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Mazor Robotics: The Next Intuitive Surgical

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Conventional wisdom in choppy markets is to avoid high valuation stocks. The volatility will give you nightmares. If properly prepared, volatility can also give you opportunity.

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In a correction good young companies often see the price of their equity fall more than average. This is what successful investors look for in the overall strategy.  Let me give you an example.

Start with a long time favorite in the healthcare field: Intuitive Surgical (ISRG:NASDAQ).  I ran across ISRG in April 2008.  Wow that was right in the middle of the financial crisis when Bear Stearns was going out: volatile times back then.  

Intuitive Surgical  are the guys that pioneered robotic surgery.  Their Di Vinci surgical suite specializes in procedures like prostatectomies and hysterectomies.  

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From a patient perspective, Di Vinci offered faster, less invasive and quicker recovery times than conventional surgery.  For physicians it meant being able to offer a better service and a happier customer.  For Intuitive Surgical it meant big upfront revenues on the sale of the equipment and even more continuous income from sale of disposable products consumed during the surgery.  A true win win situation.

Back in 2008 when I discovered ISRG it was selling at nearly 100 times a token level of earnings.  The total market cap was somewhere around $500 million.  To rich for my blood at the time.  After all, it was the middle of the financial crisis.  Not a time to take chances.

Today Intuitive Surgical is worth just over $45 billion.  They are far and away the leader in robotic surgery.  The lesson: if there is a long term investment thesis, even a major financial crisis is a short term hurdle.

Along Comes Mazor Robotics For Spinal Surgery

Mazor Robotics (MZOR:NASDAQ) created the Renaissance Robotic Surgical System.   This dramatically simplifies the very nature of spinal surgery.  The system is 98%-99% accurate, reduces complications by more than two-thirds and reduces exposure to harmful radiation by 35%-50%.  Finally, it reduces recovery time and that makes for happy patients.  When it comes to alleviating back pain a satisfied customer is a walking endorsement for the Renaissance System.

Promising Agreement with Medtronic

The fun got started back in 2016 when Mazor signed a marketing and distribution agreement with Medtronic (MDT:NYSE) that represented a breakthrough for the Renaissance System.  Mazor is an Israeli company strong on technology but weak in global distribution.

The selling and distribution of surgical suites like Renaissance is long and involves entire project teams of medical experts and IT professionals to train hospital physicians and their surgical teams.  Once trained, it practically takes an Act of Congress to force doctors to change their habits.  So the long selling cycle tends to lead to long-term customer relationships.

How Mazor Makes Money

The company makes money from three sources.  The Renaissance Surgical suite sells for about $850,000.  With the sale, Mazor offers maintenance and service under contracts.  This is like annuity income that is highly profitable.  Disposables at a cost of $1,500 per operation are the second most important revenue stream.  The gross profit on these items is over $1,350.

Blade & Razor Business Model

The interesting thing about Mazor’s business model is the disposables business. One only needs to consider the potential 100,000 US procedures and 500,000 worldwide might do for the company. Of course there is a lot of blue sky thinking here.  For example, not every surgical procedure will be appropriate.  Sometime, patient characteristics like obesity etc. preclude the use of various surgical techniques. Also cost and reimbursement issues have to be taken into consideration. Having stated all these caveats the opportunities for Mazor are interesting, so say the least.

Constant Comparisons

Along the way Mazor’s potential will constantly be compared with Intuitive Surgical.

The most recent data shows Da Vinci was used in over 650,000 procedures last year employing 3597 machines.  That works out to one surgery suite for every 180 procedures.  If we use this as a proxy, Mazor will need to sell roundly 2800 Renaissance Systems to service 500,000, and that is just half the global market.

Will Mazor succeed or will something trip them up along the way. On the positive side, it has regulatory approval for use in the United States and most everywhere else in the world. However, the healthcare business is littered with promising companies that flamed out so the risks are there. For all their success, Intuitive Surgical’s path encountered a few bumps.

There are already over 200 systems in place worldwide.  Mazor is starting to catch on. The company expects to report full year 2017 revenues of about $65 million in mid February.  We think near term order backlogs could be a little soft.  If so the stock could be impacted and that is an opportunity to watch for.

Something to remember, Mazor’s current value at about $1.7 billion may sound sizable but Intuitive Surgical is a far more lofty $45+ billion. We are neither doctors nor investment advisors so we won’t give you advice on your aching back or you financial portfolio.  However, we will keep you informed as more information on Mazor becomes available about this technology.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 75 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Walmart’s Flipkart Deal: The Dawn of a New Day in India

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It’s the dawn of a new day in India, particularly cross-border investment, thanks to Walmart’s groundbreaking controlling stake in Bengaluru-based e-commerce darling Flipkart. Walmart has tried for years to no avail to enter the South Asian country, until now.

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As a result of the deal, Walmart now has five seats on the online retailer’s board and is poised to play an influential role on the direction of the company — including a possible Flipkart IPO — setting the tone for further investments into the region in the interim.

It’s $16 billion deal values Flipkart at a whopping $21 billion and helps the Arkansas-based big-box retailer to compete more fiercely with Amazon, considering that the integration goes smoothly. Walmart has chosen a controversial target company to kick things off. Flipkart has been at the center of a saga ironically surrounding a previous cross-border investment.

Amazon is fighting back, however, as evidenced by it reaching into the belly of western India including Gujarat’s Bhuj, where some residents don’t even have online access. Amazon is taking an Etsy-like approach there with a focus on handmake craft items that are unique to this corner of the world.

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No doubt corporations around the world have it on their radar as a possible harbinger of more cross-border investment activity to unfold in the region.

Gopal Jain of Mumbai-based private equity firm Gaja Capital told The Financial Times: “India continues to be perceived in global boardrooms as a tough place to do business in.” But he also said that as a result of this deal, global executives have gone from “being on the heels to being on the toes.”

India’s Cross-Border Investment

The overhaul of India’s international investment has been two decades in the making. And while India Prime Minister Narendra Modi says his administration has opened the doors to foreign investment, there still hasn’t been much evidence of that. For instance, cross-border M&A into India totaled $14.5 billion last year, lagging the performance of other developing countries including Brazil and China by as much as 50%, as per Dealogic data cited in the FT.

Indeed, the last time that a deal of anything close to the size of Walmart’s Flipkart acquisition was more than a decade ago in the telecom space when Vodafone took a majority position in Hutchison Essar. That deal left a sour taste in the mouths of would-be pursuers given hostile tax environment in which Vodafone was forced to operate.

Prime Minister Modi has the opportunity to prove to the rest of the world that India indeed is open for investment. If the Walmart deal can somehow help to shake the stigma that is attached to foreign investment into India, as evidenced by the “tax terrorism” that’s been attached with the region, it, in fact, could reflect the dawn of a new day for cross-border M&A in India.

Feature image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 6 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. Full disclosure, she's invested in bitcoin.




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R3’s Blockchain Corda Used By HSBC and ING For The First Time

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HSBC

UK-based HSBC Holdings Plc. along with Dutch ING Bank NV, completed the first transaction based on the blockchain.

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The transaction was credited to Cargill Inc. and was performed during last Monday. It was based on a shipment containing soybeans and transported from Argentina to Malaysia. The transaction relied on a distributed ledger technology or commonly known as blockchain platform named Corda, developed by the R3 consortium.

R3 Blockchain Network

R3’s own blockchain network is currently supported by 12 banks, including Bangkok Bank, ING, SEB & U.S. Bank, and of course HSBC among other international banking institutions, which could help the DLT technology broaden its borders and make it accessible to the mainstream public.

The use of blockchain technology eliminated the need for paper and/or other physical documents, while it drastically fastened the transaction process.

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Under traditional circumstances, the same transaction would require from five up to ten days to be filled, exchanged and verified by the respective parties involved in the transaction. Using next generation DLT technology, the process was smooth and instant without the need for mortal interference.

Vivek Ramachandran, HSBC’s global head of innovation and growth for commercial banking, issued the following statement when asked about the transaction:

“This is an inflection point for how trade is conducted. With blockchain, the need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous.”

“The reason why letters of credit have persisted is because of two real challenges — the absence of digital infrastructure and the challenge of coordinating multiple parties. This platform helps us overcome the first and I think the technology and everyone focussed on it gives us the impetus to go after the second now with hopefully much better results than we have seen in the past”

The use of blockchain technology in the IT sector seeks to make transactions of crucial data more reliable, secure and faster. With DLT technologies, companies are able to reduce the risk of fraud in letters of credit and other types of transaction with the use of smart contracts, as well as severely reduce the number of steps required for the transaction to happen.

Major Partnerships

Letters of Credit (LoCs) are the main way for vendors (importers and exporters) to trade with each other, as it eliminates problems such as the great distance between them, the different language and the different laws.

LoCs guarantee more than $2 trillion worth of transactions annually, but the process creates a great deal of paperwork and it is extremely time-consuming.

R3, while a silent player in this disrupting scene, has managed to establish some astonishing partnerships with major international central banks, including the Bank Of America.

The company uses a slightly different approach when it comes to blockchain technology, which is relatively close to IBM’s approach with Hyperledger. Corda is not a token, and you won’t find it or its mixed market cap used by projects using R3’s network in CoinMarketCap or similar cryptocurrency trackers.

While many banks attempted to join the blockchain train with Ripple and other similar transfer unions using blockchain technology as their basis, HSBC and ING are not your average banks, and they’re definitely on the verge of something that might revolutionize the scene and bring banking institutions closer to the future.

Featured image courtesy of Shutterstock.

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Goldman Sachs Plans On Joining The Blockchain Revolution

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While blockchain-powered monetary systems are considered extremely volatile by the majority of traditional investing firms and banking professionals, some of them might have found their way onto the scene. Take Goldman Sachs for an example.

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Goldman Sachs carries an interesting log of achievements throughout its history in the banking and venture capital fields respectively.

Being an American “Bulge Bracket” investment bank and financial services company, GS managed to get involved with major Wall Street banks, governmental agencies and Academic Institutions, as well as large industrial corporations, establishing a series of long-term relationships with their partners, clients and associates.

Goldman Sachs is considered a primary dealer in the United States Treasury market, and it is one of the few banks that suffered but endured the subprime mortgage crisis in 2008, receiving a $10 billion investment from the United States Department of the Treasury as part of the Troubled Asset Relief Program.

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Ten years later, Goldman Sachs is again on the main scene of the global economy, this time taking its chances by investing in the disrupting high-tech sector and specifically in distributed ledger technologies, commonly known as blockchain.

Goldman reported last week that they would soon open a trading desk for bitcoin (BTC) futures contracts after a series of requests generated by the bank’s clients and partners.

At the same time, the Goldman-backed Circle company recently purchased cryptocurrency exchange Poloniex and it is planning to transform it into a leading exchange.

Most of these banks have heard about the numbers or seen the numbers that companies like Coinbase and Binance are putting up. There’s a real risk that some of those companies could overtake some of Wall Street’s biggest banks if they don’t get in the market.

…says Spencer Bogard, a Goldman Sachs partner at Blockchain Capital, who thinks that although it is an important step towards the legislation of cryptocurrencies and/or other token-based systems, it might cause further confusion as we still can’t say with absolute accuracy which token is actually legit and which is not.

Rana Yared, an executive officer responsible for creating the “silk road” between the GS customers and cryptocurrencies as an investable asset class, quotes that “Bitcoin is not a fraud” as previously described by various other Wall Street major bankers, including Jamie Dimon from JP Morgan, as well as important figures in the scene such as Waren Buffet and Bill Gates.

Whether Goldman’s adoption is a move towards mass adoption of this innovative technology or just a short-term opportunity to make fast profit for the major banking institution, we can say with greater certainty that cryptocurrencies and blockchain technology are here to stay.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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