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  • Writer's pictureIshfaaq Peerally


Let's start with Diageo $DGE.L (this has been the case for the last days). Today, Diageo is not having a great time as the $GBPUSD gains over 0.5% with uncertainties about when actually Brexit will happen. Sooner or later, Brexit will happen. These short-term volatilities are to be expected with Diageo but long-term, it is still a good investment.


A few days ago, I talked about Dexcom $DXCM telling you how they partnered with Apple $AAPL and Google $GOOG . There is another important partner of Dexcom and that's Tandem Diabetes Care $TNDM . Tandem makes insulin pumps. Many patients suffering from diabetes, mostly those suffering from type 1 diabetes need to inject insulin in their blood stream multiple times a day. On average, patients suffering from type 1 diabetes must inject insulin in their body 7 times a day. It is not comfortable. You have to bring syringes everywhere you go and inject yourself. With an insulin pump, you only have to insert the needle under the skin once and you can set how much insulin you need to be injected on the keyboard(the one made by Tandem is touchscreen).

The main competitor of Tandem is Medtronic $MDT , the largest medical devices company in the world. The insulin pumps made by Medtronic can work together only with a CGM (Continuous Glucose Monitor) made by Medtronic. The most popular CGM is the one made by Dexcom and this one can work with Tandem. Even if you have an Abbott $ABT or Medtronic CGM, it can work with a Tandem insulin pump but they are not synchronized. Other advantage of the Tandem insulin pump is that it is more effective, it is smaller, easy to charge and also touchscreen. The next generation of Tandem insulin pumps will be automatic, you don't need to manually input how much insulin you need to be injected. You just program it and it is synchronized with your Dexcom CGM, if your blood needs insulin, it is automatically injected.

We can see the correlation between the growth of Tandem and Dexcom. In the last five years, revenues grew by 38% CAGR while gross profit by 56%. But they are losing money and have a negative free cash flow. They currently have a positive book value but it has been negative in 2016 and 2017. It means liabilities were higher than assets. They are improving. They are also diluting shares a lot. They remind me of Tesla $TSLA but with higher growth and a smaller market cap. If you are looking for a speculative stock, I would recommend Tandem.

But for me it is not a good investment today. The stock price is too expensive. It is more expensive than Dexcom and there is too much correlation with Dexcom. They have only one product and they are relying to much on the Dexcom G7 CGM success next year for their own growth. Warren Buffett said that what separates the successful from the very successful is that the very successful says NO to most opportunities. I have to say NO to Tandem(and also Dexcom for the time being).

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