Anthony-Rossmann Wealth

28/12/2022

As a very tough year draws to a close, there is reason to be optimistic in light of technological advancements!

https://www.bloomberg.com/opinion/articles/2022-12-27/future-of-tech-despite-the-gloom-there-s-been-important-progress?utm_medium=social&utm_campaign=socialflow-organic&cmpid=socialflow-facebook-business&utm_source=facebook&utm_content=business&fbclid=IwAR3PBvc5FQEeZ1hqgVxrJ1Ln8YnFKJdTEfE_NLGgzyeAQ5oO8XZxlH6DavY&leadSource=uverify%20wall

Things look bleak. Yet progress across the board give reason to be optimistic about the coming few years.

24/10/2022

As expected, whilst globally average funding rounds decrease significantly by close to half, deal size remains relatively steady in venture capital markets - suggesting smaller and increasingly focus on seed rounds; The mantra TINA, there is no alternative to stocks, is understandably squashed as a 3-month treasury yields 4+%.

However, there are real and seismic underlying innovations to an archaic banking system ripe for disruption that go above and beyond B2C wants, such as accessibility and ease of trading, focussing instead on pressing issues such as SME funding gaps left unfilled. As difficult as fintech conditions are, the truth will eventually win out as superior technologically enabled business models prove more than capable!

Fintech investment slowed down in Q3'22 as quarterly funding returned to pre-2021 levels. Learn more in the State of Fintech Q3'22 Report.

24/10/2022

Venture Capital funding is pouring into the eventual widespread marketization of liquid biopsies; In relation to improving the breast cancer detection to treatment journey, liquid biopsies will increasingly play a larger role in supporting archaic technology and working models. AI & ML developments are fundamental underlying pillars, be it for genome sequencing, or the expected replacement of outdated mammography with advanced and more precise CT systems. Advancements and hugely falling AI training costs, at around 50x Moore's law, are and will continue to act as a holistic springboard for more accurate, comfortable and convenient integrated breast cancer care!

This analyst note explores the VC landscape for liquid biopsies, detailing the challenges to widespread liquid biopsy adoption and highlighting a new startup in the space, Hedera Dx.

26/08/2022

An expected & monumental agreement for the auditing of US listed Chinese companies is reached, marking a win-win situation for both nations, with too much to lose in the event of further decoupling!

Agreement gives US regulators access to Chinese accounts in effort to keep listings on New York exchanges

03/07/2022

PHYSICAL STORES ARE NOT DYING, THEY ARE BECOMING SMARTER… THE STRETCH FROM TECH TO A BUSINESS MODEL WILL BE DEFINING

During the 2010’s online retail initiated and demonstrated a low-capex way to reach customers all around the world; A truly game-changing phenomenon in which competitive barriers (at least in the short run) were broken down, satisfying immediate gratification consumerism. The 1980’s opening-up of China under Deng Xiaoping a few decades earlier, the factory of the world, provided in tandem a perfect backdrop of sustained low priced goods to feed the west. In 2010, online US retail sales stood at around 4% quadrupling to a height of 16% a decade later.

Ever since, doomsayers have forecasted the slow but consistent decline of the physical retail store. Whilst indeed relative online sales, offering convenience & ease, are expected to continue to climb as a % of total retail turnover, this does not necessarily undermine the competitive advantage that a physical store can entail. And digitally native retailers are setting the trend; Amazon, Birchbox and a host other well-known digital-first retailers have taken the leap to navigate an increasingly physical presence. In 2021, twice as many retailers opened shop in the US as closed down.

Nonetheless, brick and mortar has and will continue to fundamentally change from simply being a place to purchase, instead focussing emphasis upon consumer engagement, connection and, most importantly, experience. Quite simply, at a time when one can buy anything at a click of a button online, how you feel in-store will shine a light on leading retailers. Just as online analytics and advertising disproportionately influence consumer habits on the web, it is only natural that the same technologies in-store instigate an equivalently significant result.

The buzzwords are the same (AI, ML, analytics, DOOH, you name it) and the applications of such technologies are becoming ever so impressive. From in-store anonymised facial detection advertising screens that can target and recommend products on a myriad of criteria, to the seamless integration of POS and unique online store customer information, the opportunities to improve upon archaic & outdated systems are enticing. The integration of the above technologies with augmented reality applications in-store, or push notifications to existing customer mobile wallets (using unique transaction data about that customer) outside, and in the vicinity of a location, revolutionize the level of personalized engagement.

Nonetheless, as exciting as some of this technology may be, as an investor, uncertainty exists around the application and wide-scale implementation of any new technology, however promising it may be; Physical retailers are under fire from every angle and most, especially smaller retailers, will not financially be in a position to outlay high CAPEX to invest for the future. After all, margins can be as low as 2.5%. The feasibility and extent to which any new technology application achieves global mainstream adoption and scale will depend just as much, if not more so, on the monetization and ultimate business model. Investors should be able to zoom out and assess any friction points that may hinder promising technologies from firstly reaching major trials with retailers per se, and the subsequent successful roll-out across a retail chain. For these conditions to be met, established retailers, often in business for many centuries, have a reputation to uphold and therefore require a host of internal departments to sign off.

In a similar vein, in an analysis of over 150 retail technology companies aiming to achieve one or more of the above, the intrinsic absence of sufficient (if any) IP protection will ultimately limit the market impact that entities can hope to achieve and maintain. In a subsection of the industry where this is more often than not the case, we look for sustainable competitive advantage where IP protection forms an element of this.

Overall, just as Facebook and Alphabet predicated their success on the foundations of a Silicon Valley-favourite SAAS advertising model, we believe physical retailers looking to lead digital in-store transformation will be similarly best served by such model.

In practical terms, this could mean that low-margin retailers for example can participate in the monetization of valuable in-store digital signage, for which advertisers will pay heavy premiums in order to reach targeted point of sale customers. One may envisage how the capture of in-store traffic data (age, gender, c-sat score) will extend monetization potential further. Collectively, under such model, retailers protect and indeed may be able to improve margins through the participation of advertising revenue, customers experience an improved brand positive message and advertisers achieve hyper-targeted POS customer accessibility.

Overall, such win-win-win business models will drive and create incredible investment opportunities in the digitalization of physical retail sphere, just as it did for the bigtech we know today!

30/06/2022

FINTECH IS MORE THAN A BUZZWORD, AND WILL BRING PROFOUND CHANGE!

To start off, it goes without saying that the last several months have been extremely difficult as equities see the worst start to a year in half a century; That is equities on average, with innovation, small caps & long duration assets being punished even more severely. To put things in perspective, Shopify, an ecommerce darling, having traded at a euphorically stretched price, has fallen 97%!

One may want to draw parallels to the dotcom bubble, and compressions in certain subsets of the market could justify one's argument, but we believe the market pendulum has been swinging too far on both sides. Just as a Howard Marks has never been more bullish on distressed corporate credit, a similar case can be made for fintech (with an actual use case, and not an idea). There has been PE funding flooding areas including Defi, trading, BNPL where competition is fierce, technology is often unproven and the business model has yet to prove sustainable; We believe there is a high chance that the next fintech giant will be a company that can globally navigate a complex regulatory environment in order to alleviate and positively affect the SME funding gap, that is the inability by SME'S to obtain sufficient bank funding.

This is an issue that has plagued global economies, and the below IMF paper highlights the real intrinsic difference that AI and big data can have upon adequate credit assessment!

In times such as this, one is best placed by the motto 'this too shall pass', and we remind stakeholders to focus on real longer term & structural trends that will nonetheless shape the future of our increasingly digital economies!

Promoting credit services to small and medium-size enterprises (SMEs) has been a perennial challenge for policy makers globally due to high information costs. R

12/06/2022

Financial conditions may be acutely challenging at the moment & for the foreseeable future, but larger fundamental shifts in the transition to biological crop protection have not changed; One of our holdings is now working with 5 of the largest agricultural companies in the world who were all eager to gain exclusive testing rights for applications from postharvest to preplant fumigation purposes.

We continue to look at the bigger picture & believe value creation will be set forth over the coming years!

In the 1950s, the "Gros Michel" variety of banana was wiped out by Panama disease. The banana crop in some locations was basically eliminated by the disease of fusarium wilt, caused by a pathogen that enters the plant through the roots.

31/03/2022

INVERSION OF THE YIELD CURVE: THE BOND MARKET IS USUALLY RIGHT, OUR VIEW!

Before we outline what the bond market may be indicating, we remind readers that we have never positioned ourselves on the basis of any fundamental macro-economic development; If anything, the last two years in particular have shown us that truly anything within the wider outlook can happen, and we (just like most investors) do not have the capability over time to make such bold predictions.

Rather, we enjoy to hold quality companies at intrinsic value-adding prices that operate within favourable longer-term structural, and more predictable, dynamics. Examples of this would include the replacement of synthetic chemicals or the need for digitalization of the brick-and-mortar retail landscape, where our holdings have made considerable progress!

Having said that, we believe it is important to be aware of what the market, more importantly treasury yields could be telling us.

Traditionally, one would expect yields on treasuries to be positively correlated in relation to duration; In other words, a 10-year bond should yield more than a 2-year security. Investors expect to be compensated for the opportunity cost and risk of higher inflation as the time-period lends to higher uncertainty. An inversion of this dynamic refers to the situation where the opposite is the case, and shorter-term treasury yields outpace the longer-duration asset.

Why is the latter important? Since 1900, there have been 28 instances where the 2/10 curve inverted, 22 times of which a recession loomed.

The last time this happened was in the latter part of 2019, a few months later of course the pandemic struck. Currently, we face a backdrop in which inflation has hit a 40-year high, supply chains are scrambling with pent-up demand and system shocks, and the fed is in the process of tightening monetary policy.

Under such circumstances, it is only fathomable that the 2-year yield has well and truly been exploding. What is more interesting, however, is that the 10 year yields have not kept pace. Reasoning may be that the bond market accepts, understand & has priced in short to medium term rate hikes (and inflation concerns) but believes that the longer-term economic outlook is bleak.

Monetary policy adjustment is always a balancing act, and fed officials arguably have an insurmountable challenge ahead, attempting to bring inflation under control without inflicting a recession. With the 2/10 curve inverting, the market may be indicating that tightening of policy, in the face of an eastern European conflict & faltering consumer confidence, may induce medium to long-term growth pressure in which monetary policy has to revert action.
One may ask why investors would be willing to accept a near equivalent yield-rate on the 10-year, when they could just buy the shorter duration 2 year?

The answer inherently lies firstly of course in the institutional requirement for duration, but more importantly, in the fact that under such a scenario, the marginal benefit would exclusively be derived from a corresponding higher long-duration treasury price, as the yields fall to reflect the new (potential) economic reality.

Nonetheless, it is important to add that consumer and company balance sheets have rarely been in a stronger position. Likewise, we have fundamentally made our beliefs clear that we believe productivity gains over the forthcoming decades will be present profound economic expansion opportunities; Inflationary concerns may not just be structurally offset by technologies such as AI costs falling dramatically, but also the competitive pressures that incumbent benchmark leaders could face; Earlier we gave an example of the transition to more sustainable agriculture, and we are seeing DIRECT instances here where synthetics such as Glyphosate, Chlorpropham etc can potentially be matched by organic alternatives, if not improved upon, in terms of efficacy as well as price. Across the board, in competitive market structures these are factors that decrease the potential of competitors to raise or even maintain current prices.

Lastly, it is important to also note that the disparity in yields may simply be short-term as the Fed per se cuts back QE and naturally allows the 10-year to rise.

Overall, whilst the current market environment has been challenging, recession or not, we believe we are fundamentally in a position to continue to provide benchmark-leading results over the long-term!

26/02/2022

Programmatic Digital Out Of Home (DOOH) advertising is expected to grow from $6.7bn in 2019 to over $17bn in 2027!

Since posting last quarterly results, one of our core holdings has signed an agreement with one of the largest DOOH platforms globally, which we expect to create substantial value over the next few years; This builds upon the previous announced partnership with one of Europe's largest security companies. These partnerships working in synergy, we believe, present unparalleled exponential growth opportunities over the longer term (from 2024 onwards).

An interesting (somewhat outdated) white paper:

28/01/2022

An interesting summary of some areas of focus by China in 2022

Learn more.

12/12/2021

The widespread nature of organized malicious shorting, especially in small-cap markets, demonstrates the extent of market manipulation. One can only agree that further steps around disclosure as well as short market-practice must be reassessed by the SEC!

The U.S. Justice Department has launched an expansive criminal investigation into short selling by hedge funds and research firms, scrutinizing their symbiotic relationships and hunting for signs that they improperly coordinated trades or broke other laws to profit, according to people familiar with...