SWAV

ShockWave Medical

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$77.06 +37.53%
My August Returns Are In!... And The Good Trend Continues
Retirement Portfolio
In August, I opened two new positions in $NET and $PCOR. I added to three times to $MKL , $TYL, $MCD, and $WM as part of my 401k DCA and added to no other positions. Another relatively quiet month. I also added to $JPM, $AAPL, $SBNY, $COST, $O, and $SBUX via DRIP. I exited $MTCH and sold 32% of my shares in $BMBL.

My retirement portfolio was down 2.54% in August but that was less than my benchmark SPY portfolio (down 4.41%) and benchmark QQQ portfolio (4.51%). I'm now down 37.40% YTD compared to my SPY benchmark at 16.52% and QQQ benchmark at 21.72%.

My best performing retirement positions YTD:
  • $SWAV is up 96% YTD
  • $EGIO is up 17% YTD
  • $WM is up 14% since I started buying a couple months ago

My best performing retirement positions in August:

My top 10 positions now make up ~35% of my portfolio. The top 6 remain in the same order of $MELI, $AAPL, $AMZN, $F, $GOOGL, and $SHOP. $SWAV jumped up from 9th to 7th after a great month with great earnings with $NVEE, $SIVB, and $COST rounding out the top 10.

Looking forward to September, I'm contemplating exiting my $SQ position. I'm turned off by Jack's comments and his insistence on $BTC.X being the be all and end all. I don't mind the crypto exposure but the Bitcoin only hardline is narrow-minded in my opinion. If you made me czar, I'd actually just have Square exit their crypto entirely and focus on what they're good at.

I'm also considering exiting $MMM in my 401k and replacing it with one of $ABBV, $BEP, $DEA, $HSY, $MKC, $MTN, $TGT, $TROX, $UNP, or $UPS but I need to research them first before deciding.

Taxable Portfolio
In August, I only added to $DT. No positions in this brokerage pay a dividend so there was no DRIP and I did not exit any positions.

My taxable portfolio had a second great bounce back month, up 9.56% after being up 13/67% in July. My benchmark SPY portfolio was down 3.64% and my benchmark QQQ portfolio was down 4.18%. I'm now down 30.15% YTD compared to my SPY benchmark at 14.84% and QQQ benchmark at 21.43%.

My best performing taxable positions YTD:
  • $TMDX is up 172% YTD for me. Wowsers.

  • $MSP with a 39.49% return YTD - RIP as is had such a great return because it was acquired.

  • That's it. None of my other 14 positions are positive. Whomp whomp.

My best performing taxable positions in August:

My top 10 positions continue to make up ~90% of my portfolio as I only have 14 positions in this brokerage. The top 10 remains basically the same with $SNOW, $TMDX, $ATZAF, $SILK, $DT, $LMND, $NCNO, $CPNG, $OM, and $BIGC.

Looking forward to September, I already added to $ATZAF as my monthly add. I don't expect to make any other moves but we shall see.
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Portfolio activity 8-12 Aug
Another nice week for my portfolios with all seeing healthy gains.

Income Portfolio: Opened a new position in $ROK . Increased holdings in $VIG and $VNQ . Collected dividends on $GD $BK $CARR and $APD . Trimmed position in $CARR

Growth Portfolio: Increased position sizes of both $ENPH and $SWAV.

Speculative: Nil.
Shockwave Medical ($SWAV) Earnings Recap
TL;DR: They crushed it. Again.

  • Revenue up 116% YoY and 180% TTM
  • Gross profit margins of 86.1%, up 390bps YoY and up 810bps TTM
  • Operating margins hit a record high of 24.5%. Now 17% TTM vs. (35.6%) the previous TTM.
  • Net margins trend the same way. Record high of 21.2% and now 15.2% TTM vs. (40.6%).
  • FCF? Yeah, we got that now. Record high of $25.3MM in Q2 and now with $48.4MM TTM vs. ($53.3MM).
  • Very little dilution in recent quarters but ~7.5% YoY.
  • Coronary revenue was the highlight, up 139% YoY and now 298% TTM. Peripheral was up 70% YoY and 53% TTM.
  • In term of revenue by geography, US remains the primary driver with 83% of the revenue. US revenue cracked $100MM in a single Q for the first time ever, up 133% YoY and 243% TTM. Europe accounts for 11% of revenue and Rest of World accounts for 6%.

On that last bullet point, I'm very curious to read the conference call transcript. I'm hoping management gives tangible updates on Japan and China, both of whom they recently received regulatory approval from and management has previously stated they expect to begin recognizing revenue from both areas in 2022.

They remain priced at a high valuation but I'd say its absolutely justified.

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Steve Matt's avatar
$18.6m follower assets
My July Returns Are In!... And They're... Good?
I'm still getting annihilated in both of my portfolios but less annihilated than a month ago!

Retirement Portfolio
In June, I opened zero new positions. I added to $MKL twice, $TYL twice, $MCD twice, $WM twice, and $IIPR. Relatively quiet month. I also added to $NVDA, $BIPC, $AMT, $MPW, $O, $IIPR, $NLCP, and $TSM via DRIP. I exited zero positions.

My retirement portfolio was up 13.09% in July. However, I'm still down 35.84% YTD and my month-by-month YTD is as bad as growth investor's portfolio returns could look.

Shoutout to my best performing retirement positions in 2022 so far:
  • $BMBL with a 35.80% return YTD
  • $SWAV with a 32.35% return YTD
  • $TYL with a 31.41% return YD

And a look at my best retirement performing positions in July:

My top 10 positions continue to make up ~33% of my portfolio. $MELI's great July brings to back to the top spot followed by $AAPL, $AMZN, $F, $GOOGL, $SHOP, little known and rarely mentioned $NVEE, $COST, my baby $SWAV, and $SIVB.

Looking forward to August, I'm still considering opening a new position in either $TTD, $TWLO $SONO, $NET, $NTDOY, and after this recent fall, $ROKU.

Taxable Portfolio
In June, I only added to $ATZAF. No positions in this brokerage pay a dividend so there was no DRIP and I did not exit any positions.

Similar to my retirement portfolio, my taxable was up 13.67% in July but is still down 36.60% YTD and the month-by-month is also still abysmal.

Shoutout to my best performing taxable positions in 2022 so far:
  • $TMDX with a 110.75% return YTD
  • $MSP with a 39.49% return YTD - RIP as is had such a great return because it was acquired.
  • $SILK with a 8.10% return YD

And a look at my best performing taxable positions in July:

My top 10 positions continue to make up ~90% of my portfolio as I only have 14 positions in this brokerage. The top 10 remains basically the same with $SNOW, $TMDX, $ATZAF, $SILK, $DT, $LMND, $NCNO, $CPNG, $BIGC, and $OM. Those other 4 positions must be truly awful performers (indeed they are).

Looking forward, I'm undecided which position to add my monthly DCA to. Leaning towards $DT or buying the dip on $OM.

Alternative Investments
I've begun putting some money into Fundrise, Landa, and StartEngine. It's too little to even bother with showing returns and a lot of the stuff is illiquid but I wanted to at least catalog what I'm investing in.

Fundrise
I haven't really dove into yet. I've just been dumping money into it since April and letting them allocate into their Flagship Real Estate Fund. I'll look at their other portfolio options when I get some extra time.

Landa
I've been putting a very small amount of money into Landa each month since April just to play around. I've bought shares in 5 properties and seen some miniscule dividends. It's an interesting foray into real estate and I will probably continue adding to it. The current list of properties I have shares in are:

  • 1394 Oakview (GA)
  • 4474 Highwood (GA)
  • 729 Winter (GA)
  • 8662 Ashley (GA)
  • 24 Ditmars (NY)

StartEngine
This is probably my favorite of the 3 and also the most risky by far. StartEngine allows angel investing in non-public companies. The odds of investments going to zero must be incredibly high while the odds of them ever making it to a publicly traded company incredibly low. That's why StartEngine will remain a very small portion of my portfolio.

I currently am invested in:
  • 3i Tech - "3i Tech Works builds engagement solutions to increase customer loyalty and drive revenue for small and medium-sized businesses. Our integrated platform aims to even the playing field for brick-and-mortar retailers and restaurants by providing them the best digital tools to connect and engage with mobile customers."
  • Future Cardia - "We are Future Cardia (Oracle Health, Inc.) - Bringing you a tiny insertable cardiac monitor for a long-term heart failure monitoring solution to disrupt the $5B market and to set the stage for Connected Implants. Our approach is a simple 2-minute office procedure that brings simplicity, accuracy, high compliance for long-term monitoring, and existing insurance coverage."

I having approved but not yet finalized investments in:
  • SapientX - "We have created a voice assistant powered by AI (artificial intelligence) that can interact with users as if it were their best friend. Today, we are working with companies that make cars, appliances, smart home devices and vending machines to voice-enable a new generation of products."
  • POPS! Diabetes Care - "We have developed and commercialized a revolutionary AI self-care platform for diabetes management. Our mission is for people to take ownership of their diabetes through simple technology, and we have people in all 50 states and Australia using Pops."
  • Kari Gran - "Kari Gran Skincare is a pioneer in the rapidly-growing clean beauty business, headed by passionate female founders disrupting the category with differentiated products targeting an underserved market; women 40+ experiencing dry skin due to menopause. We know the stresses and challenges that come with dry skin, but more importantly, we also know the solution."

I also have an approved but not yet finalized investment in a signed edition Banksy artwork, Laugh Now.
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James Andrews's avatar
$16.1m follower assets
What I did this week
A reasonably quiet week trading wise but a solid week for the portfolios with some nice gains across the board. Monthly wrap up to follow later this weekend. I have a 10 year reunion for a team sports championship we won in 2012 so unlikely to be in any condition to crunch the numbers today or tomorrow :)

Income Portfolio: Opened new positions in $DVN and $LCII . Collected dividends on $ROP $OZK $AFG and $CMCSA . Trimmed $PCAR with a view to being all out over the next few weeks. Sold all $JEF for a negligible gain.

Growth Portfolio: Added $SWAV to my portfolio holdings. Up 25% on my $ETH.X purchase last week. I will be keeping a close eye on this and have set a tight trailing SL.

Speculative: Nil activity once again but $MARA had a nice bounce as did $NOTV
Steve Matt's avatar
$18.6m follower assets
Commonstock says Buy The Dip. I say Buy The Rise. My
$SWAV Pitch
I didn't realize the cut-off for the Buy the Dip competition was yesterday but whatever. Sill posting!

Being that this is the literal first actual due diligence I have ever written, I figured why not write it about a medical company I don't understand very well but am very bullish on. Who knows, maybe I'll learn some things along the way. Here goes nothing!

Also, I encourage any cardiologists or anyone with better knowledge of the technology or financials to please correct anything I get wrong in the comments. The best way I learn is by making a mistake!

Who is Shockwave Medical?
Shockwave Medical developed and and commercialized intravascular lithotripsy (IVL) technology.

WAIT. Don’t click away yet. Stick with me for this part. The financials are worth the wait.

What is intravascular lithotripsy? Let’s break it down.

Intravascular: Situated in, occurring in, or administered by entry into a blood vessel (per Merriam-Webster’s).

Lithotripsy: An electrical current that creates a spark within water, vaporizing it, which create pressure waves at the speed of sound that pass safely through soft tissue to break kidney stones into smaller pieces. It’s worth noting the most common form of kidney stone is a calcium stone, calcium coincidentally being a common for of atherosclerosis which is the buildup of plaque in blood vessels

Ok, so IVL is the use of an electrical current that causes a momentary spark that creates a pressure wave that breaks up calcium buildup in arteries while safely passing through the thin membrane that lines the inside of the heart and blood vessels. This treatment allows stents to be placed in areas that would have been difficult or impossible to be stented using other treatment methods.

Shockwave has gained FDA and CE approval for IVL treatments of peripheral and coronary artery disease while treatment of aortic stenosis is in the clinical development stage.

Is IVL safe? Well, I’m not the kind of person who can read a clinical study and understand it but my wife, who is a doctor and published author herself, thankfully is one of those people. She kindly perused several studies and confirmed that the data does indicate that IVL is safer for the patient over existing methods such as PTA (Percutaneous transluminal angioplasty, colloquially known just as angioplasty). Shockwave’s site has several different visualizations of their products safety and efficacy.

What are the financials?
You made it. Thanks for sticking around (or skipping ahead). Prepare to see revenue and margin growth that will knock your calcium off.

The development and refining of IVL began in 2009 and gained initial FDA approval in 2017, the year they first recognized revenue, a whopping $1.7MM. From then through 2021, their revenue CAGR was over 240%, with 2021 bringing in over $237MM.

As revenue has soared, gross margins have flourished with 2021 coming in at 85% and Q1’22 at 86.2%, an increase from 75.3% in Q1’21.

Operating margins on a TTM are 10.7% and came in at 16.4% in
Q1’22, again an incredible improvement from past quarters and years.

You want profits? They have that as well. On a TTM basis,
Shockwave has profits of $29MM, good for a 9.8% net profit margin. They are
also free cash flow positive over the LTM and dilution, while high early on as
can be expected from an unprofitable medtech company who IPOs, was just 6.1% in
2021 over 2020.

Another metric that matters to me is revenue per employee.
This can be a greater indicator of hiring just to say you hired without
actually adding to the bottom line. A good example of the latter is Appian
($APPN) who grew employee count 109.3% from 2017 to 2021 while revenue grew
108.9%. Non-retail companies should be able to grow revenue exponentially faster
than headcount. So how did Shockwave do? Pretty, pretty, pretty good, despite
ramping up head count, primarily in sales and marketing to sell their newly
approved treatments.

What’s the valuation?
While Shockwave is by no means cheap, they are trading near their own LTM and NTM lows for P/S and EV/S. P/FCF is 324 although I wouldn’t use this metric just yet as they just became FCF positive.

The balance sheet is solid with long-term debt of $9MM vs cash and equivalents of $66.3MM.

How’s inside ownership?
From the Co-founders, nope, not really. The original co-founders of Shockwave are Daniel Hawkins, businessman, John Adams, electrical engineer, both of whom are described by the company as serial entrepreneurs. They came up with the technology for IVL while working in a medtech incubator so t’s not entirely surprising they developed it and moved on. They added Stanford cardiologist Todd Brinton, head of Stanford’s biodesign program and also an entrepreneur, as a third co-founder later on. Brinton stuck around until Dec 2018 before moving on to become the Chief Scientific Officer and VP of Edwards Lifesciences ($EW). Hawkins transitioned from CEO to Sr. Advisor in May 2017 and started a new company, Avail Medsystems, in Aug 2017. He stayed on as a Sr. Advisor until Nov 2020. Adams is a mystery as my googling didn’t turn up much. Since none of the three are insiders, I haven’t been able to determine if any still hold shares in SWAV.

As of Q1’22, directors and executives owned 3.9% of the company, with Doug Godshall, the current President and CEO, accounting for 1.6% of that and Dr. Frederic Moll, a board member, accounting for another 1.1%. The inside ownership is a bit disappointing but at least they have an experienced team who has been with the company for most of its post-FDA run. The CEO joined in May 2017 while and CFO joined in April 2016.

Who are the competitors?
So… ummm… nobody? According to Endovascular Today, Shockwave is the only company with IVL products on the market. This is their tech. That would make them not just the first mover and top dog in the IVL field but the only moved and the only dog in this field that.

What’s the TAM?
Shockwave puts their current TAM at over $8.5B, of which they’ve captured less than 3%. That TAM includes Japan, where they just received regulatory approval in in March of this year, and China, where they just received regulatory approval in May of this year. Management stated on their recent conference call that they expect to recognize sales in both countries this year and have begun ramping up sales and marketing teams in both countries.

In a January 2022 report by DelveInsight on the Lithotripsy Devices Market, it was noted that technological advancements in lithotripsy is expanding the global market and bringing in procedures that previously weren’t within the lithotripsy domain.

Gaining regulatory approval in new markets, the increase in heart disease worldwide, the continued improvement and efficacy of the IVL technology, and expanding its use cases, I could easily see their TAM growing well beyond their current estimate.

On heart disease in particular, the coronary segment was their main growth driver in 2021, accounting for 68% of their revenue after being just 36% in 2020 and 2019 each.

Meanwhile, the US accounted for 79% of their revenue after being between 50-60% the previous three years. Assuming successful launches in Japan and China this year, I’m hoping to see APAC be broken out as its own geographical category in 2023 and then new markets come in sight to continue expanding their TAM.

How has the stock performed?
Sorry friends but there’s no dip to buy here, at least not right now. Not only has Shockwave thumped SPY and QQQ over the past 3 years, it’s also a green stock in the past year while SPY and QQQ are firmly red.

What’s my position?
As of June 30, SWAV was my 22nd highest position by total cost basis, which puts it in the top 20% of my portfolio. I first purchased shares in August 2021. I increased my share count by 60% in February, 13% in March, and another 16% in May. My average cost per share currently sits at $172.91. Shockwave has easily been a benchmark beating position for me so far, but take that with a big grain of salt as I’ve only held for ~11 months. Considering my time horizon is decades, my returns vs my benchmarks over such a short timeframe should carry little weight.

What am I watching going forward?
To keep my thesis intact, management needs to keep growing revenue without needing to expand headcount to absurd levels. Revenue per employee is a metric I watch for that. Intuitive Surgical ($ISRG) is a good comp in my book and they are around $600,000 in revenue per employee.

I’ll also be watching their IR page for progress of their clinical trials and news of any regulatory approvals in new countries or expanding the type of procedures IVL can be used for in existing countries.

Lastly, I need to see Japan and China take off. Failed adoption wouldn’t be a company destroyer as the US can hold it owns in heart disease but APAC is a significant portion of their estimated TAM. If management bungles this, it would be a severe blow to my trust in their ability to execute.

That's it?
They close their investor presentations with the below slide which I enjoy so I just had to include it.
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Steve Matt's avatar
$18.6m follower assets
My May Returns Are In!... And They're Not Great (Still).
As I said in April, my horizon remains 20+ years out. I see my portfolio getting pummeled right now and generally don't care. I only see opportunity.

Retirement Portfolio
In May, I added to $ABNB, $BIPC, $CHWY, $CRM, $CRWD, $DDOG, $GLOB, $JPM, $MMM, $MPW, $O, $OKTA, $PEP, $PGNY, $PLD, $PUBM, $SHW, $SWAV, $TROW, $U, $UPST, and $ZS. I also added to $AAPL, $COST, $JPM, $O, $SBNY, and $SBUX via DRIP. I exited $SMG and $XYL.

May saw my retirement portfolio retreat by 6.86%, bringing my YTD fall to 37.36%, easily getting beat by $SPY, $QQQ, and $VTI.

I'm still learning this new investment software so my all-time performance below is only through the end of 2021.

It's safe to say QQQ is beating me by at least a couple hundred bps through May 31, 2022. I'm certainly still trouncing SPY though.

My Top 10 holdings by current market value make up ~34% of my portfolio.

Taxable Portfolio
My taxable brokerage is ~10% of my total investments. It's also much more speculative (early stage medtech is a big portion). In May, I added to $SILK, $BTC.X, and $ETH.X. Nothing in my taxable brokerage pays a dividend so no DRIP. I didn't exit anything either.

May saw my taxable portfolio retreat by 9.67%, bringing my YTD fall to 42.22%, easily getting beat by $SPY, $QQQ, and $VTI.

My taxable has gone through 3 different iterations over the past 13-ish years. You can see there was no holdings around 2013 and again around 2017 as I sold out of all positions for different life reasons. The beginning to 2013 iteration was the "I don't know what the fuck I'm doing, let me buy random companies I know with no research and pray" phase. Thankfully it was a bull market and I got lucky. The 2014 to 2017 iteration was "I nailed it last time. I'ma do that again but also play with options as well" phase. You can see how well that worked out.

This iteration is actual research with a what-can-this-company-be-in-a-decade being my main thought. This approach is why I don't mind seeing my this portfolio getting whooped. None of the positions in this portfolio are core holdings, which means I follow them quarter-by-quarter via 10-Q/K, press releases, general news, etc. I have my finger on the pulse and the underlying businesses are performing as I hoped or struggling by with bright spots (looking at you $DMTK, $LMND, and $BIGC).

(Note: I didn't lose almost all my money in 2015 but I can't figure out why the software is calculating it that way. 2015 was a bad year in the taxable portfolio but not that bad. Hopefully I have it corrected for my June update).

My Top 10 holdings by current market value make up ~90% of my portfolio.
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Sachiv's avatar
$866.5k follower assets
Profits are made on the way down…
Agree with the ⬇️ philosophy /approach. Here are my names to add to that list:

$QCOM - growth in every sector of chip use, with a lot capex model helps this company remain low risk with high interest rates…a global talent pool and legal strength, and partnerships across industries makes this company important to governments

$TXN - a shift away from China Mfg will help lower geographic risk. 40% of revenue currently from China. Very strong capital allocators and generates tons of OCF/FCF…no need to look at BS “adjusted” metrics

$TSLA - strong supply chain management(batteries,
Minerals, and components) and in house problem solving vs using consultants to maintain strong margins and operating leverage, in an increasingly difficult world, & uses leverage from other related companies like SpaceX, and has built positive reputations in Europe Asia and the Americas already…

$SWAV - a small company relatively, it’s basically using a razor and blade model to serve the cardiovascular calcification issue globally. It’s recently won permission to serve the China market, and a randomized study has just been released where patients after two years of receiving their treatment are doing better than those who underwent regular angioplasty (stents, etc). At these valuations and improving topline, bottom line, and OCF/FCF numbers & having no debt, I find a global reopening scenario (regardless of economic trend for the next 12-18 months) a great time to relook at $SWAV

Thanks to @osayawe_terry for his post, jogging my thoughts…and these are just a few of the top of my head. Hope to add more as the storm continues to brew! Thanks for following!

Steve Matt's avatar
$18.6m follower assets
[Press Release] Shockwave Medical ($SWAV) and Genesis MedTech Obtain Regulatory Approval in China for Intravascular Lithotripsy
Shockwave received Japanese approval in March and now has received Chinese approval. Major news as they expand their footprint. The US share of their revenue has been increasing since 2019 when it was 53%, compared to 2021 which was 79%, and Q1'22 which was 84%. Obviously the demand in the US is ridiculously strong and the growth in Europe (the other major geographical segment they report) has been no slouch, but I'd love to see the need for report APAC. Hopefully Japan and China take off.

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