It's Time For A Pushback


As we are now in a government mandated lockdown in the entire state of California, and New York as well, it is time for cooler heads to prevail, if they exist, amongst public policymakers.  We are not health experts, as we have said, but we are a professional research organization in that we make a living researching ideas of all sorts, and making determinations as to whether or not we want to invest our and our clients' hard-earned money in those ideas.

From what we have observed from research on the coronavirus, while it is serious for a small subset of the population, the statistics appear to show that the vast majority of people infected by the virus are not at risk of death.  Yet, the entire economy is being sacrificed at the altar of "public health" with no understanding that the economic damage that we are facing will cost real lives, potentially far in excess of any death rate that can come from this virus.  This is an important point to understand, yet  many don't. It is a fact that when percentage points are taken off of GDP,  it costs lives.

It has been seen throughout history that the most vulnerable and poor are the ones that suffer the most when lower standards of living exist.  There is a direct link to standards of living and economic growth.  And at the lowest socio-economic levels  (ie. where standards of living are already low) allowing those standards to drop further will result in death.  In first world nations, like the U.S., it may not be as obvious, at least initially, but in second and third world nations, it can become obvious quickly.  Just look at what lack of economic growth has done in places like Haiti, Africa, etc.  

Granted, there are external reasons why this has happened in those places, but it ultimately comes down to the reality that a lack of economic growth is the primary culprit, regardless of how it has come to pass.  Is this really the path we want to take?

Many have tried to "guess" at what the economic impact will be in the United States.  We have seen estimates for Q2 GDP being down anywhere from 10-50%!  This is a massive contraction, and it is hard to believe that there will not be some unable to survive, literally, such a drastic cut in economic activity.

We have quietly and to ourselves been saying we thought the cure was going to be worse than the disease with this coronavirus situation; now we are convinced.  It's time to end this insanity!

Now that we have gotten that off our chests, what to do?  We have been hard at work speaking to the managements of our companies and making a determination as to the fallout to our portfolio (of course notwithstanding the obvious decline in values).  Thus far, we have determined that with very few exceptions, our companies will come out of this okay.  There will definitely be a hit to most businesses revenues (and, thus, earnings).  However, the narrative-based investment approach works and we can say that these narratives are either going to survive or, in some cases, oddly benefit from the circumstances this situation has created.  Now, more than ever, the concept of "owning businesses through multiple market and economic cycles" is being tested.  But we believe it will, once again, be proven to be a successful approach, especially in difficult times.

The crazy volatility in the prices of our companies at any given second on the exchanges is not something to which we will react.  We have never seen the most proficient of traders consistently be able to outguess such markets in the short run and we are not about to change our mode of operating at all.  That said, where appropriate, there may be opportunities to add to positions or take new positions in the present environment.  We are diligently looking at those opportunities even as we publish this update.  Thus, there could be small changes but we emphasize they will likely be small.  

So far, our analysis has confirmed our long term, narrative-based process.  We liked our companies before this debacle, and we like them more now!  Stay strong, and stay invested!!





Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.

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As for Volatility -- There's More Problems than the Coronavirus!





image: YouTube (link).

If anyone really enjoys the kind of wild swings in individual stocks that make no fundamental sense (and, for that matter, swings in the major stock market averages) and that have been an increasing hallmark of the market for the past couple of decades and not just in the recent sell off, then they should just keep proliferating the "derivative" phenomenon of passive vehicles like ETFs and the algorithmic trading (algos) that are creating and profiting from such activity.

All of those who say "I just use index funds" have no idea what they are investing in from a business standpoint.   They are essentially allowing black-box models to deploy their investment dollars which are at the center of the problem with the market mechanism and these investors are actually contributing to the crazy volatility we are seeing, and have been seeing for some time now.

It was one thing when so-called "indexing" was a tiny fraction of the market, but now that almost 35% of invested funds are indexed, it's an entirely different situation. By the assessment of the many "human" traders we work with (yeah, there are still a few left), a whopping two-thirds of trading activity is now being done by algos/passive.

Couple that massive increase with the regulations spanning the past twenty years that essentially made it unprofitable for brokerage firms to make markets in OTC stocks (those are the small/mid-sized companies), and you have an illiquid market, subject to the whims of the computers.

Of course, as active managers, we will be accused of bias for pointing this problem out: that's fine by us. After 35 years of watching our industry abdicate responsibility for making real investment decisions and come up with "products" that have nothing to do with financing real businesses, frankly, we have no problem saying what we see going on!

We've spent our careers watching the biggest of the Wall Street firms get bigger and fewer in number every step of the way.  These same firms have been pushing more and more financial "product" that has nothing to do with raising capital for businesses or providing quality research to real investors.  BlackRock now "manages" almost $7 Trillion in assets (or they did, until about three weeks ago!).  

How do you manage $7 Trillion in assets?  The answer is: you don't!  You create as many vehicles as you can that keep the "fee train" going: vehicles such as ETFs and index funds, because when you have that much money to manage, you have to own every stock in the world, as the CEO of BlackRock admitted in an interview five years ago that we blogged about (see THIS POST from 2015).

Those big Wall Street firms also emphasize "financial planning" instead of actual "asset management" that would involve analyzing specific stocks (no offense to financial planners, but they are trained for different skills than stock selection and analysis). Those big Wall Street firms also tell their advisors: "you don't want to be managing money, you just find it" -- again, de-emphasizing the responsibility of making real investment decisions about individual businesses, which is at the very core of the problem.  This disengagement from business analysis is a big part of how we got here.  We will be circulating more of this in coming days/week.  If the "smartest guys in the room" don't agree with us, so be that too!

This is why we have spent our professional lives promoting the need to take a business approach to investing!  No doubt, there is enough uncertainty in the real business world right now for us to sort out.  Fortunately, because we take that approach, we are in touch with the managers of the businesses we invest in as they assess the impact the COVID-19 debacle will have on their business. Most definitely it is not completely clear for a number of businesses. But we take great comfort in knowing that one of the most important, if not the most important, aspects of our due diligence process is an assessment of management capability.  And in times like these, this provides us the confidence necessary to advise incremental additions to portfolios for those who are able, and to absolutely stay the course for all.



Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.

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Don't get off the train, 2020 edition



On Monday, March the 2nd, 2009 we wrote a blog post entitled "Don't get off the train" advising readers of this blog not to panic and liquidate long-term investments during the severe bear market that was then underway.

The title of that post was a reference to the fact that the market can move very rapidly and with a lot of violence, and that trying to jump on (or off) with any kind of delicate timing is extremely dangerous. The post was written at the very depths of the 2008 - 2009 bear market and global financial crisis, when investors were extremely worried and many were asking us if they should sell and "go to cash" and then "get back in" when things looked better. 

We wrote that this kind of thinking is extremely dangerous, because when the market turns it happens so rapidly that it is shocking, and that the further it moves up the more difficult it becomes (emotionally) for those who got off to buy back in -- often resulting in tremendous losses for those who panic-sold near the lows.

The timing of that advice was extremely note-worthy, in that it was published exactly one week to the day before the very bottom of the 2008 - 2009 financial crisis. The market reached its low on March the 9th of that same year and subsequently rebounded extremely rapidly. In fact, as we noted in another post about one month later, the Nasdaq index had moved up 30% from its lows in the weeks following the March 9th market bottom.

Note well that we have always counseled that both individuals and institutions can only successfully avoid fire-sale situations if they have planned properly for their budgetary needs: the only thing that should ever be committed to equity investment is long-term capital.

Additionally, we must also point out that we have always emphasized very strongly that we do not invest in markets and we do not advise owning market indexes (whether in the form of index funds or ETFs): we own companies which we research very carefully, whose businesses we understand, and which are positioned to take advantage of long-term narratives which may take years to be fully realized. 

We invest in those companies through the inevitable cycles of both markets and the economy itself, for as long as we judge those companies to be led by competent management teams and positioned in front of fields for future growth, and we sell them when those conditions are no longer met. We do not recommend that investors just "buy-and-hold forever" and we certainly do not recommend that investors "just buy the market."

The benefit of our type of strategy is that we are regularly in contact with the management of our companies and able to "take their pulse" as to what is happening in their respective businesses.  That is a process we find invaluable in times like these as they provide us with the confidence that these are solid businesses that are well-positioned to rebound when the tide turns, as it inevitably will!

While we still hold to the view -- as stated in our commentaries over the last couple of weeks -- that the reaction to the coronavirus has been overblown, it is now more than obvious that we are going through a market down-cycle, and it is also now clear that we may also go through an economic down-cycle as well (potentially resulting in a recession).     The good news is that the economy was in relatively good shape prior to the onset of the coronavirus outbreak and the more-recent oil-price volatility, although there will certainly be some sectors of the economy that will be impacted more than others.

Our advice to investors is to remain calm and remain invested with long-term money that has already been committed to business investment -- and to the degree they can we recommend that those who have long-term funds to invest begin doing so now.

There are many examples of investors who sold at the panic-lows in 2009, as well as in 2002 and even going back to 1987, and who never got back in at anything near the prices where they sold, because the snap-back when it finally happened was so sudden and so violent that they missed moves of 25% or more, and then it became emotionally difficult for them to buy back in as the prices continued to go higher.

Now is not a good time to panic.

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.

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The "Hissy Fit" Continues


As of this morning, March 9, 2020, we are witnessing a continuation of the "hissy fit" in markets that we wrote about last week.  Within a few moments of the market open, markets were halted across the board on the NYSE and NASDAQ due to "circuit breakers" that kicked in when the market dropped 7% in the session.  Since that time, markets have stabilized a bit and have been somewhat orderly since reopening, now down about 5%.

Of course, those values can change in a heartbeat as markets in this type of environment can move wildly in very short periods of time.

It is notable that today is the 11the anniversary of the market bottom during the 2008-2009 financial crisis.  That bottom happened on March 9, 2009.  Is this the bottom of this decline?  We have no idea.

The S&P 500 at this point is down over 16% from its highs set just recently on February 19, 2020.  Factoring in the low hit today, the market was down almost 19% at that point from its highs.  It would seem this selloff, rapid as it has been, may be getting close to its last leg down.

As we previously stated, we expected a correction in markets could happen at any time and have been warning our investors that such an occurrence was normal, and healthy.  Clearly this has gone further than the typical "garden variety" correction, but it is certainly not unprecedented.  In fact, as recently as the fourth quarter of 2018 the markets experienced a similar selloff.  In that instance, the markets recovered relatively quickly and 2019 was one of the stronger market returns in years.  We expect this correction will be similar.

The culprit has clearly been the reaction the world has had to the fear of the coronavirus outbreak, although this morning, the trigger was also the spat between Russia and Saudi Arabia over their failed attempt to collude on oil production.  This has sent oil prices (already off considerably from recent highs) down over 30% in the session.  Consequently, we are seeing further panic over what all these factors will mean for global economic growth.

We have not changed our view from that of last week; we think the reaction has been overblown from almost all angles.  We believe the panic due to this virus has been much more damaging than the virus itself and we believe that when the dust settles that point will be proven.  As for crude oil prices, one can make an argument that lower prices are good for economic growth just as much, if not more, than one can argue lower prices are bad for economic growth.  Simply put, market forces will sort this out and it will likely not factor that much in the overall economy.

We have a saying in our shop "we don't do the market".  What we mean by that is we don't make market calls as a factor in determining what companies we want to own.  We believe that analyzing the business in which our companies participate is much more useful in determining how long term value is created.  On that front, we are extremely pleased with the progress our businesses are making.  Keeping focused on the business centers us and keeps us confident when the market is having one of its hissy fits (or panic attacks, as the case may be).

Not doing "the market" doesn't mean we pay no attention to market prices.  Quite the contrary, we believe smart investors can take advantage of downturns like this and add to their investment accounts.  We urge investors to start making such additions if they haven't already.  Additionally, we look at these downturns as opportunities to add to positions in our portfolio and often add new positions when they are "on sale".

Lastly, we would hope that cool heads will prevail in this mess.  The "crisis" industry (the media) is having a field day playing on fears.  However, in our view, reactions that have included cancelling events and telling everyone to stay home is irresponsible.  Unfortunately, the exact opposite is what organizers of these events think.  In monitoring the statements from the Center Disease Control and the World Health Organization, the folks who have succumbed to this virus are sickly and elderly in almost all cases.  The incidence of this disease causing death is about the same as the flu, and the overall numbers are drastically lower as the flu has already claimed tens of thousands of lives this year, as it does every year, and yet we don't have this type of reaction to the typical flu that comes around like clockwork every year.

As we have previously stated, this is not to understate the effects of this virus on anyone afflicted by it.  However, we believe rationality is in order, to say the least.  To that point, we also hope that policy makers do not overreact either.  We have long argued the the "crisis mentality" that has been a hallmark of the 21st Century in reaction to the "crises" that this century has experienced, has served to cause more problems than it has solved.  Level-headed calm is what is needed in times like this.  Policy-makers will do well to be the leaders in acting rationally.

We've been through many of these periods in the past and will come out of this one just as favorably as we did the previous episodes.  As our mentor Dick Taylor used to say all the time: "on any given day, about 1% of shareholders price our companies.  Don't let 1% of shareholders tell you what your companies are worth!"

Good advice from a sage and successful investor.  We heed that advice!


Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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What A Difference A Week Makes! Another Hissy Fit


Anyone who has read our comments over the years has seen our previous posts describing market "hissy fits" ( here and here, for example).  We are going through one right now and the culprit is the scary coronavirus.

We have no idea what the ultimate outcome of the coronavirus will be and it is a horrible thing anytime we are discussing an issue that is resulting in human suffering and, in some instances, death.  Thus, we do not take lightly the reality that this is causing much disruption in the lives of people around the world, particularly those infected with the virus.  Also, we are not health professionals and would not begin to try to assess the ultimate health impact of this situation.

However, as investment professionals, we do have to assess the potential impact this event may have on business and the markets, and on that front we believe some perspective is in order.

According to the United States Center For Disease Control there were 55,672 deaths in the United States caused by influenza and pneumonia in 2017.  That represented a 5.9% increase from 2016, so the number was pretty high in 2016 as well.

According to the World Health Organization, as of February 27, 2020, there have been 78,630 confirmed cases and 2,747 confirmed deaths in China out of a total population of 1,422,823,000 people in the country.  In the rest of the world there have been 3,664 confirmed cases and 57 deaths.  That's out of some 7 billion people!  We understand that the fear is that cases outside China are increasing, but this far into the outbreak, the overall numbers are still quite low compared to typical yearly flu cases around the world.

We simply do not see the type of reaction every year to the significant number of people who die of influenza in the United States as we are now seeing surrounding the coronavirus which has yet to even come close to the number of deaths that happen each year in the U.S., let alone the entire world.  Again, we simply suggest some perspective is important.

Those brief statistics would indicate to us that while it is clearly important to work towards containing this virus, and concurrently work towards a vaccine (which appears to be close), this situation has been turned into a near panic by the "crisis industry" (otherwise known as the media) and that has sent the markets around the world into a another "hissy fit".  We recall past "pandemic fears" such as the Avian Flu, SARS, and the Ebola outbreak.  Those diseases were deadly too, but ultimately ran their course and we believe the coronavirus will do the same.

Our Chief Investment Officer, Gerry Frigon, has recently been giving his quarterly update to clients in live group presentations and he has discussed that we expected there could be a 5-10% correction at any time given the recent strong performance in our portfolio strategies, and the market in general.  We wouldn't have expected it would all occur in one week, but here we are.

The major averages are all down over 10% from their recent highs (achieved last week!), as are our strategies.  Fortunately for our clients, this year started out very strong for us as all our equity strategies outperformed their respective benchmarks into mid-February.  We did not necessarily expect this selloff to happen so quickly and it is not our strategy to react to such market events in a frenzied manner.  However, we have recently taken some profits in companies we have owned for many years (some we've owned for over 15 years) and believed had reached maturity.  We have been deploying that cash to new companies that we expect have significant prospects and are generally smaller companies.

These times are difficult to go through and we have no idea if a bottom was put in yet.  Yesterday, February 27, 2020, the markets were off across the board about 4.5%.  This morning the markets are off another 3+%, as of this writing.  There certainly could be more on the downside, but we would urge our clients with excess cash to take advantage of this correction and immediately deploy at least some of any excess cash to our strategies.  These opportunities don't come around all the time.  It is time to take advantage.

The coronavirus scare will pass and there will be some economic impact but we expect it will be light in the overall scheme of things.  There are some very favorable trends happening relating to 5G in telecom, regenerative medicine in healthcare, the Internet of Things and automation in the factories, virtualization of network infrastructure, and many more (see our portfolios for all the examples of narratives on which we are focused).   Yes, what a difference a week makes, but it's just another hissy fit in the market.

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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SNN Interview: 2020 Narratives Informing Investment Decisions with CIO, Gerry Frigon of TFCM



In this Wall Street View, host Robert Kraft spoke with Gerry Frigon, CIO of Taylor Frigon Capital Management to discuss stock market performance in 2019, how things are going thus far in 2020 and the key narratives for 2020 that are informing Gerry's investment decisions. SNN Interview with Gerry Frigon.

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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Are We At “Peak-Unicorn” Yet?

This article written by Gerry Frigon first appeared in ValueWalk on January 20, 2020

We’ve been asking ourselves in our investment management shop for some time if we have finally reached the peak of the “unicorn” phenomenon.  For those who may be unfamiliar with the concept, it is a term now used to describe a venture-backed private company that has reached a $1 billion valuation before it goes public.  The early pioneer in that realm was Google, who went public in 2004 at a $24 billion valuation.  Facebook went public in May 2012 with about a $104 billion valuation.  Clearly, Google and Facebook have been successful post-IPO as Google (now Alphabet) is worth almost $980 billion.  Facebook is worth about $624 billion.  These early multi-billion IPO valuations were a distinct change from the previous IPO paradigm and led the way to a new era of companies waiting to IPO until their valuations were stratospheric compared to the preceding era.

For some context, in March 1986, Microsoft went public and its first trade on public markets was at $21 per share.  It had 24.7 million shares outstanding for a total value of about $518 million.  This was a big deal for the time, but it’s amazing to think that less than 20 years later (even with inflation considered) Google went public with a $24 billion valuation.  Take a look at another 1980s iconic tech company: Apple. That company went public at $14 a share which valued the company at over $850 million.  And while that same day the stock traded up to $29 per share for a valuation of $1.77 billion, again, even inflation adjusted, it pales in comparison to the values that twenty-first century unicorns reached.  Even though it was over thirty years later that Facebook went public at $104 billion, the dollar hasn’t lost its value enough over those three decades to make the comparison even remotely close.

These comparisons are among some of the most successful companies ever launched.  And while we can come up with significant reasons to argue that there are other important differences between twentieth-century tech companies such as Apple and twenty-first century “tech” names such as Facebook, we’ll save that analysis for another article.  What’s more concerning is the number of companies in the last fifteen years that have risen to the ranks of unicorn and have not proven that their businesses can ever be profitable (for example, Uber!) or which have just completely bombed altogether and had to close up shop.  Continue Reading

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.



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Gerry Frigon, Chief Investment Officer at TaylorFrigon talks to Business Insider about investing in ‘enablers’ in high growth industries.

"A CIO overseeing $230 million explains how he's gaming the biotech industry by investing with minimal risk — and shares his 2 favorite stocks in the space."

"Age-old investing folklore says that risk and return are inextricably linked. If you want a higher return, you have to take more risk. An investor can't have one without the other. But Gerry Frigon, the founder and chief investment officer of the $230 million Taylor Frigon Capital Management, doesn't adhere to that school of thought — and he's found a way to play high growth trends with less traditional risk exposure."


Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.


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Why Is Silicon Valley Ignoring Core Technology Companies?

This article written by Gerry Frigon first appeared in ValueWalk on December 18, 2019

Recently, the world witnessed the largest IPO ever.  Saudi Aramco went public and just a couple of days later it hit the $2 Trillion level in market value.  The company has been around in one form or another for decades and it is somewhat ironic that the world’s largest company, and the first to go public at such a valuation, is an oil company. Given the “unicorn-like” mentality of venture capital nowadays, one would have thought it would be a social networking application or a ride-sharing company, or a real estate leasing arbitrage company parading around as a technology company that would be the first to hit such lofty levels.  One can only imagine that this is quite disappointing to the twenty-first century Silicon Valley venture mavens who are convinced windmills and sun-worshipping is the key to our energy future, but I digress. The real scandal in the news of this massive IPO has nothing to do with energy.  Instead, it is the lack of energy that has persisted in the financing of core technology startups thus far in this century and has resulted in a persistent lack of IPOs in general... Continue Reading

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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Investment Climate January 2020

The year 2019 ended with strong price increases for major markets in the United States and capped off a very good year overall with large company stocks outperforming their smaller counterparts when comparing indices based on company size.  

Interestingly, while small and mid-cap stocks clearly underperformed large company stocks in the general market this past year, for our growth portfolios, the best performing stocks came from the ranks of mid-cap, small-cap and even micro-cap companies.  Israeli-based Novocure, Ltd., a developer of cancer treatments which use electric “fields tuned to specific frequencies” to disrupt solid tumor cell division, grew 151% and is now over $8B in market value.  Phoenix-based Carvana, Inc., an online used car retailer, was up over 181% and the lone large-cap company in the mix Canada-based Shopify, Inc., a software platform that allows online businesses of all sizes to run their entire business online, was up 187%.  Micro-cap biotech company Compugen, Ltd., also Israeli-based, was up over 174% and optical component manufacturer Inphi Corporation, based in Sunnyvale, CA., was up over 130% to round out the best performers.

This result was that our Core Growth Strategy outperformed the general market averages again in 2019.  

These top performers are a good indication that our portfolios were favorably impacted by a very broad mix of companies representing a diverse set of industries, so there was no one “sector” that could be identified as the reason for positive influence on the portfolio.  Company-specific dynamics were the driver for each of the best performers.

The same is true of those that were the biggest detractors in the portfolio.  QuickLogic Corporation (-41%), provider of analog and mixed-signal semiconductors for communications and data center markets, Green Dot Corporation (-71%), a consumer-oriented financial technology company, and Vuzix Corporation (-58%), a maker of augmented reality smart glasses, each are clearly representative of differing groups.  In all those cases, while the near-term performance has been disappointing, we believe there remains significant potential in the future.

Looking forward, most of our exposure in the portfolio is in the information technology and healthcare-related sectors.  What is most important to understand, however, is that in those areas, the portfolio is represented by significant diversity amongst industries, many of which have sensitivities that vary greatly from each other.  Thus, it can be misleading to look at the overall portfolio weighting of over 50% in “information technology” (IT) and assume that it is heavily concentrated.  For example, in that broad “information technology” group we find such differing industries represented as cybersecurity software maker CyberArk, Ltd. and analog semiconductor foundry (also known as a “fab” or “fabrication plant”) Tower Semiconductor, Ltd.; subscription software platform company Zuora, Inc. and Airgain, Inc., a designer of embedded antenna technologies for the wireless industries. 

In healthcare (with roughly 25% representation), veterinary products manufacturer IDEXX Laboratories, Inc. differs greatly from Apyx Medical Corporation, maker of electrosurgical devices used in cosmetic procedures, or Vapotherm, Inc., a maker of devices used to non-invasively treat patients who are suffering from respiratory distress.

These are some examples of companies that fit well into our narratives that are built around three schemas: demographics, technology and business processes.  Descriptions of the companies mentioned above give an idea of some of the narratives relating to healthcare and technology.  Others, such as the rise of the subscription economy, relate to business processes and how business is conducted; or to the significant impact that biotechnology is having on the treatment of disease. We also invest in companies that are not necessarily inventing these new treatments, but instead companies which support the proliferation of such technologies.  A great example is Cryoport, Inc., which provides cryogenic transportation of drugs both in the development phase and also during commercialization.

Each of these narratives, as well as many others, are represented in some form in our portfolio.  With economic tailwinds at this point, we expect the companies in our portfolio to either continue on the positive track they’ve been on, or to achieve breakthroughs in their efforts at attaining the expectations we have for them.  It is entirely possible that some of the smallest companies in our portfolio will be where the largest returns come from in the next year or two as some long-awaited business prospects come to fruition in specific companies.  This could well result in a circumstance where the returns in our portfolio significantly diverge from those of the broader market which is so heavily dominated by the “mega-cap” stock such as Google, Amazon, Apple and Facebook.  Stay tuned.

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.

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