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What's Obsolete? What's Rising?

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September 13, 2013 – Comments (2)

Board: Macro Economics

Author: WendyBG

International Paper, once a Dow 30 company but no longer, is laying off people due to lack of demand for paper.

As new technology is developed, paper is only one of many products and services that are becoming obsolete. (Tim pointed out that many elderly do not use computers, but many do and the ones who don't will eventually fade away.)

As investors, we don't want to hold buggy whip manufacturers. We do want to invest in the rising sectors.

So the question of the day is: what's obsolete or will soon become obsolete? What's likely to remain stable in price while providing a reliable income stream? What's rising?

Which companies will be affected?

I hope that many METARs will chime in with industries and specific companies.

I'll start out by proposing a few. Please feel free to add more and/or disagree.

1. Heading toward obsolescence. Paper, some technology companies (e.g. producers of personal computers and their software, including Dell and Microsoft, as well as some electronics such as Nokia), brick-and-mortar retailers whose products are easily sourced online, such as Best Buy.

2. Stable. Consumer staples, such as food (KO, PEP, etc.) and family-care consumables (KMB and JNJ). Utilities.

3. Rising. Exporters of consumer goods. Big pharma (MRK, JNJ, Novartis).

I'm really not sure what to think about energy (e.g. XOM, CVX) and energy-related companies such as pipelines. I'm also not sure how to evaluate the financial sector, which now produces 40% of all after-tax profits, because the change in the accounting rules makes it harder than ever to evaluate their balance sheets.

Of course, any company's stock price is based on supply and demand. Sectors rise and fall in popularity. Investors may be more or less interested in growth (which can lead to high P/E ratios) than dividends.

Each investor has personal risk tolerance and desire for growth vs. income.

Please add your thoughts.

Wendy 

2 Comments – Post Your Own

#1) On September 14, 2013 at 1:19 PM, maniladad (< 20) wrote:

Hi Wendy, I learned about the technologies below from the individual companies rather than the other way around. For that reason I own or have owned shares in all of the companies I mention in this post.

1) Stem cell therapy: Presently in some disrepute because of extensive quackery, stem cell therapy has the potential for major application in a number of areas of medical practice. It is used primarily now in cosmetic and reconstructive surgery, such as breast reconstruction to reduce inflammation, increase blood flow and speed healing. Applications under investigation include use in acute heart attacks to reduce the size of the damage and in life-threatening congestive heart failure refractory to standard treatments. It is also being studied for use in imcreasing blood flow to limbs with severe diminution of blood flow with a goal of preventing the need for amputation. The company which I stumbled on is Cytori (CYTX) which has developed and is improving a device which extracts, on-site, such as the operating room, stem cells from fat taken from the patient, so that they can be injected or infused in a matter of minutes, not after several weeks as is required in techniques which grow in culture stem cells extracted from the patient's bone marrow. Cytori has a unique business advantage because they sell many of their devices to researchers studying new applications of stem cells. When the results are published Cytori's device becomes more well-known, new applications are discovered and the research helps to obtain approval for the application from regulmatory authorities. I think Cytori meets the criteria for 'top dog, first mover' in a field with enormous possibilities. With the standard caveat that many promising therapies have not achieved their initial potential, and whoever emerges as the leader in the field, stem cell therapy seems likely to play a vital role in many areas of medical practice.

2) antibody-based cancer therapy. I'm no expert in this field but the basic concept is that a patient's T-cells, which provide, among other things, a natural defense against cancer cells, are linked with an antibody to the patient's cancer. For reasons unclear to me, the presence of the antibody negates the cancer cells' ability to develop a resistance to the T-cells, the cell dies and the T-cell/antibody moves on to another cancer cell. Because the antibody is specific for the cancer cell, many of the undesirable effectrs of chemotherapy are avoided. In initial tests of one of the drugs using this approach, many patients who had relapsed after treatment of a blood cancer with other chemotherapeutic agents were completely free of cancer cells in their blood after treatment with the experimental agent. 100% absence of cancer cells in the blood is associated with a high rate of cure. At least one such drug is currently approved for use in Europe. In addition to cancers, much more prevalent disorders such as rheumatoid arthritis, systemic lupus erythematosis and fibromyalgia may be treated with this approach. The company that got me interested in this approach, Micromet, was bought out by one of the big pharmas but I don't remember which.

3) Use of genetically-engineered microorganisms to produce most anything: Solazyme (SZYM) uses algae to produce oils for cosmetics, the food industry, speciality lubricating oils and even fuel. Codexis (CDXS) uses bacteria to produce pharmaceuticals (drugs), enzymes and ethanol. Other companies that I don't know much about are using the same approach for different products. The potential applications seem limitless.Of the new technologies I'm aware of, this seems the one to have the greatest potential to change the world.

4) CO2 Solutions (COSLF) is a tiny Canadian company which uses an enzyme, carbonic anhydrase or CA (which it obtains from Codexis) to remove the carbon dioxide from smokestack emissions economically and efficiently to produce coke, a commerically valuable product. I suspect the availability of cheap natural gas is the reason the company and the process have not received more attention. I think that at some point coal-fired plants coupled with CA scrubbers will become common.

5) Perhaps this last one comes under the "Something that no one could presently conceive of" but it involves some aspect of psychology that will revolutionize teaching, the penal system, public relations, politics and the whole area of human relations. Possibly it may involve the ease in which strong subliminal suggestions can be placed and the magnitude and duration of the effects that these can produce. Depending on who is using it and the purpose for which it is used, it can produce great good or great harm but will probably be used most often for trivial reasons, such as to induce buying. The technique may be used without anyone being aware of it. The use of the technique may have already begun. You're not aware of any such technique? See, that proves it. I told you that people wouldn't be aware of it being used. Now try to remember something you have done recently that had no rational motivation. Told you. Be on guard.

 PS I got a little out of control on that last one but the point is that the most profound changes come from things that no one with the exception of science fiction writers could anticipate. Conversing with computers with terabytes of memory? Now that's the stuff of science fiction. "Right, Mr. Spock?"  (And I really do think that the greatest advances are going to be the field of psychology,)

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#2) On September 14, 2013 at 1:19 PM, maniladad (< 20) wrote:

Hi Wendy, I learned about the technologies below from the individual companies rather than the other way around. For that reason I own or have owned shares in all of the companies I mention in this post.

1) Stem cell therapy: Presently in some disrepute because of extensive quackery, stem cell therapy has the potential for major application in a number of areas of medical practice. It is used primarily now in cosmetic and reconstructive surgery, such as breast reconstruction to reduce inflammation, increase blood flow and speed healing. Applications under investigation include use in acute heart attacks to reduce the size of the damage and in life-threatening congestive heart failure refractory to standard treatments. It is also being studied for use in imcreasing blood flow to limbs with severe diminution of blood flow with a goal of preventing the need for amputation. The company which I stumbled on is Cytori (CYTX) which has developed and is improving a device which extracts, on-site, such as the operating room, stem cells from fat taken from the patient, so that they can be injected or infused in a matter of minutes, not after several weeks as is required in techniques which grow in culture stem cells extracted from the patient's bone marrow. Cytori has a unique business advantage because they sell many of their devices to researchers studying new applications of stem cells. When the results are published Cytori's device becomes more well-known, new applications are discovered and the research helps to obtain approval for the application from regulmatory authorities. I think Cytori meets the criteria for 'top dog, first mover' in a field with enormous possibilities. With the standard caveat that many promising therapies have not achieved their initial potential, and whoever emerges as the leader in the field, stem cell therapy seems likely to play a vital role in many areas of medical practice.

2) antibody-based cancer therapy. I'm no expert in this field but the basic concept is that a patient's T-cells, which provide, among other things, a natural defense against cancer cells, are linked with an antibody to the patient's cancer. For reasons unclear to me, the presence of the antibody negates the cancer cells' ability to develop a resistance to the T-cells, the cell dies and the T-cell/antibody moves on to another cancer cell. Because the antibody is specific for the cancer cell, many of the undesirable effectrs of chemotherapy are avoided. In initial tests of one of the drugs using this approach, many patients who had relapsed after treatment of a blood cancer with other chemotherapeutic agents were completely free of cancer cells in their blood after treatment with the experimental agent. 100% absence of cancer cells in the blood is associated with a high rate of cure. At least one such drug is currently approved for use in Europe. In addition to cancers, much more prevalent disorders such as rheumatoid arthritis, systemic lupus erythematosis and fibromyalgia may be treated with this approach. The company that got me interested in this approach, Micromet, was bought out by one of the big pharmas but I don't remember which.

3) Use of genetically-engineered microorganisms to produce most anything: Solazyme (SZYM) uses algae to produce oils for cosmetics, the food industry, speciality lubricating oils and even fuel. Codexis (CDXS) uses bacteria to produce pharmaceuticals (drugs), enzymes and ethanol. Other companies that I don't know much about are using the same approach for different products. The potential applications seem limitless.Of the new technologies I'm aware of, this seems the one to have the greatest potential to change the world.

4) CO2 Solutions (COSLF) is a tiny Canadian company which uses an enzyme, carbonic anhydrase or CA (which it obtains from Codexis) to remove the carbon dioxide from smokestack emissions economically and efficiently to produce coke, a commerically valuable product. I suspect the availability of cheap natural gas is the reason the company and the process have not received more attention. I think that at some point coal-fired plants coupled with CA scrubbers will become common.

5) Perhaps this last one comes under the "Something that no one could presently conceive of" but it involves some aspect of psychology that will revolutionize teaching, the penal system, public relations, politics and the whole area of human relations. Possibly it may involve the ease in which strong subliminal suggestions can be placed and the magnitude and duration of the effects that these can produce. Depending on who is using it and the purpose for which it is used, it can produce great good or great harm but will probably be used most often for trivial reasons, such as to induce buying. The technique may be used without anyone being aware of it. The use of the technique may have already begun. You're not aware of any such technique? See, that proves it. I told you that people wouldn't be aware of it being used. Now try to remember something you have done recently that had no rational motivation. Told you. Be on guard.

 PS I got a little out of control on that last one but the point is that the most profound changes come from things that no one with the exception of science fiction writers could anticipate. Conversing with computers with terabytes of memory? Now that's the stuff of science fiction. "Right, Mr. Spock?"  (And I really do think that the greatest advances are going to be the field of psychology,)

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