Getting Back To It
After taking a month and a half off, I am going to get back to writing more regularly again. I took time off of more than just the blog. I really didn’t do much at all in my portfolio (which I will have updated in the next day or two). I can count my trades on two hands.
In mid-December I took new positions in Coveo Solutions and Sentinel One. In early January I took positions in CRISPR Therapeutics, Intellia and Crowdstrike. And for a brief period at the end of December I owned Tesla, but I chickened out and sold before the stock took off. I also doubled down on Eiger (more on that at the end).
That is about the extent of it. I mostly have sat on my hands, both through the down move in late-December and the recovery we have had in January.
This is consistent with my view. The market is not really cheap or expensive, it is somewhere in between, and that until we have a big event in one direction or another the market will probably range listlessly (but violently) around.
With that being my guide, we are now back near the top of the “do nothing” range, which means I should be more inclined to sell than buy. I started to do last week and will continue to do this week. Not existing positions, but making them a bit smaller.
With not much new to discuss, let me talk for a minute about a couple of stocks I bought back in November. Impinj and Identiv. Both of these names are part of a bigger idea I have about digital tracking. Tracking product more accurately seems like a natural win for efficiency and new tech seems to be making that tracking more feasible. Since I bought the stocks, PI is up a bit while INVE went straight down for a month and has since stabilized. Both stocks have not been big winners thus far.
But RFID tracking appears to be gaining traction and that traction makes sense to me so I have held on. Consider this bullish fireside chat with $PI from earlier this year.
PI has a platform for RFID called RAIN which includes one-time sales of their readers/scanners and recurring sales of RFID tags. About 75% of revenue is tags right now, 25% readers.
In the fireside chat Impinj talks about the opportunity. RFID in apparel/retail is about 25% penetrated. However about 95% of the companies are in at least early stage of deployment or better. In other words, most have started but few are at a mature stage of deployment. This bodes well for near-term demand as more companies ramp. Indeed, Impinj has had 6 quarters in a row where their demand has outstripped their ability to get supply of semiconductor chips needed to make their tags. While their mature customers are pulling back a bit with the economy slowing, this has been more than offset by the ramp of new customers. There are not too many businesses that can say they are legitimately accelerating right now.
Bigger than apparel is the supply chain opportunity, which is just starting to materialize. Supply chain is putting RFID tags on any goods or pallets along the supply chain. This is a $400 billion TAM vs a $80 billion for apparel/retail. 2023 will be the first year PI delivers tags for the supply chain vertical.
INVE manufactures RFID tags and readers, which is different than PI, which designs and develops a platform. That means INVE is not really as good of an idea as PI, in fact I’m not sure they have much IP in this space that really sets them apart. Nevertheless, INVE is much smaller in terms of market cap (~$180 million) and I think its found itself in the middle of something that could grow quite a bit.
The idea here stems around a partnership they have with an Israeli company called Wiliot. Wiliot has a lot of IP. They are a semiconductor designer focused on designing chips for RFID tags and they have come up with what seems like a prettybrilliant design.
Wiliot has figured out how to make an RFID device that works extremely well in the supply chain vertical. This device basically doesn’t need a battery and it doesn’t need a crystal, which makes it very tiny and also very independent. It is a sticker smaller than a postage stamp. It transmits and receives a bluetooth signal that allows it to communicate location, temperature, other important parameters.
They get into the whole idea of Wiliot, how they invented their product, which I think is totally fascinating, in this podcast called the Digital Supply Chain Podcast as well as on this interview with TechFirst.
While I’m still trying to figure this space out, I think that Wiliot is one of the early leaders in the supply chain tracking space. And Identiv is their manufacturing partner. INVE gets high-20c per unit price for each tag:
At 25 million units, that isn’t a huge amount. But Wiliot is talking billions over time, so that could scale quite substantially.
One other thing I did was double down on Eiger. I know its crazy and only losers average losers, but I also know this company quite well and while I recognize that they could completely destroy what is left of their value with an ill-timed and priced share offering and that because this is a money burning biotech there is a tonne of room for error, I also know interferon-lambda worked in COVID, I know that it has worked in HDV, and I know they have an approved drug that should be able to reach $40 million in annual sales over the next few years.
My guarded optimism has been confirmed, at least to a degree, by recent purchases by insiders. Here is my thought experiment on those purchases. You are the CEO or Director of a small biotech firm. Your firm is burning about $20 million a quarter. It has about $100 million of cash. Your firm just released crappy results from its lead program. The other drug, which had big potential for COVID , was just rejected by the FDA and you will need to run a big, expensive, lengthy trial before it ever has a chance of approval. Your former CEO was just turfed. You don’t have a significant readout until at least the end of the year.
Do you buy shares in your firm?
I think the answer here is pretty obviously no. Even if you like the longer-term prospects, you are likely going to need money and you might as well wait for that raise to buy because it will either be lower or come with warrants.
So why did they buy?
There was also a recent article in the WSJ talking about the efficacy of lambda and the variant agnostic nature of its action. The article questioned why the FDA would not approve such a drug. That reason could be getting more attention in the near future – the Project Veritas expose on Pfizer should bring attention to it again. While some of the Veritas work seems pretty sensational and some of the commentary about what the Pfizer executive did or didn’t say seems to be more hyperbole/fearmongering than reality, what the Pfizer exec did say quite clearly is that there IS regulatory capture of the FDA by Pfizer. This, IMO, is the reason lambda was not approved. I increased by share count by 5x which in dollar amount was a double-down.