TDOC Bear Thesis + My Reponse

I don’t own TDOC, but LVGO is my largest holding. I plan to hold LVGO until the merger. (Side note - you never know, it could fall through and LVGO could remain a stand-alone business. So, I think it’s premature to sell at this point even if you don’t want to own TDOC.) Also, I’m pretty sure I will keep the TDOC shares after the merge. The more I think about it, the more I am liking the future possibilities.

I like to think in terms of alternatives. If they did not merge, I assume TDOC would have tried to build out it’s own competing services in the areas that LVGO covers. A very long process, with lots of investment and risk. Realistically, it would have taken them years. The time they would have spent building it up would have prevented them from expanding in other areas. So, they paid a high premium, but they got the best-in-class company who is currently years ahead of anyone else. They get the product that is selling “like hot cakes”. If TDOC wanted to be in this space, then they did the absolute best thing they could have done - they bought an amazing company and instantly catapulted themselves into a whole different ball game.

If you are LVGO, your alternative would be to try to stay independent - knowing that you will have a huge battle looming against a solid company. LVGO would have had to develop the international expansion on their own which would have taken years and a lot of investment. There will still be investment needed for international, but it’s a whole lot easier when you have infrastructure and expertise in a bunch of countries around the world - which is what TDOC brings to the table.

The combined company has a YUGE head start over everyone else. No one else is even close, and it’s going to be extremely difficult for anyone else to get to their scale.

If there are other similar quality acquisitions in the future, I WANT TDOC to pursue them. I WANT them to become as monstrous and complex as possible. I want to see them become an absolute behemoth of a company that disrupts as many areas of health care as possible.

Would I have preferred that LVGO stay independent? If there was no major competition, then sure - that would have been great. But that’s not the way the world works. When you are growing 100% per year, someone is going to come after you. I do know that I can not think of any other company I would want them to merge with more than TDOC. So, it’s a little sad seeing them go, but I think it might be the best possible outcome.

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excellent discussion…

Few of points to consider…

A. We have seen a real example - Last year, most people on this board jumped off TWLO as they acquired Sendgrid and spent some time digesting acquisition… organic growth of combined company looked like slowing down… fast forward in 12 to 18 months, TWLO has tremendous, growth seems to be resuming and shares have appreciated in the overvalued territory again…

Why is this important?
two reasons… First-- both companies said clearly that as standalone companies, they were going to march into each others’ territory… TWLO was looking to build an email product to integrate with its own suite and SEND was looking to acquire text / voice product… infact, SEND had a smaller acquisition lined up and that company was left hanging as a result…

So LVGO / TDOC looks very similar / rational to me

Second… I sold TWLO despite personally expecting it to resume growth (as I saw the acquisition very complimentary… still a long growth opportunity and did have confidence in the management)… as I tried to ruthlessly focused on latest results and maximizing growth… result was paying taxes… and though luckily jumping on LVGO at right time, I did not miss much gain at portfolio level…

I feel that planning to be lucky is not a good idea… and selling and paying taxes on what was clearly a great potential company was painful as TWLO ramped up its ascent again…

B. Healthcare is even bigger space than enterprise communication… I am not sure how it compares to cloud SW market size but it certainly is not small potato…

And TDOC’s Gorevic has even proven that he is a visionary, capable and interested operator (the last piece was missing with Tullman) and proven that he can manage multiple acquisitions and leverage to further grow… therefore, I see much less risk here than a run-off-the mill acquisition.

  1. End to end integrated virtual healthcare - The Intouch acquisition was smaller but crucial one… just TDOC buying LVGO would have looked like TWLO / SEND scenario, avoid fighting… lets join hands… thats good… but with InTouch, it becomes even better…

LVGO is strong in data, AI, and generating action on based on this data… mostly focused on chronic care so far…

InTouch is strong in getting access to a range of data… specially in clinic environment…

TDOC has huge base for acute care in telehealth…

Three of these together enables LVGO data capability to expand into acute care thanks to InTouch and TDOC established base becomes strong selling machine for LVGO chronic care

I think TDOC, LVGO and InTouch truly becomes integrated, end to end data driven, modern healthcare company…

While I agree that this vision takes time to implement and succeed but in this case, each of these companies likely to continue its hypergrowth while waiting for integration to supercharge…

With all these, I certainly like to hold a piece of this asset in my portfolio for a long time…

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B. Healthcare is even bigger space than enterprise communication… I am not sure how it compares to cloud SW market size but it certainly is not small potato…

Find out!

Historical

The National Health Expenditure Accounts (NHEA) are the official estimates of total health care spending in the United States. Dating back to 1960, the NHEA measures annual U.S. expenditures for health care goods and services, public health activities, government administration, the net cost of health insurance, and investment related to health care. The data are presented by type of service, sources of funding, and type of sponsor.

U.S. health care spending grew 4.6 percent in 2018, reaching $3.6 trillion or $11,172 per person. As a share of the nation’s Gross Domestic Product, health spending accounted for 17.7 percent.

For additional information, see below.

https://www.cms.gov/Research-Statistics-Data-and-Systems/Sta…

Denny Schlesinger

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B. Healthcare is even bigger space than enterprise communication… I am not sure how it compares to cloud SW market size but it certainly is not small potato…

Find out!

Captain, that link shows $3.6T in annual health care spending… and of that, per one of the pdf, “physical and clinical services” is 20%… TDOC / LVGO will address large portion of it… may be as much as half… and also some portion of “Other Health and Residential services” bucket which is additional 5%…

https://www.cms.gov/files/document/nations-health-dollar-whe…

So theoretical market size - or TAM - is in the range of $450B (half of 25% of $3.6T… assuming other half can not be addressed remotely)… I think its feasible to see them getting to 3% of the TAM which would be ~$13.5B in revenue and at a conservative 10x P/S, becoming $135B market cap… ~5x of today’s combined market cap…

Now this to me is a base case scenario… there are many upsides to it with

  • first, these numbers were 2018… its already 2020 and we are talking about playing this out in next few years… so there is as much as 20% to 30% upside on the size of the market…
  • instead of 3%, their market share can go as much as 5% to 8% as this is one of the lowest cost delivery service with huge benefits to all involved… just think how e-commerce playing out vs physical stores… and you start to get the picture…
  • Combined company can offer their own insurance…
  • TDOC being in many many countries, its addressable market is much larger…
  • InTouch offering additional services for brick & mortar physician’s office and also hospitals… and so on.

yes, there is a risk to get carried away with this line of thinking with a lot of extrapolation… but IMO, if there is an Amazon of healthcare delivery feasible in foreseeable future, it is this company…

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“link shows $3.6T in annual health care spending… and of that, per one of the pdf, “physical and clinical services” is 20%… TDOC / LVGO will address large portion of it…”

Hi nilvest!

Two more offsetting variables that i see as very material that might be included in those projections would be expansion into international markets on the one hand, and the near certainty that in the USA, health care costs of 19% of GDP is unsustainable and must decline.

The former would up your estimates, while the latter (19% of GDP is twice the next highest cost country), might decrease them. Of course, we expect that the need to decrease health care costs everywhere is likely to accelerate the move to online services

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Two more offsetting variables that i see as very material that might be included in those projections would be expansion into international markets on the one hand, and the near certainty that in the USA, health care costs of 19% of GDP is unsustainable and must decline.

Exactly and both business models, Teladoc’s and Livongo’s are designed to do just that. The business model of traditional medicine, at least in America, is to milk patients dry. Covid-19 is the catalyst that is triggering the paradigm shift, the catalyst that is enabling the disruption of traditional medicine.

But it’s not all roses, the Healthcare Industry is very powerful and it will do everything in it’s power to prevent losing their stranglehold on medicine and they have the regulatory agencies in their pocket. Healthcare is a political football and the stakes are huge. Be warned.

Denny Schlesinger

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Both companies are “cost savings” from the view of the insurers paying for the services. From the patient’s view, more convenient. If the merger doesn’t break anything, it should do pretty well.

  • PATIENT: At point of sale, the patient is spending someone else’s money. Costs aren’t part of the decision. Expected results are. The only “problem” to a LVGO client is the hassle of putting it on the phone, letting the insurer track their habits, and the pressure to do what they are told about diabetes while the insurer and doctor are “watching”. But then a life-saving phone call from time to time might influence that, right? TDOC services may be more convenient and seen as “safer in COVID era” if they trust the online doctor and advice given. If the TDOC doctors are “in network” for insurers, it’s cheap and efficient.

  • DOCTORS: A doctor is focused on treating the patient, telling the patient what is good for them, and measuring results. The insurance company pays most the bill, so again, it’s someone else’s money. They care about their track record. For telemedicine, they need good video to see facial and physical details of the patient and good audio to hear how they speak. For the LVGO services, they need good reports (they get them) and a warning system (they have it). TDOC advertises a worldwide network of online doctors and consultants and the software that does the connecting and record-keeping. My own HMO is listed as one of their clients. I haven’t ever used TDOC services, but I imagine an agreement between my HMO and TDOC will extend the HMO’s reach. And if one TDOC doctor needs advice from a specialist, there is a large group to get it from.

  • INSURERS: THE PEOPLE WHO ARE PAYING: They will only obligate themselves if it buys them something. Insurers pay LVGO big money with a smile, because they save bigger money in the long run in lower overall diabetes costs. They encourage customers to join up. This is like car insurers offering discounts if you let them track your driving with your cell phone. With the TDOC services, I imagine (again, have never used) online medicine is a net savings over paying for visits, especially post-COVID. I have had 2 online consultations with my own HMO’s doctors who worked there. The video was so-so, but we know from the quality of Zoom’s video that technology exists to make online video better.

If there are medical people who are familiar with the services provided, it would help our conversation. Any here?

One issue I saw in earlier posts is whether the two companies can be as good together as LVGO was alone. It can go either way. Depends on the chemistry of the leadership, and how many LVGO people stay around after getting the shares/money from the merger.

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My wife is a Nurse Practitioner and has picked up TDOC calls for about 9 months and has worked in HC and insurance for over 20 years. I asked her for her thoughts on Total Market for TDOC. She made the analogy of TDOC is to healthcare as McDonalds is to food. Based on quick and convenient. TDOC is the quick easy, non-comital choice. She estimates that based on her and her fellow HC practitioners (not scientific) experience about 60% of the calls are flu/covid/fever/child related (a lot of it’s 3AM and my child has a…), 15% are cuts/falls/ER referrals, 25% are other areas (asthema, infections, rash, ED). She makes about $25 per call depending on the length and she says it easy. Complicated cases, repeat visits/referrals are rare. In fact she’s never had one.

Her Health Care System also does telemedicine and she accepts calls through them. The experience is completely different. Most calls are about existing health care issues where either she or another in-system HCP has seen the patient. She says Flu/covid/child care 30%, pre-existing conditions 30%, referrals to MRI’s, CAT’s, LTC, ER are 20%. Then 20% mental health. As you can see, the calls are completely different and more complicated. On these she gets a flat $32 per call. She can also prescribe non-therapeutics and 1st time therapeutics which TDOC does not allow.

As for reasons: Her take is that patients don’t want to go through their complete HC history when they call on complex cases and she has access to their files. However by far most important is the fact that she is an employee’s of “their” local HCS. There’s a trust, she’s not just a voice. Health care is way more intimate than buying shoes at Amazon. Sometimes convenience matters. But not when you have cancer. McDonalds and Whole Foods coexist.

The question becomes, can TDOC overcome this? Is it simply exposure to the system that consumers need or is this an issue TDOC can’t or doesn’t want to overcome? After all McDonalds makes a lot of money. All to say that when you are talking about the TAM of TDOC you can not simply extrapolate from total HC spending. There are a limited subset of medical conditions TDOC can address at this time.

She has also used BestDoc which is their Doc-to-Doc service. She sees value in this service especially in rural markets where specialists can be a good distance away. Here the problem is that most rural medical centers are affiliated with or have a co-op to medical centers with level 3 trauma, ICU and maternity.

How they break into this market without these services remains a question. Most Doc’s are reluctant to share records outside of their system so it has to be initiated/insisted upon by the patient. Like any other profession, physicians have a group of people they trust. And why would a Medical Center want you to go outside?

All to say, our healthcare system is complicated and diverse and disruption will be slow. And, that may not be the market TDOC wants.

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Interesting that hospitals were laying off a large percentage of their personnel, during the early phases of covid when elective procedures were not being performed. If the number of elective procedures in the US was equivalent to those performed in other nations, the cost of health care in the US would shrink enormously. Leveling the playing field by equating national costs of performing equivalent procedures would more far more accurately assess the real comparative costs of global healthcare alternatives.

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Interesting that hospitals were laying off a large percentage of their personnel, during the early phases of covid when elective procedures were not being performed. If the number of elective procedures in the US was equivalent to those performed in other nations, the cost of health care in the US would shrink enormously. Leveling the playing field by equating national costs of performing equivalent procedures would more far more accurately assess the real comparative costs of global healthcare alternatives.

This may be getting off topic for the board but I should correct the misconception that only non-essential “elective procedures” were not being performed. Many (perhaps most)delayed procedures were essential (biopsies and other cancer screening, cardiac procedures, joint replacements, etc.) and data suggests these delays were very costly in terms of lost lives and quality of life. Moreover, other important non-procedural care was delayed or deferred, also damaging health and costing lives. There is plenty of fat in the US health care system and this is part of the equation. But the type of care delayed during this pandemic is not likely the source of national health care cost differences. There is some truth that the pandemic did reveal inefficiencies in our health care system and this is where LVGO/TDOC can play a role.

Dave - just retired ER doc

long LVGO/TDOC

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As you say, I have invested in what is already happening, in Teladoc for its tele-health business model and in Livongo for its paradigm shifting business model that worked for me as an individual by breaking free from the conventional medical model. For me the merger does not change (break) either business model but strengthens them by creating a stronger capital position and by creating synergies. What could be simpler than that?

I cannot predict the future so I’ll be watching how this merger goes forward but I’m not going to be scared out of the positions unless events dictate a change of course. Currently healthcare and the obesity epidemic are among the greatest economic problems America has. The cure is to break the old model that has created these problems. The cure is to return medicine to where it belongs, to the doctor/patient relationship. Way too many bureaucracies are currently screwing up healthcare including government, insurance, big pharma, big HMOs, and malpractice lawyers… What is needed is a disruptive technology that is capable of taking on the incumbents that have created the mess and that is the investment thesis.

The risk to the Teladoc/Livongo merger is not what you imagine but the incumbents, the very powerful incumbents, fighting back. With a bit of luck, the incumbents will be defeated by the Innovators Dilemma. My thesis is that fewer people reporting sick through behavioral change will simply reduce the power of the Healthcare Industrial Complex that has captured the government regulating bodies.

Denny Schlesinger

I’ve been following this thread which only strengthens my investing thesis. Although I have extensive experience in emergency medicine, I have had only limited experience with telemedicine. But my understanding of medicine helps me understand the potential of both companies. I appreciate the observations of those here who have more direct experience.

This is an excellent summary of the overall picture. Health care in the US is immensely complicated by regulations and powerful entrenched interests. This has caused the cost of care to soar while hindering access and stifling innovation. As Digized so aptly detailed, much of this regulatory apparatus is now being relaxed. At the same time, the strengths of alternative approaches that TDOC and LVGO offer have been highlighted. There will be obstacles and this may slow growth for this company. But there are immense green fields and low hanging fruit ahead before these obstacles are likely to come into play. Current growth attests to this reality. And the opportunity or TAM is massive no matter how you estimate it.

Typically, I’ve been reluctant to invest in the health care field due to the above regulatory complexity and roadblocks. But this is a time of significant change in health care. If you worry too much about the complexity, you miss the forest for the trees and miss out on a great investment opportunity. There are merger risks and health care market risks that are still unpredictable. But I don’t see lesser risks with any of our other growth stocks. I’m not betting the farm on TDOC/LVGO but making a sizable bet.

Dave, just retired ER Doc, long LVGO/TDOC

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harryda, thanks for the post, it’s good to have news from the front lines!

The comparison to McDonald’s is interesting. Cheap fast food is a better investment than fancy eating places simply because there are many more poor people than rich. The food is not better, the service is not better, the place is not fancier, yet it’s the place to go for the masses.

All to say, our healthcare system is complicated and diverse and disruption will be slow. And, that may not be the market TDOC wants.

The way disruptive technology usually works is that it serves an underserved market with a low priced product or service that is no match for the traditional product or service offered by incumbents. This underserved market is of little interest to incumbents and the disruptor is ignored or denigrated as inferior.

BTW, some 20 years ago there was an attempt to create a low cost, walk-in medical service by installing kiosks in places like drug stores. The idea flopped because it never became profitable. Teladoc is the same idea but based on more modern technology that seems to be taking root.

Back to how disruption works. While it is being ignored by the incumbents, the disruptor is improving and moving upscale. When you say “And, that may not be the market TDOC wants” shows that you are thinking statically, not taking into account the progress that the disruptor makes. M&A is one way the disruptor grows. By buying Livongo Teladoc is entering new markets! This is one case where M&A is superior to organic growth.

Disruption is not an event, it’s a process that can take years.

Denny Schlesinger

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But there are immense green fields and low hanging fruit ahead before these obstacles are likely to come into play. Current growth attests to this reality. And the opportunity or TAM is massive no matter how you estimate it.

Dave,

What is this “low hanging fruit?” I’d be concerned current growth attests to a Covid spike for TDOC and a small revenue base for LVGO.

An important point about TAM. TAM matters when you think a business is too niche – it’s nice to estimate that a company has only tapped 2% of their potential customers, or whatever. A “huge TAM” isn’t something to be excited about. The larger the TAM, the harder the struggle. I’ve been looking at ETSY, and I even took a small position and will probably write it up for the board. But I’m worried their TAM is too huge…can they really compete with Amazon? You or I can start a business and say our TAM is all of retail, but unless we do one thing really well, we’re probably going to go out of business. The only way ETSY succeeds is if they target a portion of that TAM more effectively than their larger competitors. And that’s hard! So is disrupting healthcare.

What’s the one thing TDOC does really well? ZM does videoconferencing really well. CRWD does endpoint security really well. FSLY and NET do edge networks really well (notice I didn’t say “edge computing” because that is still nascent). TDOC does…now a jumbled mess of video visits and software to monitor glucose levels and give feedback…and some other things they’re trying to get into. Healthcare is too big. One upstart isn’t going to do it all. Some things will work and others won’t. I don’t think this company will utterly fail, but I don’t think it will grow swiftly or cleanly enough to be a good investment short term or long term. Saying that they have a huge TAM is saying that we’re not really sure what they’re going to do or how they’re going to do it.

Bottom Line: Getting excited about a huge TAM without a realistic path of getting there, I’d say is like ogling the forest yet somehow managing to miss the trees that are right there in it.

Don’t just place a bet because of grand dreams. We can do better than that.

Bear

PS Health care in the US is immensely complicated by regulations and powerful entrenched interests. This has caused the cost of care to soar while hindering access and stifling innovation…There will be obstacles and this may slow growth for this company…There are merger risks and health care market risks that are still unpredictable. But I don’t see lesser risks with any of our other growth stocks.

You just named several risks our other companies don’t have to deal with. Our other companies don’t have to deal with regulatory risks, an industry that stifles innovation, a huge merger that’s changing the fundamentals of the business, or the growth-by-acquisition TDOC has had even before this.

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What is this “low hanging fruit?” I’d be concerned current growth attests to a Covid spike for TDOC and a small revenue base for LVGO.

This is a valid concern. But annual revenue growth was 32% for TDOC and 148% for LVGO (the difference is one reason I preferred the pure play of LVGO) in 2019 pre-pandemic. That’s quite good. The pandemic lowered regulatory barriers and also raised awareness of telemedecine’s value which should provide some lasting tailwinds post-pandemic, increasing growth. I would bet this is a lasting change in medicine but the growth, especially combined, was already superior.

An important point about TAM. TAM matters when you think a business is too niche – it’s nice to estimate that a company has only tapped 2% of their potential customers, or whatever. A “huge TAM” isn’t something to be excited about. The larger the TAM, the harder the struggle. I’ve been looking at ETSY, and I even took a small position and will probably write it up for the board. But I’m worried their TAM is too huge…can they really compete with Amazon? You or I can start a business and say our TAM is all of retail, but unless we do one thing really well, we’re probably going to go out of business. The only way ETSY succeeds is if they target a portion of that TAM more effectively than their larger competitors. And that’s hard! So is disrupting healthcare.

A large TAM is very important for sustainable growth - the larger the TAM, the longer the runway and the more room for growth before competition becomes problematic. This creates potential which the market will value and price accordingly. I’ve had investments that didn’t pan out due to a limited TAM.

As for ETSY, I also recently opened a small position. Unlike LVGO/TDOC, competitive threats may be more of an immediate concern and their TAM might be an issue as well.

What’s the one thing TDOC does really well? ZM does videoconferencing really well. CRWD does endpoint security really well. FSLY and NET do edge networks really well (notice I didn’t say “edge computing” because that is still nascent). TDOC does…now a jumbled mess of video visits and software to monitor glucose levels and give feedback…and some other things they’re trying to get into. Healthcare is too big. One upstart isn’t going to do it all. Some things will work and others won’t. I don’t think this company will utterly fail, but I don’t think it will grow swiftly or cleanly enough to be a good investment short term or long term. Saying that they have a huge TAM is saying that we’re not really sure what they’re going to do or how they’re going to do it.

I don’t know how well TDOC has differentiated itself from the competition but their pre-pandemic growth indicates their product is well received by the market. They have favorable ratings from both physicians and patients. They are a first mover, allowing them to navigate regulatory hurdles before the competition. Now they also have LVGO which is the premier telemonitoring company. This differentiates them further, likely a lot further. It creates synergies for telemedicine and sales. Furthermore, they might create a network effect which may be hard for later entrants to challenge.

You just named several risks our other companies don’t have to deal with. Our other companies don’t have to deal with regulatory risks, an industry that stifles innovation, a huge merger that’s changing the fundamentals of the business, or the growth-by-acquisition TDOC has had even before this.

But other companies have unique risks that TDOC/LVGO is unlikely to face. Technological change could easily derail our other tech stocks. Cybersecurity, for instance, is littered with hot companies which were sidelined by new entrants with a better mouse trap.

Don’t just place a bet because of grand dreams. We can do better than that.

Bear

I’m not betting on grand dreams but on a company with proven growth and increasing opportunities ahead. But I do think it’s important to dream big. A vision or dream of the future may be the most critical element in investing, especially growth investing. That may be one thing I’ve learned here on Saul’s board.

I appreciate your bearish viewpoint. I share all your concerns and limit my bets accordingly. And I invest in multiple other companies here with wonderful growth prospects as well.

Dave

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But annual revenue growth was 32% for TDOC and 148% for LVGO (the difference is one reason I preferred the pure play of LVGO) in 2019 pre-pandemic.

Exactly. I don’t see this culminating in a company that grows 60% or even 45% in 2021. The slower-growth TDOC side is a lot bigger percentage of the new whole than the hypergrowth LVGO side (which I think will also slow vs the larger revenue comps).

Just wanted to be clear about that as I don’t know if I’ve spelled it out before. I wish you and TDOC the best, and we’ll just have to agree to disagree about their potential and their advantages or lack thereof.

Bear

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Exactly. I don’t see this culminating in a company that grows 60% or even 45% in 2021. The slower-growth TDOC side is a lot bigger percentage of the new whole than the hypergrowth LVGO side (which I think will also slow vs the larger revenue comps).

Just wanted to be clear about that as I don’t know if I’ve spelled it out before. I wish you and TDOC the best, and we’ll just have to agree to disagree about their potential and their advantages or lack thereof.

Bear

Yes, this is a valid concern but synergies (notably in sales), lower regulatory hurdles and lasting tailwinds for telemedicine post-pandemic all favor higher and sustainable growth for the combined company.

Yes, I think we just see things differently. I don’t know if we disagree on the potential as much as the likelihood of reaching that potential.

Dave

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“Exactly. I don’t see this culminating in a company that grows 60% or even 45% in 2021. The slower-growth TDOC side is a lot bigger percentage of the new whole than the hypergrowth LVGO side (which I think will also slow vs the larger revenue comps).”

Bear, always a fan of your opinions, even the ones I disagree with (such as this one).

I haven’t commented much on the TDOC LVGO merger because at first, I wanted to let the dust settle somewhat, and I also wanted to hear Bert Hochfeld’s opinion (sidenote, Bert’s ticker target is just $10/week and you can do a free trial to get all info you need for now. I am keeping the service - seems well worth it to me).

It seems that most people who are bearish on TDOC LVGO share your opinion that TDOC was a a slow grower before the pandemic, therefore it must be a slow grower after the pandemic. The thing is, is that no one knows what will happen after the pandemic. No one knows when after the pandemic will be. Will TDOC get 2 more quarters of pandemic growth or 2 more years? I know that 2 years seems highly unlikely, but people in general have underestimated this pandemic since the get go.

The question of “how long will pandemic boosted growth last” has striking similarities to the question that we must ask for any company at any time - which is, how long will hypergrowth last for (insert stock name here)? CRWD, DDOG, TDOC, ZM, COUPA, TWLO, etc are all fighting against the law of large numbers. Growth will fade for all companies over time no matter what, and no one knows when the slowing down will start or how quickly it will slow. When this starts to happen, we sell. Like we did with TWLO, ZS, NEWR, etc.

Also, doctors and patients like TDOC. They like telemedicine and are not going to want to go back to the way things were before the pandemic. So why would growth slow afterwards? The pandemic, in many ways, has permanently changed the world, such as Zoom and Teladoc. Zoom is not going away and neither is Teladoc.

Lastly, in case people are curious, I have not sold a single share of TDOC or LVGO, which means that when combined, LVGO TDOC takes up 24% of my portfolio. I feel confident to let TDOC LVGO be a top position for me, however, being completely honest with you I do wish that none of my positions were bigger than 20% or so. I am considering selling my TDOC shares (smaller tax consequences) to get the combined position under 20%.

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What’s the one thing TDOC does really well? ZM does videoconferencing really well. CRWD does endpoint security really well. FSLY and NET do edge networks really well (notice I didn’t say “edge computing” because that is still nascent). TDOC does…now a jumbled mess of video visits and software to monitor glucose levels and give feedback…and some other things they’re trying to get into. Healthcare is too big. One upstart isn’t going to do it all.

Bear,

I may be wrong but it seems to me that the one thing TelaDoc (TLDC) does really well is low cost distance health care. Distance health care barely existed before the internet and reliable high quality video conferencing. Problem is, people in general seem to be very wary of talking to nurses and doctors over the internet in spite of the savings in time and money. Understandable as a person’s health is a very intimate topic.

To be honest, I never saw any potential in TDOC as an investment when compared to my other stocks. I estimated growth would be far too slow.

Then along comes covid-19 forcing many people to accept video chat, remote work, online shopping, and many other internet & cloud solutions. Talking to a doctor over the internet must have become a lot more palatable to many people these past few months. And by the way, save a bit money at a time when everyone is particularly aware of the high cost of health care and how tight finances have becoome.

Livongo (LVGO) certainly complicates the company yet I can see the potential synergy in providing low cost (cost saving) remote health care solutions.

The big wrinkle, as others have pointed out, is that the health care establishment won’t easily give up its patients to a new operating model. Only time will tell if people’s desire for these new solutions will offset the established health care giants. Before covid-19 I would have said not a chance. Now … It may be possible.

As a health care consumer, I see the merger as a good thing.
As an investor I see a lot of potential in this company for steady growth.
As an investor of hyper-growth stocks I don’t have enough information.

I have been in and out of both of these companies more than once. At the moment I have a small position while I watch and learn and wait for more information on what the future will bring.

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“Don’t just place a bet because of grand dreams. We can do better than that.

Bear

I’m not betting on grand dreams but on a company with proven growth and increasing opportunities ahead. But I do think it’s important to dream big. A vision or dream of the future may be the most critical element in investing, especially growth investing. That may be one thing I’ve learned here on Saul’s board.

I appreciate your bearish viewpoint. I share all your concerns and limit my bets accordingly. And I invest in multiple other companies here with wonderful growth prospects as well.

Dave“

Interesting discussion. While grand dreams have kept me in names like AAPL since 2003, great analysis has moved me out of stocks like SHOP at 150, NVDA at 250/300.

TSLA is a great example of a company and a CEO I finally decided to take a chance on last year. I entered to stock at 375 with a 50k investment. I love investing in leaders like Bezos and Hastings, so I finally decided that even with Musks crazy quirkiness, he had something very special and I’d take the chance, even if it felt more like a dream investment. Two weeks later I read a scathing and well presented post On the MF TSLA board that scared the bejesus out of me and moved me out of the stock at 425. I gave up on my dream of taking a chance on Musk and let well thought our fundamental analysis be my guide. Oh what a mistake that has turned out to be.

As for AAPL, on a historic day like today when AAPL becomes the first company to ever cross into the two trillion dollar market cap area, I remember the dozens of times I could have sold out of the stock because of fundamental analysis. It’s overvalued, it’s growth is slowing, the competition, no new products. So many reasons to sell.

What’s even more interesting to me is that back when I first bought AAPL in 2003 the market cap was 7.8 billion, which is lower then just about every cloud name that’s discussed on this board today. In 17 years AAPL grew from a 7.8 billion market cap to over two trillion dollars. Amazing. No really amazing.

Which I have to wonder, is there another company that will be the next AAPL, that will have that kind of mind blowing phenomenal growth, and will anyone have the patience to hold that stock for a decade or longer?

TMB
Still holding my original positions in AAPL, AMZN, NFLX. Wish I held my SHOP, TSLA, and a large handful of others.

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In teledentistry, I now have different codes that I can bill out for different reimbursements. One code that utilizes video and one code for without video.

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