Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Perhaps like tech there may be a small bubble but the future is with both.
Personally, I think the future of tech is with companies that are innovating in terms of improvements of day-to-day life. Here's a somewhat odd note. I'd rather own the increasingly tech-y Nike (people wearing Fuel Bands and using shoes that report to your phone) versus something like Facebook. But, that's just me.
Nike's not the best example, but I guess the question becomes what are tech companies that are innovating in terms of/things related to quality of life improvements. That's interesting to me, not social media companies.
In terms of healthcare, people aren't going to change the way they eat en masse (sorry, Chipotle isn't healthy), population continues to get older/demographics, etc etc.
It goes along with - as I mentioned in another thread - an increasing focus for the foreseeable future on things that are "needs" instead of "wants". As I mentioned in the other thread, even something like Canadian National Railway is an example - I don't like that the Canadian government is forcing the rails to move more grain, but between oil, a bumper crop of Canadian grain that needs to be moved and apparently a glut of timber that is sitting in warehouses, it feels like there's not enough railroad for all of the things that need to be moved - and they aren't building any more railroads.
I don't want anything where I have to ask whether it will be popular in a few years.
Reply to scott From conference call Hercules Technology Growth Capital's CEO Discusses Q4 2013 Results - Earnings Call Transcript Feb. 27, 2014
Question from Jon Bock - Wells Fargo ...where are you starting to see on a venture stage the most valuation bubble or shall we say the least compelling valuations in your view? Response from Manuel Henriquez - Co-Founder, Chairman and CEO Hercules Tech.Growth Capital NYSE:HTGC It's really the equity guys chasing these valuations. Now that said, you're seeing still a fairly robust increase in valuation in technology companies and early-stage social media companies and SaaS-type companies. We are purposely – we are the most under invested in technology that we've been in the history of Hercules.(10 years) However, I believe that that tide will change in the second half of 2014 as all these companies finally get acquired, you'll start seeing a whole new birth of new technology companies being started that have new business models and a much more attractive valuation to be in. At which point, we will wade back in with some new product offerings that we will have to offer new plans of services to earlier stage companies that we don't have today, to really start grabbing some of that market share and some of that void in our portfolio today. So, technology is something where we purposely are under investing today. It is the easiest transaction to originate to. It doesn't require a lot of sophistication when you're first doing early stage deals compared to the expertise needed in energy technology or life sciences investing, for example. Edit 03/14/2014 SAN FRANCISCO (MarketWatch) — Castlight Health Inc. shares soared almost 150% Friday on a strong reaction to the public debut of the cloud-based health care software company. Castlight CSLT ended the day up by $23.80 at $39.80 after the company went public by selling 11.1 million shares of stock at $16 each. Castlight had originally priced its IPO in a range of between $9 and $11 a share.
The company’s software is used by businesses to improve their spending on health care and reduce waste in what Chief Executive Giovanni Colella called “the only industry in America that’s been failed by capitalism.”
By Brian Gormley ‘Next Big Thing’ Castlight Health Scores Giant Win for VCs Latest Headlines is home to all the latest, up to the minute news headlines from The Wall Street Journal in a streaming continuous headline experience. 03/14/2014 Evening Castlight Health Inc.‘s initial public offering is a giant win for Venrock and other venture capitalists who pumped $181 million into the San Francisco health enterprise-software company.
Venrock owned 20.6% of Castlight before the offering and 18% after, according to a regulatory filing. Based on Castlight’s market capitalization of $3.45 billion, Venrock’s stake now figures to be worth about $620 million.
Castlight’s shares debuted at $37.50, 134% above the expected offering price of $16, and closed at $39.85 Friday.
Castlight’s other venture backers included Oak Investment Partners, which holds 13.8% of the company’s stock following the IPO; Maverick Capital, which has 8.9%; Fidelity Investments, holding 8.6%; and Wellcome Trust, owning 7.6%, according to the filing. All major investors held onto their shares in the offering.
The IPO represents an eye-popping public debut for the company, but its large market opportunity and the track record of its investors and management made it a company to watch well before its IPO.
Among its board members are Facebook CFO David Ebersman, Venrock partner Robert Kocher, who served in the Obama Administration as special assistant to the President for health care and economic policy, and Venrock Partner Bryan Roberts, a prominent health-care investor who co-founded Castlight in 2008.
The other co-founders were RelayHealth founder and Castlight CEO Giovanni Colella, and Todd Park, who is now U.S. chief technology officer.
The Wall Street Journal named Castlight the “Next Big Thing” in a 2011 feature that ranked the most promising up-and-coming venture-backed companies.
Castlight helps self-insured employers control costs by making health-care cost and quality data accessible. The model appeals to many investors given the struggle companies have had with rising health expenses. The company secured its valuation despite drawing only $13 million in revenue last year.
Venrock previously backed Athenahealth Inc., a provider of cloud-based services to physician practices that formed in 1997. Athenahealth went public in 2007 and is now valued at $6.5 billion.
Castlight’s offering follows a successful IPO from medical-software concern Veeva Systems Inc., which went public in October and is now valued at $3.9 billion. Another, employee-benefits software vendor Benefitfocus Inc., went public in September. Its market capitalization is $1.3 billion.
These trends have caused venture capital investment in health-care information technology to soar to heights not seen since 2000, prompting some to warn of a bubble forming. Venture firms sunk $947 million into medical software and information services last year, the most since 2000, when they invested $2.3 billion, according to Dow Jones VentureSource.
Health IT last commanded this much interest around 2000, when “e-health” startups like Drkoop.com Inc. went public despite untested business strategies. Drkoop.com, which provided health information online, folded in 2001 after finding it couldn’t survive on a business model that included selling advertising and enabling e-commerce transactions.
Amid the new investment surge, some venture capitalists see another crash in the making, with a crop of startups launching with products but no real business models. But many longtime health-IT investors say there’s also an emerging class of companies poised to pull health care into the digital age and lower costs for hospitals, employers and consumers.
“There are high valuations out there today, but there’s so much more room to run in the digital transformation,” Stephen Kraus, a partner with Bessemer Venture Partners, said.
Rising medical expenses are pushing employers and their employees to examine costs, a trend that led Venrock, Castlight’s earliest investor, to back the company at its founding in 2008. Castlight says it has signed up more 100 customers as of the end of last year.
"Personally, I think the future of tech is with companies that are innovating in terms of improvements of day-to-day life. Here's a somewhat odd note. I'd rather own the increasingly tech-y Nike (people wearing Fuel Bands and using shoes that report to your phone) versus something like Facebook. But, that's just me."
I agree. Social media to me is a distraction. The blending of tech into our lives like the example of Nike is what I look at. Wearable tech is going to get bigger. Healthcare and technology will merge in a good way further than what it is. Technology in commerce is another huge area with the Apple and other pay systems coming online.
"Personally, I think the future of tech is with companies that are innovating in terms of improvements of day-to-day life. Here's a somewhat odd note. I'd rather own the increasingly tech-y Nike (people wearing Fuel Bands and using shoes that report to your phone) versus something like Facebook. But, that's just me."
I agree. Social media to me is a distraction. The blending of tech into our lives like the example of Nike is what I look at. Wearable tech is going to get bigger. Healthcare and technology will merge in a good way further than what it is. Technology in commerce is another huge area with the Apple and other pay systems coming online.
Exactly. Wearables will be big and I think healthcare connected devices will be very big.
As I've noted before, I also like Qualcomm and Gemalto in terms of plays on connected healthcare devices/machine-to-machine (although Qualcomm is fundamentally cheaper and offers a nice dividend that they just raised the other day.)
Payment is going to be big, as well, although the pre-existing players (Ingenico, Verifone, NCR) have been considerably volatile stocks over time.
In terms of Apple's iBeacons, Qualcomm's Beacon page notes this: "Gimbal proximity beacons have been designed and certified by Qualcomm Retail Solutions, Inc. to meet Apple performance standards. iBeacon-enabled apps running on an iPhone, iPad, or iPod touch may be developed." (http://www.qualcomm.com/solutions/gimbal/beacons)
So, Qualcomm does have a foot in this Apple payment-related tech possibility.
Interesting. I didn't know about the Qualcomm-Apple connection. Makes sense though as there has to be somewhat of a standard. This also opens a new targeted ad industry as people will get ads or coupons on their phones as they shop. That could be a nuisance or a savings depending on the individual.
Edit: The downside of this is that this marks the beginning of the end of cashiers and check out stands. Jobs losses to start until people transition to new jobs. These are not career jobs anyway.
Interesting. I didn't know about the Qualcomm-Apple connection. Makes sense though as there has to be somewhat of a standard. This also opens a new targeted ad industry as people will get ads or coupons on their phones as they shop. That could be a nuisance or a savings depending on the individual.
Edit: The downside of this is that this marks the beginning of the end of cashiers and check out stands. Jobs losses to start until people transition to new jobs. These are not career jobs anyway.
I do see registers going away and that space opened up with more retail space. I do think some of those employees then either check-out on the retail floor via Ipad checkout (which has become big at Nordstrom Rack and other stores) and/or offer more in the way of customer interaction. That's the best case, I think.
I think what may signal scary large changes in retail is Hointer, the start-up by a former Amazon exec. Hointer to me means much smaller retail stores and the need for less people working there. Basically, you walk into a store and you download an app. There is one of every size clothing item on display (way less floor space needed). You scan the tag, indicate your size, walk into an assigned dressing room and the item pops out of a chute. What are in the back? Robots.
Robots. That is another huge area to watch. The Video reminded me if another retail outlet that is long gone. Jafco. You shopped around and picked up tags which were deposited at a central location. Then you waited for your item to come out on a conveyor. All human driven back then.
I'm so old I remember price stickers on every item. Manual registers that didn't tell the cashier what the change was. We learned to count change properly in grade school. Stockers had those price guns clicking away in the aisles. To top it off, no plastic bags either. It was paper or a box.
Basically, you walk into a store and you download an app. There is one of every size clothing item on display (way less floor space needed). You scan the tag, indicate your size, walk into an assigned dressing room and the item pops out of a chute.
Once you find what you like, you launch another app, scan the tag of the size and style you have tried out and Amazon bids $10 lower than the price and guarantees it will be waiting at your door by the time you get back home. You tap to order and walk out of Hointer leaving the robots behind.
Hointer is forced to sell only items that are unique or at very low margins that doesn't justify the rent and goes out of business.
Just because you have technology doesn't mean you have a business model.
You have the right intuition on need vs want but that is the wrong dichotomy in my opinion. What you want to bet on are businesses that have sustainable pricing power for their products. Whether people want or need those products is irrelevant. There are very few of those in new technologies which is why incorporating technologies in products that already have a pricing power like Nike may be attractive.
Scott,Maybe a lot of investors saw your video post!Thanks for your timely takes on investment opps and current trends and long term ideas. Aeropostale -12.3% AH on FQ4 miss, guidance, $150M financing deal
Aeropostale (ARO) is guiding for FQ1 EPS of -$0.70 to -$0.75, well below a -$0.17 consensus. The forecast doesn't account for expected consulting fees or "potential accelerated store closures." The apparel retailer has obtained $150M worth of credit facilities - a 5-year, $100M term loan facility, and a 10-year, $50M term loan facility - from P-E firm Sycamore Partners. The deal includes an apparel sourcing arrangement with Sycamore-affiliated MGF Sourcing, and also gives Sycamore preferred stock good for buying 5% Aeropostale's common stock at a price of $7.25. If converted, the shares would raise Sycamore's stake to 12.3%. Aeropostale was previously reported to be weighing investment and sale options. The company ended FQ4 with $106.5M in cash/equivalents, and no debt. Aeropostale now plans to close 52 stores in FY14 (ends Jan. '15), while opening 7 and remodeling 10. The FY14 capex budget has been lowered to $22M from $35M; FY13 capex was $84M. Comparable sales (inc. e-commerce) fell 15% Y/Y in FQ4, the same as FQ3. Gross margin fell 680 bps Y/Y to 13%
Scott,Maybe a lot of investors saw your video post!Thanks for your timely takes on
Thanks! It's just really a matter of being tired of following trends and moment-to-moment movements. I have a mix of income (REITs, preferreds, MLPs, healthcare names, etc) and growth and it's really a desire to not have to worry about "will this be popular in a few years?" and focusing more on "needs" (Aussie company Graincorp is a large position and, as I noted months ago, I was thrilled when the Archer Daniels Midland buyout didn't go through - not for conservative investors, but great assets - grain silos, rail and ports) versus wants. I also love "toll roads" (rail, pipeline, credit cards and others) and real assets.
In terms of the teen retailers, you couldn't pay me to invest in them. I think that age group isn't doing well, doesn't have the discretionary income, mall visits are down and this age group is spending less money on trying to be fashionable. Consumers in general are looking for more one-stop I think one or more of these teen retailers will not be around. Urban Outfitters will probably win out.
Five Below (FIVE), which is like a teenage/tween Dollar Store (everything is $5 or less), is likely going to continue to fare well (I went into one for the first time the other day and while it's not for me, I can see where it would be popular.) Too expensive at this point, tho.
Biotech is no longer a rising tide lifting all biotech stocks. May just mean some consolidation and mean reversion amongst them as the support level I mentioned last week (IBB around 255) has held for several days. This is a good sign.
I would still keep a tight stop at around 250-252 on it which represents about 7% pull back from its recent top. About 10% upside potential and 8-10% downside risk at this point.
I do play with a very small portion of my portfolio on what I feel are potential game changers or innovators, but leave most of that to WAGTX, which I have been very pleased with. Recently I started buying PLUG at $2.60, and stopped when my average cost was $3. Put a stop loss in and it sold at $8.42. What a heart pounded experience that was, but like I said, gambled with less than 1% of my total. Am about to sell my Gilead since I think most of my biggest gains have been made, but will still hold FBTIX and PHSZX as I think biotech and healthcare will be strong performers in coming yrs. My stock portfolio is to add alpha, but my mutual funds and etfs are still the majority of holdings. Latest additions are ARII and WWAV .
Comments
Regards,
Ted
http://www.businessweek.com/articles/2013-10-15/sorry-nike-youre-a-tech-company-now
Nike's not the best example, but I guess the question becomes what are tech companies that are innovating in terms of/things related to quality of life improvements. That's interesting to me, not social media companies.
In terms of healthcare, people aren't going to change the way they eat en masse (sorry, Chipotle isn't healthy), population continues to get older/demographics, etc etc.
It goes along with - as I mentioned in another thread - an increasing focus for the foreseeable future on things that are "needs" instead of "wants". As I mentioned in the other thread, even something like Canadian National Railway is an example - I don't like that the Canadian government is forcing the rails to move more grain, but between oil, a bumper crop of Canadian grain that needs to be moved and apparently a glut of timber that is sitting in warehouses, it feels like there's not enough railroad for all of the things that need to be moved - and they aren't building any more railroads.
I don't want anything where I have to ask whether it will be popular in a few years.
From conference call Hercules Technology Growth Capital's CEO Discusses Q4 2013 Results - Earnings Call Transcript
Feb. 27, 2014
Question from Jon Bock - Wells Fargo
...where are you starting to see on a venture stage the most valuation bubble or shall we say the least compelling valuations in your view?
Response from Manuel Henriquez - Co-Founder, Chairman and CEO Hercules Tech.Growth Capital NYSE:HTGC
It's really the equity guys chasing these valuations. Now that said, you're seeing still a fairly robust increase in valuation in technology companies and early-stage social media companies and SaaS-type companies. We are purposely – we are the most under invested in technology that we've been in the history of Hercules.(10 years) However, I believe that that tide will change in the second half of 2014 as all these companies finally get acquired, you'll start seeing a whole new birth of new technology companies being started that have new business models and a much more attractive valuation to be in. At which point, we will wade back in with some new product offerings that we will have to offer new plans of services to earlier stage companies that we don't have today, to really start grabbing some of that market share and some of that void in our portfolio today. So, technology is something where we purposely are under investing today. It is the easiest transaction to originate to. It doesn't require a lot of sophistication when you're first doing early stage deals compared to the expertise needed in energy technology or life sciences investing, for example.
Edit 03/14/2014
SAN FRANCISCO (MarketWatch) — Castlight Health Inc. shares soared almost 150% Friday on a strong reaction to the public debut of the cloud-based health care software company.
Castlight CSLT ended the day up by $23.80 at $39.80 after the company went public by selling 11.1 million shares of stock at $16 each. Castlight had originally priced its IPO in a range of between $9 and $11 a share.
The company’s software is used by businesses to improve their spending on health care and reduce waste in what Chief Executive Giovanni Colella called “the only industry in America that’s been failed by capitalism.”
By Brian Gormley ‘Next Big Thing’ Castlight Health Scores Giant Win for VCs
Latest Headlines is home to all the latest, up to the minute news headlines from The Wall Street Journal in a streaming continuous headline experience. 03/14/2014 Evening
Castlight Health Inc.‘s initial public offering is a giant win for Venrock and other venture capitalists who pumped $181 million into the San Francisco health enterprise-software company.
Venrock owned 20.6% of Castlight before the offering and 18% after, according to a regulatory filing. Based on Castlight’s market capitalization of $3.45 billion, Venrock’s stake now figures to be worth about $620 million.
Castlight’s shares debuted at $37.50, 134% above the expected offering price of $16, and closed at $39.85 Friday.
Castlight’s other venture backers included Oak Investment Partners, which holds 13.8% of the company’s stock following the IPO; Maverick Capital, which has 8.9%; Fidelity Investments, holding 8.6%; and Wellcome Trust, owning 7.6%, according to the filing. All major investors held onto their shares in the offering.
The IPO represents an eye-popping public debut for the company, but its large market opportunity and the track record of its investors and management made it a company to watch well before its IPO.
Among its board members are Facebook CFO David Ebersman, Venrock partner Robert Kocher, who served in the Obama Administration as special assistant to the President for health care and economic policy, and Venrock Partner Bryan Roberts, a prominent health-care investor who co-founded Castlight in 2008.
The other co-founders were RelayHealth founder and Castlight CEO Giovanni Colella, and Todd Park, who is now U.S. chief technology officer.
The Wall Street Journal named Castlight the “Next Big Thing” in a 2011 feature that ranked the most promising up-and-coming venture-backed companies.
Castlight helps self-insured employers control costs by making health-care cost and quality data accessible. The model appeals to many investors given the struggle companies have had with rising health expenses. The company secured its valuation despite drawing only $13 million in revenue last year.
Venrock previously backed Athenahealth Inc., a provider of cloud-based services to physician practices that formed in 1997. Athenahealth went public in 2007 and is now valued at $6.5 billion.
Castlight’s offering follows a successful IPO from medical-software concern Veeva Systems Inc., which went public in October and is now valued at $3.9 billion. Another, employee-benefits software vendor Benefitfocus Inc., went public in September. Its market capitalization is $1.3 billion.
These trends have caused venture capital investment in health-care information technology to soar to heights not seen since 2000, prompting some to warn of a bubble forming. Venture firms sunk $947 million into medical software and information services last year, the most since 2000, when they invested $2.3 billion, according to Dow Jones VentureSource.
Health IT last commanded this much interest around 2000, when “e-health” startups like Drkoop.com Inc. went public despite untested business strategies. Drkoop.com, which provided health information online, folded in 2001 after finding it couldn’t survive on a business model that included selling advertising and enabling e-commerce transactions.
Amid the new investment surge, some venture capitalists see another crash in the making, with a crop of startups launching with products but no real business models. But many longtime health-IT investors say there’s also an emerging class of companies poised to pull health care into the digital age and lower costs for hospitals, employers and consumers.
“There are high valuations out there today, but there’s so much more room to run in the digital transformation,” Stephen Kraus, a partner with Bessemer Venture Partners, said.
Rising medical expenses are pushing employers and their employees to examine costs, a trend that led Venrock, Castlight’s earliest investor, to back the company at its founding in 2008. Castlight says it has signed up more 100 customers as of the end of last year.
I agree. Social media to me is a distraction. The blending of tech into our lives like the example of Nike is what I look at. Wearable tech is going to get bigger. Healthcare and technology will merge in a good way further than what it is. Technology in commerce is another huge area with the Apple and other pay systems coming online.
As I've noted before, I also like Qualcomm and Gemalto in terms of plays on connected healthcare devices/machine-to-machine (although Qualcomm is fundamentally cheaper and offers a nice dividend that they just raised the other day.)
Payment is going to be big, as well, although the pre-existing players (Ingenico, Verifone, NCR) have been considerably volatile stocks over time.
In terms of Apple's iBeacons, Qualcomm's Beacon page notes this: "Gimbal proximity beacons have been designed and certified by Qualcomm Retail Solutions, Inc. to meet Apple performance standards. iBeacon-enabled apps running on an iPhone, iPad, or iPod touch may be developed." (http://www.qualcomm.com/solutions/gimbal/beacons)
So, Qualcomm does have a foot in this Apple payment-related tech possibility.
Gemalto MHealth:
http://www.gemalto.com/m2m/markets/mhealth.html
Qualcomm Life:
http://www.qualcommlife.com/
Edit: The downside of this is that this marks the beginning of the end of cashiers and check out stands. Jobs losses to start until people transition to new jobs. These are not career jobs anyway.
I think what may signal scary large changes in retail is Hointer, the start-up by a former Amazon exec. Hointer to me means much smaller retail stores and the need for less people working there. Basically, you walk into a store and you download an app. There is one of every size clothing item on display (way less floor space needed). You scan the tag, indicate your size, walk into an assigned dressing room and the item pops out of a chute. What are in the back? Robots.
I'm so old I remember price stickers on every item. Manual registers that didn't tell the cashier what the change was. We learned to count change properly in grade school. Stockers had those price guns clicking away in the aisles. To top it off, no plastic bags either. It was paper or a box.
Hointer is forced to sell only items that are unique or at very low margins that doesn't justify the rent and goes out of business.
Just because you have technology doesn't mean you have a business model.
You have the right intuition on need vs want but that is the wrong dichotomy in my opinion. What you want to bet on are businesses that have sustainable pricing power for their products. Whether people want or need those products is irrelevant. There are very few of those in new technologies which is why incorporating technologies in products that already have a pricing power like Nike may be attractive.
investment opps and current trends and long term ideas.
Aeropostale -12.3% AH on FQ4 miss, guidance, $150M financing deal
Aeropostale (ARO) is guiding for FQ1 EPS of -$0.70 to -$0.75, well below a -$0.17 consensus. The forecast doesn't account for expected consulting fees or "potential accelerated store closures."
The apparel retailer has obtained $150M worth of credit facilities - a 5-year, $100M term loan facility, and a 10-year, $50M term loan facility - from P-E firm Sycamore Partners.
The deal includes an apparel sourcing arrangement with Sycamore-affiliated MGF Sourcing, and also gives Sycamore preferred stock good for buying 5% Aeropostale's common stock at a price of $7.25. If converted, the shares would raise Sycamore's stake to 12.3%.
Aeropostale was previously reported to be weighing investment and sale options. The company ended FQ4 with $106.5M in cash/equivalents, and no debt.
Aeropostale now plans to close 52 stores in FY14 (ends Jan. '15), while opening 7 and remodeling 10. The FY14 capex budget has been lowered to $22M from $35M; FY13 capex was $84M.
Comparable sales (inc. e-commerce) fell 15% Y/Y in FQ4, the same as FQ3. Gross margin fell 680 bps Y/Y to 13%
In terms of the teen retailers, you couldn't pay me to invest in them. I think that age group isn't doing well, doesn't have the discretionary income, mall visits are down and this age group is spending less money on trying to be fashionable. Consumers in general are looking for more one-stop I think one or more of these teen retailers will not be around. Urban Outfitters will probably win out.
Five Below (FIVE), which is like a teenage/tween Dollar Store (everything is $5 or less), is likely going to continue to fare well (I went into one for the first time the other day and while it's not for me, I can see where it would be popular.) Too expensive at this point, tho.
I would still keep a tight stop at around 250-252 on it which represents about 7% pull back from its recent top. About 10% upside potential and 8-10% downside risk at this point.