So Inari Medical announced yesterday. The announcement was a mixed bag, but the “truth” in all of this is that market didn’t/doesn’t like it, at least as of now (8/11/21). From their announcement:
Treated a record number of patients, with revenue of $64M for the second quarter of 2021, up 11% sequentially & 150% year-over-year.
Announced FDA clearance of FlowSaver, enabling bloodless thrombectomy with the use of Triever Catheters.
Presented interim results of the CLOUT DVT registry at New Cardiovascular Horizons, confirming best in class safety, clot removal, and clinical results for patients treated with ClotTriever.
Increased full-year 2021, revenue guidance to $255M (up from $250M)
I am very data driven and fell in love with NARI’s revenue growth (up 100%+ YoY in their Q1’21 ending in March) and gross margin (around 92%), but they did signal that there were some headwinds and the market’s reaction to this news also said something, and that should have raised a red flag. It raised a red flag for Saul. From his last monthly summary below https://discussion.fool.com/my-portfolio-at-the-end-of-july-2021…
Now that Covid seemed over, instead of being elated, they (NARI) were warning that the hospitals are now full with people who had been putting off tests and procedures during Covid. In other words they weren’t seeing the big tailwind they had been expecting. They wouldn’t even give guidance for the June quarter that they were already in, although they were halfway through it in mid-May, and they gave full year guidance that was just a little over four times the March quarter’s revenue. I also heard from doctor friends that many hospitals are in a bad financial situation now due to Covid. This may lead to hospital administrators being unwilling to pay for Inari products which are four or five times more expensive, even if they do work better. All in all it seemed too complicated for me. It may all turn out to be a false alarm. They may be just super-duper cautious. That’s very possible. But I certainly wasn’t the only one who read it the way I did. The price dropped about 35% and almost $40 in the next nine trading days. It looks a if my decision was correct, as in the last four weeks Inari hardly bounced back at all from that precipitous decline, while my portfolio as a whole was up substantially, and hitting all-time highs
Further, in their conference call yesterday, the CEO was a bit cautious in his comments about vacations impacting sales.
"as we head into Q3, we are seeing a significant number of vacations by employees’, physicians and staff. The commercial impact of this is uncertain. We believe a note of caution through the remainder of Q3 is warranted,”
I was somewhat concerned that vacations, are such an important factor in $NARI’s business model that the CEO would have to mention it in the call. Maybe he’s being super cautionus, but we are already in August of the next quarter so maybe he’s signaling for next quarter.
What’s the take away here? I try not to just blindly follow Saul, but there’s a difference between blindly investing in the same companies that he invests in, which we should not do, and following his approach to investing, which we should do.
The lesson learned here is the numbers tell a story, but the story also tells a story. I should have listened more carefully to the info that they were reluctant to provide full year guidance (last quarter), and external data suggesting that hospitals were struggling financially, which is not good for a relatively expensive product like NARI, compared to its peers. And, with that info, should have paid more attention to how the market was reacting.
Will $NARI be back from this? Probably, but my approach suggests cutting my losses and redeploying into companies in which vacations don’t significantly affect their business model.
I sold my entire position in NARI over this morning, at a 36% loss and will be redeploying those funds into ZI, LSPD, ZS, CRWD, and NET.
I hope others learn from my mistakes.