Looking to the New Year, with Randy Baron

Everyone knows the Three Rs as Reading, Writing, and ‘Rithmetic. In 2021, those Rs got replaced with Reopening, Recalibration, and Reflation. Oh, and meme stocks. The media focused on alleged “bubbles” in many asset classes, with much of its attention on technology, innovation, disruption, and cryptocurrencies. Ironically, many equity markets around the world not known as hotbeds of innovation and disruption performed well last year. Valuation disconnects apparently have begun to matter and we view this a portend of good things to come for our strategy in 2022.??

Looking to the new year, Covid is likely to become endemic, meaning it will not totally disappear, nor does it need to for some semblance of normality to return. It just needs to be defanged enough to become a nuisance we can live, work, and play with. It is worth remembering that the Delta variant had little impact on demand and instead a material impact on global supply. Outside of China, Zero Covid policies across Asia have now ended, so the Omicron variant should not have a similar supply impact; it would need to prove more impactful to hospitalizations than Delta to have any real impact on demand.

The market’s overall performance in December (and for that matter for the full year) suggests that we shall overcome the near-term challenges from the Omicron variant. The market focuses in 2021 should largely remain the same in the year ahead: Investors will continue to watch the trajectory of the pandemic, supply-chain issues, inflation, labor force availability, and how central banks around the world shape policy.?

We are investors, not traders. Our mindset is focused on the long term.??With that in mind, here are a few investment ideas we’re watching for the year ahead.

Amyris, Inc. (AMRS:NASD)

There are three constants in life: death, taxes, and the inevitability that Amyris will find a way to screw up third quarter earnings. This was true at the end of 2021, after which we leaned in and subsequently Amyris’ stock soared. November 2021’s earnings disappointment provided a similar opportunity.?

RenalytixAI??PLC (RENX:London

Renalytix suffered from a share price downdraft in the fourth quarter, though unlike Amyris this was not due to anything company-specific. Publicly-listed medical device company stocks declined around 40 percent on average in the quarter. Renalytix was not spared. As management has publicly stated, in 2022 Renalytix could announce a dozen or more hospital systems will begin to use its KindeyIntelX test in the year(s) to come, thus opening the robust path towards massive revenue generation.?

Top Shelf International (TSI:Australia)

TSI is trying to up-end the Australian high-end spirits ecosystem. Most notably, they are trying to farm Australian agave towards growing a domestic tequila brand. They have a premium whiskey as well. In the fourth quarter, management reached out and asked if we would participate in their latest round of growth capital. We were happy to contribute, especially when the AUS$30 million deal they were trying to raise had almost twice as much underlying demand as they needed.?

Seeing Machines Limited (SEE:London)

Seeing Machines is on the cusp of a breakout, as they now have commitments for eighty million vehicles over the next five years via eight different OEMs -- five of which are new. (Compare that to the fact they are only in 150,000 cars on the road today, via six models.) Most notably, in December Ford announced Seeing Machine is featured in its flagship F-150 truck, the best-selling vehicle in the United States. We expect a US cross listing for Seeing Machines in 2022.?

IHS Holding Limited (IHS:NY)

Based out of Africa, IHS has everything we like in a tower business: Cash flow margins on its 30,000 towers are nearly 60 percent. It’s only 2 times levered, with no maturities until 2025. Its tenancy ratio of 1.5x is below industry averages and could improve. Similar to the US tower model, IHS utilizes long-term contracts with limited termination rights and annual escalators. Africa is the lowest-penetrated cellphone continent in the world, and there is also a long runway for future network upgrades: 4G rollouts in urban areas are in early stages.?

Willow Biosciences Inc (WLLW:Toronto)

Willow Biosciences is a Canadian pure-play generating synthetically created cannabinoids. Willow’s CBG is 99 percent pure, in fact, which leads even our favorite synbio name, Amyris (which currently markets its CBG via the?Teresana?brand). Willow’s CBG and CBGA (the acid form, used by fragrance and flavor companies) sells between $5,000 and $10,000 per kilo. That is roughly 5 to 10x the price of CBD, a very popular, commonly used molecule we think Willow, Creo, and Amyris (all of which we own) will eventually displace.

Mynaric AG (MYNA:NASD)

As Mynaric’s IPO makes clear, there is an influx of capital accelerating space’s innovation cycle. Novel use cases and business models are emerging as the sector swells with new entrants. Mynaric (founded by an early member of Space X) has lasers key to the infrastructure for space’s democratization. We continue to track?Space as a Service?(SPaaS) as a burgeoning, disruptive industry with massive growth potential that could unlock the economic value of space. SPaaS have not yet reached the radar of mainstream investors.

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