strongpawn

Companies I like: Starpharma

strongpawn — Fri, 05 Nov 2010 02:56:15 +0000

Disclaimer: All the information provided here is not financial advice. The information presented is my opinion and may be completely inaccurate.

Starpharma Holdings Limited (SPL) is engaged in the development of dendrimer technology.

From wikipedia:

Dendrimers are repeatedly branched, roughly spherical large molecules. The name comes from the Greek word “δένδρον” (pronounced dendron), which translates to “tree”. Synonymous terms for dendrimer include arborols and cascade molecules. However, dendrimer is currently the internationally accepted term. A dendrimer is typically symmetric around the core, and often adopts a spherical three-dimensional morphology. The word dendron is also encountered frequently. A dendron usually contains a single chemically addressable group called the focal point. The difference between dendrons and dendrimers is illustrated in figure one, but the terms are typically encountered interchangeably.

Dendrimer structure

Key financial ratios: This company is not currently comparable to other companies I have commented on from a financial ratio perspective. I.e. Starpharma does not currently exhibit strong ROE, low DER and the like.

Qualities that attract me:

Very significant patent ownership. Probably (at the time of writing) the largest share of dendrimer related patents. This was achieved by acquiring DNT. Notably these achievements stemmed from the work of Donald Tomalia and work he did at Dow chemical.
Dow chemical still has a decent stake in Starpharma, via the DNT acquisition.
Platform technology is potentially applicable to many different products, this lowers risk.
Applications of the platform are developed in conjunction with experienced and well funded partner organisations (e.g. pharmaceutical companies), again, this lowers risk.
Business model should be moderately resilient to a downturn, since healthcare products tend to be needed regardless of what’s happening in the economy. Caveat: deals may be much harder to come by and interest in niche technologies might wane if there is a serious meltdown, this is pure speculation on my part.

Things that concern me:

Dendrimer patent applications are likely to continue rising. Starpharma needs to continue innovating. Other companies, with deep pockets, may push harder into this space and substitute Starpharma’s technology. This bit is completely unknowable, an inherent risk when investing in cutting-edge technology firms.
The company needs to increase cash flow, the business model, in my mind, is therefore still not completely proven.

More on non-linear dynamical systems

strongpawn — Fri, 05 Nov 2010 02:30:29 +0000

I took a quick peek at dynamical systems theory on wikipedia today, following on from my last post about global warming and the CO2 hoax. Jokes aside, I think it’s a really important concept to come out of mathematics that we are only scratching the surface.

From wikipedia:

This branch of mathematics deals with the long-term qualitative behavior of dynamical systems. Here, the focus is not on finding precise solutions to the equations defining the dynamical system (which is often hopeless), but rather to answer questions like “Will the system settle down to a steady state in the long term, and if so, what are the possible attractors?” or “Does the long-term behavior of the system depend on its initial condition?”

And further down…

Chaos theory has been so surprising because chaos can be found within almost trivial systems.

The thing I love about chaos theorists is that they openly admit that we know very little. This humble standpoint is missing in large swathes of the scientific community where a humanistic behaviour seems to prevail. I think it is eminently scientific to, initially, stand in awe of what we don’t know (and what don’t know we don’t know). The study of chaos and related fields (think turbulence) are beautiful for this reason alone.

My (un-researched) thoughts regarding CO2 and global warming

strongpawn — Thu, 04 Nov 2010 12:27:56 +0000

About a year ago I watched a DVD (available in most video stores) called The Great Global Warming Swindle. It is a documentary featuring a number of notable climatologists who believe that CO2 is a *trailing* indicator of global warming and that solar flare activity is a *leading* indicator.

I think it depends on who you want to believe. Both CO2 and solar activity, appear to correlate with global temperatures when taken at face value.

In my humble opinion, the CO2 global warming theory is not a scientific consensus (put the pitchforks down).

There appear to be notable scientists, whose names appear on the global warming document often used as ‘evidence’ that 99% of climate scientists agree. However, some scientists are unable to retrospectively remove their names from this document even when they begin to question the CO2 premise.

But, what I am most fascinated by is that this might be a case of Extraordinary Popular Delusions and the Madness of Crowds. Taking this a step further, this could end up as the most costly fallacies of all time (just behind the idea that governments can solve their debt issues by printing money).

If we implement CO2 trading, and our premise is wrong, it will cost trillions – money down the drain for the sake of an otherwise harmless gas. If CO2 is the cause of the problem, then the laws of dynamical systems would seem to suggest that that we have very little ability to control the quantum and direction of potential side-effects. Basically, the system is *very* complex, and it’s best to admit, that at this point, we really don’t know what is going on. Also, we should continue to find all possible causes.

Remember the hole in the ozone layer?

I distinctly remember, when studying a course in environmental science as part of a Chemical Engineering degree, our lecturer displayed an utter contempt for the ‘hole in the ozone layer’ theory. This struck me as a very contrarian view, since, at the time, this idea was reaching fever pitch. This ozone layer hole was going to grow into the size of the earth and we were all going to be toast.

My lecturer argued that popular science only focused on a small number of chemical processes, but ignored many other potentially counter balancing processes. His main disagreement was that the full picture of scientific facts wasn’t being interpreted objectively by the media and the general public. Having said that, the reduction of CFCs was very likely an important solution to the ozone issue.

Again, it was an idea that the world believed and became fixated on as a collective. Kind of like a reinforcing mechanism based on the tendency for most people to believe the consensus. As the consensus view becomes more of a consensus, a kind of viral effect is spawned.

Equally, I find it interesting that there’s also always a small contrarian contingent. This group is, ironically, like the ignored atmospheric chemical reactions, and possibly the solar flares of today. Within the social dynamical system, contrarians tend to keep us honest, always being prepared to look at the other side of the coin. Admittedly, they also stick to their views religiously. This seems to create a kind of natural balance. Most of the time we have an evolution of ideas as the masses adopt the consensus idea, but often the contrarian after a long wait sees his or her vision realised – revolution in thinking occurs. I might call this a public revelation. In the case of the GFC, Peter Schiff was ridiculed on public television and YouTube for years before his grim predictions became a reality for America.

Regarding, CO2 and global warming, maybe this time it is different. Maybe us masses are right. I hope not.

I think we should hold off on implementing a CO2 trading scheme until we are more certain. We can spend a tiny fraction of the cost of a CO2 trading scheme to make sure we are right. The problem is, that – as a crowd – we may not come to our senses soon enough to support a collaborative and rigorously scientific effort to objectively search for the real cause(s).

Most people reading this, will think “what are you talking about Andrew, we have found the cause, there’s no doubt!”. I simply challenge you to think about where you are getting your facts from, and to what extent your belief is an instinctive reaction to the overwhelming consensus view, along with a dash of cursory confirmation bias. Be contrarian!!

If you really disagree, I would love to hear your thoughts. There is nothing more agreeable to me than a two sided, logical discussion.

Companies I like: Wotif.com

strongpawn — Sun, 24 Oct 2010 11:03:56 +0000

Disclaimer: All the information provided here is not financial advice. The information presented is my opinion and may be completely inaccurate.

Wotif.com Holdings Limited is an Australia-based company, engaged in the provision of online travel booking services. Its services provide a range of choice for accommodation, flights, car rental, cruises, insurance, travel packages and tours.

Key financial ratios:

Return on equity (2010): greater than 60%
Debt to equity (2010): less than 1%
Payout ratio: approximately 86%

Qualities that attract me:

Internet companies have very low operating costs
Zero debt (practically)
Founder has large shareholding
Strong market share
Business model should be moderately resilient to a downturn, since accommodation providers will look channels like Wotif to get rooms booked.

Things that concern me:

Lack of a competitive moat, market share isn’t as high as other online businesses (like SEEK.com)
Strong Aussie dollar makes travelling in Australia expensive for OS travellers, also Aussies can travel more cheaply OS.

A message from God to his people

strongpawn — Sun, 24 Oct 2010 07:08:34 +0000

I came across Deuteronomy 8 recently. It is an old testament book that contains a stark warning to his people. I think, to some degree this gives Christians an insight into the nature of God, and a warning. I firmly believe that Jesus forever changed the nature of our relationship to God, but this is still something worth pondering. This passage indicates two things to me, firstly that God is trustworthy in bringing us through any desert we may find ourselves in, and secondly that when we feel that we have reached some promised land that we must not forget who brought us there.

Do Not Forget the LORD ( Deuteronomy 8 )

¹ Be careful to follow every command I am giving you today, so that you may live and increase and may enter and possess the land that the LORD promised on oath to your forefathers. ² Remember how the LORD your God led you all the way in the desert these forty years, to humble you and to test you in order to know what was in your heart, whether or not you would keep his commands. ³ He humbled you, causing you to hunger and then feeding you with manna, which neither you nor your fathers had known, to teach you that man does not live on bread alone but on every word that comes from the mouth of the LORD. ⁴ Your clothes did not wear out and your feet did not swell during these forty years.⁵ Know then in your heart that as a man disciplines his son, so the LORD your God disciplines you.

⁶ Observe the commands of the LORD your God, walking in his ways and revering him. ⁷ For the LORD your God is bringing you into a good land—a land with streams and pools of water, with springs flowing in the valleys and hills; ⁸ a land with wheat and barley, vines and fig trees, pomegranates, olive oil and honey; ⁹ a land where bread will not be scarce and you will lack nothing; a land where the rocks are iron and you can dig copper out of the hills.

¹⁰ When you have eaten and are satisfied, praise the LORD your God for the good land he has given you. ¹¹ Be careful that you do not forget the LORD your God, failing to observe his commands, his laws and his decrees that I am giving you this day. ¹² Otherwise, when you eat and are satisfied, when you build fine houses and settle down, ¹³ and when your herds and flocks grow large and your silver and gold increase and all you have is multiplied, ¹⁴ then your heart will become proud and you will forget the LORD your God, who brought you out of Egypt, out of the land of slavery. ¹⁵ He led you through the vast and dreadful desert, that thirsty and waterless land, with its venomous snakes and scorpions. He brought you water out of hard rock. ¹⁶ He gave you manna to eat in the desert, something your fathers had never known, to humble and to test you so that in the end it might go well with you. ¹⁷ You may say to yourself, “My power and the strength of my hands have produced this wealth for me.” ¹⁸ But remember the LORD your God, for it is he who gives you the ability to produce wealth, and so confirms his covenant, which he swore to your forefathers, as it is today.

¹⁹ If you ever forget the LORD your God and follow other gods and worship and bow down to them, I testify against you today that you will surely be destroyed. ²⁰ Like the nations the LORD destroyed before you, so you will be destroyed for not obeying the LORD your God.

Apple – change function catalyst

strongpawn — Fri, 22 Oct 2010 00:04:32 +0000

It only takes one company to crash through a barrier, then other companies can benefit from the increased user adoption of a better product. Take iPhone for example, for years countless enourmous companies tried to get mobile right, and largely they failed to deliver on the mobile promise. E.g. ubiquity of a good hardware platform, and an app delivery mechanism for developers.

Sure, we can talk about what we don’t like about AppStore and the like, but in the process I think we tend to forget what our expectations of a mobile experience (think Blackberry) were before iPhone. Put simply, iPhone transformed the mobile industry, and to think anything else might be selective memory. The silver lining of this is that Android (and maybe Windows 7) customers can also enjoy a great mobile experience, competition in the market is always good. Taking this a step further, competition will spur continued innovation, also good for us Borgs.

The new macbook, is another transformation towards solid state drives, by default and at reasonable prices, in laptops. As I write, competitors will be developing their takes on this great idea, but again, Apple is leading the charge. Apple seems to innovate *constantly* and is often the market leading innovator. Contrary to what the naysayers think this is useful to me as a user of Apple products. For the record, I also really love Linux and Windows 7, they are both developing into really great platforms.

We don’t all have to use Apple to benefit from their innovation.

This is the key idea that inspired this short blog entry. The Change Function by Pip Coburn makes this point brilliantly. Great ideas don’t always succeed, there is often a key catalyst, a particular execution, that teaches the marketplace the value of a great idea. Until that point, the change function, a subconcious weighing of percieved benefit vs cost of switching, prevents us from changing over.

Apple is one almighty influence on people’s change function.

I will be interested to observe how long it takes for solid state (flash) drives to become a mainstream water-cooler conversation topic. This until now hasn’t been perceived as important by anyone other than tech mavens.

Companies I like: Blackmores

strongpawn — Tue, 19 Oct 2010 11:00:49 +0000

Disclaimer: All the information provided here is not financial advice. The information presented is my opinion and may be completely inaccurate.

Blackmores produces vitamins and supplements. You may have seen their range of products in your local Woolies.

Key financial ratios:

Return on equity (2010): greater than 30%
Debt to equity (2010): less than 70%
Payout ratio: approximately 76%

Qualities that attract me:

Great marketing
Constantly and rapidly evolving product line
Organically investing for long term growth E.g. Warriewood facilities.
Expanding (successfully) into Asia
A long history of solid financial metrics. In 2010, debt was reduced.

Things that concern me:

Lack of a competitive moat (apart from a strong brand)
Scope to continue adding new products has limits

Companies I like

strongpawn — Tue, 19 Oct 2010 09:15:30 +0000

I have decided to start posting about companies that I like. The context of this is share-market investing, i.e. I want to find great investments that I might be able to purchase via my trusty online ‘trading’ account.

Blackmores (BKL)
Wotif.com (WTF)
Starpharma (SPL)
Coming soon… CSL Limited (CSL)

Disclaimer: Do not take this list of companies as a tip to buy. Finding a great company is only half the formula for successful investing. The harder part is estimating the intrinsic value (now and in the near future) and only purchasing at a price *below* this value. Always remember the three most important words in investing – margin of safety! Therefore, this list might be considered as candidates for further research. Some of them may well be overpriced, and the price you pay, along with the performance of the business determines your ultimate return. Always seek the advice of a professional financial adviser. I highly recommend that you visit Roger Montgomery’s blog to learn more about value investing.

Gadgets, tools and languages I use

strongpawn — Mon, 17 May 2010 12:15:56 +0000

Emacs
C++
Javascript
HTML5/CSS3
Erlang
- OTP framework
- Mochiweb HTTP server
- Mnesia database
Nginx web server/reverse proxy
WordPress
Git
BERT/JSON
Ubuntu Linux (linode.com)
iPhone

Squz now has a website -> squz.com

strongpawn — Sun, 14 Feb 2010 15:10:32 +0000

Squz is our company for producing iPhone games and other useful stuff.

Check out some cool screenshots of MultiMaze, our shiny iPhone maze game

Squz.com | Download MultiMaze from iTunes

Alternatively you can just search for “multimaze” in the AppStore from your iPhone.