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A Review Of The Key Tech Frontiers Recommendations
In 1973 and 1974, as the U.S. stock market descended into one of the worst bear markets since the Great Depression, Warren Buffett began buying shares of The Washington Post Company. The opportunity seemed absurd. The Post owned one of the most important newspapers in America, along with valuable television stations and other media assets. Buffett estimated that the entire company was worth roughly $400 million. Yet the stock market valued it at a small fraction of that intrinsic value – $80 million.
As he would relay in anecdotes he told for decades after, part of what fascinated Buffett about this opportunity was that as the 1970s bear market deepened, The Washington Post Company shares traded more cheaply even as the underlying business strengthened. The company's competitive position improved. Its media assets became more valuable. Its management remained exceptional. Yet investors, terrified by recession, inflation, and collapsing stock prices, drove the shares even lower anyway.
For Buffett (shown below with long-time Post publisher Katharine Graham), this disconnect represented one of the most important lessons in investing: occasionally, the gap between price and value widens not because a business deteriorates, but because the market temporarily loses confidence in the story, or the capacity to perceive it clearly.
This June marks two and a half years since I began writing what has become Tech Frontiers. We’re overdue for a systematic, top-to-bottom portfolio review – and this month, we’ll begin that assessment by revisiting our entire core biotech portfolio – where we began. We’ll complete the second half of our review next month, when we focus on our non-biotech names.
As I reviewed our biotech portfolio, I found myself returning repeatedly to Buffett’s Washington Post Company experience.
Let me explain…
Several of our biotech portfolio holdings have become much stronger over the past year. Alnylam Pharmaceuticals has transformed itself into a commercial powerhouse. Fortress Biotech has monetized its most important asset and now trades at negative enterprise value. Prime Medicine has moved from platform promise toward product reality. ImmunityBio has largely resolved its biggest regulatory uncertainty. Sagimet Biosciences has found a faster path to value creation. And even uniQure, despite its regulatory frustrations, possesses stronger clinical data and a stronger balance sheet than when we first recommended it.
Yet in many cases, the stock prices, after soaring for a short time, have come all the way back to where we originally recommended them, or even below.
For long-term investors, this combination – improving fundamentals accompanied by stagnant or falling prices – isn’t a problem… It’s an opportunity.
So this month, we'll revisit the major positions in our biotech portfolio and explain why, in several cases, the investment thesis has improved even as the market's enthusiasm has faded. As Buffett discovered with The Washington Post half a century ago, some of the best opportunities emerge when value moves in one direction and price moves in another.
Let’s begin…
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