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#182 Risks to Global Value Chains

 The following chart combines multiple factors, including how much of
the industry’s current geographic footprint is found in areas prone to each type of event,
the factors of production affected by those disruptions and their importance to that value
chain, and other measures that increase or reduce susceptibility. For example, heat waves
affect some regions more than others. Within them, labor-intensive value chains are at
comparatively higher risk—and within that group, those with the highest concentration of
workers in outdoor or non-climate-controlled settings are most exposed to disruption.


7,033 suppliers (for Dell) illustrate the interdependencies on a value chain.
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#181 Prospective Investments in Bio Firms

Vertex (VRTX) - $ 261.5
Vertex Pharmaceuticals discovers and develops small-molecule drugs for the treatment of serious diseases. Its key drugs are Kalydeco, Orkambi, Symdeko, and Trikafta for cystic fibrosis, where Vertex therapies remain the standard of care globally. Vertex's pipeline also includes therapies for cancer, pain, inflammatory diseases, influenza, and other rare diseases.

Gilead (GILD) -  $ 62.2

Gilead Sciences develops and markets therapies to treat life-threatening infectious diseases, with the core of its portfolio focused on HIV and hepatitis B and C. The acquisitions of Corus Pharma, Myogen, CV Therapeutics, Arresto Biosciences, and Calistoga have broadened this focus to include pulmonary and cardiovascular diseases and cancer. Gilead's acquisition of Pharmasset brought rights to hepatitis C drug Sovaldi, which is also part of combination drug Harvoni, and the Kite acquisition and pending Forty-Seven acquisition boost Gilead's exposure to cell therapy and noncell therapy in oncology.



#180 The Future of Bio Innovations

Advances in biological sciences, combined with the accelerating development of computing, data processing, and artificial intelligence (AI), are fueling a new wave of innovation that could have significant impact in sectors across the economy, from healthcare and agriculture to consumer goods and energy. At present we are finding a rapidly evolved discipline to bring bio innovations:


SOURCE: <https://www.mckinsey.com/~/media/McKinsey/Industries/Pharmaceuticals%20and%20Medical%20Products/Our%20Insights/The%20Bio%20Revolution%20Innovations%20transforming%20economies%20societies%20and%20our%20lives/May_2020_MGI_Bio_Revolution_Report.pdf> 

The projected applications will cover a wide spread of innovations that hitherto were not feasible:

There is a wide range of research efforts that will now cover the bio domains:

Human health and performance have the most scientific advances and the clearest pipeline
from research to application. The science is advanced, and the market is generally accepting
of innovations. However, based on our use cases, the impact could be far more broad-based:
in the next ten to 20 years, more than half of the direct impact is likely to be outside health,
primarily in agriculture and consumer products.
Summary:

The potential for beneficial economic and social impact seems enormous. As much as
60 percent of the physical inputs to the global economy could, in principle, be produced
biologically. Our analysis suggests that around one-third of these inputs are biological
materials, such as wood, cotton, and animals bred for food. For these materials, innovations
can improve upon existing production processes. 

Personally this will require reliance on medical services. These are questionable investments.







#179: Prospective Investments in China

Tencent:

Tencent is a Chinese Internet giant with businesses and investments in a wide variety of Internet services and contents. Major services include communication and social networking (Weixin/WeChat and QQ), online PC and mobile games, content (news, videos, music, comics, and literature), utilities (email, app store, mobile security, and mobile browser), the cloud, and financial technology. Tenpay in Weixin/WeChat and QQ is a payment solution that enables closed-loop transactions in Tencent's ecosystems and has been adopted by many third-party partners and offline merchants. 

Tencent has an aggregate monthly active user base of over 600 million for QQ and 1.2 billion for Weixin/WeChat.

Summary: 

Current Margin of Safety: -51.48%. Do not buy as yet.

We remain concerned with the growth strategy and competitive landscape despite our respect for the longtime success of the business and its founder.


Baidu

Baidu is the largest Internet search engine in China with mid-70s mobile traffic share in the search market. The firm generates 86% of revenue from online marketing services and the rest from other segments. Baidu is a technology-driven company and has been investing in AI technology, such as autonomously driven cars. Over the last 12 months, Baidu Inc. (NASDAQ:BIDU) has dropped significantly, from nearly $280 per share to $152.4 per share at the time of writing.

As of December 2018, Baidu had $20.23 billion in cash and short-term investments. The interest-bearing debt (including short term and long term) was $9.44 billion. Thus, the net cash position was very high at $10.79 billion. With the share price at $152.4, Baidu's total market cap stands at $53.3 billion. Thus, the net cash position accounts for 20.2% of the total market valuation.

Baidu Core is the company's main operating business, focusing on search-based, feed-based, other online marketing services and artificial intelligence. Despite facing increasing competition, Baidu still holds the leading position in China's search engine market. According to Statcounter, the company's market share stood at 66.25% in March. The second- and third-largest search engines, Shenma and Sogou, held 15.5% and 9.6% of the market.


Summary:

Your expected growth rate may not be reached. Expected 10-Y average free cash flow growth rate is greater than Historical 10-Y average free cash flow growth rate. Dalio sells stock, do not buy.