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Some Links, Thoughts, and memes
The week in review: notable things I read and Listened to with some commentary and memes
How to solve problems: We tend to add things to solve problems. So maybe the next steps aren't to ask what stocks are the best ones to buy but rather which companies have you bought that may be good to sell. This issue is less problematic in investing because a limited amount of cash forces us to make decisions in tandem (need to sell to buy), but most of people's time is spent looking at new companies. Maybe my returns could be better if I spent more time analyzing the companies I have already bought to ensure the stocks are still worth it.
Pharmacies and the Drug Industry: Great rundown of a drugs journey and description of the value chain. It's breaks down where the profiteering occurs and where each type of company fits in the past, present, and future of drugs. This interview with a former employee at PillPack is pretty good for a more boots on the ground view. Summary for both in the following image from the interview (h/t Nikhil Krishnan)
Baumol's cost disease: an issue of wage inflation higher than productivity growth because comparable wages increase. For example, musicians produce the same amount of music as they did in 1900 but now cost more because comparable jobs have higher wages. This issue often arises in careers focused on person-hours where the service rendered is essential (notably education and healthcare). In healthcare, a worker is often needed to talk with the patient and implement routine tasks. In addition, doctors spend half their time on paperwork. We can really drive down costs by automating these tasks. We need to essentially turn more of medicine into a goods like process where each result is reproducible and rote tasks are automated.
A drop in approval rates for drug applicatons: A new, more restrictive FDA could spell trouble for biotech stocks looking for approval. Non paywall link here
The new tax proposal: The Biden tax proposal would only affect 45 companies with >2B in profits. Aa someone fishing in the pond where the market cap is usually not 2B, this isn't terrible news. However, any companies whose customers are big tech might be hit by delayed CapEx spending due to less cash on hand (looking at you Arista Networks).
The guys at Chit Chat Money have a great interview with Motley Fool analyst John Rotonti. Two parts stick out to me: 1) his background isn't the typical by the bootstraps story, he was privileged and knows it. His family did run into financial troubles, but he had a pretty nice upbringing and admitted it, which is different than the typical story. As someone from an upper middle-class family, I appreciated the honesty. 2) He dropped some great wisdom on the uselessness of detailed DCFs and models. He keeps everything simple and runs 3 sanity check models: a reverse DCF (using a simple template), the FCF yield, and a comparable company analysis (using acquired companies as the basis). As someone who values qualitative insights first and putting numbers to it second, this approach makes sense. Make sure the business makes sense and then model it out. Don't start with a DCF.
h/t to Ben Carlson for the meme
Mario Cibelli is bullish Stich Fix and it looks fairly priced even after the run up if he is right (and he often is).
The Patient will See you Know By Eric Topol: just finished this book and I recommend it to anyone looking to understand the possible directions healthcare can go. A lot of it is overly optimistic and he even praised Theranos in the first version of the book, but there are some nuggets of wisdom to frame your thinking if you’re interested in innovation in healthcare. It still holds it own even from 2014 because of the salience when it comes to discussing patient owned data to make healthcare processes seamless.