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#Investment Thesis
Last edited 2 months ago

My initial investment in this company was based on some naïve and very optimistic expectations of Admedus’ immunotherapies division.  This story has not played out and I experienced ‘thesis creep’ as I looked and found other reasons to continue to invest in this company.

Far more conscious of the dangers of this type of behaviour I am now setting out my current reasons for holding this company at the start of the financial year 2018-2019.  My aim is to inject some accountability into my future decision-making.

I am in the midst of swotting up on ‘discounted cash flow’ and other concepts of stock valuation but am finding the task arduous.  I hope to have a more precise criteria for tracking this investment thesis including some Free Cash Flow estimates in the coming months.  Minus these forthcoming details the framework for my current investment thesis is as follows:

  • Any consistent and reliable growth for Admedus will come from increased sales of products within the ADAPT platform;
  • For this to occur, the company must scale well: costs must not increase at the same pace of sales and the high profit margin of ADAPT must remain intact;
  • The opportunity costs of this investment, as with all investments, increases with time – as does the risk of competition or other disruption. My investment thesis relies on Admedus being a profitable and significant player in the field of human tissue repair by the end of the calendar year of 2021. I will challenge myself to a sell of this position if Admedus has not achieved this outcome at that point in time;
  • If Admedus has succeeded in obtaining this foothold at that time I intend on continuing to hold the company as it grows and exploits its position;
  • Admedus may experience sporadic tailwinds from its investments in vaccines or TAVR.  These are high risk/high reward plays and exist outside of my assessment of ‘fair value’ for the company.  A significant or onerous re-investment in either area by the company would force a re-assessment of my thesis;
  • Admedus’ infusion business may continue to reliably bolster the bottom line of the company.  It is unlikely to grow significantly nor is it worthy of a premium; and
  • Growth in sales must come chiefly from the United States and Europe for high profit margins to remain intact.  Any success in an emerging market is unlikely to return the same margins. China may also present a risk for the intellectual property of Admedus.

*** Edit 19/11/2019 ***

Latest entry in the Investment Diary of a Bagholder - 'The Thesis Creep':

Dear Investment Diary,

today I continue to hold.

Today's circumstances are so far removed from my original investment thesis that it could only be categorised as the most imaginative of fan fiction.  But surely it is not long now before this erstwhile mediocre company pronounces that they, indeed, have made it rain.  And they did so only because I waited as patiently as Rapunzel keeping my capital locked up in their terrible tower waiting for this good fortune,

yours inexplicably faithfully,

Pablo E. Bruh


*** Edit 05/06/2020 ***
Almost nothing like my original thesis, but a couple of things could be going Anteris' way, and possibly more has changed than just the name.  This is still an absolutely speculative punt (and as a long term baggie on this I have given up on objectivity), but for the first time in a long time I think this could be a tempting buy even if I wasn't holding.

It is all down to TAVR now (point 5 of original thesis), and a binary outcome, make or break.

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