Angelalign Technology (6699 HK)

Stock pitch + Q&A with a healthcare sector specialist

I recently came across an intriguing stock pitch on Angelalign, a Hong Kong-listed (and Shanghai-based) company specializing in clear dental aligners. Angelalign holds the #1 market share in China and has recently embarked on an ambitious global expansion.

The pitch was authored by Healthy Stock Picks (“HSP”), a healthcare sector specialist based in Hong Kong, whom I recently had the pleasure of meeting in person. It was a very thoughtful pitch that I enjoyed a lot, so I’m excited to share the idea, along with a brief Q&A with HSP, with my subscribers.

Following the Q&A, you’ll find the stock pitch and a link to download the full deck. Enjoy!

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Q&A with “Healthy Stock Picks”

1. You launched “Healthy Stock Picks” this year. Can you tell us about your newsletter and what inspired you to start it?

The idea with Healthy Stock Picks is to become a Healthcare sector specialist and share deep dives and overviews of different sub-sectors of the global healthcare space. Over time I plan to add more and more sub-sectors to my skill set, for the moment I'm mostly focusing on Med-tech. I have previously been on a 8 year journey to evaluate myself as an investor, become more structured in company analysis and find an investment style that suits me. I did that by putting my ideas and reviews on a blog called GlobalStockPicking.com. Reviewing my 8 year journey, there were two things that stood out: I really enjoyed digging deep into healthcare related ideas. Going back and evaluating my performance, the healthcare ideas also had (on average) much better returns. Looking online for other healthcare investing blogs and not really finding much kind of sealed the deal.

2. Tell us a bit more about your investing journey.

My investing journey started when I was a kid, I sat at the kitchen table with the daily Swedish newspaper looking at how my mutual funds had moved day by day. But it was exactly 20 years ago that I bought my first stock position from my dorm-room as a student. The investing grabbed me so strongly during the Uni years that I shifted my Msc engineering degree towards quant finance. That unfortunately did not lead to a full time investing role but I did get other roles within banking. I divide this 20 year time-period into two parts: My first ten years as an amateur investor, many hard lessons were learned and 2008 colored me to be a more cautious investor. The second ten years has been a journey of becoming a more sophisticated investor. This was spurred on by a few things, taking a CFA was important as I hadn't even studied basic accounting. Later working as a fund allocator running a Fund of Funds strategy. I met many professional investing teams during this time period and drew a lot of inspiration from their way of working. This inspiration was also the reason I started the GlobalStockPicking blog.

3. How would you describe your investment style?

My basic thoughts have been to not constrain my investment universe. My investing style first of all is global (or as global as my broker allows me to be). Secondly, from the experience with all those professional investing teams I understood how high the competition is. I try to compete with as few as possible highly intelligent investors. This led me to looking at smaller companies but also hated sectors/markets etc. I try to invest in areas where I have good knowledge and a higher possibility to have an edge. I grew up in Sweden and since many years lived in Hong Kong so I gravitated to investments closer to these markets. Finally I have a value tilt to my investing style, but I challenge myself and also try to own other types of companies, for example loss making companies are common in the healthcare space. My ideal company is probably something with Growth at Reasonable Price (GARP). Putting all of these things together, my portfolio is mostly Nordic or Hong Kong stocks in the micro to small cap space, mostly profitable with decent growth and a not-too-demanding valuation.  

4. As a healthcare sector specialist, are there any common misunderstandings or misconceptions about healthcare stocks?

When I talk to other investors most of them actually avoid the healthcare space, especially Pharma. Given how large part of the global benchmark is within Healthcare I really think this is a shame. Sure some companies are very hard to understand within Biotech etc, and perhaps they are best to be avoided, but Healthcare is a nice defensive sector which in a portfolio context works really well with the rest of your non-Healthcare holdings. Especially among the smaller companies, they are actually not that hard to understand, AngelAlign is a good example of that. 

5. Speaking of AngelAlign—how did you come across this company?

I have followed the company since its IPO. The IPO serendipitously helped me a lot, as it pulled up the valuation of my other holding Modern Dental (link to write-up). Angelalign had a ridiculous valuation at IPO and I was not at all interested. I started to learn about the dental sector six years ago when I invested in Modern Dental. Since then I decided to understand the whole sector globally and what all players are up to. Somehow by having this global understanding of how all players operated, it just fell into place in my head this idea that MBK should buy Angelalign. This might of course never happen, but I think it makes a lot of sense. So from there I just had to dig deeper if it's investable as a stand-alone business without this potential "kicker". I think this is also a nice example of how one can connect the dots by really understanding a space globally and applying the ideas to smaller stocks which aren't well covered.

6. Are there any specific sub-sectors or trends within healthcare that you’re particularly excited about for the next few years?

Given how we changed habits in the last 50 years in terms of computer usage, staring down in a smartphone all day, these habitual changes create new healthcare problems, like for example spinal problems (which I myself experienced), I see this as an extremely interesting space for investments given the enormous tailwind. In the same way I focused on dental as there is this huge structural tailwind of aging in the rich world. It's an inevitable fact that when we get old, our teeth will shatter and fall out. I like to identify major tailwinds like that and then dig deeper for ideas that benefit from that tailwind. 

7. What’s the best way for readers to follow your work or get in touch with you?

Just subscribe to my Substack and follow me on Twitter (X). I'm in a transition period now where I still mostly write under my old handle @GlobalStockPick, but my new handle is @HealthStockPick

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AngelAlign (6699 HK)

Elevator Pitch

AngelAlign, listed on the HK exchange, has emerged as the only other substantial stand-alone clear aligner brand worldwide. With a 3% global market share, AngelAlign is on par with the other big dental companies who all try to land grab within the clear aligner space. Many dentists want to at least have an option to Invisalign to both offer different price points but also to not be at the mercy of Align Technology’s pricing.

The pitch has two parts:

1. Buy-out speculation: Korean Private Equity powerhouse MBK is recently acquiring dental assets to create a new global dental giant, especially focused on the more “value oriented” customer. They have all major business lines under their umbrella by now, except clear aligners. AngelAlign stands out as the only viable option if they want a complete product portfolio.

2. Regular attractive growth company to own: After a spectacular IPO in 2021 with massive interest from investors (2000 times oversubscribed), the AngelAlign stock has equally spectacularly crashed and been left for dead in the Hong Kong bear market. That has not really changed the company fundamentals which is performing quite well. AngelAlign is still a unique asset, and now trading at an undemanding price given their strong position in the clear aligner space.

Align Technology pioneered the clear aligners through their Invisalign brand in the late 1990’s. As different patents fell off the large incumbent dental companies have been trying to win market share in this highly attractive dental category. When visiting a dentist one of the most expensive procedures offered by the dentist is clear aligners and as such this a large category of dental sales. A more detailed pitch follows. Press below to download the deck, hope you enjoy it!

Angelalign Healthystockpicks

1.57MB ∙ PDF file

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