Illumina ($ILMN), AbbVie ($ABBV), Gold ($GLD)


Illumina ($ILMN) ◾ Biotech


Since peaking in July, the stock has fallen 25%. In July, Illumina lowered guidance for the year and expects revenue growth of 6% compared with its previous guidance of 13-14%. They blame slowing revenue on problems with its population genomics initiatives, weakness in the direct-to-consumer market, and lower sales associated with its non-high-throughput sequencing systems.

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This is Why Netflix Will Crush the Competition: They Take More Swings Than Anybody

📺Netflix and the Current OTT Landscape

Important: Good, even great companies can make bad investments if the price paid is too high.

Last week, Netflix ($NFLX) missed their subscriber target by 2.3 million. In addition, they lost 100k subscribers in the U.S., and their stock fell ~16% on the week; the largest weekly decline in years.

After the miss, a narrative started to develop: (i) They are losing two of their most popular shows — “The Office” and “Friends.” How will they replace them and keep subscribers from churning? (ii) They have reached the upper limit on their ability to raise prices.

We will address those narratives in a minute. But first, let’s back-up and go over some common terms used when describing various OTT players and get a snapshot of the current landscape.

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🏠Long Zillow. Short Real Estate Agents?😔

👋Hello from the home office. Warning: This is quite long:)

I spent a lot of time this week thinking about Zillow ($Z) and the future of real estate. I will update this post as time goes on and as more information comes in.

And no, I don’t think all real-estate agents will go away. I just think there will be less of them. And the way they are compensated will change or be less than current state (6%).

MUST READ: CNN penned a good article about why a current class-action lawsuit could do away with the 6% real estate commission. It’s really long, but lays out why major changes in the real estate industry could be forthcoming. And what the affect on agents, brokers, and consumers could be.

In the article, they asked Rob Hahn what would happen to the industry if the lawsuit is successful👇

“It kills the industry,” said Rob Hahn, a real estate marketing consultant with the firm 7DS Associates, who predicts the number of people in the profession would drop to just 200,000 if the lawsuit is successful. “A lot of things that we as consumers value go away.”

Some context: There are an estimated 1.36 million real estate agents. A drop to 200,000 would be jarring.

Resources used in this article:

Important: Just because we’re bullish on the long-term potential of a business, doesn’t mean we’re bullish on their stock. Good companies can make bad investments if the price paid is too high:)

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Apex Mountain

👋Hello from the home office. No housekeeping today, so let’s get right into it.

Before we get started…

This article will do a lot of looking back. And it’s easy to say all of this was obvious in hindsight.

Two things:

  1. In every annual report, companies state their future intentions (i.e. their future business plans).
  2. It’s our job as investors to assign a likelihood to those intentions. And figure out one, if they are realistic. And two, if they are realistic, why this company — and not their competitors — is in the best position to execute on those intentions.

💡The light bulb moment

I first heard the term “Apex Mountain” from The Rewatchables; a Ringer podcast. The podcast does deep dives on movies they deem “rewatchable.”

You know, those movies that suck you in when you’re flipping through channels. Movies that you can watch over and over.

They break up the podcast into different categories. Like most rewatchable scene, what’s aged the best, and is this an actor or director’s Apex Mountain? Meaning, is this their best work, the peak of their powers?

For example: Is Vince Vaughn’s Apex Mountain Old School or Wedding Crashers? I lean Wedding Crashers, but many would say Old School.

It got me thinking…

How could we apply the “Apex Mountain” framework to investing?

Most companies, whether young or mature, probably had one product that got them to where they are today. But will that same product lead their next leg up in market cap? Will it remain their Apex Mountain?

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Netflix’s Moat, Lululemon Defies Retail, Disney Breaks Out

👋 Hello from the home office.

Today’s Agenda

  • Netflix might lose its best shows in the next few years. Will people still subscribe?
  • Lululemon has defied the retail carnage. How?
  • Disney breaks out of a four-year base.

What are your favorite shows on Netflix?

I primarily watch reruns of The Office, Friends, and Parks and Rec. The WSJ reports those shows could be removed from Netflix when their contracts expire in 2021.

Two alarming facts for Netflix:

  • Three companies are launching competing streaming services: NBC Universal, AT&T, and Walt Disney. Their T.V. shows and movies make up 40% of the viewing minutes on Netflix.
  • Eight of the ten shows people spent the most time watching in 2018 were reruns and might not be on Netflix in a few years (see chart below).

Source: WSJ

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A Deep Dive on Zoom’s IPO

👋 In today’s update, we’re talking about Zoom.

  • What do they do, what products do they sell, and who are their competitors?
  • Are they an economic franchise or just a business?
  • What’s their ceiling? Risks?

Resources used in this article:

  • Zoom’s S-1: Management’s discussion about their business starts on page 54.
  • Alex Clayton’s breakdown of Zoom’s S-1.

An Overview of Zoom

What do they do?

Zoom was founded in 2011 by Eric Yuan. Eric was a lead engineer for Cisco Systems Webex product (collaboration product similar to Zoom). Zoom helps companies communicate through video. They enable face-to-face communication through video, audio, and chat in a single meeting across different devices (desktop, iPhone, iPad) and different locations. For example, they’ve helped one customer with 1,000 all-remote employees, grow and maintain their culture.

Their goal is simple: To make Zoom meetings better than in-person meetings.

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