Do You Have a Quiet H.E.R.O. In Your Portfolio Protecting & Fighting For You? [Nordic Global Leader in Analytical Equipment & Disposables in Automated Cell Counting & Analysis]
Case Story: Nordic Global Leader in Analytical Equipment & Disposables in Automated Cell Counting & Analysis
[Week (14-18 Sep): +13.5%]
Another Innovation Stack story in our portfolio companies is Nordic global leader in analytical equipment & disposables in automated cell counting and analysis, which is up 8.4% since the inception of the Fund on 28 August 2020, versus MSCI ACWI World index/NASDAQ -3.6%/-7.6% over the same period. The rising dividend-yielding company has also compounded 2,143% in capital gains in the recent 5 years vs MSCI ACWI World index +47.6%.
Highly attractive market conditions for this highly-profitable and cashflow-generative Nordic medtech innovator come from cellular immunotherapies, which seem to have efficacy in curing otherwise incurable cancer patients by means of their own cells, whereby a dose of “activated” immune cells is injected into a cancer patient to specifically attack the patient’s cancer cells. The new regimes originate from the U.S. where several therapies have now been approved by the FDA and many more are expected to obtain approval over the next few years. The development of new cellular immunotherapy regimes is gathering momentum in China, Japan and Europe as well.
The company’s automated cell counter is used in connection with amplification of a patient’s genetically engineered cells before they are reinjected into the patient. The equipment & digital solution monitors the cell count and cell viability throughout the amplification process to ensure that the cells are growing as intended, making it an integral part of an overall approved therapeutic product. According to customers, the equipment is easy to use and produces highly consistent test results. No competing cell counter product offer similar qualities. No calibration is a critical advantage: The method looks at the DNA of the cell nuclei rather than the whole cells (or particles of a certain size). Cell sizes differ, whereas cell nuclei size and amount of DNA or number of base pairs are more uniform. The company has became the quiet global leader with an Innovation Stack business model by interlocking its instrument system with its unique disposable cassette and software.
CEO Mr. S shared: "We specialize in the development, production and sale of high-quality analytical equipment for cell counting and analysis within a broad range of areas. Our analytical equipment is based on a unique patented technology platform that ensures high-quality analytical results, operational reliability, cost effectiveness and ease of use. Our core technology consists in capturing images of a prepared liquid sample through a special-purpose microscope to subsequently perform an automatic cell count and/or analysis using digital imaging."
"This technology allows for high-precision counting and analysis of large numbers of cells at competitive prices. The development of our unique disposable cassette for our instruments is a key factor of our success within cell counting. Cell samples to be analysed are sucked directly into the cassette. Dyes may potentially be harmful and are not added manually, because they are deposited within the cassette during production. The customer then places the cassette containing the cell sample in our instrument and the rest of the analysis is performed automatically. The cell count results are available after a short while, and the software used to control the entire process is compliant with the strict FDA requirements for handling digital data. This is a more simple and more precise concept than the ones used by competing cell counters currently on the market, and it eliminates many of the factors usually causing measurement variations and inconsistencies by calibrating all cassettes individually during the production process."
"With the improved revenue in 2019/20, our revenue has more than tripled over the past five years which was not least driven by our ability to build a particularly strong market position in the immune-based therapy growth area. The development of new therapies in this area is still growing in the USA, Europe and Asia."
"Bioprocessing will be a special focus area for us in future, and we will particularly target the area comprising the production of antibodies and proteins for use in pharmaceuticals – a strongly growing area driven by the development of more and more new therapies within this field. There is a significant need for cell counting and viability determination within bioprocessing, an area involving work with living cells and in which the number of cells are essential. With our new products, we can offer our customers faster analysis and higher analysis capacity as well as great stability of the measuring equipment which reduces maintenance costs considerably. The software used also enables customers to manage data electronically and to automate their data flows. This is of major importance to customers within bioprocessing as a substantial amount of resources is required to meet various documentation requirements and generally to meet the requirements for GMP production. Bioprocessing is a big and lucrative area in which we currently do not have a major presence. Our ambition is to build a new, attractive business area within bioprocessing over the coming years.”
The H.E.R.O. Investment Framework
The H.E.R.O. framework, methodology and strategy are powering equity portfolio asset for our institutional client.
This is the only equities strategy in the market that focuses on both dividend yield and innovation-driven capital gains to enhance total shareholders’ returns. This is also the only dividend-yielding equities strategy in the market that is entirely not dependent on and with zero exposure to: (1) cyclicals (concentrated in economically-sensitive and rate-sensitive sectors such as financials, property & construction, energy & materials) that may not be resilient in economic downturns, and (2) cheap-gets-cheaper yield- and value traps. It also applies the proprietary forward-looking fact-based accounting fraud detection system that was pioneered and taught at the Singapore Management University, ranked top five in the world accounting rankings, and presented to the top management team of Singapore’s top financial regulator Monetary Authority of Singapore (MAS), to mitigate downside risks which escape detection by typical western-based forensic tools.
I. Strategic Focus on Quiet Innovators & The H.E.R.O. Investment Framework
Our investment strategies distinguish from all other tech- and innovation-themed funds with its singular focus on quiet innovators, which present structurally mispriced opportunities and avoid overcrowded misopportunities that stem from the human tendencies to equate flashy popularity with excellence, and have an active ratio of over 95% (vs the MSCI World Index). The portfolio companies are exceptional innovators and focused market leaders in their respective fields with unique, scalable, recurring-revenue and high-profitability business models delivering innovative products and services indispensable to our well-being in daily life and run by high-integrity, honorable and far-sighted entrepreneurs with a higher Purpose in solving high-value problems for their customers and society whom we call H.E.R.O. – Honorable. Exponential. Resilient. Organization.
H.E.R.O. is operationalized into a systematic 4-step investment process and investment framework powered by sustainability & ESG principles to identify the winners, to distinguish between the true innovators and the swarming imitators, between the devoted missionaries forging a greater Purpose and the mercenaries. Not only do the H.E.R.O. innovators generate high profitability at the inflection point of their exponential growth trajectory, more importantly, they are governed by a greater purpose in their pursuit to contribute to the welfare of people and guided by an inner compass in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure, in continuing to do their quiet inner innovation work, persevering day in and day out.
We use the framework and positive criteria of the United Nations Sustainable Development Goals (SDGs) to integrate environmental, social, and governance (ESG) considerations into the research and investment process in selecting companies that generate sales in products and services that contribute to the achievement of the UN SDGs. The central focus of our impact investing is on innovators who contribute to the UN SDG Goal 9: Industry, Innovation, and Infrastructure — “Build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation”.
H.E.R.O. is unique in eliminating the downside risks from accounting tunneling fraud and misgovernance through unusual related-party transactions, consolidation accounting craftiness (opportunistic shifting of expenses and debt into unconsolidated entities), and hidden balance sheet liabilities at the wider pyramidal business group level etc., which escape detection by western-based forensic tools through a proprietary forward-looking fact-based accounting fraud detection system developed by KB, and taught at the Singapore Management University, ranked top five in the world accounting rankings, and presented to the top management team of Singapore’s top financial regulator Monetary Authority of Singapore (MAS). For instance, prevalent across Asian companies, previously Big-4 audited “cash” in the balance sheet are often misclassified “cash equivalents” disguised from improper short-term related party loans employed by the insiders to expropriate or tunnel out cash from the company after initially propping up financial numbers artificially to create false positive signals to lure in funds.
II. Be Stronger, Wiser & Kinder By Participating in the Quiet Innovators' Quest to Purpose
“Innovators” are companies that generate sales in technologically enabled new products and services that potentially transforms the way the world works. We seek to identify companies capitalizing on innovation in offering faster, cheaper, more productive, more cost effective, more compelling products and services, or that are enabling the further development of an innovation theme in the markets in which they operate.
III. Quiet Innovators Thrive in Stormy Times
Prepare and position a winning portfolio for a post-pandemic world with innovators who thrive in stormy times and transform crises and trauma into opportunities for the future. The coronavirus crisis has helped accelerate innovation and enhanced the leadership of innovators. Market positions are not redistributed during sunny and calm times, but during times of crisis. The pandemic crisis has changed the behavior of both consumers and businesses. Companies offering faster, cheaper, more productive, more cost effective, more compelling and innovative products and services are gaining significant share.
Market leadership and resilient winners in stormy market environment and in the post-pandemic future will be much less about the overcrowded popular trades in mega-cap tech and loss-making tech/biotech, as defined by FAANGT-STAMP (U.S.: Facebook, Apple, Amazon, Netflix, Google, Tesla; Asia/China: SEA, Tencent, Alibaba, Meituan-Dianping, Pinduoduo), who also do not pay any dividends (with the exception of Apple and Tencent), and will be led more by highly-profitable quiet innovators, including dividend-yielding cloud Software-as-a-Service (SaaS) companies.
Notably, of the 90+ cloud software companies listed in the U.S., nearly all (>95%) do not pay any dividends, with many still looped in a negative free cashflow position, while the 20 global SaaS portfolio companies in the Fund are unique in being exceptional market leaders in their respective field with ample internal cashflow generative capacity to reinvest for higher-margin growth and still consistently produce rising dividend yield to reward shareholders.