Thank you for visiting my first post. Today is the 7th of November 2016, a time of unusual uncertainty and volatility in my world. Right now in macro news the whole world is playing guessing games on the US Presidential election and the Fed funds rate hike that nothing else seems to be important – even clicking the China tab on FT shows “Why some in the Chinese elite plump for Trump.” In micro news I started a new job in a totally non-finance related field, and as an aspiring investment analyst… I feel like I’ve hit a dead end and I am currently not loving life.
But the lessons that I would like to share with you today is:
- With an informed fundamental view, capitalise when the market is getting crushed due to macro uncertainty. Instos are looking to move into safer asset classes, so these rebalances give rise to a mismatch between price and risk. Secure companies with robust operations at undervalued prices.
- Around 15 years ago, I remember that one of the first investment vocabulary words I learnt was “blue chip”. My father then went to quote companies such as Woolworths (WOW.AX) or Telstra (TLS.AX). Times have changed, the definition of blue chip to me is now synonymous with competitive advantage + nascent market + growth strategy. This combination is often seen in companies in growth industries positioning for the future.
With this in mind, I’d like to introduce you to my ASX gem: Sirtex Medical (SRX.AX). The company manufactures SIR-Spheres, which are a non-invasive concentrated radiation dosage of Yttrium-90 injected in areas affected by liver cancer. 😦
Why I like it: Healthcare/biotech/pharmaceuticals although attracting relatively high valuation multiples are companies that have long-term growth catalysts: sadly, a growing and ageing population means there will statistically be more people being diagnosed with liver cancer, demand for life-prolonging treatment is price inelastic, most countries have healthcare support which distributes the cost of treatment among governments, insurers and patients.
Competitive advantage: Sirtex is the market leader in providing these sphere doses. The company has regulatory approval in critical markets such as FDA in the US, CE Mark in Europe and TGA in Australia (See their website). Sirtex is also ahead of its competitor/s who do not have such product clearance and sales distribution network.
Nascent market: Sirtex specialises in inoperable treatment. By God’s grace I have been fortunate enough not to be afflicted or to be close to people afflicted by liver cancer, however I have read that surgery is advised against when cancer is malignant. The SIR-sphere is a new development giving patients an option to extend their life, and in extraordinary cases causes enough remission to allow a safe surgery. Management have provided guidance that only 2-3% of aggregate demand for inoperable treatment has been serviced.
Growth strategy: The key to unlocking product sales especially in pharmaceuticals is by proving that the product is successful and beneficial to users. Sirtex has been executing its growth vision of conducting clinical trials to seek greater product approval, and reinvestment through R&D and M&A projects to secure patents, technology and protect its market position. The company has also shown increasing product sales growth in APAC and EMEA, indicating growth in its distribution network and has also announced plans to venture into kidney cancer treatment, two growth catalysts for the long-term.
It’s been 5 days since my original post, and I’m glad to say that I’ve completed my very first slide deck for a valuation summary by myself. This deck is my buy pitch on the stock as I am quite bullish as you can probably tell. I recently bought in at $A27.75, and lets hope Mr. Market delivers. Won’t be adding an appendix coz I will upload the deck and my valuation model as well.