Pre-election Portfolio Review

Here's my portfolio going into the election. The main holdings are: 

• GOOGL
• ILMN - talked about oncology upside here 
• FNF - I sold down in Feb as explained here, but bought back a chunk when it dropped to ~$30.
• AMZN
• PGR
• SQ+PYPL
• ASML - a small position from 2018 that doubled and turned into a material position
• TTD - this has tripled. First wrote about it last year, and here
• SHAK - bought in August
• FORM
• GH

Google and Illumina are 6-7% positions, the rest are no more than 4% each. I also have a long tail of smaller positions. 

Roughly, I'm 75% long equities, 25% cash/bonds/preferred's/yield plays. I'm also -15% short index futures, taking net equity exposure down to ~60%.

So it's a defensive posture. But probably less defensive than it looks. I'm running a barbelled portfolio where I have cash & equivalents on one hand, and highly volatile stocks on the other. 

The newer stocks in the portfolio are FORM, GH, and ILMN. For now I'll just do a few bullets points about them.

FORM (avg cost basis slightly < $29/share).

• #1 player in probe cards for semiconductor testing. Here's a nice little explanation of where probe cards fit in.
• Every new chip design needs its own probe card. This is really a consumable business so I regard it as steady revenue (at least compared to equipment makers) in a structural growth market.
• Their largest customer is Intel. Intel's troubles contributed to FORM's stock weakness this year. But FORM is gaining share at TSMC and particularly at the most advanced product lines.
• Management has a good track record of achieving its goals. The company's 2023 target calls for about $160mm FCF. Assume some interim cash flows and 17-20x EV/FCF, stock is worth close to $50 in 2-3 years.

ILMN and GH (avg cost basis ~$283/share and $97/share, respectively)

I actually had a starter position in ILMN since mid-2019, added during the downturn in February and March, and made it my biggest position in September when ILMN announced the acquisition of Grail, and stock got crushed below $270. (ILMN lost way more in market cap than what they will be paying for Grail!)

I was initially negative on Grail too, but quickly came around to it. 

Grail does pan-cancer liquid biopsy screening. The advantage of liquid biopsy is obvious. 

A few years ago, my mom did a checkup and found nodules in her lungs. It was suspected to be lung cancer. But the doctor couldn't confirm until my mom undergoes a biopsy - basically surgery to cut out a piece of her lung tissue for examination. 

My mom's fine now. But she sure would have preferred a simple blood draw! As for ongoing monitoring, blood draws will be infinitely preferable to repeated surgery.

But why Grail? Isn't there a ton of these liquid biopsy companies? 

• Yes, there's a ton of liquid biopsy companies, but only a few are 1) pan-cancer, and 2) for screening. 
• For example, I also own Guardant Health, which is one of the few companies that does pan-cancer liquid biopsy, but for cancer therapy selection instead of early screening.
• I posted a long thread here. Quick summary thesis: The pan-cancer screening market will be a natural oligopoly, where the first successful product will gain economy of scale and customer stickiness - overtime that combination will make Grail's lead insurmountable.  
• The whole field is very early innings, so I have an entire basket of these. ILMN and GH are the largest ones, but also PACB/EXAS/NTRA/NVTA.

More on Pan-Cancer Screening

Take a step back for a second. Forget the theories and just think about it. Pan-cancer screening just makes sense! Society NEEDS this.

Does it makes sense that people should have 50 screening tests for specific cancers such as colon cancer, lung cancer, breast cancer...etc? And then have insurance cover them one by one?

In practice, having these separate screenings means we don't get screened until some doctors suspect we have one of these diseases - and that's most likely AFTER we start showing symptoms. Stage 1 cancer is about 90% curable, while stage 4 cancer is only about 10% survival. Not getting screened until you're showing some symptoms is a huge disadvantage.

Pan-cancer screening solves that. You get it early, before you have any reasons to suspect you have cancer. You get it on some routine annual check up. One blood draw, 50 screens. Millions of cancer deaths prevented.

That's the holy grail of cancer screening. Someone has to drive that forward. Used to be Grail, now it's Illumina. 

The technology is here. It would be a sin of our healthcare system to not make it happen.