Steve Matt's avatar
$10.5m follower assets
The Coming Week in Earnings
Woooo boy, this week will be fun for my portfolio.

Monday (5/2)
  • $BIGC^ (On my Sell Watchlist)

Tuesday (5/3)

Wednesday (5/4)

Thursday

Friday

Anything with a ^ indicates I read the 8-K and 10-Q/10-K and track their financials along with KPIs on a spreadsheet I have.

So basically, this will be me next week...
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The Devastation Continues
Here are a ton of stocks at lows and appear to be headed lower:

$JPM - JPMorgan Chase & Co. - Banks - Diversified - $386.69B

$BAC - Bank of America Corporation - Banks - Diversified - $317.55B

$ASML - ASML Holding N.V. - Semiconductor Equipment & Materials - $257.15B

$VZ - Verizon Communications Inc. - Telecom Services - $221.35B

$NKE - NIKE, Inc. - Footwear & Accessories - $211.96B

$ADBE - Adobe Inc. - Software - Infrastructure - $204.90B

$CRM - Salesforce, Inc. - Software - Application - $187.74B

$PYPL - PayPal Holdings, Inc. - Credit Services - $112.45B

$BLK - BlackRock, Inc. - Asset Management - $106.91B

$WBD - Warner Bros. Discovery, Inc. - - Entertainment - $58.36B

$ILMN - Illumina, Inc. - Diagnostics & Research - $53.47B

$ADSK - Autodesk, Inc. - Software - Application - $44.78B

$A - Agilent Technologies, Inc. - Diagnostics & Research - $38.87B

$ALGN - Align Technology, Inc. - Medical Devices - $33.79B

$COIN - Coinbase Global, Inc. - Software - Application - $33.18B

$STT - State Street Corporation - Asset Management - $27.92B

$TWLO - Twilio Inc. - Internet Content & Information - $24.68B

$HUBS - HubSpot, Inc. - Software - Application - $20.53B

$SWKS - Skyworks Solutions, Inc. - Semiconductors - $20.04B

$PAYC - Paycom Software, Inc. - Software - Application - $19.25B

$KMX - CarMax, Inc. - Auto & Truck Dealerships - $14.95B

$DPZ - Domino's Pizza, Inc. - Restaurants - $14.26B

$PINS - Pinterest, Inc. - Internet Content & Information - $14.23B

$ETSY - Etsy, Inc. - Internet Retail - $14.15B
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THIS is what i’m talking about, very aesthetically pleasing post, thanks for putting this together 💪🏼
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Been building my $PLTR $ASAN positions the past week. Happy with my entry prices for these. I see 15%+ return from here for these names.

Got interested in $TXG. Fan of the founder and the innovative platform they are building. I feel $TXG is the next monopoly after $ILMN in Life sciences technology. Incredibly long on this one!
Winner of the day: Illumina
This is the second day in a row where there is a single outlier winner in the S&P 500. Is that normal? Yesterday it was Moderna, today it is $ILMN, up about 17%.

Illumina is up big today because Barclays at long last relented on its pessimism, removed its sell rating, and upgraded the shares to equalweight. Also, there was rumors that Illumina is going to try and get into long-read sequencing, like PacBio (Illumina currently specializes in short read sequencing)
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The Innovators Dilemma: Why I am Selling Illumina
There are really only two reasons why you should sell a stock:

  • The thesis is broken
  • It’s time for you to spend your money on the thing you were investing for in the first place

I am selling 50% of my Illumina shares today because I believe they are no longer prioritizing the strategy that my thesis is based on.

The Thesis
When the cost of sequencing a human genome falls to $100, almost anyone will be able to afford access to their genetic information, which will unleash a wave in personalized medicine. Illumina owns 90% market share of the genome sequencing machine market, and will be an enormous winner from this trend.

Illumina’s Business Model
Illumina sells genome sequencing machines at a low margin in order to lock-in customers who will need to buy high-margin consumable products (reagents, panels, index plates). As Illumina sells more machines, and each machine runs more tests, Illumina collects more in sales of the supplies needed to run those machines.

The Problem
In Clay Christensen’s The Innovators Dilemma, he describes how well-run, technologically innovative companies get disrupted not because they made the wrong choices, but because they made the right choices.

This sounds counter-intuitive, so a little more background is necessary:

There is a strategically important distinction between sustaining technologies and those that are disruptive. Sustaining technologies foster improved product performance along the dimensions that mainstream customers value.

Disruptive technologies bring to the market a very different value proposition. They underperform established products in mainstream markets, but they have other features that a few fringe and generally new customers value. Namely, they are typically cheaper, simpler, smaller, and more convenient to use.

A good management team listens to their customers and optimizes their technologies to serve these best customers.

The most profitable customers generally don’t want, and indeed initially can’t use products based on disruptive technologies.

Disruptive technology is initially embraced by the least profitable customers in the market. Hence, most companies with a practiced discipline of listening to their best customers don’t invest enough in disruptive technologies until it is too late.

In my opinion, this is what is happening to Illumina.

Who are Illumina’s customers?

Academic institutions, hospitals, government entities, and research labs. Illumina’s DNA sequencing is most often used by companies with more than $1 billion in revenue.

These customers all have dedicated lab space. They have large budgets that can pay for more specialized products, and they employ and pay experts to get trained on how to use Illumina’s products.

The result? Illumina doesn’t have as much of an incentive to keep making their products cheaper, simpler, smaller, and more convenient to use. If they did, they would be catering to less valuable customers.

This is what I mean when I say they are being disrupted because they are making the right choices. They are making the right choices to optimize their product offering for what their best customers want right now.

But my thesis is all about the $100 genome and anyone being able to afford access to their genetic information. Instead the cost to sequence a genome using Illumina's products has stabilized at around $1,000.

Molecular diagnostics companies are saying that Illumnia is not passing along the cost declines to the consumer. They are also not pushing out new products fast enough to enable the cost declines down to $100.

Their most recent product is the NextSeq, which sells for either $335,000 or $210,000 depending on the model you get. In contrast, privately held Oxford Nanopore technologies is pushing the envelope on the size of sequencing devices, and released a product close to the size of a thumb-drive.

Illumina's big customers do not want a machine with less functionality just to reduce the size. And they can pay $210k for their machines. So Illumina would be making the "wrong" decision to focus on developing the weird disruptive machines that their best customers don't want. But those fringe products are how sequencing technologies gets into the hands of everyday people around the world.

It’s a tough call to make, but the growth of the whole market is the ultimate goal, not maximizing profits for where the market is now. This is not a mature industry by any stretch.

DNA sequencing, artificial intelligence, and Crisper gene editing could all work together to unlock the ability to cure many diseases. We want as many people as possible tinkering with these tools in order to make huge breakthroughs for humanity.

The starting point is DNA sequencing. Illumina has got to move more aggressively down the cost curve.

For now I am selling 50% of my shares in Illumina. If progress isn’t made toward dropping the cost of sequencing a genome, I will sell the other 50%.

I’ll be moving the funds over to other companies in the genome space. I'll be writing about these in future memos. Follow me to see what and why I buy to replace $ILMN
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Today's Ark Invest Trades
Current value of these holdings and respective ETF's after these transactions:

$SHOP - $106.2M. $ARKF $ARKK

$EXAS - $285.3M. $ARKG $ARKQ

$NTDOY - $177.7M. $ARKQ

$SNAP - $104.7M. $ARKF $ARKK

$PINS - $266.9M. $ARKF $ARKK $ARKQ

$ROKU - $1,003M. $ARKQ


$ILMN - $17.5M. $ARKG

$SQ - $948.4M. $ARKF $ARKK $ARKQ

$TSLA - $1,620.8M. $ARKQ $ARKW
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