Episode 0015: Entellus Medical – Part 2: Let’s talk about the rough and tumble history of how balloon sinus dilation companies evolved, and how the dogfight might continue.

In part 2 of this stock research podcast discussing Entellus Medical, we explore the rough an tumble world of how rivals in the medical device industry can vary from raising a hundred million dollars for companies that wind up having minimal revenues and fail, to the foibles of industry giants such as Johnson and Johnson, which can be outwitted by small, nimble competitors such as Entellus Medical.  We also share with you the lurid side of small companies that raise capital from investors who think new technology can be a panacea, when in reality just a few innovators succeed.  Even when a company develops an advance to the industry’s state of the art, it isn’t a lead-pipe cinch that it won’t fall prey to the political leverage a well-connected political contributor and lobbyist might exert to quash treatments that would save money for insurers, improve outcomes for patients, and raise incomes for doctors, as incredible as that may seem to those who unquestionably support either the left or right ends of the political spectrum.

Episode 0014: Entellus Medical: Is this Broken IPO a niche leader in balloon sinus dilation that could gain market share and grow for many years?

Entellus Medical came public in January 2015 under the premise that it was the leader in office-based balloon sinus dilation, which was a small but increasingly preferred niche compares to FESS operations performed in hospitals.  The investment research discussed in this podcast examines whether changes in medicare reimbursement may have been a setback that favored hybrid-FESS procedures, and how steroid implants may have temporarily affected what seemed to be an inevitable shift to treating chronic sinusitis in a dentist-like procedure.  We also discuss complications that arise, and the suitability of dealing with these outside of the operating room.

Episode 0013: Plantronics: Will Skype for Business succeed, and will unified communications adoption expand beyond its presently low level?

Institutional investors have heard the story that unified communications is under-penetrated, and that soon most businesses will want to buy Plantronics’ headsets that incorporate software compatible with Microsoft’s Skype for Business cloud-based platform for office workers.  Why has penetration stalled at a fraction of where consultants thought it would have been already?  This stock research podcast provides equity analysis of Plantronics, and discusses why the penetration rate of unified communications might leap higher at some point in the next few years.  The competitive position of Plantronics and GN Store Nord / GN Netcom is explored fully.  There are high barriers to entry, for there are over 3 million lines of encrypted code in headsets.  These two players are duopolistic competitors, and they are both intensely focused upon returning cash to shareholders rather than destroying shareholder wealth.

Episode 0012: Trimble Navigation: Maturing competition in precision navigation and the growth in building information modeling (BIM)

Three players are preeminent in the field of precision navigation: Trimble, Hexagon, and Topcon.  Is the competitive dynamic stabilizing?  How are managements dealing with slower revenue growth, and does this mean that end markets are much more penetrated than before?  How rapidly can adoption of building information management (BIM) take place?  What are the implications for profitability going forward?

Episode 0011: Trimble Navigation: Casualty of King Dollar or building a durable cloud-based enterprise software empire?

Trimble Navigation’s high-margin geospatial business and its precision navigation systems for farm use have slumped as the dollar has pressured commodities markets.  But the company continues to grow in building information modeling (BIM) software and in mobile solutions for truckers and other fleets and work forces.  Management is seeking to improve profitability, and heavy investment in new features make its precision location software more  indispensable.  As technology continues to advance rapidly, will Trimble be a beneficiary of improved hardware and cloud-based data systems, or will its customers retrench?  Can it continue to make acquisitions, or must it focus inward to improve margins?

Episode 0010: Cree, Inc. Part 2: Can Cree’s strategy of heavy R&D investment in high power LEDs translate into better downstream profitability?

We described in Part 1 how Cree, Inc. ramped up its headcount in its LED fabrication operation during the major up-cycle that occurred from 2006 through 2010.  Although fewer bodies have been added since then, there’s “only” been a 10% reduction in corporate headcount since the all-time peak in fiscal 2014, and LED sales are now back to where they were before fiscal 2010.

Although Cree has changed course to emphasize lighting fixtures, the company still suffers from low gross margins and excessive operating expense relative to sales.  It also pays out a generous stock comp package even though its stock has underperformed Acuity, a pure-LED comparable that has treated its shareholders to the above average returns one might expect when being a leader in such a rapidly growing category.

In this podcast, we recap the operations discussion from part 1 (including thoughts about how our model has been changing over time), document how well the rest of the industry is doing, talk about the nature of excess Chinese capacity that was accumulated to accommodate flat screen TV manufacturing back in 2010-2011, and provide some color on what it’s been like to participate in the commercial, residential, and overseas markets for LED lighting.

Having heard parts 1 and 2, we think you will now have the building blocks to ask the right questions and properly think through whether Cree’s breakthrough SC5 technology might separate high power LEDs from those made by commodity LED fabricators, mirroring what happened coming out of the cycle downturn nearly a decade ago.  Importantly, you will want to consider whether Cree, Inc. can continue to grow in line with industry leaders on the lighting fixture side and if downstream margins might improve.

Episode 0009: Cree, Inc. – Part 1: The LED commercial lighting market is expanding rapidly, so why have Cree shares been left for dead?

Shares of Cree, Inc. are trading at about the same price as they fetched a decade ago, but at this point in time demand for LEDs for use in commercial lighting applications is very robust.  Other companies involved in this area have enjoyed a warm reception from investors, in stark contrast to Cree.  In this stock research podcast, we explore in detail what is happening in the realm of commercial lighting design and construction, and how Cree’s strategy has positioned this innovative company for the future.  As with many other episodes, we revel in the contrarian nature of the present moment, which we feel can reward those who choose to carefully examine the components of this company’s financial statement reporting and evaluate corporate strategy in a thoughtful and considered way.

Episode 0008: Zeltiq Aesthetics – Part 2: How does cyrolipolysis stack up against competition in non-invasive fat reduction, cellulite, and acne?

Besides having a unique technology, cyrolipolysis, Zeltiq may be able to effectively use this revolutionary platform to address needs beyond the original intention to selectively reduce fat in a non-surgical way.  In 2017, it plans to use CoolSculpting to treat grade 2 cellulite and acne.  Grade 2 cellulite affects a large portion of women, while some other devices target grades 3 or higher, which are characterized by unsightly manifestations like cottage cheese thighs.  By 2018, management hopes to introduce CoolSculpting to treat acne.  In this stock research podcast, we discuss the research of Dr. Rox Anderson of the Harvard Medical School, who delves into the history of acne treatments.  Powdered dry ice and acetone pastes were prevalent in the 1940s and 1950s, but were pushed aside by antibiotics and retinoids.  A tightly controlled approach to cyrolipolysis may improve outcomes and address worries of antibiotic resistance and fetal retinoid syndrome.  Using one platform to treat three conditions would present a unique competitive advantage to Zeltiq, should it succeed.

Episode 0007: Zeltiq Aesthetics – Part 1: Pioneering the market for non-invasive fat reduction

Zeltiq has single handedly created a new market for reducing fat that targets the moderately overweight segment.  It has become the fastest growing aesthetic treatment, which was already notable for the tremendous demand for neuromodulators like Botox and hyaluronic acid fillers like Restylane and Juvaderm.  In Part 1 of this podcast, we explore how Zeltiq’s high margin consumables and systems have permitted the company to break through the barriers that often restrain new aesthetic products.  We also discuss why cyrolipolysis, an affordable and non-surgical procedure, is popular with a new group of women and also men who are approaching practitioners for help in sculpting difficult areas of their bodies that they can’t control with dieting or exercise alone.

Episode 0006: iRobot: New leader of the connected home?

With the launch of its Roomba 980 vacuum in September 2015, iRobot has added cameras, sensors, and Wi-Fi connectivity.  CEO Colin Angle explains why he feels a roving sensor platform aboard the Roomba places iRobot in a unique position to grab leadership in the connected home of the future, and why fixed-point sensor arrangements such as Nest and Dropcam have suddenly fallen from favor. In an analyst day presentation in New York City, CEO Angle unveiled a new corporate strategy that relies on home connectivity as an engine of differentiation and growth.  In this podcast, we discuss how the company’s new empirical approach to marketing may convert millions of skeptics into evangelistic promoters of robotic vacuums, explore a disruptive opportunity to capture share in lawn mowers and related services, and explain why management is deemphasizing defense and remote presence robots.