Healthcare REITs from Hoya Capital

This was a pretty good post on Healthcare REITs, though my perspective is similar to Hoya’s (preference on lower risk segments) creates a bit of echo chamber here.

https://seekingalpha.com/article/4296372-healthcare-reits-rehab

DOC and WELL are each ~2% of my actively traded portfolio within the income growth segment. LTC is a much, much smaller allocation mostly because their management team is excellent, but the SNF is a tough business and to be mostly avoided. I am not expecting continued stock price appreciation and have recently trimmed my DOC position, but all 3 will remain in portfolio unless business changes materially.

Words chosen matter

Over the last couple of days, financial news headlines from mainline sources, especially Marketwatch, CNBC, and their peers, have chosen headlines that I see with strong bias toward painting events more negative, more bearish – interest rates and economic data.

An example from today was the jobless numbers this morning. The data was below the aggregate estimate, but MarketWatch headline was: “Jobless claims inch up in mid-september” … a true statement, but the probable audience reaction for the headline tilts negative, rather than “the number was better than anticipated” which would have been more positive.

My point here is not to highlight an incorrect bias, but that we as readers have to carefully respond and look at the data ourselves – not just the headlines. They are deliberately chosen for a narrative by that source and their motivation will always be to sell more content – not really help us make better investment decisions.

I worked with a brillant strategy person not long ago – truly brillant – and in a meeting this phrase was spoken with everlasting impact: “You have failed to realize the power of the English language”. Words chosen by news outlets have a purpose and it just may not be the same as ours.

A plausible bleak scenario

Scenario planning across many domains works for me – thanks to my early study of Shell’s work. I think thru the different scenarios and try to weed thru Plausible, Probable and Unlikely. From that, plans and contingencies and mitigations are created.

Portfolio managers in today’s environments can easily be overwhelmed with the different scenarios birthed by the seemingly irrational events surfacing around the world.

However, that does not mean you can dismiss them without considering the scenario plausible or probable. This scenario posted today is plausible – tho it bothers me greatly.

Thanks to Heisenberg report for diligently working through this over the last few weeks … it’s not crazy, but it’s scary. How do we plan for it is the key question.

India population growth

GDP is powered by population growth – workers, buyers, innovators … Most of the developed world is slowing, shrinking in some cases (political questions withheld). From a portfolio management perspective, I acknowledged that I am woefully under invested in India. This just makes my error more painful

Statista followed up w/ additional info on India – this targeting United Nations multidemensional poverty. https://www.statista.com/chart/18680/the-number-of-people-in-multidimensional-poverty-in-india/

Infographic: Then & Now India's Fight Against Poverty | Statista

5G rollout speeds so far

Another great data slice from Statista on current speed updates … a small sample size for sure, but will be interesting to watch this over time.

and a projection of up-take over time by geography (source Ericsson)

Infographic: Global 5G Adoption to Take Off in 2021 | Statista

Confusion?

After all the Fed speak today, the current interest rate futures are a bit strange, maybe confused

Near term rates are surely going down (wisely or not tbd) yet longer rates are mixed w/ 10yr flat and 30yr up … the superficial interpretation: fed lowers front end, increases inflation and “perfecto!”. Such BS – nothing is that simple. I am holding capital until some of this falls out. Younger more risk accepting traders can get in the saddle – and many will make money for sure. I just, as i’ve said countless times, want a return of my capital, not necessarily fantastic returns on my capital.

Ecosystems or Platforms?

A recent post by a followed SA author (John M. Mason) returned to the ‘ecosystem’ value chain narrative – i remember this from almost 10 years ago as my former employer tried to create “the third mobile ecosystem” behind Google and Apple. We failed miserably, but the learnings and strategy were invaluable. John has a solid way of tilting paradigms for investor evaluation, and I appreciate that. Ecosystems are a type of moat – but way more resiliant. Ecosystems take big money and years to evolve to that strength however, and that was our learning – we tried to make it happen on our timeline. They also seem cemented with differentiated and spectacular user / customer experience – not a ‘thing’.

https://seekingalpha.com/article/4269956-21st-century-leaders-build-ecosystems-contrasting-amazon-and-t

Actionable take-way will be an increased scrutiny on my T investments.

Potential 5G unintended consequences?

Bloomberg posted an article on NOAA positioning that some 5G frequencies may interrupt their ability to predict weather – as i understand it (the non-scientist view), NOAA tracks waves emitted from water molecules in the atmosphere as part of their prediction toolbox. 5G disrupts that ability to the tune of 30% degradation. https://www.bloomberg.com/news/articles/2019-06-04/march-to-5g-could-trample-hurricane-tracking-scientists-warn

Again, on these 5G posts … I am NOT pushing any position on 5G safety. I am just forcing myself to risk manage my investment priority in the IOT narrative over the next 10 years. I am making risks I find visible — no more.

A view of the 5G Economy – but a bit old (2017)

I stumbled on an article from 2017 on 5G economy. I poked thru looking for insights into 5G value chain decomposition to help sequence up-coming investments.
https://cdn.ihs.com/www/pdf/IHS-Technology-5G-Economic-Impact-Study.pdf

I have already started a country (or region) coverage strategy focusing on US, China, UK and Canada. I was going to add another country and was looking at S. Korea, but this data suggests Japan the better target.

IHS did a great job then with use cases and specific industry impacts.

I am working on a value-chain guide to investment placements and timing, but will be a few weeks before ready. Key take-away from this IHS report is two-fold: a) pay attention to Japan and b) view opportunities with an industry overlay (like above table).

SaaS primer and Microsoft, Zoom & Slack

Bespoke pointed to this article on SaaS and the comparisons between the three companies. I am not sure that I totally agree with their differentiations, but their one chart is an interseting framework to use when evaluating technology companies. A matrix between use case innovation and customer relationships.

Teams expands the use cases within Microsoft's existing userbase

Post on 5G

There was a post this week on Seeking Alpha on 5G technology, but it really came up short for me.
https://seekingalpha.com/article/4259057-5g-story-profit-technological-evolution

The post has some very good information for those of you who may not understand 5G technology and how it is different from 3/4 G. The author, then however, goes more into why Verizon (VZ) is an undervalued investment. As far as the post goes, the comments are probably worth more than the VZ content. There was a undeveloped recommendation to pay attention to other aspects beyond the towers (CCI in this case) and the carriers (VZ), but without sufficient information – hence why short for me.

I am starting to partition out the 5G businesses in an order of investments (and profits). My big buckets are in the order of profit hitting bottom line 1) Infrastructure equipment, 2) devices and their components, 3) services and 4) security (timing is hard on security) – i am NOT looking at applications at this point. In the referenced post, CCI is in infrastructure and VZ is services. I am long carriers to cover most global areas: T, VZ, CHL, TU and VOD; but those investments all yield (at entry prices) >5%, so i can afford to wait. The infrastructure is the first investment bucket to really dive into … i have just started.

Q1 2019 Earnings conf calls #1 – HASI, WELL, CY & INTC

Disclaimer: these are my opinions, not recommendations

I worked thru 4 of my Q1 earning conference call transcripts: HASI, WELL, CY and INTC. I find these conference calls both educational on a business strategy / communications perspective and a specific company performance level. There is also some value in learning which analysts ask good questions and which just toss a slow-pitch ‘gimme’ questions. Guess who you ignore?

The two that were terrific both in terms of company execution and depiction of strategy: HASI and WELL. My allocation to HASI is tapped out, but i will soon (Q2/3) turn back on the DRIP machine (i had turned off due to valuation). WELL is one to watch and I will both turn on DRIP and watch for opportunistic purchases to double my current holdings (in IRA).

CY was not bad, but their business is a tough one and they admitted that visibility is a bit opaque at best. This is an opportunistic purchase imho trying to get a dividend yield ~3.0% from the 2.6% today. With that said, I believe their IOT strategy is solid but will be a 2020-21 story. CY and MRVL are my favorite IOT connectivity plays (others like SWKS), but this is a longer term narrative and i strongly believe there will be lower prices ahead to take positions.

INTC was terrible on a couple of fronts – talk about new CEO birth with fire. Declining units, competitive ASPs, inventory write-down and worse a 2H hockey stick in demand because customers are working thru 2018 purchases / supply. Really? What happens if demand in cloud and enterprise does NOT pick up in 2H? I have seen this movie before and there will most like be much lower stock prices. The one ‘good’ nugget was the talk about 5G edge and infrastructure; however, that is a small portion of the overall product mix and a 2020-21 story as well (depends on 5g roll out plans across the globe)

Market complexity and simplistic press narratives

One of the most complex / dense writers that I read regularly and usually read more than 1x, the Heisenberg Report, posted on SA today an article that reflects a point I was making earlier this week about the simplistic press narratives and marketing spin used to keep individual investors putting our capital in play.

https://seekingalpha.com/article/4255508-its-simple-fata-morgana-redux

This is a dense post and has at least two key themes, but the one that I am focused on is how simplistic narratives drive both human and headline algos to make investment decisions that may / may not be completely factual, or grounded on solid financial data. As marketing departments do what they are designed to do – drive more business, they will continue to get better and better and influencing consumers (amateur investors) to generate revenue for the professionals. The marketers / spinners are not evil or malicious; they are doing exactly what they were designed to do: drive revenue growth.

The key take away for me, which is the same point I made earlier here, is that we individual investors need to really spend the time and diligence behind our strategies and investment decisions – check, cross-check and corroborate all inferences and recommendations with our own data analysis. Our jobs are getting harder.