It's been another whirlwind of a quarter for us here at Spaceship.
We've bought and sold some stocks, and changed our positions in others, so let's take a look at the latest changes to our Spaceship Voyager portfolios.
Changes to the Spaceship Universe Portfolio
Bought: Eli Lilly and Co
Eli Lilly is a global pharmaceutical company headquartered in the city of Indianapolis in the US. Founded in 1876 by Colonel Eli Lilly (formerly an American soldier and prisoner of war), the company is one of the largest pharmaceutical companies in the world.
Eli Lilly is most famous for being the first pharmaceutical company to distribute the polio vaccine globally and commercialise insulin.
By the numbers, Eli Lilly is equally impressive.
The company has five key divisions: diabetes, oncology, immunology, neuroscience, and 'other', and it has more than 39,000 employees worldwide, with approximately 9,400 employees engaged in research and development.
We like Eli Lilly for the Spaceship Universe Portfolio because of its breakthroughs in two key diseases, a new class of diabetes drug which leads to weight loss (potentially helping solve obesity) and a drug showing potential in slowing Alzheimer's.
The diabetes drug, known as Mounjaro, has already been approved in the US to help with type 2 diabetes, with approval for weight loss slated for later this year. In the US alone, medical care costs tied to obesity were $173 billion in 2019 dollars, according to research cited by the Centers for Disease Control and Prevention. We see the opportunity for large cost savings, as the hypothesis is that reducing obesity can help prevent diabetes, cardiovascular issues, and cancers. We believe insurers are likely to increase coverage, reducing costs for consumers, and also believe the treatment is likely to see ongoing usage with obesity a chronic problem.
The other interesting tidbit here is that Mounjaro is proving to have less side effects than Ozempic and Wegovy, which are similar drugs issued by Eli Lilly's competitor Novo Nordisk. You may have heard about these two drugs in recent months, as there have been global shortages due to increased popularity.
We also like Eli Lilly’s progression in Alzheimer's disease. Clinical studies of their drug Donanemab showed the treatment slowed Alzheimer's progress by ~35% in the early stages of the disease.
These are large markets, but the potential in weight loss is massive. We believe that even a small takeup of Mounjaro (which will likely have a separate name/brand for obesity usage) by the addressable market would provide Eli Lilly with a large opportunity, and that's why we bought it.
Sold: Cleanaway Waste Management Ltd
We've had Cleanaway Waste Management in the Spaceship Universe Portfolio for a few years now, but this quarter we sold it.
While it has been a stable business, the company has recently made aggressive plans (in our opinion) to build waste-to-energy plants in Victoria and Queensland. These projects typically require significant capital investment (potentially up to $2 billion), and the company has a market cap of approximately $6 billion. We believe the company will likely sell down some of its stake to finance these projects to reduce the risk, but it is still a significant change to operations.
With all this in mind, we decided to sell out of Cleanaway Waste Management.
Changes to the Spaceship Earth Portfolio
Bought: Veeva Systems Inc
Veeva Systems is a cloud computing company that specialises in providing software solutions for the life sciences industries that help its customers market, sell, store data, coordinate, and stay compliant!
We like Veeva Systems for a few reasons.
To start, we believe it has no true peers across its product range currently. This has meant, for example, that it could introduce annual price increases for the first time with little push back from customers.
On that, it's apparent the team — lead by founder and CEO Peter Gassner — knows how to manage a business. It raised about US$7m in venture funding, and only spent US$4m of that before it became profitable. When the company eventually went public in 2013, it had a valuation of US$4.4bn, just six years after launch.
With breakthroughs in artificial intelligence helping speed up the drug discovery process, we believe there will be increased clinical trials which should benefit Veeva.
As for why we bought it for the Spaceship Earth Portfolio, we believe Veeva Systems contributes to Goal 3 (Good Health and Well-Being) and Goal 8 (Decent Work and Economic Growth) of the UN Sustainable Development Goals agenda.
It helps life sciences companies become more effective and efficient. The company has also taken legal action to fight the unfair use of non-compete agreements (and does not use them itself) as they believe such agreements limit an employee's fundamental right to work where they choose.
Bought: Eli Lilly and Co
You can read more about why we like Eli Lilly above, because we also bought it for the Spaceship Universe Portfolio.
As for why we bought it for the Spaceship Earth Portfolio specifically, we believe Eli Lilly contributes to a number of goals, but in particular, Goal 3 (Good Health and Well-Being) of the UN Sustainable Development Goals agenda, as Eli Lily increases access to medicines, thereby directly contributing to good health outcomes.
Bought: Crowdstrike Holdings Inc
Crowdstrike is an advanced cloud security platform. Their mission is simple: to stop breaches. Their platform is designed to help customers manage policies, control reporting data, manage, and respond to threats.
We like it because, well, the threat landscape continues to worsen. We've seen it across Australia over the past year, and as companies have to constantly evolve to manage cybersecurity threats, the opportunity grows — which is where Crowdstrike comes in.
Crowdstrike benefits from a powerful network effect. Its platform is designed so that the more data that is fed into it, the more intelligent it becomes. This means customers see compounding improvements, and the cost to switch out increases.
As for why we bought it for the Spaceship Earth Portfolio specifically, we believe Crowdstrike’s cyber security solutions contribute to several goals such as Goal 9 (Industry, Innovation, and Infrastructure) (as their software promotes secure infrastructure), Goal 16 (Peace, Justice and Strong Institutions) (as they prevent cyber threats and assist in incident response) and Goal 17 (Partnerships for the Goals) of the UN Sustainable Development Goals agenda (as they collaborate with various organisations to combat cyber threats).
Sold: Nintendo Co Ltd
While Nintendo's Switch product has become its best-selling console, the company has become, in our minds, over reliant on one platform, with hand held devices now replaced by the multi-purpose Switch (it can be played at home and on the go).
Additionally the Switch is ageing and Ninendo has had mixed platform launch results in recent years with reliance on the Switch just adding to the risks. Shares have increased recently due to excitement over the Mario movie, but we believe this is a one off benefit, not recurring/ongoing revenue.
All this taken together, we feel there is increased platform risk in Nintendo, which is why we decided to sell out of our position.
Sold: Mercari Inc
Mercari operates a marketplace app where users can buy and sell almost anything. It is dominant in its home base of Japan, but we are negative on their expansion into the US which is a competitive market thanks to the likes of eBay and Etsy. As such, we decided to sell out of our position.
Reduced: First Solar Inc
We still like First Solar. We are reducing the position due to outperformance and concerns that new regulations will slow growth. Solar buyers in California will receive a much smaller credit on their bills for the electricity they feed back into the grid. The rules are designed to encourage pairing batteries with solar panels. Our exposure to the solar trend sees us investing in both First Solar and Enphase Energy. As Enphase Energy has more exposure to the combined battery opportunity, we decided to reduce our position in First Solar.
Changes to the Spaceship Origin Portfolio
For customers in the Spaceship Origin Portfolio, things are a little different.
The Spaceship Origin Portfolio is made up of around 100 of some of the largest ASX listed companies by market capitalisation, and around 100 of some of the largest global companies by market capitalisation.
If a company moves in or out of the Spaceship Origin Portfolio, it will be because its market capitalisation has changed, not because we've made the decision to buy or sell it.
One or more of the Spaceship Voyager portfolios invest in Cleanaway Waste Management, Crowdstrike, Eli Lilly, Enphase Energy, First Solar, and Veeva Systems at the time of writing. Please refer to the Spaceship app or our website for more information on what each portfolio invests in.
Important! We’re sharing with you our thoughts on the companies in which Spaceship Voyager invests for your informational purposes only. We think it’s important (and interesting!) to let you know what’s happening with Spaceship Voyager’s investments. However, we are not making recommendations to buy or sell holdings in a specific company. Past performance isn’t a reliable indicator or guarantee of future performance.
