CASE 1: Event driven case: Fuel Systems, 2009 and 2010
- Delta made 50% in a month on short and options positions from my research on fuel systems (FSYS), Italian-American manufacturer of CNG and LPG conversion systems with half its business in Italy (letter attached).
- Research on stock’s primary catalyst–Italian auto sales—found legally available source from trade association before end of month announcement.
- Source required intimate knowledge of institutions, language and culture—which no conventional analyst would have.
- Large mismatch between source info and consensus expectations yielded a high return, low risk date-specific trade.
CASE 2: EU organic food market and food company position
Year-long research on the EU organic food market for large Delta position in EU organic food company.
Delta needed to know/have:
- If company’s strategy was compatible with market’s evolution.
- A detailed picture of organic food market’s competitive landscape.
- A nuanced picture of individual country markets.
- Analysis of where growth would accelerate from organic going mainstream.
- Hundreds of interviews with store owners, wholesalers and trade associations in French, German and Italian.
- Meeting with Delta’s owner and company’s CEO.
- Organizing and participating in Delta owner’s interviews with other organic food company CEOs.
- Understanding politics and web of family and company relationships in Germany, EU’s largest organic food market.
Research projects done for Blueshift Ideas:
CASE 3: Weight Watchers (WTW):
Researched Weight Watchers’ European business.
- Found hidden driver of WTW’s European growth: providing outsourced obesity treatment in European health care systems.
- Interviewed French, British and Spanish dieticians and British National Health Service public health and obesity treatment specialists and Primary Care Trust managers.
- Found publicly available, compliant quantitative data proving Weight Watchers was the lowest cost provider of weight loss services in the UK: a poster publicly exhibited at an NHS conference showing Weight Watchers’ cost per kg. lost was lower than its competitors.
Conclusion: National health services’ desperate need to cut the costs to treat obesity-induced diseases is a secular growth driver of demand for outsourced obesity treatment. As the proven lowest cost provider, Weight Watchers will benefit from this trend.
CASE 4: Cognex (CGNX)
Researched Cognex’s bar code readers and machine vision systems business.
- Interviews with distributors, competitors and industry experts on Cognex’s European business.
- Discovered possible catalyst: the use of machine vision systems in the high growth area of anti-counterfeit security on pharmaceutical production lines. Big pharma will pay anything to secure its production lines, but Cognex must sell through machine builders for whom machine vision systems are a small part of the total package.
Conclusion: CGNX would be slow to benefit from high growth in this area.
CASE 5: Green Mountain Coffee Roasters
Interviewed on line coffee retailers, coffee roasters, GMCR competitors and securities and patent attorneys to determine if the GMCR brand could remain dominant in the face of imminent patent expirations, shareholder lawsuits and increased competition.
Conclusion: not likely and that GMCR was a great short if the stock bounced strongly off its big drop after the David Einhorn/Greenlight Capital presentation.
CASE 6: Electronic Health Records
Industry white paper on the UK’s high growth EHR sector.
- Interviewed high level health IT officials in the British National Health Service and the Royal College of Physicians, doctor-founders of patient-driven and open source EHR firms and directors of health IT trade media.
- Built SWOT analysis of incumbent health care IT providers and their business models.
- Reached high level sources through extensive back and forth negotiations. Achieved free access to private sector sources that typically expect to be paid, as sources for Expert Networks are, and detailed explanations why this was not possible were necessary–and usually successful.
Conclusion: the end of the centralized National Program for Information Technology (NPfIT), and government policy moving toward open source and decentralized procurement, will hurt big incumbent IT providers.
CASE 7: Paypal and Mobile Payments
Interviewed mobile app developers, competitors, retail research firms and other industry specialists to determine if Paypal would continue to be the jewel in Ebay’s crown as mobile payments ramp up in the next three years.
Conclusion: Paypal has an established brand and user base, which are big competitive advantages–for now. But the spread of NFC and its checkout anywhere mobile technology could help Paypal’s competitors while its app developers who are supposed to build out its mobile payment platform have no faith in or loyalty to Paypal and the spread of NFC and its checkout anywhere mobile technology could help Paypal’s competitors.
CASE 8: Mobile Payments and the Mobile World Congress
Attended the Mobile World Congress and in four days interviewed 22 exhibitors, presenters and attendees, including the CEOs/Principals of Vivotech, Quantum Wave Capital, Aerotel, Proxama, Exadel, Blippar, Escher Group, PlugWallet, Restoration Partners and Kuapay. In-depth interviews of up to 90 minutes and presentations recorded and covered:
- The shifting relationships between banks, carriers and retailers.
- The rise of near field communications (NFC) and the possibility that Paypal may not be prepared.
- Shifting consumer behavior, or how consumers say no until they say yes with breathtaking speed if the provider designs their experience right.
- The proliferation of private label mobile payment platforms serving the unbanked 2/3 majority.
- Augmented reality and shop anywhere.
- Mobile health and the spread of body energy driven sensor technology for mobile monitoring and assisted living.
… and much more.
One interview was a debate about NFC’s future between the CEO of Vivotech and his neighboring exhibitor, Paythru, interviewed the day before. A debate’s value: it produces a narrative that gives a sense of where the power in a business is shifting toward. Participants say what they might hesitate to say when talking just to the interviewer.
Conclusion: The mobile payments market is wide open and the rise of NFC and shop-anywhere augmented reality will transform retailing and produce big winners nobody expects from countries nobody expects big winners to come out of (the next Mpesas-Safaricoms). Mere payment processing is a commodity and fees charged to retailers will drop drastically and go flat per transaction. The banks’ best line of defense is their expertise in managing security and liability. All but the biggest payment processors will be disintermediated.