This report is of November 2014
My simple reason is either simple and simple, or simple but profound, and you can decide for yourself which it is.
My reason is that the most effective tool the Federal Reserve Board has for steering the economy are interest rates. But when interest rates are near zero, it’s like a steering wheel that is turned all the way to the left. And you won’t do much steering with the wheel all the way to the left.
So time to return the wheel towards center.
When we consider what things were like when the Fed reduced rates to zero, they were pretty bad. They were very bad. Since then, we’ve seen the economy recover, the stock market rebound, retract, and then go up again. This suggests two things. One is that the economy isn’t bad anymore. Indeed our published Economic Performance Index shows it north of a normalized 50%, suggesting expansion. Second, it suggests that the economy isn’t responding to Fed rates.
So raise them some.
How much? Hey! That’s what they’re paid for, not me. They can decide what’s appropriate.
This report is of August 2015
Theralase, With a Credible Cure for Cancer, Has Dynamite Investment Potential and a Business Performance Rating of 78%
THERALASE BUSINESS PERFORMANCE RATING: 78%
ASSET PERFORMANCE FACTORS
BLUE SKY 9
These are both brand new products
There are laser therapeutics already in use by competitiors, though they claim their’s is superior I didn’t see any evidence in the presentation that their’s is superior to competitor’s The cancer drug is novel
COMPETITIVE AND INTELLECTUAL PROPERTY RISKS 8 They have patents on all of it As discussed above, there are competitors already in the laser therapeutics division To me, it sounds as though other companies could copy the approach to laser cancer treatment, since the mechanism by which their drug targets the cancer cell is well-described. And I suspect a bright scientist can figure out how to make a cell with a light-activated mechanism
PRODUCT MIX 4
I like that one product has a currently cash-flow positive characteristic, which will support the clinical tests on the Laser cancer division I also like the diversification They have only 2 products, one of which is not ready for commercialization
PRODUCT VALUE 8
I didn’t see any proof that the laser therapeutic is superior to competitive products I did see great evidence that the cancer treatment is effective
The market is huge for both, and growing
PEER VALUATION 10
The stock is cheap given its potential
BUSINESS STRATEGY 10
Their strategy is sound, especially building a direct sales force
Management knows it’s stuff
G&A is 6% of MV, which is high, but to be expected given the R&D and sales Insider ownership is a sizeable 7%
CAPITALIZATION AND FINANCIAL STRATEGY 4
Overhang is high, at 35% or so. I’d prefer it under 25% Cash will last a year or less They will need to raise equity at low 0.30 cent prices
MARKETING AND OPERATIONS 6
They will need to build a direct sales force, which will be expensive
INTEGRITY APPLICATIONS BUSINESS PERFORMANCE RATING: 75%
May, 2016 RATINGS (1-10)
ASSET PERFORMANCE FACTORS
BLUE SKY 10
This is a brand new market
COMPETITIVE AND INTELLECTUAL PROPERTY RISKS 2
Their are plenty of competitors trying to fill the need, many of whom are much larger
PRODUCT MIX 1 They have only 1 product
PRODUCT VALUE 10
Product is 97% accurate No pain to the patient measuing glucose level
The market is huge and growing
If it works it’s obviously undervalued
It only trades 150 shares a day
BUSINESS STRATEGY 10
Makes sense, to get the products sold in countries where they are allowed to sell it, combined with seeking approval in other countries
Lots of experience
CAPITALIZATION AND FINANCIAL STRATEGY 10 They burn $3m-$4m and will increase 50% next year But they seem to have less than that in cash
MARKETING AND OPERATIONS 4
Marketing is tough for these and will be expensive for a small company G&A is high, at 8% of MV III. THE PRESENTATION General
The article is about research done by Rebecca Spencer of UMass Amherst. It showed that those making decisions the same day were happier with their decisions than those who slept on it.
I don’t dispute Ms. Spencer’s research. I suspect it is right. The sleeping on it that concerns me, however, isn’t based on decisions made the next day, but on decisions made the next week.
“Better Decisions are Made When Allowed to Gel Over Weeks Rather Than Days”
My experience shows that better decisions are made when allowed to gel over weeks rather than days. Specifically, by allowing weeks to pass I find in working with clients:
- During a phase where we are brainstorming ideas, more ideas come to mind over the course of a week’s time
- During a phase where we are evaluating ideas, new pros and cons emerge over the course of a week’s time
- During a phase where we are determining the best course of action, decisions change over a week’s time.
Let me give some examples:
We are brainstorming ideas for a Marketing Plan. The client attends a local Rotary meeting, hears a speaker, and suddenly has the idea to partner with the speaker and deliver a multi-discipline talk designed to promote both businesses. The client sends me a text message and asks to add that to our possible strategies for next week’s meeting.
We are evaluating ideas for a social media campaign. We feel it’s great to add more personal posts to the client’s Facebook page, in order to build rapport. During the week I recall an earlier strategy session involving Brand Image where we wanted to add formality to our image. I send an email to the client “I forgot that in our Brand Image work we wanted to reduce the informality. Let’s revisit personal posts next week when we meet.”
We are determining the best course of action during an expansion decision. The best alternative seems to be to create another office in a different county to expand geographically. The Pros seem to outweigh the Cons. During the week the client remembers that some time ago he had heard that the county under consideration wasn’t open to his way of doing business, and maybe we should either elect a different county or else scrap the idea altogether.
“Accuracy Increases by Allowing Time Before Finalizing Choices”
All three cases highlight the increased accuracy of the decision-making process by allowing time before finalizing choices. Why is this? I don’t pretend to be a psychiatrist but I assume there are intuitive and subconscious processes going on in the intervening days. Those processes can be dwarfed by the powerful frontal cortex of logic. During intense strategy sessions the intuition is muted but later, at unexpected times such as while watching TV, the subconscious is working to evaluate those decisions at a level not possible during strategy meetings.
A psychiatrist would probably laugh to read my interpretation of how the brain works, but as a consultant I am confident of the result: allowing days to pass results in better made decisions. At Performance Business Design we remedy weak areas of a business by meeting in a series of weekly meetings, typically 6 or so. Often enough, clients will suggest that we double up, to two meetings a week.
Michael Emerald, CFA
Business Strategy Consultant, Performance Business Design
Note: pictured is Sharon Kania, our marketing director
Here’s my report:
Here’s our full report: