May Investment Update

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Dear investors and well-wishers,

We finished April down -5%, but are up over 15% so far in May.

The March/April sell-off gave us an opportunity to buy into a number of companies, a number of which have rebounded strongly.

HIMS has been a standout performer. A popular bear case was that GLP-1s would come off the FDA shortage list and HIMS would no longer be able to access cheap compounded versions. Short interest built to an astonishing 34% of the register.

But HIMS promptly a partnership with Novo Nordisk, and as competition heats up (and Novo feels the pressure from Eli Lilly’s superior Mounjaro),access to supply is secure. So I’m not sure where that leaves the short thesis.

This is a $12 billion company growing at 110%, with margins and profits growing faster, and only 2.4 million customers in a company of 340 million. There’s a long way to go.

Of course we are applying our risk model, and got a very helpful re-entry point at $28.

This is a good example of why applying this approach is so effective in stocks this volatile.

Growth has been metronomic, but just in the last year the stock has had multiple >100% moves, and a 65% drawdown.

A number of growth stock started selling off late last year. We exited, and got timely reentries. ELF growth slowed, but is managing through tariff risks.

Transmedics, which got hit by a weak result last year and a short report also gave a recent re-entry:

Biotech has continued to languish. We are down about 7% for the year, and XXX is due to biotech.

There are two core parts to our portfolio, healthcare (mostly Australian) and global growth. Growth/tech has been a solid contributor, particularly as we moved to cash in March, and then bought aggressively once momentum turned.

There were a number of companies we were watching growing over 100% organically that dropped 65% or more in that period, and these bounced back the hardest, helped in part by high short interest.

But we held the bulk of our biotech holdings, partly as they’re too illiquid for the same kind of nimble trading, but also as readouts and deal announcements can have unpredictable timing. Anteris partially recovered, though is still down 21% from the Nasdaq IPO price.

And there are near term readouts from Syntara in mid-June and Clarity Pharmaceuticals later in the year.

Syntara’s mid-trial readout was strong, including patients that had been on the drug for some time, and it would be unusual for that to reverse. There are two key metrics, reductions in spleen volume and symptom scores, and the readout was strongest on symptom scores.

A number of patients had already hit the 38 week mark in the interim data.

The drug was clearly having an effect, and reduces fibrosis in other settings, so the key question may be whether the data is good enough for a partnership, which is harder to judge. Our base case is a readout in line with the prior result, likely stronger in symptom scores than spleen size, and ultimately evidence there’s a drug that clinicians will want to use.

Outlook

Nvidia reported strongly, and will have grown 17% on the quarter where it not for restrictions on their H20 sales to China. So far there are still capacity constraints at major LLM providers.

Nvidia’s year-on-year growth came in at 69%, so demand is still growing fast.

Markets often move on the second derivative, and the bear case is that the major buyers of GPUs keep spending steady. Earlier this year the stock was trading at a forward PE of under 20x, so you could still see substantial gains from here.

Once again, a risk-managed approach is the right way to monetize trillions of dollars of potential market cap gains with the risk of a cyclical collapse. Nvidia shared forecasts that datacenter spend would double from $500 billion in 2025 to over a trillion in 2028.

If so, I there’s probably at least a 2x in Nvidia from here.

The winners and losers of the next phase are starting to become clearer. Google is finally hitting its strides, rolling out an AI offering right below their multitrillion dollar search bar. They now claim to have over a billion people interacting with their AI.

This will generate the data required to run the kind of feedback loop that made Google Search one of the greatest products ever.

Their video model is also leading, with voice included. YouTube has the most video content on the internet, growing every day, and is perhaps only rivalled by TikTok, so I expect Google to win on video AI.

Perplexity looks like a loser. This is an AI-enabled search engine, and had the market to themselves for a while. Now search is build directly into OpenAI’s ChatGPT and other major LLMs, so a standalone skin that searches the web looks increasingly redundant. They’re reportedly raising $500 million at a lowered $14 billion valuation, so the future of the company will hinge on how well they spend that.

We have a number of listed AI-related investments, mostly growing at over 100%. These collapsed over 65% from February to the April lows, so we had some lucky entry points in companies like Astera Labs:

And Credo:

Michael