Asymmetrical Investments (F)
Motif Human Evolution ETF and Virgin Rail USA are two examples of potential asymmetrical investments with potential for growth in the next 3-5 years. One focuses on disruption in the field of medicine and the other on the expansion of high-speed rail in high traffic corridors in the US.
Motif Human Evolution ETF
- Motif Human Evolution is an Exchanged Traded Fund that holds assets like stocks, commodities. It is generally designed and operated to keep it trading close to its net value asset.
- The Fund was first released on July 15, 2019. Because it is recently organized, it has a limited operating history and no indices to track.
- Its general focus is stocks that "may benefit from the development of new knowledge, medicines and technologies for the medical treatment of the human condition, from birth to end-of-life care."
It is expressly set up to include the following:
- Precision Medicine comprises companies that are working on innovations in the development of precise medical treatments or techniques. These can consist of targeting specific cells of types of cells, technologies that are physically precise or for a particular group of patients.
- Robotic Surgery will be composed of companies that will design and develop robotic surgery technology and miniaturized surgical instruments.
- Genomics includes companies using the knowledge gained in the study of the human genome to create techniques in gene therapy, gene editing and the use of biomarkers in developing treatments.
- Life Extension companies are those that will benefit from the aging population and helping it stay healthy as long as possible.
- Digital Health companies are those in the area of general consumer health care devices that improve the daily life of the consumer.
- Prospectus Metrics For Composition:
Type Percentage of funds
- Life Extension 26.2
- Precision Medicine 21.0
- Robotic Surgery 20.7
- Genomics 20.1
- Digital Health 11.2
- Cash 0.9
Type Percentage of Funds
- Health Care 97.6
- Information Technology 0.9
- Consumer Staples 0.4
- Industrials 0.3
- Cash 0.9
Type Percentage of Funds
- Pharmaceuticals, Biotechnology & Life Sciences 53.3
- Health Care Equipment & Services 44.3
- Software & Services 0.9
- Food, Beverage & Tobacco 0.4
- Capital Goods 0.3
- Cash 0.9
Thirty Percent of the Portfolio is invested in the following top 10 companies:
- Medtronic PLC 4.8
- Intuitive Surgical Inc 4.4
- Abbott Laboratories 3.8
- Boston Scientific Corp 3.1
- AstraZeneca PLC 2.9
- Johnson & Johnson 2.7
- Novartis AG 2.3
- Roche Holding AG 2.2
- Fresenius Medical Care AG & Co KGaA 2.1
- Sanofi 2.0
The remaining 70% is invested in smaller companies.
Research Strategy- Motif Human Evolution ETF
For this investment, we began by reading projection by futurists for 2025. Where did they think the world would be?
One of the consistent predictions we found was the disruption of healthcare and the growth in precision medicine, robotic surgery and more. Seeing this as a significant growth area that is likely to be relatively unaffected by a downturn in the economy, we then searched for companies looking for angel investors with small investments.
Like many innovations over the last 60 years, the cornerstone is research by DARPA, Defense Advanced Research Projects Agency of the US government. They are currently funding research in robotics use, specifically but not limited to prosthetics. They are working in partnership with prosthetic companies to develop the next generation of prostheses that can be moved by commands directly from the brain, mimicking the human way of moving limbs.
We searched for small companies working in this area. Our criteria were that the business was far enough along the production path to have a minimal risk with a good payoff and might welcome angel investors. However, as we did more research, we came to the conclusion that it was not the best approach.
We then looked for and found the Motif Human Evolution ETF recently created by Goldman Sachs. After reviewing the prospectus, we believe an investment in this fund has an excellent risk tolerance with little chance of loss over the long term and excellent potential for substantial gains.
Virgin Rail USA
- Virgin Rail USA is a rebranded name for Brightline Rail. Its history is interesting.
- Fortress Investments fund Brightline.
- Brightline was initially launched in May 2018 as the only privately owned high-speed rail company in the US. Its route was Miami to West Palm Beach, and the purpose was to alleviate commuter congestion on the corridor. Estimates were it would take 3 million cars off the highway.
- In September 2018, Brightline, a privately owned and operated inter-city passenger rail system acquired Xpress West.
- Xpress West had the rights to build a federally approved rail line from Las Vegas to Southern California.
- Plans for the line included a 230-mile route connecting Las Vegas, through Palmdale and Victorville and ending with a connection to Los Angeles Metrolink service.
- With planned speeds of 150 mph, the trip between Los Angeles and Las Vegas was expected to take about 80 minutes.
- Ridership studies have shown that more than 50 million annual trips are taken between Southern California and Las Vegas.
- The governor of Nevada stated that "The introduction of high-speed rail between Las Vegas to Southern California will bring significant economic and environmental benefits to our state and support increased tourism."
- The terms of the acquisition have not been disclosed.
- Brightline planned to build and operate the rail line. The first phase of the project was expected to be built adjacent to Interstate 15 for 185 miles.
- In November 2018, Sir Richard Branson and Wes Eden, co-founder of fortress investment, joined forces to invest in the future of high-speed rail in the US.
- For an undisclosed sum, Branson bought a minority interest in Brightline. In April 2019 Brightline was rebranded as Virgin Rail USA to take advantage of the name recognition and marketing power of the Virgin Conglomerate.
- Construction began immediately on completion of the Florida Line to Orlando and then to Tampa Bay.
- Construction on the western line is expected to begin in 2019, with service to start in 2022.
Research Strategy- VIRGIN RAIL USA
For this recommendation we looked at IPO's planned for the beginning of this year. One that caught our interest was an IPO planned for February that was pulled to be issued later.
We selected Virgin Rail USA as a potential choice for investment for the following reasons:
Both Wes Eden and Virgin have a strong record of picking winners among new industries. Virgin has experience running a high-speed rail for 21 years in Britain. The management team of Brightline has been successful to this point. The strategy and plan seem solid.
High-speed rail is much more climate friendly than cars. The time may come when the government will mandate its use. Even if that doesn't happen, the upcoming generation is much more attuned to doing something about climate change and will patronize high speed rail, as will the aging boomer population that wants to travel but doesn't want to drive. Every other developed country in the world has invested heavily in high-speed rail for many years and America will need to do so as well to replace carbon dioxide spewing vehicles.
22 million people live in Southern California and Las Vegas is a popular destination. Brightline has acquired 38 acres next to the Las Vegas Strip to build a transportation station at the end of the western line with access for taxis, buses, shuttles, and limousines.
Although we do not expect the IPO to be put up until 2020, we do believe all of these factors make this a good asymmetric investment over a 3-5 year range once the stock goes on sale.