Lithium Stocks to Soar? Insider Trading Worries? Investing Taxes? - Stock Market Q&A

Hey guys, welcome back to the channel! So in today's video, we are quite simply doing a Q&A. I sent the message out on my YouTube community tab recently, and you guys left a lot of comments. So unfortunately, I'm definitely not going to be getting through all of the questions you guys sent in today, but hopefully, we'll get through a few of them.

I also wanted to note at the top of the video that, uh, I'm going to try and keep most of the questions on the main channel investing related or YouTube stock market kind of related. I also got a lot of questions about, you know, me personally; I guess a little bit more personal. So I'm going to make another Q&A video with all those questions, but I'm going to put it on the new Money Clips channel. So you can check it out; the link should be coming up on the screen right now. But with that said, let's get this video started! Roll the intro, and I'll see you on the other side.

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Alright, well, let's get stuck into it! I've got my laptop ready, my MacBook Pro. Man, oh, fire out, this is a sidetrack; this is like the biggest tech regret ever! I bought this fully specced-out MacBook Pro. Oh, that was a waste of money.

Anyway, first question comes from Guillaume. "I know you don't try and time the market. However, if you came into 100 grand cash, would you hold in anticipation of a correction or go all into the S&P 500 and similar long-term strategy indexes?"

Uh, yeah, so you're right, I don't try and time the market. However, if I had like a massive lump sum of money, like people ask this with, say, inheritances—they've just come into a lot of money and they want to put it to good use. Inheritance is usually quite common. So, look, the way I see it is you don't want to try and time the market. You don't want to wait for a crash because you never know; you could be waiting for years. You know, you could be waiting for who knows how long. We don't know when the market's going to crash.

But in the same vein, if you plonk all that money in at one time, then you are stuck on that one value of the S&P 500. So you know, if it turns out to be a low value and the market goes up, then you look fantastic. But if you invest that one point and it's quite a high value of the S&P 500, and the market maybe crashes, then you're stuck on that one point to judge your future returns.

So the way I would do it, again, none of this is financial advice, so do whatever you like really, but the way that I would do it is I would try and ease that money in over, say, a few years. You know, I'd come back every quarter and I'd invest another chunk of that money, another quarter goes by, another chunk of that money. So, you know, I wouldn't dump it all in at the same time. I wouldn't hold it all out of the market waiting for a crash because that’ll just run you into trouble. I'd try and ease it, and I think that's how it goes.

So thanks for the question, Guillaume! Next one comes in from Gus. "More of a content question, but do you plan on doing more company deep dives similar to the Alibaba series?"

Um, I mean, the reason I went deep on Alibaba is because it was—it is a company that I'm really interested in from an investing standpoint. So, um, I think if there's another one that pops up on my radar that looks cheap and really warrants a deep dive discussion and analysis, then I think that I will.

Generally speaking, those kind of videos, typically for me anyway, don't do particularly well from a YouTube perspective from a views perspective, but I mean, the Alibaba series did quite well. So, you know, if there's something that pops up that people are obviously really interested in—I mean, the talk of the town is Alibaba at the moment—so if there's another stock like that that comes up and you know is kind of relevant from a rational value investing standpoint, then for sure I’d be more than happy to do another deep dive series like that mini-series.

Um, also, also I should say that series was definitely inspired by Investing with Tom's mini series that he did around Alibaba. So to get another perspective on Alibaba like a mini-series, I think he did three videos, but he's done a lot more videos, just incidentally, over the last couple of months on Alibaba. But definitely check out his channel if you want to learn more about Alibaba. I actually owe him because I learned a lot about Alibaba from Tom, so yeah, definitely check out his channel.

Alright, moving on. Next one comes in from Luke. "Do you find that talking about money and finance has a stigma in the real world? Why do you think that is?"

I mean, yeah, it definitely is. You know, there's always that classic when you're growing up, "Oh son, we don't talk about money." You know, "Don't talk about money at the dinner table." But you know, I think personally, I think it's because, you know, maybe it's parents trying to teach their kids that you know there's more to life than money, which is obviously definitely the case.

But I think that kind of gets carried across as like we just don't talk about money, which I think is a big mistake because clearly, I mean, money is pretty darn important in life. I mean, it's pretty much related to every single thing that we do in our lives. So I think that people should be comfortable and open with talking about money, um, because, yeah, I think it's very important. I think it needs to be taught much more in schools.

I think you really don't get enough financial education in the schooling system, which sucks. Um, because yeah, it's obviously if you learn the principles of compound interest at like 16 or 18 years old, even just dollar cost averaging passive investing, you're going to go a long, long way. So I definitely think people need to talk about money more, but yeah, I can understand why that's the case because, you know, we—you know, you don't want money to be the thing that you focus on every day, "Oh I'm just in it for the money," kind of thing.

So I can understand both sides, but I definitely think we need to shine more light on financial independence and strategies to get there.

Alright, next one comes in from leg6988. "Do you have any thoughts on lithium stocks in the US and on the ASX? The industry appears to be growing with EV production increasing."

Yeah, so um, back when I was less strict on my kind of value investing Warren Buffett-style strategy, I did make some investments in the lithium space. Generally speaking, I'm bullish on the space because, yeah, you're right, it comes down to supply and demand.

So lithium is obviously used in batteries, but forever lithium was just in cell phone batteries and there's like two or three grams of lithium in a cell phone battery. But now, obviously, we're making big batteries for electric vehicles, and that trend is only really just starting to catch on. So there's obviously a massive potential. Like, I think there's 60—how I wrote it down—63 kilograms of lithium in a 70-kilowatt-hour Model S battery.

So yes, there's definitely potential there. The issue that I have around these days about investing in commodity stocks is that it's really hard to find a moat in when we're talking about commodities or resources just because they end up—they're all selling the same thing. Like, they're selling—or very close variations of the same thing; like they're selling lithium, right?

So the only way to really find a moat in the commodity space is to find like the lowest cost producer, the ones that can have the highest margins. So I typically don't look into that space all that much and also these days I look at the lithium industry and I realize that actually, back when I made that speculative investment, I really did not know enough about the industry to be investing in it. So, I mean, maybe I'll do a bit of a deep dive.

Obviously, there's heaps of lithium in Australia. In Australia, it's all about the hard rock lithium as opposed to in places like South America where it's more about the brines, the big brine deposits of lithium. So, uh, yeah, there's certainly a lot that you could look at here in Australia when it comes to lithium, but I wouldn't say that I'm an expert on lithium.

Alright, let's move on. Next one comes in from Bella. "Hey Brandon, so one of the companies I invested in has been reflecting some insider trading as some key executives have been selling off, but only small percentages—like six percent of their total stake. It doesn't seem like a big percentage, but should I be concerned? Much love from South Africa."

Oh, that's cool! I did—I don't know if I have any other viewers in South Africa. I think that's awesome! Hello, South African viewership! Um, but yeah, in terms of insider trading, a lot of CEOs will, these days, of big companies will do a lot of selling periodically just for like philanthropic purposes. Like, Mark Zuckerberg for example, um, or they could just be buying and selling because of what they believe, you know, the value—the shares are.

So, you know, I would definitely keep a close eye on it. I mean, there's no doubt that insider trading is a little bit of a peek behind the curtain at what the management team thinks. I know that there was a point in time where Tesla had just shot up—it was 10x or something like that—and a lot of the insiders took that opportunity to sell. So it's a little hint that, okay, maybe the Tesla insiders thought that, yeah, you know, stock's a little bit expensive now, I might take that good deal.

So maybe that's what they're doing, but again that comes down to your discounted cash flow evaluation, whether you believe it's overvalued. Maybe they might be selling down, but, yeah, I mean, you're right, six percent is not—like it's not the end of the world; it's not a huge percentage. But, you know, if they were selling like 10, 20, 30 percent of their stake, I'd be like, "Okay, they're really selling for a reason here." Um, but hopefully that helps. I don't really have any hard rules on that, so I apologize there, but hopefully it's still helpful.

Okay, next one comes in from Koza. "As an Australian, is it worth investing in other countries or is the currency and tax implications? Do they reduce any profits too much?"

Uh, so well, I do most of my investing in the United States, to be perfectly honest. I mean, a lot of the ETF stuff that I do, like the passive investing, I just keep here locally in Australia. But, um, all the companies that I've really invested in the last few years have been US companies.

So you're always going to cop kind of currency fluctuations when you're investing overseas. The way I see it is that over the long run, I just tend to think that especially if you're investing in the US, I mean, you're probably going to average out. You know, um, it's probably not something to really worry about.

In terms of tax, we've got to remember that Australia has income tax or just general broader tax treaties with a lot of countries around the world, which really makes the tax thing not so much of an issue. Like, if you get taxed—if you have an American investment and they hold some tax over in the States, then you just get a tax credit here in Australia. So it kind of negates the effects because we have those income tax treaties with, you know, the United States. We've got a big long list; I might flash it up on the screen right now; you can see all the different countries that we've got tax treaties with. So that's not so much of an issue.

Um, so yeah, I really don't worry about investing in overseas markets. I mean, just really, I think the main thing is invest in what you feel confident investing in. You know, stick within your circle of confidence, and if that takes you to maybe your Chinese—and that takes you to Chinese companies, then go for it. You know, if that—if you're from the States or you know, you like the big American companies, then maybe your investing journey takes you more to those US companies.

Maybe you work in mining here in Australia, so you like to look at ASX listed mining companies. I think it's more important just to focus on what you feel you know, what's within your circle of confidence, I guess is the right way to say it. So hopefully that helps Koza.

Uh, next one comes in from Digby. "What's the biggest investing mistake you have personally made?"

Geez, I've made a lot of—I've—there's certainly no shortage of mistakes. I don't know. Um, I think probably the biggest mistake would be speculating. The mistake that has cost me the most money has been putting too much faith in management's expectations—so just believing what the management tells you. Um, so that's lost me quite a bit of money.

Um, yeah, I think the main investing mistake would just be speculating. I'm trying to think of a good example in terms of the management thing. The immediate example that pops into my head is Sky and Space Global. I lost—well, I lost 100% because that company is now bust. But they were—the management team was talking about how they're so confident in getting these nano satellites up; they're essentially doing what they were trying to do—what Starlink is now—but on a smaller scale.

But they were so confident, "Yeah, you know, we don't have any satellites up at the moment, but yeah, we're progressing really well. All's fine, Hoppy Doodle Dandy; we're going to send up our little nano satellites, and we're going to start generating revenues, no worries! We've already got the agreement signed; don't worry about it." And then it just never happened. They just ran out of money and couldn't do it, so that definitely burned me.

An example that I can think of recently is something we were talking about on the Young Investors Podcast—myself and Hamish were talking about Lucid Motors and the upcoming Rivian IPO as well. The article was talking about how the—you know, these two auto manufacturers have like no cars on the road right now, pretty much zero. Zero cars on the road, and they're being valued based like in tens of billions of dollars valuation because their management team is saying, "Well, look, in 2025, you know, we expect to have this much in revenue."

And then investors are going, "Oh, okay." So they—if they get to 2025 and they make 30-something billion dollars in revenue, that, oh yeah, that makes a great investment. Whereas in reality, I mean, to get from zero cars in 2021 to however many they're going to do, I mean, it's clearly just—you're putting a lot of faith in the management team when really at the moment they haven't really got anything.

So that's a mistake that I've made in the past, and I definitely caution investors out there to just not blindly back the management team if there's kind of no operations at the current time. So that's that one.

Then, uh, Investing with Tom, how did you manage to grow such luscious locks?

Well, step one: don't get a haircut, and then it just happens naturally. But yeah, my hair's getting pretty long. It's so funny because I think I just always face the camera dead on; some people think—I don't know if it's completely obvious, but some people think my hair is really short because I don't think I ever turn my head, so you can't see my hair out the back. But yeah, my hair is getting long. It doesn't look very good when it's out; I much prefer it when it's tied back like this.

Um, but yeah, a bit of an experiment. We'll see how far it goes. Um, do you think that the tied back look is better, or do you think my old look with the side part and the flicked back hair was better? I don't know; you guys tell me, I'm opening myself up there in the comments section.

Um, alright, let's do one more. This one comes in from James. "How do you approach business analysis to create your watch list or book/resources you'd recommend we read to upskill?"

So yeah, my—the approach that I take, and I don't want to kind of go too deep because I feel like I say this quite a bit, is pretty much a four—kind of four-pillared approach. First step is you have to take the time to understand the business. So you read the annual reports, you read any relevant books or literature or whatever you can find about the company you're interested in; you learn about the industry, how the company fits into the industry, et cetera, so you understand the business.

Then secondly, you look for a competitive advantage, so you test whether the company has a moat—whether it's been able to grow uninterrupted and the competitors really aren't influencing the company at all. Then thirdly, you have to make sure the management team operate the company with skill and integrity. So you have to make sure that they're honest people, and you also have to make sure that they're good at their jobs. So they are investing well within the business to get that growth.

And then the last pillar is the valuation. Like, you can't go buying great companies at really expensive prices because you're just shooting yourself in the foot. You have to buy at a discount to intrinsic value. So that's the four key steps. And if you're new to that kind of approach, well, I'll give myself a little plug: I have made a course on this—like a full eight-hour course—which is called "Introduction to Stock Analysis," which is over on Profitable if you just wanted my step-by-step kind of thorough explanation of the whole strategy.

But if you're looking for some books to read, then I definitely recommend first starting with "Rule One." "Rule One" is a really good kind of introductory guide into that four-pillar analysis. Also, reading books like "The Dando Investor" will help a lot. They'd probably be the two that I would start with.

And then going from there, I kind of do most of my learning these days by uh, reverse engineering what I see or hear from the best investors in the world that follow that strategy. So the Charlie Mungers, the Warren Buffetts, Monash Probbi, Phil Town, Guy Spier—all of these different investors that follow that kind of strategy. Watch what they're doing and kind of reverse engineer why they're doing it based on that four-pillar analysis.

So hopefully that's helpful, and hopefully you guys enjoyed this video! This is certainly a little bit different to what I normally do—very unscripted—but that will just about wrap things up for today, guys! So hopefully you enjoyed. Again, I'll do another one of these for the, uh, the clips channel, which will be more about the personal questions that I got asked from that Q&A post.

So if you're interested in that as well, then you can watch even more Q&A. I'll put the link up on the screen again here, or the link will be in the description so you can check that out. But apart from that, guys, if you enjoyed this video, please leave a like on it and subscribe to the channel if you're new around here. And that will just about do me today, guys. Thanks for watching, and I'll see you guys in the next video!

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