Ryan
Jan 84 min
Weekly Update Nov 20-24
Let’s jump right in!
Datadog
Datadog recently did a small acquisition of a company named ActionDesk. From the announcement:
Actiondesk is a cloud-based spreadsheet application that integrates with your live data sources, enabling you to access and join data from across your cloud stack. Actiondesk automatically connects data directly from your databases and other services, removing the need for CSV export operations that become stale the moment they are executed. You can then run common spreadsheet functions, such as lookups or pivot tables, using the same methods available in other spreadsheet applications.
This will probably enable better reporting for devops engineers. It’s much easier to have visualizations when your data is tied to some sort of spreadsheet.
TransMedics
The company bought its 9th airplane for $12.9 million. This is from the 8-K:
On November 9, 2023, the Buyer acquired a fixed-wing aircraft from Hurricane Express Logistics, Inc. for a purchase price of approximately $12.9 million.
I am surprised by how quickly the company is moving. On the Q2 call, they said they were targeting 10 planes and now they’re basically at that point. That’s why, on the Q3 call, they explained how they were now targeting 15-20 planes.
Tesla
GM recently announced it purchased Tools and Equipment International, a Tesla supplier of sand-casting molds. I wouldn’t be surprised to see GM start doing gigacasting to copy Tesla’s innovative manufacturing methods. Meanwhile, Tesla is attempting to in-source even more of its materials and supplies so I don’t think this should be too much of an issue. Further, this is just for the sandcasting, the actual gigacasting supplier, IDRA, is from Italy. If an ICE manufacturer were somehow able to buy that company, then I’d be worried. However, in that case, Tesla’s $26 billion cash pile would almost certainly go into effect.
Second, the company’s Cybertruck launch event will be November 30th. I’m excited to finally see some of these trucks in the wild. From the side, I think the car looks fairly silly but from the front, it actually looks pretty awesome. The shape of the truck and the performance will be like walking billboards for Tesla. This is a great example of why, historically, they haven’t had to do any advertising. Relatedly, I saw a clip of Dwayne “the Rock” Johnson on Joe Rogan and he didn’t even know about the existence of the Cybertruck. Rogan was explaining it all to him. Ready for a bad joke? What, does he live under a rock?
Third, India sounds like it’s changing its stance on Tesla’s potential investment in the country. Tesla allegedly wants to build a Gigafactory worth $2 billion in India, which will provide a great shipping hub for southeast Asia. There have been various setbacks and it seemed like everything was grim until this week. Worst case, it looks like Tesla will eventually be able to import cars into India.
New Companies
One thing I like to do is look at the best companies regardless of price. I primarily look at growth and business quality first and then wait until the valuation is somewhere in my wheelhouse. This makes sense to me because business pattern recognition compounds. Looking at terrible, cheap businesses doesn’t quite give you the same quality of pattern recognition. In saying this, allow me to briefly introduce you to an Australian company named Pro Medicus.
The company was founded in 1993 by Sam Hupert. It’s the leader in medical imaging software. Its main product, Visage 7, allows radiologists to see x-rays via streaming technology rather than compressing the files. This makes physicians jobs so much easier because their files can be quite large so instead of waiting hours to compress their files, they can pull them up quickly. This seems like a rather simple problem to solve but Pro Medicus actually has to run a whole GPU cluster to enable the streaming. It’s actually quite a tough technical problem to stream these images with nearly zero latency.
The size of some of its contracts are a testament to this. In May, the company signed a 7-year $10 million deal with the University of Florida. In January, the University of Washington inked a $16 million, 7-year contract. And Gunderson Health System signed a $16 million, 7-year deal with the company. Why 7 years for each of these? Honestly, I don’t know – that just seems to be the sweet spot.
Pro Medicus’s systems are also enabling physicians to notice abnormal things on MRI and CT scans, through the use of AI. The software is trained on millions of images and so it has rapidly improved to aid doctors in noticing weird patterns or cancerous growths.
TTM revenue is only $85 million and the enterprise value is nearly $6 billion so that is about 70x sales, an incredibly high number – probably the highest I’ve ever come across besides the first month after Snowflake’s IPO. However, Pro Medicus has 70% EBIT margins and 50% FCF margins. The business is incredible. Revenue is growing about 30% and is even set to accelerate after some of these large contracts start hitting the books.
With all of that said, Pro Medicus is on my watchlist and I’ll be waiting until we see a little better valuation. But I just wanted to let you know about the company.
Closing
If you want to gift someone a Dynasty Membership, the referral program will still be in effect. Just email me (ryan@investingcity.org) and I’ll send a code for checkout that would give you and the person you referred, one free month.
Happy Holidays!