Saturday, May 30, 2020

Finding good investment themes


  While the long-term bull market has been largely attributable to the influx of money into index ETFs, which has been successful for some time, due to Covid a new paradigm shift has occurred.  That paradigm is one that no longer says growth and low unemployment will alone catapult the market forward due to a relatively healthy capitalist system.  Instead, we've learned over the past few months, that humanity can be challenged by complex viruses and if we are not more prepared, we are all at risk.  

Finding Investment Themes that make sense and staying with them, until they don't.  It's all your call, your opinion, your perspective on where you fit in, what products and services you value and whether those companies reflect not only your perception of the world, but also if those companies are growing.  The above discussion regarding how I'm viewing the new paradigm causes me to focus on my first investment theme, Scientific Research to further strengthen and improve the overall health of humanity.  Coming off of selling all of my equity holdings in early March,  just after the covid crash, and then starting to reinvest  that cash slowly back in in late March, a few months ago, I started investing more heavily into pharama and biotech, more than ever before.  This is because investing in Science is not only good for humanity and life on earth as we know it, it is also good for business and returns.  In addition the disparity of valuation that is being seen within that sector, is greater than I've ever experienced.  

I'm currently allocated to Regeneron, CRISPR, Illumina, JNJ, Bristol, Abbott and Masimo - I believe genetic editing and immunization and treatment for molecular and biological disease and treatment.  Covid falls into the biologic.  All of these companies, from what I've read show great progress with fda approved drugs in pipeline for re

More on Remote Software

DOCUsign, MSFT, FB, SNAP, 

This portfolio shows that it performs very well when the markets are uncertain and when the "covid trade" as its been coined which has been favorable to 

Friday, May 22, 2020

Current Portfolio

https://docs.google.com/spreadsheets/d/1F30wVvslgeYgs0eX_LcYGL09OdPQG4bDichvgR4bE_4/edit?usp=drivesdk

Wednesday, May 13, 2020

Assessing E(R)p Expected Return

A friend of mine who is very entrepreneurial, like me, called me up to intro me to 2 other "partners" to launch a new business in the medical product delivery space. We both have small and growing related businesses that could theoretically grow faster with the success of the delivery business. I encouraged him to focus on his, or my existing product line, not a new business. Once you have a sustainable business worth real revenues and real client accounts, would it then make sense to create the delivery business.

Every new business decision should be assessed with E(R), expected return.

Project 1 - Sell sell sell, with existing resources or inexpensive toolsets that can increase the marginal return of selling one more product. This is easy effort means modest but important sales. In economics, this is called assessing the Marginal Return of a product or service. Marginal Revenue / Marginal Cost. Optimally, an owner wants his Marginal return to be increasing. High probability of sales, low scaling factor. Takes time to grow to get ready for Project 2 below.

Project 2 - new delivery business, unknown cost structure, team, partner risk, unknown returns, and more. Huge potential return, huge risk. Low probability of realizing any return short term, ober the same time period as Proj 1. The devil is calling you with this Project, and with little execution experience to see him, it, for what it is, a long shot. Do not listen!

With the above, the probability, 0

Heres how i assess it. Simplified without any error coefficient.

If $1,000 of potential revenue
Proj 1 E(R) = 80%*1000 = $80

Proj 2 (R) = 1%, So if above, 1%*X=80, so x=80/.01 or $8k is what profit

Of Proj 2 must be in order for the additional risk (lower probability) to be worthwhile, over the same time period.  By the way, if you'be ever studied derivati es, that probability is the same as the delta of an option. Its essentially the percent probability that your project (or option) will prove to be have a sucessful outcome (in the money, when time is up).  This is just not a reality for a new company with modest revs and clients, its also a deathwish.

Product product product, Sales sales sales.

Stay focused.




Thursday, May 7, 2020

Slack - WORK - An alternative to email, finally?

For years, companies have been trying to solve the "alternative to email."  Noone's been able to solve it.  The closest to try?  Google's Gmail with more efficient cataloguing of emails, a redesign of email threads which consumers grabbed onto as a last resort.  When I learned about email way back in the early 90s, it was a revelation, an amazing technology that allowed messages to be sent to anyone in the world for free.  Only a few years earlier, I had been studying in Mexico as part of my graduate program's study abroad - and remember having to communicate with my friends and family back home with fax or snail mail.  And years earlier - it was mail.  So, how amazing when email came and also MUDs - multi-user dungeons.  Do you remember the commands?  N, S, E, W for directions.  "Pick up axe", "Attack"  "Pick up stone", etc. this was before the first Graphical Interface, Mosaic which was also a mind-blown event.

But, over the years, email has gotten tired - we lose emails - spam is still a major problem - its time consuming - remember, "Send signature Receipt" - a lot of attempts to improve email have failed.

Its because technology and information has surpassed what email as an app can handle.

And, along comes Slack - most IT professionals use it - its got the brand and the users and the functionality AND, seems to be the best yet alternative to Email.

I've owned it for several months as one of my smallest positions, and now I'm watching closely as it hit 29.57 today so far - its tested its previous 6 month high of 30.47.  It's done this twice in that time frame - that's a good sign, but not a buy sign until it breaks 30.47.  If so, it has room to run to 40.


So, I've put a Stop Limit Buy Order to double my position, Stop at 30.48, and Limit of 30.48.  This means if it trades 30.48, automatically place a limit order for 30.48.

Why don't I just buy it now?  I'll be buying it $1 lower - isn't that better?  Not in my mind.  If we buy it here and it doesn't break 30.47, then it could fall again - I have my money at risk without technical confirmation.  If I wait to buy it if it hits 30.48, then my Expected Return increased substantially, because the probability of increased returns increased from an unknown, or 50% chance to, because of technical confirmation of breaking out above 30.48, of >75% in my opinion.

Slack - let's keep an eye on it!

Wednesday, April 29, 2020

Gilead's rare bullish chart -- Zoom light years ahead.








Two days ago I posted,  that the .SPX was at a critical point that if it broke through 2879, then there seemed to be 10%-15% upside before resistance sets in.  Yesterday it broke through early in day and seemed to lose steam, but still closing above 2879.  Today we hit a big rally, so that call seemed to become a reality today with the .DJI up 2% and Nasdaq +3.5% and .SPX up 2.5%.  That's a good beginning but seems we have more to run until about 3,100 on the .SPX - so it's more like from 2850 to 3,100, and then 3,400 is next resistance level.

I own Gilead - they seemed to be on a good track toward treatment and other covid-19 drugs, but moreson, this was complemented by a phenomenal chart that seems to be setting the stock up for multiple returns going forward.  Looking at the 2 year chart below, you can see an extremely long base and accumulations of stock with increasing volume over the last month or so - it almost looks like an old-school steam locomotive, gathering enough power and then its unstoppable (would it be steam or diesel, or both?, hmm). And finally, Gilead's P/E ratio is about a 12, which is extremely low for a company that is already quite profitable, with a good pipeline of drugs, even before the Covid-19 opportunity.  This combination of positives in a stock analysis is what I strive for in choosing a company to invest in.  When there's a combination of "good factors" that potentially could hit a homerun for the stock, its time to load up.




Gilead is showing a 2-year base and it has recently broke above that base.  And is rallying due to Covid treatment drug promising results.  Gilead leads the pack of several pharma companies working on treatment, testing and immunization products.  

The longer the base of a chart, the stronger the rally that follows...usually...there's always a usually.


Gilead released positive results toward an effective treatment for Covid-19.  They are in Stage 3 and the closest to an FDA fast track toward approval of their medicine.

Funny enough a few days ago, a leaked report from WHO about a chinese study of Gilead's remdesivir was published and the market punished Gilead - Gilead immediately made a statement that it was not accurate.  Its important not to fear a stock selling off short term and to learn why it is selling off or rallying before taking any action.  I decided to add to the position when it sold off because it didn't make sense and Gilead responded positively.  It seemed like a hedge fund leaked information for some reason.

Zoom
Zoom is selling off because Google is entering online video conferencing and ramping up efforts.  Facebook said they were also and this hurt Zoom.

Zoom enables 50,000 attendees on a zoom call.

"While video Hangouts for personal users is limited to 10 users, the current limit is 15 simultaneous users in Google Hangouts for Business Apps. The new video calls limit for Google Apps for Work (Work, Gov and Edu) is now 25." Stack Exchange.  

Zoom is so far ahead of the competition 

Let that sink in.  Facebook can handle 50, Google 25 - yes, 25

That's a big difference.  Imagine you're on the product development team at Facebook and Zuck calls you in - "We're gonna build a great product to rival Zoom.  The time it takes Facebook to get a beta out and coordinate all the bureacracy of a large company is very long.  Zoom's light years ahead and they will stay that way.  Its very hard for anyone to catch up.