In this week’s episode:
📉 Badger discusses his Chinese investments including $JD and $BAIDU, making Monkey appear like a savant
💋 Keep it Simple Stupid: why one solid principle can save you from having to make two hundred hard future decisions
📬 Question from our new patreon Steven about opportunity costs. We discuss $TDOC and $RLAY and why what you paid for a stock should not influence whether to sell it!
🦁 Listeners help us name our stock exploration segment the Stock Safari, kinda obvious in hindsight!
🦀 Krzysztof pitches $EXAS as a safe(r) biotech company helping you avoid unpleasant colonoscopies at the doctor’s office
💖 Luke pitches Transmedics $TMDX a fascinating organ transplant company that has two sides to its business
Sources mentioned:
Portseido: https://www.portseido.com/?fpr=luke54
Transmedics IR: https://investors.transmedics.com/
Exact Sciences IR: https://investor.exactsciences.com/
Segments:
[00:00:00] Introduction
[00:01:23] Are Luke’s China Investments Getting Bailed Out?
[00:08:43] Opportunity Costs of Not Selling
[00:25:02] Stock Safari – Exact Sciences $EXAS
[00:30:43] Stock Safari – Transmedics $TMDX
EP47
[00:00:00] Introduction
[00:00:02] Luke: On today’s Wall Street Wildlife, Krzysztof and I are talking about opportunity costs when you’re sat on a losing bunch of investments. And we also have two hot new stocks. Thank you, Tom, for naming our stock, Safari. That’s what we’re calling the new segment. So in this week’s Stock Safari, we’re going to go on safari with exact sciences and Transmedics, two interesting companies in the healthcare sector that are on both of our radars.
[00:00:32] Krzysztof: you know, in hindsight, when we were fishing for a new category name, Stock Safari seemed so obvious. But, uh, yeah, brilliant name. So thank you We have two new Patreons. Shout out to Paul and Steven P. Remember Patreon is The platform that allows you to officially say, Hey, you believe in us and you’re going to throw us a couple of bananas so we could make our show even better. And in return, you get a few privileges like Asking questions and making sure they’re answered. Uh, check out all the bonus tiers on patreon.com/wallstreetwildlife.
[00:01:14] Luke: And Stephen might be pleased to note as a new Patreon that we’re digging into his question on opportunity costs for a good chunk of today’s episode.
[00:01:23] Are Luke’s China Investments Getting Bailed Out?
[00:01:23] Luke: But before we get there My China investments, my shitco China stocks, they’re coming good, Krzysztof, they’re coming good.
So
[00:01:34] Krzysztof: you, surprise me every time because you’re the model of, you know, the proper Englishman with nothing but quality companies. And here I am on Monday morning, minding my own business to find out you’re often some degenerate. China Shitco Casino Explain yourself badger.
[00:01:54] Luke: I say they’re shitcos, I mean, I suppose this is just resulting, probably good quality companies, well, mainly, but they’ve just done horrifically. Since I built this portfolio. And if I wind my mind back, I’m going to have to actually refresh myself and see when did I buy these damn things? Cause they’ve been a bloody lead balloon on my results.
It looks like I bought these in June, 2021. So a couple of years ago, and I bought a whole ton of stuff. And it was on the, this is do not do this as an investor. I decided in 2021, like, You know, US dominance might be in danger. So I’ll build a hedging portfolio. I thought China, you know, that’s the big risk to maybe, you know, the US perhaps losing reserve currency status and, uh, you know, trade wars, China, US trade wars.
So, um, I thought I’d just buy a bunch of Chinese stuff. And also I had just. I’d move my pension, which in normal worlds, like a pension is supposed to be like your safe money, I’d move that to a different kind of an account called a SIPP. It’s a bit like a, I don’t know, like a retirement account at 401k, but my SIPP allows me to buy like weirder stuff than my regular investment account does.
So part of my SIPP is like random options, trades, which some of which have done great. Thank you, Krzysztof, and your upstart recommendation a couple of years ago, and most of which have done very, very badly. Um, but a big chunk of the Pension was a bunch of China stuff I couldn’t buy in the main portfolio, and most of them have been languishing pretty horribly since then.
Well, uh, China’s finance minister I think has announced some kind of stimulus package, and don’t ask me to explain the details of what they’ve done or why, but they’re trying to, I believe, achieve some sort of trade targets by the end of this year. So stimulus package announced and now all of my shitco stocks are suddenly out of the bin.
And these are, I say shitcos, you know, these are companies like JD. com, uh, Baidu, BYD, BYD is probably the only company in this basket. I actually have an investment thesis around and believe in, and I believe I have an open bet with you that they’re going to outperform Tesla by the end of this year. So that’d be fun to come back to.
[00:04:13] Krzysztof: is interesting. This feels like a inverse black mirror episode where I’m the one that’s principled and upright But you’re the degenerate Degenerate monkey, maybe we should swap shirts, but This is one of those principles that I learned early in my investing career that has served me extremely well. At some point, who knows when, 15 years ago, I got suckered into some Chinese investment. Of course it went badly, but the principle that came out of that was that was, do not ever under any circumstances invest in Chinese companies. Why? Because it became clear to me that not only is investing, you know, risky, you never know what’s going to happen, but or if things go bad in any kind of financial fiduciary sense, you as an American citizen, or maybe even as a Chinese citizen, have zero recourse to getting your money. Zero. You’re just not going to get it. Like you, you are powerless in the face of, you know, their national government. So it became clear to me, just don’t mess with it. Like there’s plenty investments all over the world. So no matter how appealing, right. And that’s, I think, more or less served me extraordinarily well.
[00:05:33] Luke: Yeah, like a far better hedge in retrospect would have just been to have bought a ton of the India index that I ended up buying like last year. That’s done really well, and I think for good reasons, but yeah, China, I won’t say I regret doing that stuff. It’s kind of a no regrets decision. I’ll say what, just why it was a very poor set of investment decisions, because I did minimal work.
I had this very vague idea. Oh, I should kind of insure myself against the U. S. losing to China. And so I said to my buddy Albert, Hey, give me like your favorite five or six China names. And I did no due diligence whatsoever. I just brought them all. And so, uh, You know, that is the major health warning. Not that my buddy Albert like sold me a bunch of lemons, although he did in this case, but, um, uh, like I was buying stuff, I was borrowing conviction from somebody else.
And then when these stocks started to go down, I didn’t really understand why, like one of them I’ve sold, it was Xinyi Solar. I sold for maybe a 50 percent loss. A couple of days I’m sad on like 70, 80 percent losses, or at least I was. Until the stimulus package got announced and now my stocks are kind of bailing themselves out.
Like really, I should, I’m breaking all of the laws of the jungle, right? Because a couple of these like JD, I’ve heard of them. I couldn’t say a great deal about what they do. And I’m looking at it going, Oh, you know, I’ll just get even, then I’ll sell it. That’s obviously what we talk about every week. Do not do that.
Do not like price anchor. What I need to do now, it’s actually become a slightly more material position. I need to go and actually do a bit of work. figure out what the F, JD actually do, and then decide does it belong in my portfolio, or should I cut bait while I’ve got like a little bit of relief.
[00:07:16] Krzysztof: Yeah. Uh, I’d like to add Badger that there’s a lot of value in keeping things simple. You know, the whole keep it simple stupid you know, if you ever own, a whole bunch of stuff in your portfolio and you can’t, you know, you’re a professional at this and you can’t even remember, like, to me, that’s like the equivalent of weeds in your garden, just like, like, it just takes up headspace, even consciously or subconsciously,
[00:07:43] Luke: Yep.
[00:07:44] Krzysztof: uh, that capital could no doubt be better allocated.
Yeah.
[00:07:49] Luke: 100%. I’m breaking all of the rules that we talk about, with this set of socks. Yeah. Hey, show’s right. Even the, even the supposed experts are like, you know, we can be suckered in by these weird random emotions like fear and greed and God knows what else. Stupidity.
[00:08:06] Krzysztof: And that’s the thing about weeds, right? Like as a metaphor too, they, they pop up when you’re sort of just not doing much of anything, but they have this tendency. And so staying really vigilant about what are your main principles and not varying them is hard work in its way, but keeping things simple and clean. I like to think of it this way. If you follow that one rule, You then don’t have to make 20 other decisions because that one is so sharp.
[00:08:37] Luke: Yep. Yep. Very good.
I’ll commit to tidying this stuff up over the next couple of weeks.
[00:08:43] Opportunity Costs of Not Selling
[00:08:43] Krzysztof: so, uh, shall we move on to our next item? which is a question from one of our new Patreons. and by the way, this really, I just want to reiterate this. When you’re part of our inner tribe, unlike say, being an anonymous person who happened to like something, we take your comments and your questions and your, investing journey, to heart. And so that’s why we, are really digging this Patreon model. So you want to take us through that question, Badger?
[00:09:16] Luke: Yeah. So it’s from Steven and he says, I have some stocks that are down a lot from 2021, 22 tech bubble. We’re talking about a firm upstart open, not from a superfluid with that one. Teladoc, who I am painfully familiar with, and Paluton. At the time knew very little about valuation.
However, if a stock is down 70 to 90 Would you sell? I hold easily. So these stocks became possibly value, but I’m less convinced about their quality. I don’t want to wind up constantly transferring, but I do see better opportunities. So this, I think if we summarize this question, right, it’s a couple of things.
One is if you’re sat on a stock that’s down like 70 or worse percent, a bit like some of my China things I just talked about. Like, is that meaningful in terms of how you Manage or think about that position. And then I think a different, but also really interesting question to explore is the question of opportunity cost.
If you’ve got money tied up in something in your portfolio, there is a cost to keeping it sort of locked up in a position that may not be one of your best ideas. So yeah, let’s, um, let’s dig into that a little bit.
[00:10:36] Krzysztof: Man, there’s so much to say here. let me start in the order that this is, if you could figure this out, you’ve figured out much of investing because like I always say, Selling has been my biggest mistake. So I’m arguing against what I’m going to say in the next few minutes, but this is why this is such a tricky question. In the end, I mean, I don’t know how else to say it, but had I not sold all the positions over time, I would, I would be much better off now. So that’s the, almost the caveat, however, the second point is everything depends on the your current understanding of the company’s future, right? so let me see, the fact that selling has been one of the worst mistakes I’ve made, that’s because in this, in the beginning, I identified great companies and I just wasn’t patient enough to to hold on to them.
But I knew, I knew, not knew, um, I still had faith in them as companies. I probably sold them for valuation reasons or, you know, outsmarting myself or something like that. But one problem I see in Stephen’s initial framework is the thought, if a stock is down 70 to 90 percent, would you sell? The reason I think it’s a mistake to frame it that way is because the market does not care what you paid for stock. It does not know what you cared for stock. So that little bit of data is completely irrelevant. Outside of, say, tax loss, gain, You know, stuff, but we’re going to bracket that out. All that matters is whether you think that company has a good future or not. Right.
[00:12:26] Luke: Yeah, I agree. I’m going to show you something. So I’ve got a new portfolio tool I’ve been using. in the last couple of weeks and I really like it. And so I’ll stick a link to it in today’s show notes. It’s called Portseido. Like I’ll probably talk about it in more detail on a future episode, but let me share this view.
So this is an extract from Portseido, which is showing me all of my sell transactions of all time. It looks like. Over the last 20 years, I’ve sold 102 things. Um, so I’m just filtering it for sales. So let’s take a look at a couple of examples, say NVIDIA.
So I trimmed NVIDIA in February, 2024, and exactly like. You just said, like, most of your big regrets relate to selling stuff and then you should have hung on to it. So if I had hung on to NVIDIA, like, that position is up 65 percent from the date of my sale. And there’s a whole bunch of others like, uh, Magnite, Tandem, Novacure, CrowdStrike, Shopify, where in retrospect I probably shouldn’t have sold those.
But there’s also a bunch where I made the right decision in selling. So for example, I think you gave me some aggravation about hanging on to new scale power. And so I ended up selling that back in July. I was calling it a worry position. So like Portseido was telling me that was correct. I, I was right to trim that one because, Like, my money would have done better by 17 percent being in the market than, uh, being stuck in that dead position.
And it looks like I made a whole bunch of good sell decisions back in 2023 where a whole bunch of stocks I got out of like Unity and Bill.Com they’ve all wrecked themselves. Oh
[00:14:25] Krzysztof: this is a great tool. Uh, and I don’t know if this is accurate, but I wonder on a, in a rough sense, if this is almost like arbitrary, not arbitrary, I’m sorry, that’s not the right word, but whether it’s close to 50 50, I don’t know, Oh, you said the win rate is 42%, so that’s. Almost 50 50, right?
[00:14:45] Luke: Oh, yeah, that’s cool. I didn’t spot that. Yeah, you’re right.
[00:14:47] Krzysztof: Right. So it almost feels like sometimes you will sell and that was correct. Sometimes you’ll sell and it wasn’t correct. So let’s call it 50 50 for argument’s sake. I think the reason opportunity cost is such a good question is this is sort of like a parlay.
You know, you’re always investing in the context of your money. needing to do something. So the second part is, after you sold, what did you do with the money? And what you did with the money, did that end up being a successful, call it follow up? this is the main point I think I want to make. So let me reiterate, you do not sell based on how much a stock has lost. You would only sell, should sell, if you believe that company doesn’t have. a bright future. And then part two is you have to have a better place to put your money, right?
[00:15:42] Luke: Yep. And I’m going to make that even more precise and say, you should have a thesis for the stocks that you own. if the company is performing in line with the thesis, that’s really like the most important thing by some significant margin.
Like if nothing has changed in the world, if your thesis is right, and if your thesis is playing out, then you know, if anything, you should be adding to that position. You certainly shouldn’t be selling it, if you truly believe in your thesis. I’m going to bring this to life again by doing another quick screen share,
because this is an example of one of Stephen’s stocks, I dug out my own investment in Teladoc and I wrote a one pager. I used to do this for some of my investments and I was doing this because I had the Telescope Investment Podcast with Albert. So we did these a little bit more publicly. In March 2021, Albert and I were Teladoc bulls, and that was one of Stephen’s stocks as well.
That was The ass fell out of it. It’s done awfully. I think it’s down probably like 90%. I had a thesis and my thesis was founded around, the acquisition of Livongo Health. I felt that these two companies together were worth more than the whole. I felt like the market was growing, like the number of, People, particularly in North America who had chronic health conditions, was increasing.
So that was going to play into the thesis. This was like March 2021, like in the midst of COVID. And like, it made sense. Like part of my, the world is going to continue to work from home and work remotely post pandemic. So I had a thesis and I believed in it.
The problem was my thesis was wrong. In this case, everyone’s going back to work. My thesis was wrong because actually, if I took my blinkers off, like it’s one thing joining a WebEx or, you know, doing some training or maybe having a meeting on Zoom. But do you really want to see your doctor, your physician, on Zoom?
Like, maybe if it’s like a dermatology or something, they can check out your skin on the camera. But most stuff, like, they want to listen to your heart and stick a finger up your ass or whatever the hell it is to diagnose what’s wrong with you. You can’t do that over a webcam. Well, maybe you can, but that’s like a whole different realm of random sex toys online.
God knows what.
[00:17:57] Krzysztof: See, this is where you and I differ, Badger. I precisely avoid going to doctors because I don’t want no fingers going up where they don’t need to go.
[00:18:05] Luke: Hey, health, I’m going to address that because I just had my annual medical last week and that’s it. At your upcoming age, what are you, like mid 40s, you should be getting your bits checked out thoroughly at least once a year.
[00:18:16] Krzysztof: well, just you wait till we talk about Exact Sciences, but wait, let’s, um, but hold,
hold up a second. I, I fear that we, because this topic it has so many layers, but it’s so important. I kind of feel like maybe we’re, we’re confusing things. I want to potentially, I’m, I feel somewhat confused and I think I understand this. Steven wrote in part of his question, these stocks, the ones that have lost something like 70 to 90 percent became possibly quote value, but I’m less convinced of their quality. this is important because the flip side to possibly value is value trap,
[00:18:56] Luke: Yeah.
[00:18:56] Krzysztof: and value traps are traps precisely because as the quality of the company deteriorates Investors all of a sudden start hoping that they can get back to some arbitrary number at which they bought back, at which they initially bought, whereas that money, if it was reallocated to a company now firing on all cylinders, would make more of itself than the possible value.
So I would emphasize much more, uh, explicitly and passionately that if you are less convinced of their quality, That is your sign to sell and reallocate as long as you have a better place for it.
[00:19:46] Luke: Yeah. Agree. But again, you have to know why you own the thing in the first place. Like ignore everything I said about China earlier. If you know why you own the stock, you can then judge whether it continues to have a place in your portfolio or not. And if the world has changed or if the investment’s broken, like be ruthless and kick it out.
[00:20:06] Krzysztof: this is a perfect, perfect, maybe completion of a circle to go back to that China rule I have and keep it simple. If you only have something like 20. companies, which I think is a, really decent, like, to me, that’s a, amount of companies to have in a portfolio. Honest, I mean, like, good, you know, that’s subjective, but 20 feels sort of like Goldilocks, not too few, not too many.
If you have 20, I think it’s reasonable to know those 20 companies very, very well. So you then aren’t confused by Arbitrary market action because you could follow something like 20 companies. pretty diligently or maybe, you know, like you keep up with quarterly earnings. It’s still kind of on a, I would say it is sort of on the lot side, lot ish, but it’s not impossible. So if you do that, right, if you don’t have an overwhelming number of companies, then you’re never confused about The opportunities in front of you and whether you should reallocate. And actually, one more thing that just came to me, it also tends to be true, I don’t know if you found this Badger, that some of the best investments that you can make, you already own. So it’s, this will be a case of, okay, you own TDoc. It’s, you no longer, you don’t care that it’s down 80%. You care that say Amazon, it’s eating its lunch, but lo and behold, you also own Amazon. So why not make a decision like, okay, TDoc is out and my investment in Amazon goes up.
[00:21:50] Luke: And like case in point, um. I ended up selling my Teladoc position for an 80 percent loss in 2022. And that wasn’t small beans, like I could have bought a Tesla with the money I lost on that stock. And I sold and I was like, Oh, I just got to take the pain. It’s down like another 75 percent from my sale price since then, like the last two years.
Like what goes down? Don’t think I was so far down. It can’t possibly get any worse. Like something goes down 80%, it can go down another 80 percent and another 80 percent again. So, yeah, you gotta, every day when you continue to hold something, like, you gotta be broadly convinced that the stuff you hold is going to outperform all the things you don’t hold.
[00:22:35] Krzysztof: Correct. And, uh, I have a particular case right now, my real world. Portfolio in which this opportunity cost question is is real and that’s with Relay Therapeutics Um, I’ll talk about it in greater depth, I think, in future episodes, but at the moment, I think this is going to be one of the world’s future best biotech companies.
I could not be more bullish about Relay Therapeutics based on all the latest data that they released, uh, over the last two months, but they’re still pre revenue. And so there’s going to be time required from now till I guess when they start monetizing all these assets and the market wakes up. Question then becomes, technically, by owning the shares now, they’re costing me because they’re not invested in something, let’s say, performing right now. But as soon as I start, so right, that would be an argument for well, why own Relay now if their future is still out there? But then I start getting too smart for my own good, right?
And then you start getting into market timing and you start, you know, trying to, I don’t know. I don’t know when a major mammoth investor is going to come along and buy 500, 000 shares of Relay because they see what I see. And all of a sudden the price now jumps, you know, 40%. Like, all of that stuff is out of my hands, so my solution is, is the following. Because I believe in the thesis, through and through, I am kind of circumnavigating the opportunity cost by saying, I want to keep building this position aggressively for the next two years because when it turns, it’s going to be a massive turn. Is it costing me something? Yes, it is.
[00:24:25] Luke: Yeah.
[00:24:26] Krzysztof: Right. Yeah.
[00:24:27] Luke: It would be good on a future episode to go into exactly, you know, why you believe, why you believe that they’re going to make this sort of turnaround or suddenly, that the thesis will suddenly execute, and why you’re continuing to add on the way down. That’s often, wealth destroying behavior.
But if you truly believe in the thesis and you’ve got good reason to do that, then it can make sense. So yeah, let’s go deeper on it.
[00:24:52] Krzysztof: Yeah, absolutely.
[00:24:53] Luke: Yeah.
[00:24:53] Krzysztof: So clear as mud, Stephen. Uh,
[00:25:01] Luke: alright.
[00:25:02] Stock Safari – Exact Sciences $EXAS
[00:25:02] Luke: so let’s hit the back half hour episode, Krzysztof, where we’re going to go on stock safari. We need to come up with a jingle for that, maybe stock safari.
Uh, and in this new segment that we tried out last week, we pick out two stocks that aren’t really being talked about so much, and then we give each other a really light one minute overview of what the company does, who they are, and why they’re on our radar. The fact that we’re talking about in this segment doesn’t mean these are great investments.
In fact, you and I both pitched two companies last week. You hit Sphere Entertainment. I pitched Oklo. I said very clearly Oklo’s on my radar, but not investable today. I think our two stock safari stocks for this week probably are a little more investable.
Um, and they are Exact Sciences, which is yours and Transmedics for me, which is interesting because actually you own that one.
[00:25:55] Krzysztof: One, uh, housekeeping memo is that our poll on Twitter, revealed that the majority of our jungle cats are interested in Sphere,
just barely edging out Oklo. By a couple of votes, I think it was. I would also offer a corrective. Uh, to the way you, just announced Exact Sciences and Transmedics. I think these are superb companies. So these are, I think of a way different caliber than Sphere and Oklo.
But that doesn’t mean that we’re saying this isn’t like a, you know, this is like intended to be a one minute elevated pitch rather than a serious deep dive.
But Exact Sciences was the first company I pitched over at 7investing because it’s such a sturdy biotech, a sturdy, anchored, It’s not quite a behemoth. It’s not a giant pharmaceutical with hundreds of billions, but the assets it has are incredibly valuable and it has its hands in all kinds of Oncology segments and they all overlap and its commercial strength is its commercial execution is its strength The pitch is simple cancer kills A tremendous number of people. Colon cancer is one of the largest killers. And most people do not particularly enjoy going to the doctor to get colonoscopies. Exact Sciences has a product called, called Cologuard, which continues to improve with each iteration, which has to get FDA approved. But it’s numbers that track basically how good it is at detecting cancer and how well it avoids false positives. Those two numbers keep going up. And the way it works is you get a box delivered to your house. You go to the bathroom, you take care of your business, you send your business back to the doctor, and lo and behold, no fingers going where they don’t need to go, and you get results that pretty much, outside of a few percentages, tell you accurately whether you have colon cancer or not.
And this product is taking market share, or has taken market share, compared to just doctor’s visits, because doctors now are starting to trust it more and more. And one last pitch, doctors now recommend that people start getting checked at age 45, which is my age. So I suppose I now might be exact science customer myself. That’s, that’s a minute, right? I’m, I’m way over a minute.
[00:28:36] Luke: That’s cool. It wasn’t exact sciences, but I pooped in a box and posted it for some other random British test. Like something similar, I think, uh, I’m just like sending feces to random locations. Who knows? Hey, sign off as a Patreon and yeah, special gift, uh,
[00:28:54] Krzysztof: Wait, I’m the monkey, right? I’m the one that swings feeties, right?
[00:28:59] Luke: are exact sciences a big company? Is this like a super risky biotech?
[00:29:03] Krzysztof: That’s the other strength, Badger, is that many biotechs, for them to be profitable investments, you’re kind of playing the lottery. You know, will they make a drug or will they not? And often they’re smaller caps, unless they’re, they’re giants. Exact Sciences for me is in that really sweet spot. It’s, what is it?
Seven billion dollar market cap?
[00:29:25] Luke: Oh, I think 12 billion
[00:29:29] Krzysztof: So that’s a, that’s a large, large ish company and it’s large because it’s so steady and I would say its risk profile is pretty high. On the safer side of the spectrum. So I would not hesitate recommending the stock to, conservative risk averse investors.
[00:29:47] Luke: And normally, biotech, like, approach with great caution. But yeah, okay, maybe this is a lower risk one. I think it definitely fits our Stock Safari. This isn’t one I hear about a great deal on FinEx.
[00:30:00] Krzysztof: depends on the circles you, you hang around in. I know, interestingly, Kathy Woods and her ARK fund had this as her top pick for many years, which is, you know, uh, historically,
[00:30:14] Luke: not really a recommendation.
[00:30:16] Krzysztof: Yeah, it wouldn’t, but she, I think, recently sold out most of it to, I think, her, again, detriment. So thesis for exact science is cancer, bad, Kohlergard test, good. Exact sciences will be making a lot of revenue from this test and making your life easier and hopefully longer.
[00:30:36] Luke: All right, let me hit my Safari stock and then we’ll ask our listeners to poll which are the most interesting of the two. Um,
[00:30:43] Stock Safari – Transmedics $TMDX
[00:30:43] Luke: I think I’m in with a winner this week because actually this is a stock that I know you own. and actually I’m going to fess up. It was on my radar.
I liked it so much I actually bought it anyway, so now it’s off the radar and it’s in the portfolio as of like two or three days ago. TransMedics. So you know this company way better than I do, but my one minute pitch. Essentially, this is all about supporting organ transplants and TransMedics currently have Like a logistics service with their own airline, with I think something like 18 planes, and they have the ability to keep either a heart beating, lungs breathing, or a liver livering, uh, in some machine as it flies with a doctor.
from the donor to the recipient of the organ. And this is really important because, like there’s a limited supply of organs for donation, and you need to find a good match. It’s not all that common that you, if you need a heart, you’re going to find like a healthy heart that’s the right blood type and the right, you know, someone young enough, uh, nearby.
And the problem is like hearts and other organs don’t stay viable. much beyond about six hours. So TransMedics solution, and I’m going to pop a little video up here as we’re chatting, their solution is incredible because it keeps like the heart beating in a box while it’s doing its journey. So you’re not really hitting into that six hour viability time.
So this is great for organ recipients and, um, and just a real innovation, I think, in the industry. No,
[00:32:21] Krzysztof: May I offer one comment to go a little deeper, or should we save that?
[00:32:25] Luke: no, please do.
[00:32:27] Krzysztof: Okay, so this is a fascinating company because it has two layers, I would think, of the obvious and maybe the less obvious. Initially, when people look at transmedics, They’re looking at the actual, uh, call it the transmedics tool, the box, which is a very fancy device that helps keep these organs alive better for longer. That’s what you see. That’s kind of the product, right? But in all of healthcare, you know, products like that can be commoditized and there’s competition and you never know when a new better box will be built, right? But that’s actually, I think, not what transmedics, it’s not really where their value is. Their value is that the biggest problem, like you were talking about, in in transplants, is time. So, solving the logistics issue, how to get the organs in as best shape as possible to where they need to go, is an infinitely harder problem to solve than, say, merely Keeping the organs alive and transmedics does both by kind of I think of becoming the FedEx of organ transplants.
[00:33:42] Luke: Yeah, it’s interesting. I wonder why they felt they had to buy their own 16 aircraft for North America. Is it as simple as like a doctor needs to accompany this thing and keep an eye on it and monitor it so it just looks freaking gory if you know you’re flying say business class to wherever across, like the country and then, you know, go and go to grab another cup of coffee and you see this heart beating like maybe you faint, maybe there’s some other incident on the plane
[00:34:10] Krzysztof: think you’ve wandered off in some deep part of the jungle there, Badger. I think it’s actually way more simple than that. I don’t actually think it’s doctors per se that travel. I think it might be trained specialists. I don’t think From my understanding, I don’t think you, uh, the devices require an actual MD, uh, alongside of it. But the answer, again, is logistics and speed. A bunch of the bottlenecks have to do with getting the things, remember, getting the things to where they need to go, and it’s not a straight shot, because organs are sent, they need to come from a specific place, go to a specific place, and if you’re waiting around for an alternate airline schedule, The organ becomes inviolable.
So they said, we’re going to just do it ourselves because we know exactly what needs to go where, and we won’t be waiting around for anybody else.
[00:35:02] Luke: Okay, you’re right. That makes sense. Uh, and I suppose like, you know, like you don’t want your heart traveling without a passport and everyone’s like, Hey, like who the hell is this heart?
[00:35:10] Krzysztof: I, it’s not the case. I have never been in an airline where the passenger next to me was a beating heart. Oh, my dear Badger. Uh,
[00:35:24] Luke: so, um, so yeah, clearly interesting company. Uh, I think the thesis is actually pretty robust on this one and, um, yeah, it’s off my radar and into the portfolio. Do you still own Transmedics yourself?
[00:35:36] Krzysztof: I do not. I sold in this case for valuation purposes in order to, you know, cleanse my portfolio and prepare for Armageddon. Uh, another, another example of, uh, if I only held.
[00:35:53] Luke: You can be the heart in the box, broken heart in the box, going, ah, I need a transplant, I need to transplant some transmedics back into my portfolio.
[00:36:03] Krzysztof: Indeed. So,
[00:36:04] Luke: Oh yeah, and actually, uh, because just on this topic as well, because I, I did sneakily buy a couple of things the other day, and one of the things also, I think it ties into this topic, so this is not my radar stop for this week, but I do, if you’ve heard of xenotransplantation, have you heard that term?
From the jungle, essentially, transplanting organs from say animals to humans, or one animal to another, like across xenotypes. And so there is a company called United Therapeutics, who I’ve also just added to the portfolio. And United Therapeutics are pretty established medtech company, but they have a whole arm around growing organs for transplant.
So xenotransplantation, I think they’ve got something like a hundred little piggies growing. Um, hearts and growing other organs, which are going to be used in like a medical trial to see how long they survive. Well, clearly the piggies won’t survive when they have the hearts removed, but how long the recipients of like a specially grown pig heart will survive.
also looking at things like organ, 3D organ printing and bio artificial organs. So like if we do start to essentially manufacture. organs either in a farm or on a production line or growing them in in different ways. Well that’s kind of a bear thesis for transmedics but like this stuff is a long way out and transmedics has a viable solution right now but I’ll be keeping an eye on xenotransplantation and organ growing as well as part of monitoring the thesis on transmedics.
[00:37:49] Krzysztof: two points. First, I can’t hold my tongue in saying that because I teach a class on animals at the University of Texas, I particularly am sensitive to questions of ethics around animal issues. So I would need to know, or read up on, the side of, you know, would these, call it, uh, organ farms, to what extent are they different from torture chambers where, you know, that kind of, uh, that issue, which for me is, is a big one. But also I’m not convinced that it would be a bear thesis for Transmedics if you take seriously my contention that Transmedics is a logistics company as much as it is a. organ transplant company because that would potentially imply more organs needing to get to where they need to get to more of them and that’s better business for transmedics.
So too hard to know at this moment and you’re right, it’s really far in the future anyway. But TransMedics numbers are phenomenal there. So it’s a very, it’s a stellar business. Um, I,
[00:38:58] Luke: Yeah,
they’re, uh, they’re profitable, uh, like net income positive last couple of quarters. And, uh, yeah, they just seem to be growing at a fair clip. So I’m very happy having this in the portfolio.
[00:39:08] Krzysztof: Indeed, Badger. So I think we should end the episode with one more call or reminder to our listeners that, at this time in our podcast journey, we are trying to find our tribe and the way you say, the way you screech, uh, and how, uh, announcing yourself as a tribe members by going to patreon.com/wallstreetwildlife. And basically voting with a couple of bucks saying, you know, we want you guys to clear out your schedules from all the backend stuff, all the editing, all the kind of menial labor, so to speak, and focus on finding us the best stocks and making the show as good as you can.
And the couple of bucks we throw at you, we’ll then use to sort of outsource some of these. production issues. Uh, we found a few members so far. We love that you’ve signed up and we’re really encouraged. So check out patreon.com/wallstreetwildlife.
[00:40:09] Luke: but you can also find us all over the social media networks. Our favourite place to chat is X. You’ll find me there, at 7LukeHallard.
[00:40:18] Krzysztof: I’m at seven flying platypus
[00:40:20] Luke: You can also get our Ten Laws of the Investing Jungle as a free download from WallStreetWildlife.com.
[00:40:27] Krzysztof: and there’s the YouTubes
[00:40:28] Luke: Yeah, if you’re listening and you’re out with the headphones only, like we do chuck stuff on the YouTubes as well, and sometimes there’s a visual. If you want to see Like a beating heart. And I don’t mean Krzysztof’s, uh, one in a box. Then check it out on YouTube and you’ll see that little excerpt.
[00:40:44] Krzysztof: you ready to become a beast of an investor?
[00:40:48] Luke: Your journey starts here. All
