gains in the market. So we are going to be on the downside. I should say we had Linus of course concerns about whether or not it's paid too much for meteoric lion town as well as we see weakness in lithium. You can see that reflected in 11. Elever at lithium there as well in the small end of town. Meteoric resources of course was the front runner up 44% on that beard. Cauldron energy did well as well while the laggards in the small end of town included fortify and American rare earths. Alright, looking ahead to what we are getting tonight, the US initial jobless claims, US and EU manufacturing PMIs and earnings from Nike or Knight, however you say it. And also policy queues coming from more fed officials including Barkin, Colin Schmidt and Waller. Tomorrow, Friday, not much happening apart from South Korea CPI and also some data out of Japan in terms of inflation.

15:18For September and you did know it of course that the Japanese yen came under quite significant pressure today as it looks like the B.O.J. may cool on another hike. The market they are closing down by 2% on the CBO 200 and a quick check on where the S&P ASX 200 is. It is also closed lower by 2% to 8,614 points down 175 points. It is now negative since the start of the year by 1.1%. So big drop coming through to kickstart October and interestingly we are also hearing from the likes of some analysts saying this is actually an Australia story, it is not about rising bond yields and energy costs, it is really more about the fact that we don't have a lot of exposure to AI. We have got rising house prices, we have falling house prices, we have rising interest rates. So a lot of worry that people are coming out there. Alright, well that does it for the CBOB, we will see you from 9.45am Eastern tomorrow.

16:32The CBOB is brought to you by Longview, a new way for investors to access Australian residential property. Visit longview.com.au Qualified shippers get a real dedicated person to get you set up and switched over for free. So in peak season hits you are ready to go. Switch today at shipstation.com, code audio.