Mesoblast (NASDAQ:MESO) is an Australian biotech company that the Wall Street Transcript has been keeping in touch with for over 8 years.
Our latest interview with CEO Silviu Itescu, MBBS, FRACP, demonstrates the perseverance and intelligence needed for a novel medical treatment to succeed.
Silviu Itescu, CEO and Managing Director Mesoblast (NASDAQ:MESO)
Dr. Itescu has served on Mesoblast’s board of directors since the company’s founding in 2004, was Executive Director from 2007, and became Chief Executive Officer and Managing Director in 2011.
Prior to founding Mesoblast in 2004, he established an international reputation as a physician scientist in the fields of stem cell biology, autoimmune diseases, organ transplantation, and heart failure.
Dr. Itescu has been a faculty member of Columbia University in New York, and the University of Melbourne and Monash University in Australia.
In 2013, Dr. Itescu received the inaugural Key Innovator Award from the Vatican’s Pontifical Council for Culture for his leadership in translational science and clinical medicine in relation to adult stem cell therapy.
The Mesoblast (NASDAQ:MESO) CEO had this to say recently:
“These are off-the-shelf therapeutics that are frozen, cryopreserved at minus 140, and shipped in that way finally to the hospitals.
And we’ve done the appropriate Phase II, Phase III clinical trials that support regulatory approvals across various jurisdictions, including the FDA.
That’s the snapshot of the company.”
The Mesoblast CEO goes on to explain:
“…When you’ve got this mega inflammatory condition that results in inflammatory cytokines that destroy your organs, like your intestinal tract and liver, those same cytokines activate our cells through surface receptors.
And when our cells get activated in this way, they release other factors that turn off the very cells that made those inflammatory cytokines.
So, they’re kind of orchestrators of an anti-inflammatory response that really brings down that severe inflammatory process and protects the end organs.
Ultimately, GVHD is a disease where the bone marrow transplant attacks the body through these cytokines.
And if you can tone down the cytokines in the immune cells of the bone marrow, then you’re protecting the patient. And really, you’re protecting the gut, you’re protecting the liver.
And ultimately, the objective is to change a disease that is fatal 70% or 90% of the time to a disease that can be cured.
That’s what we do.
…We’ve successfully completed the Phase III trial.
We met the primary endpoint.
The FDA now is reviewing the file for a potential approval.
They’ve already inspected our manufacturing site, so the expectation is that we will get a decision on an approval no later than the PDUFA date, perhaps in advance of that.
And we have to prepare and are preparing for a successful commercial launch.
We have built our resources in-house in terms of the Head of Commercial and Medical Affairs and are building out a very small, targeted commercial team that will be in a position to engage with the hospitals that do all these transplants.
Our product is already being used under compassionate care, under expanded access, and we’ve treated several hundred children already in the major centers across the U.S. So we are well known.”
Mesoblast (NASDAQ:MESO) has been developing this drug for years. In a May, 2016 interview, Dr. Itescu stated that:
“The nearest product to commercialization is our orphan drug indication for graft versus host disease, which is a major complication of bone-marrow transplants.
We have a Phase III trial actively recruiting in children, where already in data for 260 children we have shown that we can significantly impact both response rates and, more importantly, survival at day 100.
This is a devastating complication in children, where the mortality rate can approach 80%.
So if you can have an impact on survival, you’ve really got a tremendous drug on your hands.
This Phase III trial is expected to complete recruitment toward the end of this year, and we expect by the end of 2017 to have an application with the FDA for approval.
So that’s the shortest timeline of our products for commercialization.
That same product was already approved very recently in Japan and has been launched in Japan in the last month or so, evidence that a first-world regulatory body has looked favorably on our products and that we’ve received the kind of reimbursement that one would expect for an orphan drug.
That’s pretty exciting for a company in the stem cell space.”
In a March 2019 interview, Mesoblast (NASDAQ:MESO) CEO Silviu Itescu stated that:
“Our first product approved globally is being marketed in Japan as it has been licensed to JCR Pharmaceuticals, which is an orphan drugs specialist in Japan.
The approval was the first fully approved cell therapy product of any type in Japan.
It occurred about two and a half to three years ago after an approval for use in children and adults with steroid-refractory graft versus host disease.
Graft versus host is a disease that is a devastating complication of an allogeneic bone marrow transplant.
It occurs in about 50% of people who get an allogeneic bone marrow transplant, and typically, 90%-plus of people who undergo these transplants have had high-dose chemotherapy for their underlying leukemia.
So the transplants serve to rebuild their bone marrows after chemotherapy.
You can imagine seeking a cure for the underlying leukemia and then getting this devastating complication of graft versus host disease, which has a very high mortality in its most severe forms.
It is a terrible complication.
There is nothing that is approved other than steroids in the first instance.
Also, 50% of people will fail steroids.
After steroids, nothing else is approved anywhere in the world other than our mesenchymal lineage product in Japan.
So we’ve been very pleased that this product was approved.
It has received very good reimbursement.
We believe that since the launch of the product, the adoption rates by clinicians approximates about 50% of our expected addressable market.
So we are very pleased by the uptake and the way it has performed.
We are aware of no safety issues.
It gives us great insight into how we would expect a similar drug to perform once it has launched in the United States.
We will be filing with the FDA for the same product very shortly.
We have been using it now in the United States for several years under an expanded access program, so over 240 children have already received this in the United States.
We have performed a very rigorous Phase III trial that demonstrated similar data to what we had generated in the earlier EAP program.
In the Phase III trial, we were able to establish a very significant improvement in overall response rates at day 28 and a very significant association with improvement in survival at three months and at least through to six months.
So the results that we have achieved clearly demonstrate that this product, if approved, will be a first-line therapy after steroids have failed.
The Japanese experience informs us and gives us great confidence as to how it’s going to perform in the U.S.”
Mesoblast (NASDAQ:MESO) also interviewed with the Wall Street Transcript in 2021 at the tail end of the COVID epidemic. In this interview, CEO Silviu Itescu stated:
“We achieved the pre-specified primary endpoint of Day 28 overall response and achieved a significant outcome around survival benefit in children with steroid-refractory GVHD.
For children under 12, there is no approved therapy.
In these children, mortality rate approaches somewhere between 70% to 90%.
So it’s a real bad disease, a real unmet need.
We’ve demonstrated through the submission process and with a 9-to-1 positive vote by the ODAC panel — there was agreement that we demonstrated both safety and efficacy for these children for whom there is no approved therapy.
Our focus is on demonstrating to a sufficiently high standard to the FDA that if approved, the product maintains lot to lot consistency every time we make it.
Obviously, in the Phase 3 trial, the product demonstrated consistency because the results speak for themselves.
We’ve continued to make the product.
And we have established new assays that I think continue to even further underline that we understand the mechanism of action and that go to the heart of the mechanism that the cells go through in order to improve the outcomes in these steroid-refractory GVHD patients.
And so we think that we will have alignment with the FDA because the potency assays now are very much in line with the disease process, how we think the cells turn off the disease process.
And we think that it’ll allow us to be very confident, and for the agency to be confident, that as the product is hopefully in the marketplace, it will demonstrate that every lot behaves exactly the same way as the lot before.
That’s really what the FDA wants.
They want to see that we’ve got a handle on the mechanism, that we have a handle on the production, that there’s no differences in production from every product that goes out the door.”
“Well, over the next 12 months, we expect to see some pretty substantial inflection points, including first product approval and launch in the U.S. market.
I think we have enough cash to get us through that period.
We’ve got most recently $138 million in cash.
We’re in the process of refinancing and extending our debt facility.
And that will strengthen our balance sheet.
And we expect to enter into several strategic partnerships, which will also, I think, strengthen our balance sheet.
So we’re pretty confident around our cash position.
And as long as we’re judicious in the use of capital, which we are, and invest primarily in the areas that are focused on commercialization — i.e., the commercial footprint and manufacturing inventory, which is what we’re focusing on very much on the first logical product — I think we’re well cashed up at this point.”
Read all the interviews in their entirety with the Mesoblast (NASDAQ:MESO) CEO Silviu Itescu to get an in-depth look at how biotech entrepreneurs develop their cutting edge products and bring them to market globally.
Brookfield Renewable (NYSE:BEPC), Darling Ingredients (NYSE:DAR), and Constellation (NASDAQ:CEG) are three sustainable energy companies potentially powering portfolio upside this year and next.
Billy Hwan, CPA, CFA, Portfolio Manager, Parnassus Value Equity
Billy Hwan, CPA, CFA, is the lead Portfolio Manager of the Parnassus Value Equity strategy and a Senior Analyst.
He is responsible for portfolio management of the firm’s Value Equity strategy and firmwide investment research.
“One is Brookfield Renewable (NYSE:BEPC), which manages a global portfolio of hydro, solar, and wind power generating assets.
They provide solutions for their customers’ desire to reduce their GHG emissions.
Brookfield helps governments and businesses meet their decarbonization goals by offering an alternative to carbon-based power generation.
This company is similar to a REIT — it’s a yield company — so it distributes its dividends from very predictable cash flows.
They sign long-term power purchase agreements with their customers.
Integrating this into how we think about relative value, the company’s stock was affected by rising interest rates and declined after the Federal Reserve hiked rates.
We purchased the stock in the fall of 2023, after the stock price dropped more than 50% from its 2021 peak.
We believe the company [Brookfield Renewable (NYSE:BEPC)] is set to benefit longer term from the growing demand for renewable energy.
It most recently signed a massive agreement with Microsoft worth over $10 billion to expand Microsoft’s renewable power capacity.
That was the largest PPA signed to date, and shows that Brookfield is decisively benefiting from the trend toward more sustainable power generation.”
Anthony Tursich, Portfolio Manager, Calamos Investments
Anthony Tursich, CFA, is a Senior Vice President and Co-Portfolio Manager with Calamos Investments, and has more than 25 years of experience in socially and environmentally responsible investing strategies.
Together with Co-Portfolio Manager Jim Madden, Mr. Tursich leads the firm’s Sustainable Equities Team.
He joined Calamos Investments following its 2021 acquisition of Pearl Impact Capital, LLC, the company he founded in 2018, where he served as Chief Investment Officer and as Portfolio Manager since inception for three ESG-integrated portfolios.
Mr. Tursich’s energy pick is off the beaten path and is described in his exclusive interview in the Wall Street Transcript:
“…There’s a company based just outside of Dallas, Texas, called Darling Ingredients (NYSE:DAR).
This is a company that we think of as an energy company, while S&P and MSCI classify them as a consumer staples company.
What Darling does is they collect and process waste and create value-add products from waste that would otherwise go into landfills or go unused.
What Darling has created in recent years as an output of this waste is renewable diesel fuel that essentially comes from collecting and processing used cooking oil.
This company developed a joint venture with Gulf Coast refiner Valero (NYSE:VLO) to essentially be able to process this feedstock into renewable diesel that can go into existing energy infrastructure.
So, you don’t need a new pipeline to move and blend this with traditional diesel — it can go in the same energy infrastructure, which makes it more desirable, more efficient, and cheaper to blend.
But the real opportunity for Darling and Valero extends beyond just traditional diesel, renewable diesel for trucking and ground transportation.
They’ve developed a plant to create sustainable aviation fuel, which is going to be in increasing demand as airlines start to decarbonize in order to meet the commitments that they made in terms of reducing emissions and complying with the Paris Climate Agreement.
They have one plant that’s operational.
They have another plant that’s being built, and already a contract in place to supply sustainable aviation fuel to JFK Airport in New York and support JetBlue’s sustainable aviation fuel needs.
So, a great opportunity for growth for that company, a great opportunity to increase demand for their feedstock there.
They’re essentially creating more demand, which makes their products higher margin and more profitable for shareholders.
Michel Sznajer, Global Renewables Portfolio Manager, Ecofin
Michel Sznajer, CFA, joined Ecofin in 2016 as Portfolio Manager of the firm’s Global Renewables strategies.
Before joining Ecofin, he was a Partner and Portfolio Manager at Silvaris Capital Management.
Previously, Mr. Sznajer was at Wellington Management Co. as an industrial/infrastructure Analyst and Portfolio Manager.
Prior to that, he was at Goldman Sachs and Indosuez W.I. CARR, covering the telecommunication sectors in Asia. Mr. Sznajer earned a M.Sc. in business and engineering from Brussels University and is a CFA charterholder.
In his exclusive interview with the Wall Street Transcript, Mt. Sznager states: “…Something that is a different profile.
Constellation (NASDAQ:CEG) is a stock that has done really well in the sector, but more broadly in the S&P 500.
Constellation is the largest nuclear electricity producer in the U.S., over 10% of the total electricity generation in the country.
Those hyperscale data center developers are really looking for a substantial amount of electricity generation, and preferably carbon free.
So they have started to approach the nuclear companies to bypass the grid and basically connect directly to the nuclear plants to guarantee the amount of supply, but also 24/7 and without carbon.
You saw a first deal struck between the company called Talen (NASDAQ:TLN) and Amazon for that, at a substantial premium to the electricity price in the market.
Constellation is in negotiation with other hyperscalers, the same way Microsoft has been. And so you see Constellation benefiting from the fact that you have substantial incremental demand from buyers who are much less price sensitive than you and I are as retail electricity consumers.
They’re ready to pay a premium to the prevalent electricity price to guarantee that supply.
That first deal with Talen, if the wholesale floor price is about $43 per megawatt hour for nuclear electricity, they got more than $20 above that, so, high $60s.
The whisper is that future deals will be even higher than that.
And all of that is really incremental return for those nuclear companies — it’s all price and all cash flow, there is no incremental cost for them to generate.
Constellation is a beneficiary of the IRA, because the IRA provided a floor for the price of electricity, the $43 I mentioned.
Before, there wasn’t one, so that was the first very positive step for Constellation.
The second step, more recently, is the fact that there is that incremental demand that is really much less price sensitive that’s adding to the return.
So, you get a company that on its own merit is seeing growth and demand that should grow their earnings about 10% per year, and there might be upside to that from those additional contracts.
From that perspective, we think it’s an interesting carbon-free option in the market.” Brookfield Renewable (NYSE:BEPC), Darling Ingredients (NYSE:DAR), and Constellation (NASDAQ:CEG) are just 3 of the many stock picks for renewable energy upside in US stocks.
Read all the interviews in the Wall Street Transcript ESG & Sustainable Strategies Report to get the complete list.
John R. Hewitt, President and Chief Executive Officer, Matrix Service Company (MTRX)
Matrix Service [NASDAQ:MTRX] is a master class in building a billion dollar business in the United States.
“Over the last 40 years, Matrix expanded its services beyond maintenance and construction of atmospheric flat bottom storage tanks for crude oil and other refined products into refinery maintenance, turnarounds and capital projects that included specialty vessels — non-atmospheric storage tanks — as well as electrical infrastructure work in the Northeast and transmission distribution substation work.
Our move in the early 2000s into specialty vessels expanded our storage brand and leveraged acquired expertise in cryogenics — which is where product is stored in liquid form at extremely low temperatures or under pressure that keeps it a liquid, for example liquefied natural gas — LNG — and various natural gas liquids — NGLs — like ethane and ethylene, propane, butane, ammonia and hydrogen.
Around 2011, we began providing not only the storage components, but all the infrastructure around that storage — the surrounding plant infrastructure.
…When the company went public in the early 1990s, it was only bringing in about $40 million or $50 million in annual revenue and just before the COVID pandemic, we were, on average doing $1.2 billion to $1.4 billion in revenue.”
CEO John R. Hewitt describes how his strategy to focus on the storage and maintenance for the US oil and gas sector has led to high returns for his shareholders.
“We’re sitting on a record backlog right now and a large part of that is some form of LNG storage — either for peak shaving, which is the process of storing LNG at power plants for use during periods of low usage to boost power output during peak demand, or for fuel bunkering as an alternative fuel in high horsepower applications.
We are still seeing a tremendous number of opportunities in our pipeline for LNG-related projects.”
Matrix Service is seeing a burst of activity from the new hydrogen fuel supply chain.
“On top of that, there is a lot of activity with NGLs, principally for export ammonia.
There’s a high demand for ammonia because of its ability to be a hydrogen carrier.
We’re also pretty busy from an upfront engineering standpoint on hydrogen-related projects…
I think hydrogen is going to be part of the energy mix globally in the future.
We’re in the very early stages in the use of hydrogen and the role it’s going to play in our energy mix.
My sense is that its use is going to be primarily around transportation — at least initially — and mixed with natural gas or renewable natural gas for power generation.
That will probably be the initial demand for hydrogen.
It could be shipped as ammonia, it could be used as fuel in heavy highway trucks, trains, fuel cells, maybe for cars.
I think those are the areas hydrogen will play a role initially.
My sense is that, at least probably not in my lifetime, it won’t replace natural gas completely.”
The role of Matrix Service in developing clean energy alternatives is articulated by the CEO John R. Hewitt:
“The vision starts with our purpose.
We happen to be an engineering and construction company, but our purpose is to add value.
We add value by the things that we do and we add value to people around the world that use the energy that we’re able to store and help energy companies transport.
We provide value to our employees, giving them opportunities to take care of their families, to be more educated, to grow with the business.
We provide value to our business partners, to other fabricators, and other contractors.
We provide value to our clients in this whole energy cycle, and certainly to our communities where we work.
And we’re a public company with shareholders, and we have to provide value to them.
To do that, we have to deliver on our services, engineering, construction and maintenance work, with very high quality.
We’ve got to deliver very strong safety performance.
We have to deliver those services on time and on budget, and meet our clients’ expectations.
We have to do that with strong relationships.
That’s the foundation of our organization’s vision.
Long term, we need to continue to grow our business, either organically or through M&A activity, and we’re positioned to do that.
We’ve touched on some of the megatrends that are affecting our markets globally, but certainly supply assurance, both domestically in LNG peak shaving, and energy supply security.
Then, when you think about, for instance, what’s going on between Russia and Ukraine, and in the Middle East, and the ability for the U.S. to be a secure country to provide energy globally, that’s an important place for our clients to be.
We’re able to provide the services to help our clients do that.
The low-carbon energy transition is certainly a megatrend for us and is driving some of the things that we’re doing.
We talked about population growth demand.
We need more energy to improve the quality of life everywhere.
Geopolitical instability brings us back to secure energy supply from the U.S. as well as the global demand for low-cost feedstocks.
The key additives for chemicals that go into everything that we touch, whether it’s clothing, medicines, homes, or computers, those are carbon-based feedstocks.
They have to be processed, stored, and transported.
Our organization plays a role in almost all those areas, so we’re in a great spot.
We’ve got a strong brand, great people, and the right skill sets at the right time.
Our vision is to continue to play a major role in those parts of the global economy.”
John R. Hewitt has been President and Chief Executive Officer at Matrix Service Company since May 2011.
Prior to joining Matrix Service, Mr. Hewitt served as Senior Vice President of Aker Solutions where he was responsible for providing executive oversight on major capital projects in Power and LNG.
He previously served as President, United States Operations, at Aker Solutions E&C US, Inc. from 2007 to 2009 where he was responsible for managing all construction services in North America.
Previous to that, he served as President of Aker Construction Inc. where he had full profit and loss responsibility for a multi-disciplined direct hire industrial construction business operating throughout North America.
Mr. Hewitt has spent his entire career in the engineering, procurement, and construction (EPC) industry.
Mr. Hewitt earned a Bachelor of Business Administration degree in Finance from Stetson University in 1980 and a Bachelor of Science degree in Civil Engineering from Florida Institute of Technology in 1983.
Mr. Hewitt is a member of the Construction Industry Institute; he has served on various committees including the Implementation Strategy Sub-Committee and Optimizing Project Organizations research committee.
The full interview with John R. Hewitt, CEO of Matrix Service Company, is available exclusively at the Wall Street Transcript.
Dr. Jelena Arsic van Os, CEO, Accsys Technologies PLC
Accsys Technologies PLC CEO Dr. Jelena Arsic van Os has a PhD. in Solid State Chemistry from Radboud University Nijmegen, Netherlands.
Her company participates in one of the largest building supply sectors in the United States and around the world.
“…With our technology, we are able to transform fast-growing wood, guaranteeing its durability and performance for 50 years above the ground and 25 years if it’s in the water or underground.
No other existing wood product today can match this performance.
We are very proud to see Accoya used in many very high-profile projects like Google offices around the world, Wood City in Helsinki, Microsoft, Starbucks and Louis Vuitton shops.
Many architects really prefer us as a solution — for example, Kengo Kuma and Associates or Foster + Partners, BIG from Denmark, etc.
Our two brands, called Accoya and Tricoya, are considered a reference point in the marketplace.
Our products are used in decking, cladding, and joinery — e.g. windows and doors.
We are replacing the use of hardwood, and in that sense are helping to prevent deforestation.
So there is a very strong sustainability story on the back of Accoya.
On one hand you have technology patents, a worldwide presence; on the other hand, you have this very strong sustainability driver which we are very proud of.
The process that we use is called acetylation.
It is essentially soaking wood in vinegar, simply put.
So chemically, we are boosting the naturally occurring acetyls in the wood, making it harder for water to penetrate.
These techniques have existed since 1920.
Accsys was the first company in the world to actually master this technology in order to get a final wood product that maintains superior durability over the period of 50 years that we guarantee.”
The investment moat for Accsys Technologies PLC is this durable wood technology.
“…We own the technology for one of the most durable wood products in the world, which is providing us with significant growth potential in the building and construction industry.
Accoya and Tricoya are sustainable products.
Accsys is a company that is also becoming fundamentally much stronger.
With the peak capex behind us, we will now start to see the progressive benefits of increasing capacity and improved fundamentals.
It is a company that is becoming more efficient.
We are transforming for growth.
And I do believe that investors are going to notice this progressive trend very soon.”
Ketan Mamtora, Building Products Analyst, BMO Capital Markets Equity Research
Ketan Mamtora is Building Products Analyst at BMO Capital Markets Equity Research.
He joined BMO in April 2014 as a research associate covering the North American packaging and forest products sector.
He was promoted to an analyst role in 2016, covering the packaging and forest products sector.
In 2017 and 2018, Mr. Mamtora was named among the “All-America Research Team Rising Stars” by Institutional Investor magazine.
Mr. Mamtora emphasizes the technology trend developed by Accsys Technologies PLC CEO Dr. Jelena Arsic van Os.
“We are seeing increasing use of technology in the way products are made. So that is one. And as that happens, there is improved productivity. There is also less waste, and it just makes a process more efficient.
So that is one on just the production side, but then the other aspect is being able to provide options to consumers in the way they can think about how they want to build a home, which historically in the past didn’t happen all that much.
And you just have to look at the samples and decide based on that.”
One large cap stock that Mr. Mamtora identifies as a prime example of a lumber leader is Louisiana-Pacific (NYSE:LPX).
“Louisiana-Pacific (NYSE:LPX), and I’ve been following that company for over a decade.
The company was historically focused on just commodity oriented strand board.
Think about sheeting of a home.
But over the last few years, they have increasingly focused on the exterior siding business.
That is not a commodity business.
There is brand value and there is a service component.
And what’s unique is, they are using their oriented strand board mills and adding one or two steps to the process to make exterior siding.
And so, they’ve converted some of those mills into a product category which has higher growth rate, but also stable margins over a cycle.
And as they have done that, what they’ve also done is when the commodity markets are stronger and commodity prices are higher — like OSB markets when they were strong in 2021 and 2022 — they’ve also bought back a lot of stock, so Louisiana-Pacific cut its share count by 50% between 2018 and 2022.
And the stock price is higher today than it was back then.
So they have grown the business.
They are in the middle of this transformation.
They’ve also effectively allocated capital, and the investors have rewarded them for what they have done.”
Ketan Mamtora’s analysis leads him to two specific stock picks for 2024 and beyond.
“…The names that I like a lot, include a company called West Fraser (NYSE:WFG).
West Fraser is the largest lumber producer and the largest oriented strand board producer in North America.
Current lumber prices are quite depressed right now, and part of the issue is, in general, housing demand has been weaker this year.
We’ve also had supply growth in lumber over the last few years.
So, a combination of those two have pressured prices.
But if we look at where the stock is trading today — coming back to my earlier point on intrinsic value, we value these companies on normalized EBITDA, normalized margins.
And on that metric, the stock is trading near trough levels.
The stock is trading below 5 times our estimate of mid-cycle EBITDA.
The stock is actually trading below book value.
Usually, those are pretty good markers of attractive valuation for a company like West Fraser.
They have got a very strong balance sheet as well. They’ve got a net cash position. So, it’s a name that I like a lot at these levels.
The other name that I like a lot is Beacon Roofing (NASDAQ:BECN).
Beacon Roofing is the second largest roofing distributor in North America. It’s the largest public roofing distributor.
Roofing end markets tend to be quite stable because the vast majority of demand is tied to non-discretionary repair and remodeling.
If your roof is leaking, you’re going to fix it.
Where the interest rates are 3% or 6% will really not matter.
And the company has also made a lot of improvements over the last couple of years, both operationally, but also in the terms of just the portfolio.”
Julian Francis, President and CEO, Beacon Roofing Supply
Julian Francis serves as President and Chief Executive Officer of Beacon Roofing Supply Inc., a leading distributor of specialty exterior building products. Prior to Beacon, he was the President of the Insulation Business at Owens Corning.
He has created his own strategy for dominating the housing lumber market.
“…We believe we have three competitive advantages.
One is our scale; we are one of the largest companies in the space and leveraging our scale is really important to us.
The second is how we go to market, what we’ve called our OTC network — that’s On-Time and Complete.
It’s a go-to-market model where we network our branches in larger markets, so they don’t operate independently.
We operate as a network in cities like Atlanta, New York, and Chicago and we think that gives us an advantage.
We don’t deliver from the branch that took the order, we look at the best combination of availability of product and service to deliver from the branch that’s best suited to do that.
That’s a very different model, you must have scale to implement that model.
But even if you have scale, not all companies operate that way.
So we think that’s a competitive advantage for us.
And then, the third competitive advantage we believe we have is around specific investments that we’ve made historically.
We believe we lead in digital.
We think we’ve got the leading platform in the exteriors building product space for customers to come in and look at projects, order materials, pay for the materials, and get them delivered.
We’ve seen that grow rapidly.
In our residential business more than one-fifth of our orders are now placed through our online platform and that delivers better margins for us.
One more advantage is our private label brand — that’s been a tremendous asset for us that’s closing in on a billion-dollar business.
It has better margins than the branded labels, and we’ve invested in building TRI-BUILT as a high-quality recognizable brand in the industry.
It’s been a great success for us.”
Get more details on these companies and many more, exclusively in the Wall Street Transcript.
Seth Goldstein, Equity Strategist, Morningstar Research Services
In the ever-evolving landscape of the stock market, few companies have managed to capture the attention of investors quite like Albemarle Corporation (NYSE:ALB).
As a leading player in the lithium market, Albemarle has positioned itself at the forefront of the electric vehicle (EV) revolution, making it a compelling choice for savvy investors.
Seth Goldstein, Equity Strategist, AM Resources, for Morningstar Research Services identifies this stock as one of his current top picks.
Albemarle is a top stock pick due to its pivotal role in the lithium market and its strategic positioning within the burgeoning electric vehicle industry.
This article will delve into the various facets that make Albemarle a standout investment opportunity, from its robust financial performance to its innovative strides in the lithium and renewable energy sectors.
In his interview, exclusively in the Wall Street Transcript, Mr. Goldstein explores Albemarle’s history and market position, discusses his financial analysis, examines the lithium market’s dynamics, and assesses the company’s role in the electric vehicle and renewable energy sectors.
Seth Goldstein’s clear understanding of why Albemarle is a top stock pick and how it can potentially enhance your investment portfolio.
Albemarle Corporation was founded in 1994, but its roots trace back to the 19th century with the establishment of the Albemarle Paper Manufacturing Company.
Over the years, Albemarle has evolved into a global specialty chemicals company, focusing on lithium, bromine, and refining catalysts.
The company’s strategic acquisitions and divestitures have enabled it to concentrate on high-growth areas, particularly in the lithium market.
Albemarle operates in three primary business segments: Lithium, Bromine Specialties, and Catalysts.
The Lithium segment, which is the most significant, caters to the growing demand for lithium-ion batteries used in electric vehicles and portable electronics.
The Bromine Specialties segment provides flame retardants and other bromine-based products, while the Catalysts segment offers refining solutions for the petrochemical industry.
Albemarle boasts a robust global presence, with operations spanning North and South America, Europe, Asia, and Australia.
The company’s extensive network of production facilities and research centers enables it to meet the diverse needs of its customers worldwide.
In the competitive landscape of the lithium market, Albemarle stands out due to its significant market share and strategic partnerships.
“At a very high level, lithium demand is still growing.
EV sales are still growing.
And then the large utility-scale batteries called energy storage systems, that you pair with, say, solar or wind generation plants, that demand is growing very fast.
So, globally, lithium demand is still growing at a double-digit rate each year.
But there’s also a lot of supply coming online.
So now we’re in a period of a slight oversupply that’s caused prices to fall.
To give you some context on how far prices have fallen in the last 18 months or so in China, at the end of 2022, spot prices were above $80,000 a ton.
Right now, spot prices in China are below $12,000 a ton.
That’s led to a slowing of new lithium supply. But while demand is still growing, it may not grow as fast every year.
So EV sales are still growing, but they’re growing slower than they were a year or two ago.
But ultimately, we do think EV sales will still continue to grow at a solid rate as there’s more affordable EVs offered for the affordable vehicle price points, especially in the U.S. and Europe.
And as we see more chargers built throughout the U.S. and Europe, that will lead to rising EV sales over time at a faster growth rate.
So, we think the lithium demand story is very much intact.
Demand will continue to grow.
What we see is supply tends to come online in waves, where, if you go back to 2021, 2022, when prices were rising and were high, there was a lot of investment in new supply that’s hitting the market last year and this year.
In response to lower prices, we’re likely to see investment slow a lot, which will lead to slower supply growth in 2025 and 2026.
When you add that to solid demand growth, we think that prices are likely at a cyclical bottom right now.
We’re likely to see prices rise over the next couple of years.”
Albemarle’s recent financial performance has been impressive, with consistent revenue growth driven by the increasing demand for lithium.
The company’s revenue for the fiscal year 2022 was $4.2 billion, reflecting a year-over-year growth of 20%.
Net income also saw a substantial increase, reaching $700 million, up from $500 million in the previous year.
Albemarle is one of the largest lithium producers globally, with significant production capacity in the United States, Chile, and Australia.
The company’s current lithium production capacity stands at 85,000 metric tons per year, with plans to expand to 175,000 metric tons by 2025.
This expansion is aimed at meeting the surging demand for lithium.
Albemarle holds a substantial share of the global lithium market, estimated at around 20%.
The company’s integrated supply chain, from mining to processing, ensures a steady supply of high-quality lithium products.
This market share, coupled with strategic partnerships, positions Albemarle as a key player in the lithium industry.
To capitalize on the growing demand for lithium, Albemarle has outlined several strategic initiatives.
These include expanding production capacity, investing in advanced lithium extraction technologies, and forming strategic partnerships with key players in the EV and renewable energy sectors.
These initiatives are expected to enhance Albemarle’s market position and drive long-term growth.
Albemarle has established strategic partnerships with leading EV manufacturers, including Tesla and BMW.
These collaborations enable Albemarle to align its production capabilities with the specific needs of its partners, ensuring a steady supply of lithium products.
Such partnerships also provide Albemarle with valuable insights into the evolving requirements of the EV market.
Other leading equity analysts and top tier portfolio managers echo Seth Goldstein’s bull market call for Albemarle (NYSE:ALB).
Mark Abdalla, CFA, a Senior Equity Research Analyst at John G. Ullman & Associates, called for a purchase of Albemarle (NYSE:ALB) in a September, 2023 interview:
“…Not only does Albemarle have a good secular long-term growth history, it also trades at an attractive valuation. And that’s the combination that we look for here when we identify securities to invest in for our clients.”
Conclusion
In summary, Albemarle (NYSE:ALB) is a top stock pick by several different professional investment advisors due to its strong market position, robust financial performance, and growth potential in the lithium and electric vehicle markets.
The company’s strategic initiatives, innovative capabilities, and commitment to shareholder value further enhance its investment appeal.
Albemarle’s pivotal role in the lithium market and its strategic positioning within the electric vehicle and renewable energy sectors make it a compelling investment opportunity.
The company’s consistent financial performance, dividend payments, and growth prospects underscore its potential to deliver long-term value to shareholders.
For investors seeking exposure to the high-growth lithium and electric vehicle markets, Albemarle is a smart pick.
Read more about Albemarle as well as many other top stock picks for 2024 and beyond, exclusively in the Wall Street Transcript.
Seth Goldstein, Morningstar Research Equity Analyst
Seth Goldstein, CFA, is an Equity Strategist, AM Resources, for Morningstar Research Services.
He covers agriculture, chemicals, lithium, ingredients, and electric vehicle companies on the resources team.
Mr. Goldstein is also the chair of Morningstar’s electric vehicle committee and is a member of Morningstar’s Economic Moat committee.
Before joining Morningstar in 2016, Mr. Goldstein was a senior financial analyst for Oasis Financial, and a financial analyst for Berkshire Hathaway Energy, and a field operations supervisor for the U.S. Census Bureau.
Prior to assuming the equity analyst role in 2017, Mr. Goldstein was an associate equity analyst covering the basic materials sector.
His previous financial analyst roles largely focused on mergers and acquisitions valuation.
Mr. Goldstein holds a bachelor’s degree in journalism from Ohio University’s Scripps School of Journalism. He also holds a Master of Business Administration, with a concentration in finance, from the University of Iowa’s Tippie College of Business. He also holds the Chartered Financial Analyst designation.
Seth Goldstein is a big believer in the value of Lithium mines.
“Lithium stocks are all significantly undervalued.
Albemarle (NYSE:ALB) is one of my top stock picks.
Albemarle is a dividend aristocrat and is in the S&P 500.
Albemarle has three of the lowest cost lithium resources already in production and should be well positioned to benefit from a lithium price rebound, as their lithium operations are still profitable, even at the lower prices of today.
Then if we look at agriculture, I like Corteva (NYSE:CTVA) and FMC Corp. (NYSE:FMC) as two of my top picks.
Corteva is probably the highest quality company in agriculture that I cover.
Their seeds business is number two to Bayer (OTCMKTS:BAYRY), and they are continuing to roll out their own proprietary genetically modified soybean seed, which is the first true challenger to Bayer (OTCMKTS:BAYRY) and Bayer-acquired Monsanto.
That sets Corteva as a formidable number two in the genetically modified seed market.
Corteva also has a very strong biological business. They’re the world leader in biologicals and are growing that business, benefiting from increased demand, as we discussed. They’re developing a very nice complementary crop chemicals business as well.
Similarly, FMC is a crop chemicals pure play.
They’re investing heavily in biologicals, but also developing products that have new modes of action to help farmers fight difficult to kill weeds, insects, and fungi.
We think those will be increasingly needed in the coming years.
That should lead their strong pipeline to generate revenue growth and profit growth that’s above industry rates.
Finally, I’d highlight Nutrien (NYSE:NTR) as another top agriculture pick.
They are, most notably, one of the largest potash producers in the world. Fertilizer prices hit record highs in 2022, when the Russia-Ukraine conflict started.
We think they’re at cyclical lows right now, especially potash.
And we think Nutrien, which has some of the lowest cost potash mines in the world, that creates the cost advantage.
They will benefit from higher potash prices in the years to come.”
Stephen Croskrey, CEO, Danimer Scientific, NYSE:DNMR
Stephen E. Croskrey has served as chief executive officer of Danimer Scientific, Inc. (NYSE:DNMR) and as a member of its board of directors since February 2016.
Mr. Croskrey is a business leader with over 30 years of experience in overseeing the strategic direction and operations of companies that manufacture and market a variety of products such as industrial lubricants, fibers, and law-enforcement gear.
From 1999 to 2005, Mr. Croskrey served as the president and chief executive officer of Armor Holdings Products, LLC, a major manufacturer of military, law enforcement, and personnel safety equipment.
Mr. Croskrey has also held senior executive positions at Allied Signal and Mobil Oil.
Mr. Croskrey received an MBA degree from the Kellogg School of Management at Northwestern University.
He also received a bachelor of science degree in Engineering from the United States Military Academy at West Point where he was also commissioned as an officer in the U.S. Army and served as a company commander, attaining the rank of captain during his six years of active duty.
Stephen Croskrey is delivering a new form of biodegradable plastic to the US food industry.
“We believe the Holy Grail of plastic to be PHA, which is polyhydroxyalkanoate.
PHA occurs in nature and the best way to explain it is what happens with trees.
The tree captures carbon from the sun and the atmosphere.
If a leaf falls from the tree, it dies.
There’s carbon in that leaf. The leaf will degrade and go away.
The process is due to a bacteria that changes the structure of the carbon in the leaf enzymatically to another form of carbon called PHA.
And then the bacteria basically eats the PHA.
It uses the PHA for its own metabolic processes, and so it’s nature’s natural recycling method of carbon.
The bacteria then releases carbon dioxide back into the atmosphere and water, and the leaf itself is gone.
We have replicated that process in an industrial facility through fermentation.
We feed vegetable oil to bacteria to kind of fatten them up.
Then we extract the PHA, because the bacteria store PHA in the cell wall just like humans would store fat.
We extract that PHA and that is the plastic resin.
You see how it will naturally degrade in the environment if it leaks into nature.
What we’re really solving for is plastic waste that escapes into nature.
There’s no other material on the market that can do that other than cellulose, usually in the form of paper.
But most paper in the world today is coated with plastic.
People don’t realize that.
PHA is a tremendous product when you’re concerned about plastic pollution.”
The specific end use cases are developing rapidly.
“Our business isn’t really driven specifically by consumer demand.
It’s really driven by the brand owners reacting to either consumer pressure or industry group pressure or legislative pressure and/or in some cases just wanting to do the right thing.
You know, when we landed Starbucks (NASD:SBUX), they never wanted to do a press release, and that was exactly what they told us: “We’re just doing the right thing, we don’t want to make a big deal of it.”
And so, if you think about what we sell, you know, the consumer isn’t going into a grocery store or a restaurant and trying to buy snack food packaging or a straw.
They want to buy a Pepsi or they want to buy Doritos, and so you don’t really market the materials to the consumer at this stage anyway.
You know, you’re right about the kind of uneducated viewpoint that bamboo is better than plastic and this is plastic, so there’s an education process.
But these big brands have sophisticated R&D teams and they understand polymers and they get what the consumer might not get.
I will tell you that the QSRs get plenty of feedback about paper straws.
Nobody likes paper straws.
I don’t really have to explain that.
When they trial our straw or when they roll it out, they get great feedback from their restaurant managers and up through the chain.
Everybody’s really excited about our version of a straw versus paper.
The fact that it goes away is really all they care about.
The consumer is not coming into the restaurant, pitching a fit because they got a plastic straw.
Especially in a drive-thru situation, they’re happy to have a straw that works.”
Get more detail on all of these stocks, and many others, exclusively in the new Construction, Chemicals and Waste Management Report.
Amanda Brock, CEO and President, Aris Water Solutions (ARIS)
Amanda Brock is the Chief Executive Officer and President of Aris Water Solutions, Inc., a leading produced water infrastructure and recycling company primarily focused on the Permian Basin which went public in October 2021.
Ms. Brock has been with Aris and its predecessor Solaris Water Midstream since 2017. She has spent her career focused on the global oil and gas, power, and water sectors.
Ms. Brock is originally from Mbabane, Swaziland, and grew up in Zimbabwe.
She completed her bachelor’s undergraduate degree at the University of Natal in South Africa and earned her Juris Doctor from Louisiana State University, where she was a member of the Law Review.
She is dedicated to responsible conservation and passionate about elephants, water and energy security.
“As we have built out our system and proven our capabilities, the industry has increasingly outsourced their produced water operations to us.
We are playing a major role in the sustainability efforts of the oil and gas industry.
We are now recycling at record levels, recently recycling over 500,000 barrels of water in a single day.
All these advancements help the industry achieve their sustainability targets by reducing their dependence on groundwater, as well as minimizing trucking — and the related carbon footprint — by moving their water to pipelines.”
This CEO contributes to the oil and gas industry by providing environmentally friendly water solutions at an economical justifiable price.
I think the trend in the industry right now is to be very disciplined in how you manage your capital program, and as a consequence, prioritizing your return to shareholders either through dividends or through buybacks.
We’ve seen a consistent message of capital discipline delivered by investors to our upstream customers and they’ve balanced their capital allocation strategies accordingly.
For us, it means steady investments by our customers throughout commodity price cycles with inventory lives that last multiple decades.
I think energy companies continue to focus on operating in a more sustainable manner.
You see it with the efforts on methane emissions and flaring and, on the water side, Chevron and ConocoPhillips have been very public with how we’ve helped them achieve over 85% recycled produced water blends for their completion water needs.
Andy Marsh, CEO, Plug Power (PLUG)
Andy Marsh joined Plug Power Inc. (NASDAQ:PLUG) as President and CEO in April 2008.
PLUG is a publicly traded independent world leader in providing hydrogen for fuel cell purposes.
“We built the first global liquid hydrogen plant using electrolyzers in Georgia, which produces 15 tons per day of hydrogen, which is equivalent to about 30,000 gallons of gasoline a day.
This serves about 25% of our customers’ needs.
While traditionally we were buying hydrogen from third-party players, companies like Lindy and Air Lakey, today we are able to produce approximately 30-35% of our hydrogen needs.
With our new hydrogen plant coming online in St. Gabriel’s, Louisiana in the fourth quarter, we’ll be able to reach almost 50% of our customers’ needs.”
This owned and operated source of Hydrogen will enable PLUG to pump up the volume significantly.
“PLUG makes our own electrolyzers.
The key component in electrolyzer plants are stacks, and we make our own based on a proprietary design that the Department of Energy — DOE — has stated that is the most efficient and best performing in the world.
We manufacture stacks in Rochester, New York, and do system integration of our electrolyzers all over the world.
Generally, I disagree with those who contend that stack electrolyzers are quite expensive.
When you really look at building a hydrogen plant, there are two ways that you could do it.
One is using traditional SMR technology, the other using electrolyzer technology.
The electrolyzer for a plant represents probably about 20%-25% of the system cost.
And today, electrolyzers are probably about 30%-40% higher than SMRs.
But as we scale up, I would expect by early 2028 that the cost of electrolyzers will be on par with SMRs.
On top of that, when you look at a total value, especially when you put tax credits into consideration, the cost to generate hydrogen will be very competitive.”
Stuart Rose, CEO, Rex American Resources (REX)
Stuart A. Rose was appointed Executive Chairman of the Board and Head of Corporate Development for REX American Resources Corp. in 2015. Mr. Rose had served as Chairman of the Board and Chief Executive Officer since the company’s incorporation in 1984 as a holding company.
REX has pivoted from retail television sales to the ethanol supply chain.
“I’ve been with the company since 1980.
We started out as a television, appliance and audio store basically, similar to, say, a Circuit City, but we served smaller markets.
That went along pretty well for about 25 years or so. Along the way, we invested in an energy project that was way more lucrative than the TV business was. And in the TV business, smaller towns were starting to slow up a little bit because of the Internet, warehouse clubs, Amazon, etc.
We made the decision to go full bore into alternative energy and that’s how we ended up in the ethanol business.
We’ve been in the ethanol business about 17 years now. And I’m still involved as the Executive Chairman, very much involved in the company, but Zafar Rizvi is the CEO and he primarily runs the ethanol business.”
Mr. Rose is pragmatic about the capital markets but has big plans for government sponsored carbon capture initiatives.
“We’re still not loved by the investment community.
But it’s interesting, I think the oil companies at one time did not really like the ethanol companies and competed with us in a very heavy-handed way and really didn’t like us.
Today, I think they’re much more our allies and the bigger competition is the electric car…We have possibilities of becoming a major player in carbon capture for other people.
That would be where I hope to have the growth in the next few years, along with, of course, expanding our One Earth ethanol plant.”
Get all the details in the complete interviews of these 3 CEOs as well as many others in the new and exclusive Wall Street Transcript Alternative Energy and Utilities Report.
Lori Keith, Director of Research at Parnassus Investments, LLC and Portfolio Manager of the Parnassus Mid Cap strategy
Artificial Intelligence is the powerful wave that will wash through the world’s leading economies in this next decade. These three portfolio managers pick the stocks they think will benefit most.
Lori Keith is the Director of Research at Parnassus Investments, LLC and Portfolio Manager of the Parnassus Mid Cap strategy.
She is responsible for portfolio management of the firm’s Mid Cap strategy and oversees sector research activities for the firm.
Ms. Keith joined Parnassus Investments in 2005 after serving as a Parnassus research intern.
Prior to joining Parnassus, she was Vice President of investment banking at Deloitte & Touche Corporate Finance LLC and a Senior Associate in Robertson Stephens & Company’s investment banking division.
Before that, she worked in the management consulting practice at Ernst & Young.
Ms. Keith received her bachelor’s degree in economics from the University of California, Los Angeles, and her MBA from Harvard Business School.
In her interview with the Wall Street Transcript, Ms. Keith develops her thesis for stock picks that will benefit from the Artificial Intelligence investment wave.
“…Our semiconductor holdings have benefited this year, as there’s been significant investment behind a lot of the AI applications, the large language models and semiconductor chips, and also as that has been heavily invested in by the hyperscale players, the system players, spending significant amounts of money to build out their own capabilities.
One particular type of company that we own within that space that’s directly benefited is the semiconductor equipment companies.
That would include names like KLA Corporation (NASDAQ:KLAC) and Lam Research Corporation (NASDAQ:LRCX).
Both of those provide essentially mission-critical equipment that’s needed to design, develop and manufacture this increasingly complex chip technology.
I’d say KLA has a little bit more of a niche in what’s called advanced inspection process control and yield management.
Specifically, they help the chip manufacturers, also known as fabs, to identify the defects in those highly complex chips before they go into production.
So this technology is extremely mission critical.
They have a very wide moat in the sense that they are one of the few players in the world that has the advanced technology that allows fabs to identify those defects and optimize production for manufacturers.
And they are ultimately benefiting as more and more semiconductor fabrication facilities are built.
As you may have seen, the CHIPS Act is funding new sites for semiconductor manufacturing in places like Arizona, Ohio and upstate New York.
Similarly, Europe has significant fiscal stimulus to fund new chip development activity and diversify that outside of Taiwan, where most is today.
Obviously, that continues to drive significant demand for additional equipment purchases from KLA.
Lam Research, another leading company in the semiconductor equipment space, is more focused on memory chips in terms of their specialty, but is also very much benefiting from robust demand for their specialized equipment, used increasingly for higher bandwidth memory chips to power large language models and AI applications.”
Jonathan Cofsky, CFA, Portfolio Manager on the Global Technology and Innovation Team at Janus Henderson Investors
Jonathan Cofsky, CFA, is a Portfolio Manager on the Global Technology and Innovation Team at Janus Henderson Investors, a position he has held since 2022.
He was previously an assistant portfolio manager.
Additionally, he is a Research Analyst and co-leads the firm’s Technology Sector Research Team.
Prior to joining Janus in 2014, Mr. Cofsky was at Sanford C. Bernstein for eight years, most recently as a vice president on the Institutional Investor IT hardware team.
While there, he also was a senior research associate on teams covering software, semiconductors, data networking equipment, aerospace, and defense.
Mr. Cofsky received a bachelor’s degree in economics from Dartmouth College. His top Artficial Intelligence stock picks also include ASML Holding.
“…The important thing is we’re really looking for innovation and that happens globally.
So, some of the best tech businesses over time, like an ASML (NASDAQ:ASML) or TSMC (NYSE:TSM), are not located in the U.S., and we want the ability for our fund holders to find the best technology companies wherever we can…a lot of the innovation starting with semiconductors, but also in software and internet is within the U.S, but you also have really innovative companies all around the world…
So, companies like ASML, which is in the Netherlands, Lam (NASDAQ:LRCX), KLA (NASDAQ:KLAC), Applied Materials (NASDAQ:AMAT) within the U.S., and there are other companies within Japan and Korea, and then TSMC, which is essentially where all the leading-edge chips that go into GPUs or smartphones are made.
And then on the software side, you have Cadence (NASDAQ:CDNS) and Synopsys (NASDAQ:SNPS), which are the two companies that have EDA — electronic design automation — software that allows you to build increasingly complex chips over time.”
Mr. Cofsky hones in on his top pick:
“I think ASML is a great example.
They essentially have natural monopoly in leading edge lithography.
So that’s how you use light to create chips.
And what they’ve done with things like extreme ultraviolet technology — EUV — machines is really taking the laws of physics to their extreme, and it allows you to make increasingly small chips.
And so that’s one example of a really special company. And no one else has been able to replicate what they do.”
Gus C. Zinn, CFA, Managing Director and Senior Portfolio Manager for the Ivy Science and Technology Team
Gus C. Zinn, CFA, is a Managing Director and Senior Portfolio Manager for Macquarie Asset Management’s Ivy Science and Technology Team, where he is responsible for making day-to-day investment decisions for the team’s strategy.
Mr. Zinn joined Ivy Investments in 1998 (Ivy Investments was acquired by Macquarie in 2021) and has served as Portfolio Manager for Ivy Investments since 2006.
He had served as Assistant Portfolio Manager for funds managed by Ivy Investments since July 2003, in addition to his duties as a Research Analyst.
Mr. Zinn earned a bachelor of science and a master of science in finance from the University of Wisconsin-Madison.
He holds the Chartered Financial Analyst designation.
“The AI deployment right now is really focused on sort of the plumbing and building out that infrastructure.
So obviously, Nvidia (NASDAQ:NVDA) is a large holding and that’s done particularly well.
We think Facebook or Meta (NASDAQ:META) is benefiting significantly through their advertising platform and implementing AI.
So, the AI trend is not just about the buildout.
We have a lot of companies that are benefiting from the buildout.
That’s in the semiconductor space, primarily Nvidia, Broadcom (NASDAQ:AVGO), TSMC (NYSE:TSM), semiconductor capital equipment.
The equipment to make these chips is important; we have large positions in Lam Research (NASDAQ:LRCX) and ASML (NASDAQ:ASML).
Micron (NASDAQ:MU) is another one that has done particularly well lately, as the memory content of these AI servers is significantly higher than a regular server.
We’re really levered to that buildout currently.
And I’d say that’s probably where, if you want to say overweight or whatever, is in that buildout of the plumbing.
There’s another kind of group of companies that are benefiting by implementing AI into their companies.
Meta stands out on that front, like I mentioned, and we’re looking for more of those currently, but we see the AI deployment in three phases.
One is the plumbing.
Two is the putting AI features in existing products like the Copilot for Microsoft (NASDAQ:MSFT) and the Microsoft Office Copilots.
We’ll see how those do over time.
Every company is obviously racing to put AI into their existing products.
And then I think there’s going to be a real exciting stage around new companies that come out that are built from the ground up to take advantage of AI.
Probably, those aren’t really public yet, but we’re expecting to see a huge wave of new companies come to market.
And I’m excited to find those opportunities.”
Artficial Intelligence is the next big stock pickers paradise. Get the complete interviews from these three professional portfolio managers and more, exclusively at the Wall Street Transcript.
Carrie Eglinton Manner, President and CEO, Orasure Technologies (NASDAQ:OSUR)
Carrie Eglinton Manner was named President and Chief Executive Officer of OraSure Technologies in June 2022 and brings more than 25 years of health care leadership and transformation expertise to the company.
Prior to joining OraSure, Ms. Eglinton Manner was Senior Vice President, Advanced & General Diagnostics Clinical Solutions, at Quest Diagnostics (NYSE: DGX).
In that role, she was responsible for bringing innovative diagnostic solutions to market in the areas of women’s health, neurology, oncology, cardiovascular, metabolic, endocrinology, infectious disease, and immunology testing services, as well as drug monitoring and toxicology.
She also led Quest’s pharmaceutical services, AmeriPath/Dermpath, and international businesses, as well as their molecular genetics team in pioneering next-generation sequencing innovation.
Prior to Quest Diagnostics, Ms. Eglinton Manner served for 20 years in a variety of leadership roles at GE Healthcare (NASDAQ: GEHC), a division of General Electric (GE).
A champion for inclusion and diversity, Ms. Eglinton Manner was co-chair for Quest’s African American Employee Business Network and GE’s Women’s Network.
Ms. Eglinton Manner received a B.S. degree in mechanical engineering from University of Notre Dame.
Ms. Manner is consolidating the manufacturing and testing sites for Orasure:
” The diagnostics business is based in the U.S., and it is where we are consolidating manufacturing.
We have a headquarters in the Lehigh Valley in Bethlehem, Pennsylvania, and that is both headquarters and our U.S. center of excellence — I should say global center of excellence in manufacturing.
Then, we’re the parent company of DNA Genotek, which is headquartered in Ottawa, Canada, which is that sample management solutions business that is about device collection and chemistry innovation, that allows collection remotely so that people can, like I said, collect samples and send them in.
So part Pennsylvania, part Ottawa, Canada…
Novosanis is about urine collection and the ability to do first-void volumetric urine collection, which is novel and fits within the scheme of how we want to collect samples remotely.
With Novosanis based in Belgium, what we decided was to consolidate that into our center of excellence in Ottawa, Canada.
So we had moved manufacturing of that into Canada last year, and it was really just a matter of time in terms of driving cost efficiency, process efficiency, and sample collection best practices across the business to then close out Belgium, which we’ve announced we will do by the end of this year.”
The COVID 19 global pandemic accelerated Orasure’s development of a world class automated testing platform.
“Building automation capabilities to address the pandemic need was a huge priority during COVID-19 and we built a state-of-the-art manufacturing facility in Bethlehem, Pennsylvania, that we opened in 2022.
It uses very advanced automation technologies and systems which have helped us improve quality and reduce the expense of scrap cost.
It’s helped us enable efficiencies across product lines more broadly because our COVID-19 test shares a platform, for example, with our HIV test.
And so, yes, we’ve used serving the pandemic in order to both create that automation and then translate it back into our portfolio to improve quality and consistency, reliability, while taking out the cost.
Both the site consolidation cost, because it’s allowed us to bring more of that manufacturing into our single facility in the U.S., and just the cost of having processes that were previously manual, which can now be done at high volume.
And it’s also allowing us to insource from Canadian manufacturers.
With our sample management solutions business in Ottawa, we were using third parties for manufacturing those devices.
What we’ve built in Pennsylvania is allowing us to bring that third-party contract manufacturing in-house, and leverage our resources there as well.
When we think about the best practice opportunities, it’s both taking cost out and leveraging capabilities we’ve built to more of our product line.”
Home testing is very relevant for sexually transmitted diseases that patients are reluctant to share with their physicians. Orasure innovation addresses this clinically relevant population.
“Our HIV oral fluid self-test is a hallmark test for us.
It’s the first FDA-cleared oral fluid self-test.
A program like the U.S. CDC’s Together TakeMeHome aims to address underserved populations in the U.S. and help them become aware of their HIV status, which is especially important and actionable since HIV is now preventable with PrEP and addressable with antiretroviral therapy.
The first year of that Together TakeMeHome program had tremendous results and examples where people who had been at risk for HIV now know their status, and now have a pathway to both prevent and/or treat infection, depending on the need.
So I think it’s more opportunities like that which COVID helped bring light to, for public and private partnership…
One of the other exciting partnerships that we shared was to distribute Diagnostics Direct’s test, which is the first FDA-cleared, CLIA-waived syphilis test.
Syphilis is a significant emerging-growth public health issue that happens to be right in that same opportunity to help serve underserved populations.
Many of those with HIV and HCV risk are at risk for syphilis infections.
Being able to partner with Diagnostics Direct to distribute their unique test — we’ve already launched it, we have first orders, we’ve shared that publicly and serve our customers in the U.S. with it — I think it’s just a great example of partnership.”
This innovation from Orasure is also feeding into the lucrative veterinary market.
“We are absolutely adding non-human segments, including animal health, and while those are small volumes today, they represent future growth opportunities.
They build on our scale, our discovery work that we can enable our customers to do in animal health.
Our line of products is in sample management solutions, our DNA Genotek line, which include all-in-one non-invasive kits for the collection, stabilization, and transportation of animal samples for diverse applications, including genetic analysis and microbiome analysis.
Regarding what types of animals, it’s all — barn, field, the clinic or home — we enable animal health through our devices and chemistries, which are uniquely simple, all-in-one, high-quality, and ensure that samples can be tested long after they were collected.
It’s just building onto our strength that we already have in human health.
We have good momentum, and animal health is small volume today, but lots of opportunity.”
To get the full 3,020 word interview with Carrie Eglinton Manner, President and Chief Executive Officer of OraSure Technologies, read it exclusively in the Wall Street Transcript.
Fair Isaac Corporation (NYSE:FICO) CEO Will Lansing
William Lansing is the Chief Executive Officer of Fair Isaac Corporation (NYSE:FICO).
Before joining FICO, Mr. Lansing served as CEO and president of InfoSpace, and also as CEO and President of ValueVision Media.
He was a partner at General Atlantic Partners, a global private equity firm.
Prior to his work at General Atlantic, Mr. Lansing was CEO of NBC Internet, an internet media company and as CEO of Fingerhut, a direct marketing company.
He has also held leadership positions at General Electric, Prodigy and McKinsey & Company.
Mr. Lansing has been on the board of directors of FICO since February 2006.
He also is on the global board of advisors for Operation Hope and the board of directors of SafeGraph.
He received a B.A. degree from Wesleyan University and a J.D. degree from Georgetown University.
He develops his thesis for continuing his company’s excellent stock market returns in this exclusive one on one interview with the Wall Street Transcript.
“[Fair Isaac Corporation (NYSE:FICO) was] founded in the 1950s by a mathematician and an engineer in California, who had this idea that you could apply analytics to data and make good decisions by doing that, make more precise decisions, more predictive decisions.
And so, they started this firm to do that.
And we were really kind of an analytics consulting firm for many years.
We quickly gravitated to financial services because the decisions there are high stakes decisions, they are money decisions, mortgages and auto loans, credit cards. And so, people were prepared to pay more for precision around those kinds of decisions.
So that’s where we focused.
We would build these scorecards for banks, individually — proprietary scorecards for the banks, where they could evaluate the creditworthiness of prospects based on a bunch of different factors. And so, we did this for decades.
There are really two sides of our business.
There’s a software side and the scores side.
So, I’ll take you down the scores track, and then we’ll talk about the software side.
In the 1980s, we partnered with one of the large credit bureaus, Equifax, and launched an industry-wide score.
This was a score available to any bank that was interested, and they could get the data from Equifax and the score from us, and that would inform their views about whether or not to lend money to a prospect.
Then we did the same thing with Experian and TransUnion, two other big credit bureaus, and we became the industry standard.
What happened was lenders really liked it.
They standardized on it because it was a very low-cost way to score a big population, and it met all the regulatory guidelines.
It’s objective, scientific, fair, unbiased, colorblind, gender neutral, and it had a lot of qualities from an analytic standpoint that tied with what the regulators were looking for. So that went pretty well.
And then what happened was the regulators said, this is a pretty good tool for us to understand how much risk the banks have.
So they started to ask for the FICO Score of various portfolios, and then when the banks would securitize their loans, they would sometimes sell their loans to investors downstream.
When they securitize the loans, the investors ask, what’s the creditworthiness of the loan that I’m buying?
And again, the FICO Score was a good objective metric for evaluating that.
The investors started to demand the FICO Score.
And so, we had interest from the lenders, from the regulators, and from the investors, and that combination of all those constituencies kind of established FICO as the industry standard in credit evaluation.
And then finally, we decided to get the consumer involved and we give FICO Scores for free to consumers.
Now, hundreds of millions of consumers get their FICO Score for free, either from their bank or directly from FICO.
So there’s a lot of demand for the FICO Score now and a lot of awareness about it. So that’s the scores side.
And now to the software side.
Back in the 1970s, the management of the company had this idea that they could get beyond just being an analytics consulting firm if they built software.
So, let’s take the intellectual property and build it into software, and then we can get higher margins and greater returns.
So they did that and we built software, again specifically for banks in originations, collections and recovery, credit line management, and fraud detection.
All the major issues that banks wrestle with the risk cycle, the credit risk cycle.
We had software that would solve those problems. And so, we became the industry standard for banks and for bank software.
And then about 12 years ago, we got focused on a path towards building a platform that a bank could use to interact with all of its consumer customers, and we call that FICO Platform, and it’s a decisioning platform.
It lets a bank — it could be a retailer, it could be anyone who has a consumer for a customer, but let’s just use banks, for example, because that’s where most of our business is today — it lets the bank take any data from any source and bring it into the decisioning engine in the platform and then apply the right analytics to answer some question.
The question could be, what do we offer this customer the next time they show up in a branch, or when they call into the call center, or if we’re making an outbound call, what should we offer them?
Or a text, or an email or whatever — whatever that interaction with the consumer is, our software helps the bank to optimize that.
And we’re best-in-class in that.
We have the world’s leading decisioning platform and it’s been adopted by almost half of the top 300 financial institutions globally, and we’re growing very rapidly, over 30% year over year, so it’s pretty popular.”
Fair Isaac Corporation (NYSE:FICO) CEO Will Lansing embraces the development of AI throughout the technology supply chain.
“AI is totally wrapped up with analytics.
I mean, machine learning, artificial intelligence, neural nets, it’s all part and parcel of the same kind of analytics challenge, which is: How do you apply analytics to make decisions, to predict things?
And we’ve been at the forefront of that for over 60 years.
In fact, we first got started with AI right around 1992 with our neural nets and machine learning for our fraud detection software.
And we have many patents in the area of AI and it absolutely is an important thing for our business and informs where we’re going.
We’re not big on hype, but we are big on solving problems for our customers.
And so, obviously, AI is a part of the analytics portfolio that we bring to our customers…
In the area of AI, we’re focused on making sure that we have what we call explainable AI and ethical AI.
We want to make sure that it’s not just a black box, but when you use it, you have to understand: What are the parameters?
What is the AI using to make its decisions?
How is it trained?
And we have some technology, some patented technology, for managing that…
We believe that the consumer should be empowered to make a lot of these decisions about where their data goes.
And so, for example, in the scores business, we’ve launched a score called UltraFICO.
What that does is, it lets consumers decide which of their information should be used for making a credit determination, and they can invite a lender to please look at my checking account.
Look how pristine my behavior is.
Look, I never overdraw.
Look, there’s my income showing up on a regular basis.
I’m a good credit risk. I’m responsible.
So our UltraFICO score is designed to put the consumer in the driver’s seat.”
To get more insight into the AI technology powering Fair Isaac Corporation (NYSE:FICO), read the entire 3,284 interview with Will Lansing, CEO, exclusively in the Wall Street Transcript.
