Chit Chat Stocks - BONUS Episode! Biotech + Semiconductors With 7investing

Episode Date: November 2, 2022

On the 1st of every month, 7investing publishes its seven best investment ideas. Brett, Ryan, Simon, and Krzysztof discuss the craze of the market. Listen in to hear where some hidden gems might be found in the current economic conditions. Enjoy the show! ****************************** Interested in becoming a member of 7investing? Subscribe with code “MONEY” and get $100 off your annual subscription for life: https://7investing.com/checkout/ ****************************** Want updates on future shows and projects? Follow us on Twitter: https://twitter.com/chitchatmoney Subscribe to our Substack to receive free show notes and charts that go along with every episode: https://chitchatmoney.substack.com/ Interested to see more of 7investing's work? Follow them on Twitter here: https://twitter.com/7investing?s=20&t=dWSrp6mORbWwyzuupxBSqg Contact us: [e-mail] Timestamps 7investing (2:22) Earnings (16:29) Electric Vehicles (26:22) Aging is a Disease (37:44) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. This is a bonus episode with Seven Investing. We have two advisors from the team, Simon Erickson, as you may have listened to before, but we also have Christoph, and I am blanking on his last name. I apologize, Christoph, the spelling on that is very difficult. We have the two advisors on the show today, and Ryan is actually doing something right now. So it's just going to be on the intro, but he is joining the show as well. We cover semiconductors and biotech stocks, as well as get an update on how things are going at 7investing and how they are navigating the market. And you know that their exclusive sponsor are presenting sponsors through the end of 2022. We talk about that during the episode. So I won't

give a big ad pitch now because Simon will go over how 7investing works while we interview them, but use code money. We talk about this during the show as well to get $100 off your annual subscription every year for life. That is a 25% discount. Code money, the link and spelling of that. I think everyone can spell money, but the link and spelling of that are going to be in the show notes. All right. Well, let's get to it. Let's talk with Simon and Christophe. Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital,

and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. welcome in this is the well this is a bonus episode so this is not a regular recurring uh episode on chitchat money but we have our friends from seven investing uh our exclusive sponsor through the end of 2022 you'll hear our spiel at the beginning of the show but we'll talk about it again at the end um as well simon christoph how are you guys doing today doing been fantastic, Brett. Excited to be on your show. Thanks for having us here today.

Yeah, the pleasure is all ours. All right. This is the first time Christoph's on the show, so we're going to have him be introduced and we have Ryan as well, as always. But we're going to do an update on 7investing, kind of what you guys have been doing lately. And then we're going to hit some topics, which are semiconductors and biotech, which is two things that you guys cover, some of the sectors that you guys cover over at 7investing. So first off, I guess any update generally on 7investing, maybe Simon, we'll start with you. How are you guys navigating the current market and the huge drawdown that has been across the growth tech software space? Yeah, Brett. So Christoph and I are both from Texas. So perhaps the weather pattern that I'll use to describe it

is a class five hurricane, right? This is a category five that's been blowing through the markets in 2022. I don't think it's been fun for any investors. As a reminder, the market is always forward-looking. A lot of people have seen drawdowns, as you mentioned, that have been pretty significant this year across the board, even the S&P 500 and then NASDAQ and broad-based indexes. They've suffered this year. There's been a reset of a lot of valuations, and now we've even seen some earnings contraction here. I do think it's important to remember, though, that the market doesn't really care what your cost basis is. It doesn't care what happened in 2021 or in what 2022 has happened thus far. It is always forward-looking. And I think that as we are

framing things as investors today, on October 25th, 2022, we have to say, what is the new normal for the stock market? Where are we today? What are we in terms of fundamentals of these businesses? We have higher capital costs because we've seen interest rates increasing right now. we see a slowdown in a lot of tech companies on new projects and new growth because money isn't free anymore. But on the other hand, there is also a camp, now that I've gone through the pessimism and all the terrible stuff of the front side of this hurricane that's blown through, let's talk about the hurricane tailwinds that are still out there in the market today. And a lot of the things that we look for, especially Christophe and I, we'll talk about several of them on this show,

is that innovation doesn't just stop when you have a tough year in the stock market, right? If the S&P is down by 30% or NASDAQ, several companies fall 50% or 60%, it doesn't mean that technology stops moving forward and the companies stop trying to innovate and do new things. And so a lot of things that we do is, what are these best-in-class companies that will benefit from the other side of this hurricane, the tailwinds that are out there? We tend to think that there are a lot of opportunities. We even have been ranking a lot of our own recommendations in terms of the level of

conviction that we have in them. And of course, when stock market valuations are more attractive, you're getting a better price on a fantastic company. So overall, I would say it's just kind of reestablish your footing and say, what is the new normal now? Where are the opportunities? And let's look forward at where those opportunities are for individual investors like we are. Now, you mentioned the conviction ratings.

Before we move on to the next topic, do you want to talk about maybe the strong buy portfolio that you guys have rolled out over the last couple of months, I want to say? and, you know, how that is supposed to help people navigate with, you know, just as a pitch, you guys do have hundreds of research reports out there, but this one, uh, and add anything, if I'm getting it wrong, can help, you know, people at this certain time know what you guys think are the best buys now. Yeah. And, and maybe just for anyone who's not familiar with it, what exactly is that best buy portfolio? How do you like determine what the buys are? Yeah. So one of the neatest things about our group is that, um, we've got really smart advisors like

Christoph and six others. There's seven total of us on the team. And every month we pitch our very best idea in the stock market. And so if you can imagine over the two and a half years that 7investing has been in existence, we've now done diligence on more than 200 unique companies. They've come up at different times. We've re-recommended some. We've really turned over a lot of stones and found some good stocks out there. And one of the, I guess, criticisms, maybe you could call it that, of people that are really interested, but they just say, hey, I don't have the time to keep up with all of these companies. I can't go out and buy 200 companies right now. What are your very best ideas? In addition to

having new picks come out every month like we do, we said, well, what if we started putting conviction ratings on these where you could differentiate a company that might be going through some struggles. It was a great opportunity two years ago, but it's having a tough time right now. We might call something like that a hold, whereas another company that we think is doing fantastic and is selling at a more attractive valuation that might be a strong buy and then we even took it one step further as you mentioned there ryan is um we said what if we put a pool of all of the strong buys together and then we fame we came up with a methodical way to actually force rank them come up with our very very highest conviction ideas this entire team would chime

in we'd have a methodical way of force ranking them and we put our 20 highest conviction ideas into a real into a portfolio into a trackable portfolio and we we tracked it and we published all the picks and we put why we put him in there and we have been updating that on a quarterly basis for two quarters now we just this past month did the most recent refresh and we have our 20 highest conviction ideas and we're calling that the strong buy portfolio all right uh christoph's anything to add there i know simon you know he runs the show there so he has the the spiel going but anything else to add? It's hard to top Simon's wisdom. The only thing I'll add is it seems to me in bad markets, it's easy to say something like I'm a long-term investor,

but it's much harder to actually do it. And it's such a common phrase that many people, I think without true understanding or true conviction in it are easily spooked away from it. And so for my part, when I recommend a company, I really truly am thinking, can this company be wildly successful five years from now? Will it still be around five years from now, seven years from now, 10 years from now? Because that's where the greatest alpha is going to come from. And so because all of the daily stuff we come across is short-term and quite noisy, I think it's very easy to get distracted. And so there has to be a fundamental deep confidence or at least probabilistic reason for me to say, this company will be thriving

in five years from now. If I can't see that, I won't recommend it. All right. That's a great overview. Yeah. And having that anchor, that long-term anchor is very, very important, especially in markets like today. But let's move on to the next topic. I want to get both you guys' answers here. We'll start with Simon. What sectors of the market interest you at the moment? One of the trends that I really think is pretty exciting right now, Brett, is electric vehicles. This is something that kind of gets a lot of buzz. It's kind of sexy, right? Everyone wants to talk about how they're better for the environment. Tesla's kind of a hot company that's out there. But I also think that it's very interesting because we are recreating the

automobile. We are not just incrementally improving the internal combustion engine that's been around for a century now. This is a completely different supply chain. This is a chance to start from scratch and create a more efficient vehicle. And of course, the foundation of electric vehicles is the battery, right? And there's a bunch of other components that are not necessarily the same components that are just modified from what we've been using before. That kind of levels the playing field for a lot of companies that are out there, either the ones that are selling the end vehicles like the Teslas or the Lucids or the Rivians, or even in China, the BYDs or the NEOs. These have been ones that have

benefited from government subsidies for years, and now they're ready to economically take on the largest car manufacturers head to head. They're economical enough that you can get price points in consumers' hands and tout the benefits of electric vehicles. I'm somebody who worked at a large oil company that was supplying fuels for internal combustion engine transportation cars, and then also was ahead of the curve, I would like to say very innovative in looking at some renewable energies and even looking at electric vehicles and efficiencies. And it's happening. We're starting to see kind of the S curve. There's this point of inflection right now of seeing this market that is $380 billion last year. It's about a 10th of the size of the $4

trillion of the overall automotive industry. But it's one that's grown over 122X over the past decade. It used to be a decade ago, you get the Nissan Leaf and not a whole bunch of other EV models. Now you could see the Tesla introduced the Roadster and the S and the X and the Model three and everything else since then and now basically every large oem in the world has got an electric vehicle that's commercially available or that will be commercially available within the next five years and to secure supply and make sure that they are able to sell the volumes that they want to to make this economical you've got to have those picks and shovels and those vendor agreements in place it's very similar in my opinion to what happened in the solar industry

where solar PV has just taken off, point of inflection over the past decade or so. We're starting to see another one of those in electric vehicles. And I'm pretty excited about not just, like I said, the automakers, but a lot of the companies that are making this trend possible. All right, Christoph, anything to add there? Any other sectors you're interested in? Yeah, I'd like to, I guess, keep it simple. and sometimes it seems like investors want to get clever

and pull miracles out of the ground, but sometimes the most obvious thing is the most lucrative and I'm thinking of cybersecurity. The world is still transitioning into the cloud. All businesses are moving into the cloud. you have actors like you know obviously individual actors individual collectives but then you have the world at war with itself using cyber crime and as you know one of the most dangerous weapons in the in present in if you you're a business you cannot

have an existential risk you know you you have to i mean you cannot not have a cyber security fortress or else you die and so when i think of budgets you know it's the last thing that's going to get cut um given that you know it's it's almost when i say this out loud it's a i have this voice that says where what else would i be interested in i mean to me it's almost so So, you know, look at the things that are non-negotiable first. Gotcha. Yeah, that's a good framework. So, Christophe, it's your first time really on the show, and I've read a couple of your articles, but we haven't really got a chance to speak. I guess this wouldn't be in person, but via Zoom.

Can you tell us more about your investing style? How would you kind of characterize yourself? um what do you typically look for when you're analyzing potential investments yeah i think of myself as a systems thinker uh who tries to be flexible and not limiting um not limiting myself to say one particular industry so with a little bit of counterintuitive thinking and um yeah i mean without but i don't want to pigeon my whole myself into any one one corner and so when i say systems thinking i mean oftentimes things that are complex and have qualities that are not yet visible but will be visible later on paradigm shifts areas where

the paradigm is just starting to shift but the end result is not yet there that's where i'm looking so i'm going to be the recommendations you'll see from me will be in multiple industries but there will be a reason why i think usually underneath that i'm going to say to myself the sum of the parts here will add up to a greater hole down the road but that hole is not yet visible for whatever reason. Can I chime in on this too, Ryan? Would you mind if I go for it? Okay. So just to add some context, you know, before Christophe even became an advisor with Seven Investing, he was actually the only person that we allowed to write articles on our site. He's the only external writer we ever had because I was just amazed at his, how impressive his writing

was especially his decision-making framework that he had uh you know christoph as a compliment to you it has done a fantastic job of kind of getting into the second and third layer of things and so he's not afraid to find trends we mentioned cyber security but it's not just surface level revenue growth it's kind of peeling back the onion getting to the third layer of what's going on in the company's earnings release and how does that matter when you're looking at you know what's going on in the bigger framework of innovation in this industry i always think christophe did fantastic job of that and just even decision making as investors you know why do we buy companies what are we looking for from this is it an opportunity to buy when the stock sells

off or do we need to step back and separate out the signal from the noise uh he does a fantastic job with that and it's really been a pleasure working with him having as an advisor now too and seeing the frameworks of how he picks companies all right that's a that's a great Great compliment there. And if you guys want any listeners here to hear these two and the five other dedicated advisors use our code money to get $100 off your annual subscription for life, only for a limited time. So if you want that discount, get a great service, use code money for life. All right, let's move on to some interesting topics here because we can't talk about philosophy all day. We've seen a lot of earnings, I think, from semiconductors.

You know, the last I don't think every company has reported, but at least some of the big ones have Taiwan Semiconductor, I think, ASML, Lamb Research, and a little while ago is Applied Materials. You guys cover both of these. I guess we'll start with Simon and go to Christoph. Any big takeaways? And is the supply crunch over? And then we'll have a few follow ups as well. Yeah, there's an oversupply of chips in the market right now. Right.

So this is a cyclical industry. We know that. We've heard the same message from AMD that we did from NVIDIA, that we did from Micron, that we just heard from Taiwan Semi and Intel, too, which is that a lot of the chip designers aren't able to sell to the end users, right? PCs are not selling at the same pace as they were before. Things that chips were going into, you know, we're not seeing the same demand. So you've got an inventory buildup, and that's cyclical, right? It slows down sales for the short term. But again, we know this.

We know that the semiconductors are cyclical, and this is nothing new. Um, the interesting piece for me is that the highest performance, most cutting edge chips are not as exposed to the cyclicality and inventory builds, right? So if you are a Taiwan semiconductor, uh, you are basically responsible for more than 50% of the world's chips that are produced. Samsung's about 30% and the rest of the manufacturers out there, about 20%, everybody, including Intel. And so if you're able to produce, you know, two and three nanometer node process technology

chips, the most cutting edge chips out there. They're going to Apple smartphones, they're going to Amazon's data centers. These things are not quite as cyclical. And the companies that are either designing or manufacturing those, that's where they're getting their margins and that's where they're getting the selling prices from. And even though smartphones are going to slow down a little bit, high performance computing, data center is not slowing down for most of these chip makers. You're seeing some of those companies losing share in the data center like Intel, some companies gaining share in some of those markets like AMD. And then at the end of the day, if you're the manufacturer, if you're Taiwan Semiconductor,

you're lining up long-term contracts for volume for whoever wants to pay you to get production lines, right? It doesn't matter to you if you're Taiwan Semiconductor, if you're making them for AMD or NVIDIA or Intel or whoever else wants to be the design for those, you're going to get your money from it anyway. And then at the end of the day, you've also got the applications, right? The companies like Amazon that want Alexa to have cutting edge chips. apologies if i just set off the name for anybody who's listening to this right now but you know

stuff like that it's got to have the horsepower to do whatever it is that you want to at the end of the day um so pooling all that together uh less complex chips oversupplied probably still going to take several more quarters to work that out cutting edge leading technology chips not as exposed to the cyclicality um but again even even chips as a as an industry has got sub segments but within that i think investors should pay attention to things like that right uh christoph anything any big takeaways from the semiconductor earnings yeah i'll say briefly asml after it reported earnings was up 17 on the week why because they said i don't we don't know about you know individual small parts but there is absolutely no shortage of demand for the machines

that make the machines and so this is where i'm going to put the practice you know to the theory if you think five years out with the paradigm shift that is ai and everything that chips enable this this uh supply glut if if you will will just be a bump in the road i just can't see the argument that would be counter to that i cannot fathom where where the these knots don't resolve themselves so i kind of like i put it in the noise bucket and say uh asml is proving that did that this is temporary all right and i want to see here both you guys's um thoughts on this i think a lot of people listening if they cover semiconductors the they've heard about the china stuff uh the US and China are in pretty big war over semiconductors right now. Not a literal war,

but kind of a continuance of the trade war. A lot of people think that's a big downside for some of these companies as they sell a lot of equipment to China or other various... They're actually selling chips to China, whatever. TSMC has the China risk because they're in Taiwan and China has talked about invading the country. As someone that doesn't cover the industry much, but is interested in, I kind of think over the long run, if the China risk actually materializes and say they get cut off from the Western world that makes chips, in the short run, that'd be bad. But in the long run, it would actually be a good thing because you're going to have

to rebuild all the supply chains. And that's going to be great for the equipment companies and the Western chip manufacturers. But I want to hear your guys' thoughts. Simon, why don't you go first? it's a complex question uh there is no doubt this is a geopolitical at the at the core of it right if you're making high performance chips that are going into your data centers or your fighter jets or anything else that might have a national security implication uh you you've got to make sure that first of all you're going to get supply you need those chips and you want to make sure

that your country gets the most cutting edge chips and this has led to a lot of um you know back and forth geopolitical issues with the U.S. and China right now. Right. At first, the U.S. said, you know, hey, Huawei, you cannot be in telecom equipment that is of security importance because of backdoor vulnerabilities. It might be in the code that goes into the hardware that goes into telecom stuff. ByteDance, the owner of TikTok, you know, we saw some some some spats about, you know, that and where the data centers

could be used and what kind of data they were collecting. U.S. is saying that NVIDIA cannot sell their most cutting edge chips china right now you know nvidia's ai chips the most the most powerful chips they have cannot be sold to china starting at the beginning of next year uh asml you know like christophe just mentioned is banned from selling the extreme ultraviolet extreme ultraviolet lithography machines to china right now and the biden administration is even posturing that maybe they'll stop allowing the deep ultraviolet uh machinery to to china so all of this is kind of you know uh we want to have a free trade globally we want to have international uh cooperation on on

where corporations can sell but again you've got to you've got other factors that are working into things like this and now this is something that intel ceo pat elsinger has been very interested in lately because he says there needs to be regional supply everything can't just come from taiwan anymore and intel's been working to try to get money from the us government and the chips act or from the german government or the eu at large japan is also very interested in this you know how can you have regional supply that secures those volumes that you would need for the demands of whatever you need chips for fabs are expensive they cost 30 billion dollars a piece it's very expensive for a company to do that but if you can get subsidized capital expenditures

for that you would need for a fabrication facility that could reduce your own cost of capital and in turn be beneficial for your investors. At the end of the day, I agree with Christoph that if you're ASML, if you're Lam Research, or you're Applied Materials, or if you're building the upstream machinery that goes into producing chips, at the end of the day, it doesn't matter as much to who you're selling it to, what country you're selling it to, as long as you're filling up your own capacities and you're getting the prices that you want to get for them. It will be interesting downstream for that of how that benefits the companies that are manufacturing and using those chips if they get a lower cost of capital out of it all right christoph anything to add there

i'll mostly defer to simon since he has way more expertise in this area than i do but i will mention that unfortunately i didn't read it in time because it just arrived in my inbox this week but there's a new uh important book about this called chip war the fight for the world's most critical technology by chris miller but that subtitle is i think tells you what you need to know the most critical technology of the what century are we in 21st 21st century uh i don't think that's an overstatement and when i think of the companies that that will be powering the rest of the world and have a lead and are the leaders in innovation like nvidia they'll be fine they'll figure it out they have to if in fact the thesis is true that it

is in fact the most critical technology so like simon said too sometimes when there's so much complexity i like to remain silent you know because it's too pontificating and it just gets you more lost than than found so you follow the numbers whatever the number is telling you eventually will this industry will be fine right you almost come back and simplify it and say the world's gonna want computer chips we're gonna make it somewhere there's company only a few companies that can do this um one more follow-up on semiconductors and it relates to what you're talking about earlier simon is the electric vehicle industry do you think this and they you know electric vehicles kind of use the not the cutting edge stuff so there might be a huge

supply boost here. And we know that, you know, the auto supply chains have been hurt because they haven't been able to get enough chips. Do you think that could help move forward the electric vehicle industry? Has that been kind of, because I know a lot of people kind of are excited about electric vehicles, but don't really follow it closely. So anything, I guess, Simon on that, where that could help accelerate the growth of the electric vehicle market as, you know, the computer chip supply comes online again. Yeah, Brett, and I give you the credit for accelerating as an electric vehicle pun so so there we go there we go uh you know typically how the the this works is when you do have you know all the manufacturer all the fabs

taiwan simies the uh the samsung to the world they they typically invest up front ahead of the cost curve so they'll bring a whole bunch of capacity online and the first customer in line is apple and samsung uses it for their own smartphones too right internal supply these are cutting edge chips are all the applications that go into your smartphone to run all the apps with minimal battery drain you know and all now all the local ai and all the other stuff that's going on like that's like the most cutting edge innovative stuff that's out there this is typically how this works and then after a while apple comes back and they say hey i want even better than what you had before i want more transistors into this integrated circuit that's

going to the chip that's on my smartphone and so they'll push the limit even farther and then that capacity opens up and you know who fills it up next the auto industry the auto industry is next in line to get what used to be the most cutting edge chips they're just a step behind the most innovative chips that are in the world and then from there you know you kind of walk your way all the way down until you get into things like uh you know industrial sensors and then washing machines and all these other things that you know are slower to a drop adopt innovation but they get there and eventually they get there and the whole world whether you're using a toaster or a cutting edge smartphone is faster and more efficient than it was the previous year and so electric vehicles

are certainly benefiting from that right now. There's a lot of chips that are already going into Tesla's cars. And Tesla is pushing the limits for innovation in terms of custom chips of what it wants to do. And the rest of the industry is certainly picking up on that. And at the end of the day, one of the reasons that Tesla got ahead of the curve was because of COVID. They accelerated in their innovation because all of the other automakers were pulling back orders because they couldn't sell enough vehicles in 2020 summer. COVID was happening. People weren't buying cars. They said, okay, we just can't produce enough. The Taiwan Simis and the Samsungs of the world, the people that are making the chips that go into cars are saying, okay, that's fine,

but you got to get in the back of the line. We're going to let others fill up our factories because we need to be making chips. And you know who picked up on that really, really quickly was Elon Musk. And he pushed the Model 3 production, not only in the US, but also in China. And there are other electric vehicle makers, NIO being one of them right now that are using ai chips uh and using servers that have neural networks that are guiding those cars neo being one of them you know several other companies too that are benefiting from the trendsetters of this industry i'm rambling a bit i'm going perhaps down a little bit of a of a rabbit hole but hopefully it makes sense like you see innovation kind of is cutting edge at the

beginning and then the rest of the world catches up with it over time all right another i guess industry that uh we tried to group some of these recommendations that you guys have had over the uh over over i guess the course of all the recommendations you guys put out um into a few categories and so one of those i guess you could group as biotech slash genetics um you both seem to be interested in that why is that what part of the industry really excites you guys why don't we start with christoph this time well i have a bias here because back in the day i was uh i studied advanced level biology so i'm just pulled in that direction i find it fascinating then you have whatever ai is enabling layered on top of the mind-boggling

disruption that is crispr technologies post dna sequencing so it seems to me that we are in this moment of history that might be as radical as any in the in in human history because we're talking about the capacity to change our blueprint and so this has been in the works now well if you think about dna the structure was discovered in 1954 i believe so even that is fairly recent so we're 70 years out from that but then from the sequencing of the genome call it 20 years ago we're now we've been at this for some time right but then with the cloning of of new edited humans in 2018 when that rogue scientist did his thing in china that ushered in a brand new era and i think one thing that's hard for humans to wrap their minds

around is you know when the paradigm actually does shift and it's still not really visible it's hard to accept like oh like we're really look this is really happening and so if you couple that with the severity of the punishment that these stocks have gone through to me i smell nothing but opportunity for the companies that have the legitimate thing and they could back up their business performance you know with actual numbers rather than anything just pure speculative and and hopi and so it's interesting just i know i'm a little bit of a book nerd but just today i received uh siddhartha mukherjee's new book he's the guy who wrote the gene and the emperor of maladies pulitzer prize winning book about cancer just today his new book was released called the

song of the cell an exploration of medicine in the new human so that's a long way of me saying we've heard sci-fi stuff now for some time but i really think that evidence is showing up that it's actually here today and it's at its very early stages and i could not be more fascinated by any industry than this one because we're talking about life and death right we're talking about curing cancer we're talking about curing alzheimer's we're talking about you know gaining superhuman i mean all of it i mean it's just sometimes a little bit hard for me to wrap my my mind around it but as far as industry goes the companies that succeed might become some of the world's biggest companies and some of them might not even have been even born yet

makes sense simon it's pretty cool i mean have you guys ever done the uh 23 and me or the ancestry i'm not i'm a bit scared about the uh the privacy stuff worries me but i know it's super popular and uh you know but i know about i know what it is i've done the ancestry one or like a family member did and we like got i don't know it was kind of cool to look at the family tree and all that and did you learn anything from it ryan was it interesting did you get any insight from the the ancestry one that you did uh yeah i'm like i'm more i guess uh of an international person than i thought i i've got i guess more diverse uh ancestors than i thought so i guess that's kind of cool but i don't know if it really like changed my day-to-day life all that much

yeah it's i did the same one that's why i was asking you know and uh i think it was a hundred you know and this is not a whole genome sequence this is a genotyping is what they're calling but it's basically like the first time i did it right away it shows the air a map of the world and it kind of tracks back your your genetics your ancestry just like the name would suggest and mine was like this giant oval over europe it says okay you're european simon okay great i just wasted 100 bucks man you know what was i thinking at this years ago but it improved the year the year after and it actually narrowed in on the countries that it was as it learned more about genetics and ancestry it actually showed you know hey simon you've got some german

descent you've got some british descent you know mostly you know swedish and and denmark but it got better as we learned more about those genes and it the reason i bring this up is because uh one i didn't completely waste my money like i thought it in the first year it actually was more insightful over time but it's the same thing as just as you're doing things like that uh which is kind of a fun experiment, doctors are now able to do a whole genome sequence for less than a thousand dollars. And in fact, Illumina has got a new series of machines called the Novaseq-10 that just came out that can get that down to $200 within a year or two. And so for years, we just couldn't see diseases. We couldn't see the DNA of a cancer or a disease or anything else

that was in the human body. Like Christophe mentioned, this is all kind of new to science. And even if you could see it, it was prohibitively expensive. But now, not only learning about ourselves as human beings, but also being able to characterize these diseases, which are living, which have DNA, a cancerous tumor is a living thing that has DNA in your body. If you can see that and even fragments of the tumor that's going through the bloodstream today, if you can use that to diagnose what it is. There's a new line of medicine, personalized medicine, specifically monoclonal antibodies can actually train your body, your body's immune system, that this is a cancerous tumor that you should be attacking. So go get it. We've got some technology that can

help you attach to that cancerous tumor and kill it. And this is a quantum leap compared to chemotherapy, blasting these tumors with radiation and killing everything around it. If you can train body to do what it's meant to do uh this new wave of medicine is extremely interesting and i think to answer the question of why why interesting um the diagnostic piece of this is is super important because it's kind of guiding the body's natural defense uh to what it should be looking at again you know this is one of the biggest killers in the world you know this is cancer does you don't need to hear from me that this is an important topic and it's costing a ton of money too and most of of us are not even treating it until way too late and so for the world of medicine for humankind as

a whole and also for the economic impact of this diagnostics for oncology super super important i think i'd like to even take that one step further if i may i don't know if you guys came across the book lifespan by david sinclair i have not i have not he's a a professor of genetics at Harvard Medical, and he's been studying aging for his entire career. And he makes an extremely bold claim in the book published in 2018, but he also has a new podcast about this released earlier this year. His claim is that aging itself is a disease. In other words, if you look at the laws of the universe based on physics and chemistry, there is no such thing as aging in there anywhere aging happens because our dna has issues the upshot is

his laboratory in recent years more or less on a rough scale has figured out the pathways to aging so in mice they can make a mouse age more quickly and they could believe it or not actually help the mouse reverse its age so we now know this right scientifically now obviously the human organism is way more complex right but why does that matter well when you have a dna test like what you guys were talking about we know it's all about dna um and it's corruption if you then send in your blood work into a company get it analyzed there's a thing called the inside tracker that david sinclair is associated with you get your lab results back and they could tell you based on your genetics right they could kind of like fine-tune and personalize the things you should

be doing not just in terms of exercise and all this other stuff but based on your own genes point being that the idea of extended lifespan and health span is again not a sci-fi thing we can now actually i mean according to his claim if you stay healthy enough during your 20s 30s 40s 50s doing the right things the technology is around the corner to actually help us live longer and not by a few years so the companies that will be able to take advantage of all of these layers via diagnostics via genetic reading via call it prescriptive dieting and whatnot are going to be solving what might be the world's most important problem how not to succumb to the disease called aging are there any like i guess tells because the opportunity feels

huge in the space. And just listening to you guys, you can tell why it's such a compelling industry to study, but it would also feel easy to pick the wrong companies. And it feels like a lot of these are smaller companies that are fairly speculative. Are there any tells for you guys that go either way? Either, yes, this is valid technology. They have a very real business model. this could be something or is there anything that you see it and you think, okay, that's a big red flag for me? Yeah, Ryan, I might chime in and say that, you know, we have got a fantastic advisor on our team named Dana Abramovitz. She has, she's the one with a PhD in biochemistry in the post doctorate. And so a lot of the things that she'll look at, she'll see things that I won't or, you

know, that other investors might not see just because she thinks about things like the mechanism of action of how this drug is actually working right what is the what is the condition what is the uh disease you're trying to treat and then why would this drug work when this other drug might not work uh you know and things like this biotechnology is very complex it's very hard you know she would she would if she was on the show right now she would say science is hard and a lot of times you can go in with a hypothesis and think something's going to work and mother nature just disproves all the the research and then the work that you put into something so far but even with that in mind there are things that we've seen there is immunotherapy there is crispr there is

car t like some of these big trends that we we catch a whiff of out there they're working for for reasons you know there are things that kind of the industry as a whole latches on to and then develops fundamental science that carries the torch forward on things like this and i think that we're doing doing a lot better job this is something christoph has talked a lot about too of matching data through ai to the mechanism of action to the disease that it should be targeting in the first place and from those you know some of these are some of the bigger mutations in the brockham mutation you know small non-small one small cell lung cancer or a breast cancer some of these these most important ones are getting a ton of attention but as we as we kind of further

the innovation and this wider peripheral vision that we're learning from ai and from the data we're collecting connecting the dots between genes and uh and therapies you can start going after orphan diseases and something that might only have a couple hundred thousand cases globally and stuff like that where there was no option before other than chemotherapy or you know hope that whatever is out there is going to work you can actually have a targeted personalized treatment for something like that that's the exciting part that's the exciting part of all this is like you see the science pushing this forward it's improving the world and it's not just a you know i'm sorry you know you're you're in stage three stage four cancer and we're gonna

do the best that we can we can get ahead of the game on a lot of this stuff and it's really improving the lives for thousands and millions of people out there and the one thing i'll add is the question, is there a commercial infrastructure in place to bring these things to market? In other words, can we discern between this is just a hopeful, speculative thing, which is close to what you get in the casino, or is there a management team scale and a whole bunch of the business side of things already in place and executing? And that's how you discern. And And it's not necessarily, I think, that one is, say, better than the other, but you just need to know what you're getting into, right?

I don't think there's anything wrong with taking a speculative position as something as long as you're aware that the commercial infrastructure is not quite there in place. But if the lab results come back and they're astonishing, then yeah, the stock's going to fly regardless, but it might not, right? So you know that going in versus something a lot more grounded with a history and the management team with evidence in hand. So just know what you're doing. All right, Ryan.

Oh, Simon, go ahead. Maybe just one final comment, if you don't mind, Brad, is that, you know, we've covered a lot of bases with this. You know, within the last quarter, Christophe has recommended a company for seven investing that is along the lines of that infrastructure. He just mentioned, I've recommended a drug developer. Dana, we mentioned her just a minute ago. She's just recommended a company that's working on drug delivery.

I mean, there's a lot of innovative companies in healthcare. And like Christophe said, it's okay to take some swings for the fences. There's a lot of ways to win in this field. All right. Well, we're going to close things out. But before we do, just a little tease. Obviously, don't spoil any recommendations. But let's narrow it down to the biotech and semiconductor industries.

one stock each that you guys have either on the watch list studying, you think maybe is interesting for investors to kind of track going forward. Simon, maybe we'll start with you. Christophe, I saw you give a puzzle look there. So maybe we'll let Simon talk about it. Hopefully you have one on the top of your mind. Yeah, man, I've got to go with AMD. I mean, AMD is probably one of my favorite companies to follow just for earnings. There's a lot of moving parts. They made a really big acquisition of a company called Xilinx right now. They're offering this whole buffet of tech, of chips, of custom chips that can sell for tens of thousands of dollars, if not $40,000, if you're selling to the data center, or even just a couple hundred

bucks for a CPU or a computer system. It's a complex company, but it's one that it's just, I think, firing on all cylinders. I'm really kind of looking forward. They guided conservatively for the upcoming quarter, which has sold the stock off, but I've really kind of liked the management team there i'm looking forward to seeing what they have to say here all right christoph yeah uh the puzzle look was because i didn't want to be boxed in with into an industry i i go all over the place all right all right we can if that was that came out the top of my mind whatever stock you have that seems interesting yeah the thing that the the one stock that i i really want to see what they say this quarter is upstart because it's an ai company and as far as

i would say the risk reward ratio here i i don't know of a bigger one that you know it could crash or it could go up you know magnitudes and i think there's there's a misperception of what this company does and there's this this theory that well things are so bad. Therefore, loans are going to default. Therefore, the stock's not going to perform well. But I think in actuality, all that Upstart is saying is we're going to do better than the banks. And so, yeah, defaults will still happen. But if we could continue to prove that what we do with our AI is more successful than what banks do, then that's the proof we're looking for. And this stock has more more rebound in it that the spring is so tightly coiled that any any small piece of

good news will be majestic so i'll be watching like a hawk all right amd and upstart those are two fascinating stocks to watch we're going to close things out but simon uh where can people find you guys uh just to close things out here yeah it's uh we're seven investing.com is our is our website. We do have a lot of free content. I guess one thing that I think differentiates us, because there's a lot of stock pickers out there, but I really, I think maybe one thing that might be a little underappreciated is the interactivity of the team with our members. We've got a discussion forum that kind of every day, we've got more questions coming up to talk about the stocks that we've recommended. It's not just publish and disappear. You know, Christoph and

I and all the other advisors too, are kind of answering questions and talking through this crazy thing called the stock market and the volatility that's going through right now i think this is a long-term journey that you should have questions and you should be asking about investing if not individual stock recommendations and that that code that you mentioned the money you know which thank you guys for partnering with us and offering this to our subscribers if you do sign up and you use money at 7investing.com subscribe that's not just 100 bucks off for your your first year or your first order that's something that would that would remain in place for every year that you'd be an active subscriber. It's 25% discount for as long as you stay active

for years in the future too. And so we'd love to encourage people to check that out, check out our site, chat with me and Christophe more in detail about the stocks that we're picking. And I'm certainly enjoying it. I mean, this has just been a two and a half year journey now with 7investing. It's been a ton of fun where you learn more and more every day. It opens your eyes to a lot of things that certainly i had not seen uh previously and i'm really having a lot of fun with it all right well thank you guys for joining us oh christoph anything else it's been a blast uh having joined the team uh you could find me at the number seven flying platypus on twitter so seven flying platypus all right that's a great handle uh thank you guys for joining us

uh we're now we're gonna get the disclosure ryan and i are not financial advisors anything we say on the show is not formal advice or recommendation. We are general partners at Arch Capital and clients may hold securities discussed in this podcast. Thank you all for joining. We'll see you next time.