What is up Cruisers?!
🎉🎉Cruising Altitude is officially over 640 Subscribers! 🎉🎉
Thank you for being part of our journey!
Best part is, we are just getting started!
What is Inside?
😂The Tweet of the Week
🔍Spotlight: Alan on $NVTA
💸Portfolio Update
📰Portfolio News
🗒️Tweets of the Week
🎮Trivia: Fastly, ViacomCBS (duh)
📕 Learn: Additional Stock Issuance
🎙️Inspirational Quote: Peter Lynch
😂HUMOR
The Tweet Of The Week
We like to start our newsletter with a not-so-finance-related tweet that is kind-of -finance-related when you take a deeper look.
This week’s Tweet of the Week belongs to @BaileyCarlin who might just be the best follow on Twitter!
This is just so well said and so well done.
CA has nothing more to add.
Bailey- you crushed it.
🔍SPOTLIGHT
The Invitae Way!!
👋Hello From The CEO
What is up Cruisers?!
We heard a lot of good feedback on the first person writing style, so I (Alan) am back!
If you take a look at Cruising Altitude’s portfolio, you will see that there are two companies that we have “ two positions” of- ViacomCBS and Invitae.
We have written about $VIAC quite a few times and it would make sense that that is a company that we have two “positions” in.
$NVTA on the other hand, we have written about zero times in the spotlight piece!
Goose egg.
Nada.
Nill.
It is not because the CA team and I have not done research into the company.
We have.
We have done a lot.
It is just because $NVTA and genomic sequencing is very complicated to breakdown in a concise, simple, clear, and fun manner.
Here at CA, we believe in patience and a journey!
Therefore, we will start sprinkling in some $NVTA spotlight pieces in a slow and steady manner!
It is really cool stuff but it is going to take time to understand the Invitae universe, but I am excited to go on this journey with every single one of you Cruisers!
**Side note**
Before getting started- this is probably our riskiest portfolio pick but also the one that has the greatest possible rewards.
If we give ourselves a timeline of years and not months, we think we will reap those great rewards.
🧒Middle School
Middle school science and I had an interesting relationship.
It was a confluence (big word) of learning about pretty cool scientific ideas mixed with spacing out and drawing up different plays that the Cleveland Browns, my childhood football team (sadly), could do to turn the losing around.
The latter was much more exciting to me.
In regards to the former, one of the main takeaways was that DNA and our genes were very cool and powerful.
Your genes not only show what color your hair is and how tall you might be, but it can also show what medical difficulties- both physical and psychological, you could be at risk for.
You did not need to be a rocket scientist, or even pay attention to all of class (like me), to know that genetic information would be the foundation of medicine treatment and preventative care moving into the future.
The question has always been when (not if) will genomic driven medicine start leading the charge and who would be behind that mission.
🧬Genomic Health
One of the many men with the vision to make genomics main stream was a man of the name Randy Scott. Randy started a company called" “Genomic Health,” in 2000.
Randy started the company after a close friend was diagnosed with cancer and had the idea to treat the cancer through understanding the genome of the tumor.
(We could all use a friend like Randy.)
Over the next few years Genomic Health was focused on creating tests for detecting very specific genes.
In 2003, the company created the first ever genetic test that tested the likelihood of breast cancer reoccurrence in a patient.
Really really cool stuff.
In 2010, Randy and crew decided to spin off and create a company called Invitae. Genomic Health would be focused on research and advancing the science of genetic testing while Invitae would be focused on the “commercialization” of genetics.
AKA- making genetics a main stream consumer medical process at a reasonable cost.
💰Reasonable Cost
One of the main reasons that Genetic testing is only starting to become main stream is because it used to be really really really expensive.
Check out this chart provided by the NIH below:
I don’t know about you guys, but I think $100 million is a lot of money to get genetic testing done.
(If it is not a lot of money for you, I would like to start reading YOUR investment newsletter. Thanks.)
When looking at the chart above, it is pretty clear why Randy Scott decided to create a company like Invitae.
The ability to process genetic information became a lot cheaper due to the increase in technology and computational speeds.
There was now a modern day gold rush or maybe a “genomic rush”.
Whoever could create the best and cheapest genetic tests would likely have a gold mine in front of them and could possibly become the platform for all of genetics.
** SPOILER ALERT**
Invitae this past quarter announced that their cost per test to produce was $227- A whole lot less than $100 million.
Absolutely phenomenal for humanity as well as Invitae.
😕How Is This Different Than 23 and Me???
Before we rap up Invitae for today (rhyme), I want to do a quick comparison between 23 and Me and Invitae, so you can start to see how powerful Invitae is.
23 and Me is a pretty cool company. Through genetic analysis, they are pretty much able to tell you your ancestry and what your family lineage looks like.
23 and Me with the large following they have, tried to grow into medical genetic testing.
A New York Times article from 2019 exemplified how complicated genetic testing just is.
The article detailed, in a rather devastating story, that a doctor who had a strong history of breast cancer in her family took a genetic test through 23 and Me to see if she carried a genetic mutation for breast cancer.
The test came back negative and she was relieved, however, two years later she was diagnosed with breast cancer and took an Invitae, more complete genetic test, that showed she in fact did have the gene for breast cancer.
The article continued to explain how 23 and Me only does surface level testing to look for three genetic variations of the breast cancer gene.
Invitae on the other hand?
Hundreds of genetic mutations of the breast cancer gene and they use something called “genetic sequencing” that virtually allows them to discover a possible new genetic variation using Artificial intelligence and machine learning technology to discover the variant.
A study of 100,000 people with the breast cancer gene showed that just 10% of them would have been detected by the 23 and Me genetic tests. Yikes.
Invitae on the other hand?
They would have identified 94% on the genetic tracers for breast cancer.
94% is significantly greater than 10% last time we checked.
Maybe even 9x greater.
Invitae = Beast.
This leads to one last point I would like to make.
23 and Me medical genetic testing is covered by ZERO medical insurance companies.
Invitae on the other hand? Over 300 million lives covered in the USA by all top medical insurers.
Invitae is legit. Every insurance company sees the value of their tests. This is a very very good sign for people that believe in the Invitae thesis.
Invitae is very very different than 23 and Me.
🎁Wrapping It Up… For now…
You might be really excited about $NVTA.
That would make sense. We shared a lot of really cool information on the company.
If you are excited about this just wait until we share:
The rapid growth of the # of tests performed
The rapid growth of revenue
A game changing acquisition that they did over this past year
and so much more.
At the same time, there are many risks with $NVTA that we will breakdown at a future date:
They spend a lot a lot a lot of money on Research and Development that leads them to losing money every year
They also issue additional stock consistently which leads to shareholder dilution (both concepts we breakdown in this week’s learning section)
As you can see, the thesis is complicated but myself and the CA team are here to make things fun and simple.
Until next time my fellow Cruisers!
-Alan
💸PERFORMANCE
Portfolio Update
As you can see, the portfolio is now a little bit more colorful! Under the “Ticker” column we are instituting a color-coded system that allows Cruisers to see how excited the CA team is about certain stocks.
Here is the breakdown:
🟩Green= “Absolutely Ecstatic”
🟧Orange= “Just Ecstatic”
🟨Yellow= “ Some Concerns”
🟥Red= “ Big Concerns”
As always, for live updates click here!
📰NEWS
Portfolio News
🔥 Acquisitions Pay Off. Last year, Fastly $FSLY acquired Signal Sciences, a phenomenal cyber security company! At the end of March, it was announced that Fastly was named a March 2021 Gartner Peer Insights Customers’ Choice for Web Application Firewalls (WAF) due to the tech it scooped up with the Signal Sciences purchase. Cybersecurity can sometimes be confusing but being named #1 is not!!!
🏀 Madness-->Profits. The men’s regional semi-finals of this year’s NCAA March Madness Tourney produced their best viewership numbers in 28 years. The games, which were available on $VIAC’s CBS averaged 12.9 million viewers, up 12% from the last tournament.
🏌️♂️ There’s a New Sheriff in Town. Effective April 5, $ELY’s Topgolf Entertainment Group has a new CEO— Artie Starrs. Artie was most recently the CEO of Pizza Hut and will bring his decades of executive experience to the Topgolf team. Hot take- we expect the pizza at TopGolf to improve😉!
Tweets Of The Week
This week’s tweets of the week are all finance memes from the phenomenal Ian Cassel!!
Oh if only….
There is never anything wrong with taking some profits, but if the company continues to execute and the future is still bright, why sell?
You can’t own them all!
🎮GAMETIME
Trivia Night!
Questions you shouldn't know the answer too but will serve as a fun way to learn more about the portfolio picks!
Question #1:
Which of these companies comprises the largest percentage of sales for our portfolio pick Fastly $FSLY?
a. Booking Holdings $BKNG
b. Live Nation Entertainment $LYV
c. Alaska Air Group $ALK
d. Microsoft $MSFT
Answer: B
Blurb: Live Nation’s share of Fastly’s sales is 13.99%, but all three other companies are also customers as well as Alphabet, Amazon and Shopify.
Question #2:
2. All of these companies are subsidiaries of ViacomCBS $VIAC except…
Comedy Central
Nickelodeon
CNET
MTV
Answer: C
Blurb: $VIAC sold CNET Media Group in a $500 million deal with Red Ventures in 2020
📕LEARN
What is “Issuing Additional Stock”?
Breakdown:
When a company issues new shares to the public they are raising money to help the business grow, pay off debts, acquire new businesses, or plainly just want more access to cash for corporate and strategic reasons.
They typically issue additional shares as an alternative to taking out a loan (which you need to pay interest on!)
Why doesn’t every company issue new shares instead of taking out a loan?
Good question. Well, unfortunately when a company issues new stock they are increasing the number of shares outstanding and in process diluting your stake in the company!
This can be frustrating for shareholders because if you believe in a company, you do not want your position of ownership to decrease!
Since too much issuing of stock can make shareholders upset, companies try to avoid issuing too much stock.
We at CA, within reason of course, are usually happy when a company issues more stock if they see a strong opportunity ahead.
How can this be good?
Sometimes issuing additional stock can be exciting! Here are a few examples:
If there is an exciting acquisition prospect but the company needs more cash for:
a. Example: (like portfolio pick Callaway Golf acquiring TopGolf)
An airline company hit hard by the pandemic needs cash in the short run or else they risk bankruptcy
b. (you definitely want to see a stock issuance. Bankruptcy is no fun!)
If a company is investing seriously in the long term growth in the company but therefore needs to take some losses in the short run to fuel the growth
c. $NVTA- they are consistently issuing new stock to fuel growth (maybe a little bit too much but we are patient at CA so that is okay!)
🎙️QUOTE
💭Parting Thought: Charlie Munger
“The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them. Stand by your stocks as long as the fundamental story of the company hasn’t changed.”
-Peter Lynch (Legendary American Investor)