Wednesday, 29 January 2025

CBA

 CBA Commonwealth Bank
22/07/26


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ASX:CBA has delivered stellar long-term total returns, buoyed by strong profitability. However, premium valuations have faced recent headwinds. [1, 2, 3]
Over the last 10 years, CBA’s key financial milestones include:
  • Profitability & Revenue: CBA’s net profit has climbed significantly over the decade, consistently hovering between A$9 billion and A$10 billion annually in recent years. [1]

  • Return on Equity (ROE): CBA maintains an excellent banking sector ROE. Historically, it has reliably averaged between 13% and 14%. [1, 2, 3]
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The Net Interest Margin (NIM) measures the difference between the interest income a bank generates from loans/assets and the amount it pays out to depositors, relative to its interest-earning assets. It is a primary indicator of a bank's core profitability, lending efficiency, and overall financial health.

A bank's interest-earning assets are the financial instruments on its balance sheet that generate income through interest, making them the primary engine of a bank's core revenue.

The most common types of interest-earning assets include:
  • Customer Loans: These are the largest source of interest income and include mortgages, personal loans, credit card balances, and commercial/business loans. [1, 2, 3, 4, 5]
  • Investment Securities: Banks invest a portion of their funds in interest-bearing securities like government bonds (e.g., U.S. Treasuries, Australian Government Bonds), corporate debt, and mortgage-backed securities. [1, 2, 3]
  • Interbank Loans: Money lent overnight or for short terms to other financial institutions (often referred to as federal funds sold or reverse repurchase agreements). [1, 2]
  • Deposits at Central Banks: Cash reserves and balances held at central banking institutions (like the Reserve Bank of Australia or the Federal Reserve) that yield interest. [1, 2]
The profit generated from these assets is called Net Interest Income, which is calculated as the difference between the interest earned on these assets and the interest paid out to depositors on interest-bearing liabilities.
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  • Debt: As a retail and commercial bank, CBA carries high raw liabilities (over A$200 billion in wholesale/debt securities), but maintains very healthy Tier 1 capital ratios heavily scrutinized by the Australian Prudential Regulation Authority (APRA). [1]
  • Share Price Growth: Despite a recent double-digit pullback caused by shifting federal budgets and geopolitical/lending uncertainties, long-term investors have more than doubled their capital over the decade, including a share price that has sat well above the A$150 mark. [1, 2, 3]
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dividends



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AYLD - covered call ETF

 AYLD - GLOBAL X S&P/ASX 200 COVERED CALL COMPLEX ETF


Quarterly distributions
Only partial  franking - so use in super
9.9% - 07/07/26
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Mainly Australian stocks
 BHPBHP Group Ltd12.07%
 CBACommonwealth Bank of Australia10.54%
 WBCWestpac Banking Corp4.70%
 NABNational Australia Bank Ltd4.37%
 ANZANZ Group Holdings Ltd4.05%
Top 10 Holdings
CodeCompanyAsset
 WESWesfarmers Ltd3.46%
 MQGMacquarie Group Ltd3.23%
 RIORio Tinto Ltd2.63%
 GMGGoodman Group2.47%
 TLSTelstra Group Ltd2.24%



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covered call

Covered call ETFs are investment funds that hold a portfolio of stocks and simultaneously sell ("write") call options on those assets or their underlying index to generate high, regular cash distributions. While they offer excellent immediate income and lower volatility in sideways or falling markets, they typically sacrifice long-term capital growth during bull markets.


How the Strategy Works 

1. Portfolio: The ETF buys a basket of stocks (e.g., tracking the S&P 500 or ASX 200).
2. The Option Sale: The fund manager sells call options on those stocks. By doing this, the fund gives a buyer the right to buy the shares at a predetermined price (the strike price) in exchange for a fee, known as an option premium.
3. The Yield: The collected premiums are distributed to investors as regular (often monthly) income, which can supplement traditional stock dividends.

Pros & Cons 

Advantages
High Cash Flow: Ideal for retirees or income-focused investors looking to generate tangible cash yield.
Downside Cushion: The collected premiums provide a buffer that can help minimize losses in a flat or bearish market.
Lower Volatility: They tend to experience smaller price swings compared to traditional, growth-focused index funds.

Disadvantages
Capped Upside: If the underlying stocks skyrocket, the call option will be exercised, capping your capital gains. You miss out on massive bull market rallies.
Eaten Principal in Crashes: While the premium offers a small buffer, it does not fully protect against severe market crashes.
Higher Costs: These funds require active, monthly trading to "roll" options, resulting in higher management expense ratios (MER) than plain index funds.

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Popular Examples Available to Australian Investors:

Global X S&P/ASX 200 Covered Call ETF (AYLD): Tracks the performance of the ASX 200 while selling call options to enhance yield.

Global X S&P 500 Covered Call Complex ETF (UYLD): Applies the same buy-write strategy to the S&P 500, targeting US equities. (no franking credits)

JPMorgan Equity Premium Income (JEPI / JEPQ): High-profile US-domiciled actively managed ETFs that use a mix of equity holdings and equity-linked notes (ELNs) to distribute high monthly income

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does a covered call etf protect against market crash?

No, covered call ETFs do not protect against a market crash. While the option premiums generated can provide a small initial cushion, they do not prevent your portfolio from losing value and will still suffer severe losses during a major market downturn. [1, 2, 3]

How Covered Call ETFs Work in a Downturn
When you invest in a covered call ETF, the fund holds underlying stocks and sells call options against them to generate income. In a market crash: [1, 2]
  • No Principal Protection: The underlying shares will plummet in value, causing the ETF's net asset value (NAV) to fall right along with the broader market. [1, 2, 3, 4]
  • Limited Cushion: The cash premiums collected from the options may slightly soften the blow in a mild decline, but they are far too small to offset a massive market crash. [1, 2]
  • Capped Recovery: While you suffer the full downside of a crash, your upside is capped during the recovery phase, which means it can take much longer for your investment to break even.
Finding True Protection
Because covered call strategies are primarily designed to generate income in sideways or slightly rising markets, they lack built-in tail risk or put option protections. If your goal is to explicitly hedge against a stock market crash, consider researching defensive vehicles designed to navigate extreme volatility, such as tail risk ETFs or hedged equity ETFs
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Thursday, 23 January 2025

The world's top 10 coffee shops 2025

 The world's top 10 coffee shops, according to the World's 100 Best Coffee Shops list, are: Toby's Estate Coffee Roasters (Sydney, Australia), Onyx Coffee LAB (USA), Gota Coffee Experts (Austria), Proud Mary Coffee (Australia), Tim Wendelboe (Norway), Apartment Coffee (Singapore), Kawa Coffee (France), Coffee Anthology (Australia), Story of Ono (Malaysia), and Tropicalia Coffee (Colombia). Toby's Estate in Sydney, Australia, has been named the best coffee shop in the world. 

Here's a more detailed look at the top contenders:
1. Toby's Estate Coffee Roasters (Sydney, Australia):
Toby's Estate has a flagship cafe and roastery in Chippendale, Sydney, which was named the best coffee shop in the world. 

2. Onyx Coffee LAB (Rogers, Arkansas, USA):
With multiple locations in Arkansas, 

3. Gota Coffee Experts (Vienna, Austria):
Gota is praised for its award-winning coffee and hands-on workshops where visitors can learn about coffee processing, roasting, and brewing. 

4. Proud Mary Coffee (Melbourne, Australia):
Proud Mary is a well-regarded coffee shop with a focus on quality and a strong connection to its coffee growers. 

5. Tim Wendelboe (Oslo, Norway):
Tim Wendelboe is a renowned coffee professional 

6. Apartment Coffee (Singapore):

7. Kawa Coffee (Paris, France):

 
8. Coffee Anthology (Brisbane, Australia):
Coffee Anthology is a Brisbane-based coffee shop that has earned a reputation for showcasing a rotating selection of Australia's finest coffee producers. 

9. Story of Ono (Petaling Jaya, Malaysia):
Story of Ono is a coffee shop in Malaysia that has made its mark on the world stage with its unique offerings and contributions to the local coffee culture. 

10. Tropicalia Coffee (Bogota, Colombia):
Tropicalia Coffee is a Colombian coffee shop that represents the country's rich coffee heritage and is known for its high-quality beans.

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A fav bookstore/ cafe in Sydney

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Wednesday, 22 January 2025

BTI - Bailador Technology Investments

 BTI
22-07-26


This is a LIC - Listed Investment Company


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ASX:BTI (Bailador Technology Investments) has experienced mixed performance over the last 5 years. While the company maintains minimal debt and consistently pays a high dividend, its core earnings have declined and the stock price has traded at a significant discount to its underlying Net Tangible Assets (NTA). [1, 2, 3, 4, 5]
Financial Snapshot (5-Year Overview)
  • Profit & Earnings: Core earnings have seen an average decline of roughly 6% per year over the last 5 years. In FY2025, BTI reported net earnings of A$19.25 million, down from $20.67 million the previous year. [1, 2, 3]
  • Return on Equity (ROE): The trailing twelve months (TTM) ROE hovers near 9.8%, having historically tracked in the solid 8% to 9% range. [1, 2]. The ROE is not consistently growly as are earnings , so forecasting future profit, dividends, etc is difficult

  • Debt Levels: BTI maintains a very strong balance sheet with negligible levels of debt (a debt-to-equity ratio of practically 0. The company finances follow-on investments using its robust capital and cash reserves. [1, 2, 3, 4, 5]
  • Dividends: BTI is a strong income stock with a dividend yield exceeding 8%. The company has increased dividend payouts by an average of 39% annually over the past 5 years, maintaining a payout ratio of roughly 44% to 45%. [1, 2, 3]

  • Share Price vs. Value: Over the 5-year period, BTI's stock has trended down, resulting in a 5-year share price return of approximately -29%. Because the share price has lagged, it regularly trades at a deep discount—frequently between 30% and 44%—to its pre-tax NTA

I look at this as a dividend stock.  There is mostly sideways share price movement. very little long term growth in the share price. But if you can buy it at low PE ratios the regular income is welcome

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PE Ratio
5.60 9.11  8.37 31.17 6.00 6.77
2026 2025 2024 2023 2022 2021

Over the last 10 years, Bailador Technology Investments (ASX: BTI) has traded at a median Price-to-Earnings (P/E) ratio of 8.27x, experiencing significant valuation swings driven by the realized gains and valuation adjustments of its underlying technology portfolio. [1]
As of mid-2026, the company trades at a historically low trailing twelve months (TTM) P/E ratio of roughly 5.6x to 5.7x, which sits about 31% below its long-term historical median. [1, 2]
Historical P/E Performance Metrics
According to historical financial tracking from platforms like GuruFocus and Market Index, the company’s key 10-year P/E boundaries include:
  • 10-Year High: 35.66x
  • 10-Year Median: 8.27x
  • 10-Year Low: 3.91x [1]
Recent Yearly P/E Breakdown
Because Bailador operates as a Listed Investment Company (LIC) focused on venture capital and private expansion-stage technology, its net profits (and consequently its P/E ratio) fluctuate dramatically based on when portfolio companies are up-valued or sold.
Period [1, 2, 3]P/E RatioValuation Context
2026 (TTM)5.6x – 5.7xTrading compressed relative to its Net Asset Value (NAV).
20259.05xAligned near the long-term historical median.
20248.32xReflects steady underlying earnings from portfolio realizations.
Important Analytical Considerations
  • The "LIC Discount" Blindspot: P/E ratios are often a secondary metric for asset managers like Bailador. Investors primarily evaluate ASX:BTI using its Price-to-NAV (Net Asset Value) ratio. Currently, Bailador trades at a steep discount to its Net Asset Value (Share Price of ~A$0.94 vs NAV of ~A$1.70), reflecting a wider market trend for small-cap investment firms. [1, 2, 3]
  • Earnings Lumpiness: High profits during portfolio exits (such as previous cash-realized exits from Instaclustr or Standard Ledger) temporarily spike earnings, making the P/E ratio appear artificially low for the subsequent 12 months.

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ARGO Vs BTI

Argo Investments (ASX:ARG) and Bailador Technology Investments (ASX:BTI) are both Listed Investment Companies (LICs), but they represent completely opposite ends of the risk, growth, and valuation spectrum. [1, 2]
From a Warren Buffett perspective, Argo aligns closely with his core principles of a mature, predictable, "buy-and-hold-forever" business with a durable moat. Bailador behaves much more like a venture capital vehicle—an industry Buffett generally avoids due to its lack of predictable long-term earnings, high risk, and technology-heavy focus. [1, 2, 3]
Key Metrics At a Glance
MetricArgo Investments (ASX:ARG)Bailador Technology (ASX:BTI)Buffett-Style Assessment
Business ModelDiversified Blue-Chip LIC (est. 1946)Expansion-Stage Tech Venture CapitalARG offers extreme predictability; BTI offers high-risk speculation.
Trailing P/E Ratio~26.9x~17.6xBTI looks "cheaper" on raw earnings, but its earnings fluctuate wildly on lumpy portfolio exits.
10-Year Growth (CAGR)~9.0% per annum (Total Return)~6.1% per annum (Total Shareholder Return)ARG tracks the broader ASX index with low volatility. BTI has higher volatility and cyclical asset realization.
Current Dividend Yield~4.2% to 4.3% (100% Franked)~7.6% to 7.8% (100% Franked)BTI pays a higher optical yield, but it commits to distributing 2.5% of its pre-tax NTA per annum rather than traditional earnings.
Dividend GrowthStable, slow increases (~2.7% p.a. over 10 years)Lumpy; dependent on tech exits.ARG actively uses profit reserves to smooth and grow dividends over decades.
Buffett-Style Breakdown
1. Circle of Competence & Business Moat
  • ARG: Argo’s moat is its longevity and cost efficiency. Operating since 1946, it has an ultra-low management expense ratio (~0.14%). Its portfolio is packed with predictable blue chips (e.g., BHP, CBA, Wesfarmers). Buffett loves low costs and defensive, predictable operating histories. [1, 2, 3, 4]
  • BTI: Bailador invests in unlisted internet, software, and technology businesses. Because these companies lack decades of steady cash flow, they sit outside a traditional Buffett "circle of competence." BTI lacks a moat on its own; its success relies entirely on the deal-making skills of its management team.
2. Price to Earnings (P/E) & Intrinsic Value
  • ARG: At ~26.9x P/E, Argo trades at a premium relative to its 10-year historical median. While Buffett appreciates quality, he avoids overpaying for slow-growing assets. [1]
  • BTI: A ~17.6x P/E makes BTI look undervalued on paper. However, Buffett warns against looking at raw P/E ratios for investment companies. BTI's earnings are highly erratic because they depend entirely on when they sell a portfolio company (capital gains realizations) rather than steady operational cash flow. [1, 2]
3. Dividend Stability & Dividend Growth
  • ARG: Argo behaves like a classic Buffett dividend stock. It possesses structural "profit reserves," allowing management to bank cash during good years and maintain or increase dividends during market downturns. Starting in 2027, ARG will switch to a reliable quarterly dividend schedule targeting a record 40 cents per share fully franked.
  • BTI: BTI pays a massive trailing yield of over 7.5%. However, this distribution is tied directly to a fixed percentage of its Net Tangible Assets (NTA) and capital gains. If the valuations of its private tech portfolio decline, the dividend payment shrinks. This violates Buffett's preference for stable, compounding cash payouts. [1, 2, 3, 4, 5, 6]
The Verdict: Which Would Buffett Buy?
Warren Buffett would almost certainly choose Argo (ASX:ARG) over Bailador, but with a significant caveat. [1]
He would view Argo as a reliable, defensive wealth-preservation tool. However, given its slow growth rate, he would likely prefer a lower-cost broad index fund if it achieved the same result for less fees. [1, 2]
He would likely treat Bailador as an unpredictable technology play, choosing to pass on it entirely due to its structural reliance on venture capital market cycles. [1]
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How does BTI fund its dividends?


Bailador Technology Investments (ASX:BTI) pays its dividends primarily out of cash reserves generated from investment realizations (capital gains), rather than regular operational earnings or debt. [1]
Because BTI is a Listed Investment Company (LIC) focusing on expansion-stage technology firms, its dividend mechanics differ from traditional operating businesses. [1, 2]
How BTI Funds Its Dividends
  • Cash Reserves & Realizations: BTI relies on selling down or exiting its portfolio investments (e.g., its cash realization of SiteMinder). These cash windfalls are held on the balance sheet to fund future investments and fulfill its regular dividend commitments. [1, 2]
  • Not Funded by Debt: According to its financial reports, BTI maintains a negative net debt position (-$14.06M) and zero long-term debt. It does not borrow money to pay dividends. [1, 2]
  • The "Earnings" Disconnect: In years where portfolio companies grow in value but BTI does not sell any assets, its paper "earnings" (Net Profit After Tax) may fluctuate or appear low. For example, a trailing payout ratio over 100% occurs because its statutory accounting profits don't directly track the cash realizations used to pay the distributions. [1, 2, 3]
The Stated Dividend Policy
BTI has a formal commitment to return cash to shareholders: [1]
  • 4.0% of NTA: BTI maintains a policy of paying regular, semi-annual dividends equivalent to 4.0% of its pre-tax Net Tangible Assets (NTA) per annum. [1]
  • Fully Franked: Because BTI pays corporate tax in Australia when it materializes capital gains, its dividends are 100% franked. [1, 2]

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