1. Existing Home Sales Could Be Turbocharged by Transformations in the Buying and Selling Process
On Zillow’s third quarter earnings call, CEO Rich Barton stated, “In September, we saw the pace of existing home sales climb to the highest level since 2006, exceeding 6.5 million annualized units.” We believe that the combination of increased demand for personal space during the coronavirus crisis and mortgage rates at 50-year lows as contributed to the surge in home sales.
In our view, sales will continue to rise as digital platforms reduce the friction associated with buying and selling homes. During the third quarter, for example, nearly two thirds of the home purchases on Zillow Offers closed digitally with an online notary. In our view, next generation real estate platforms like Zillow, Opendoor, and Redfin will continue to simplify the home buying and selling processes, adding significant liquidity to the real estate market during the next five to ten years.
2. Pacific Biosciences Is Close to an Inflection in Clinical Demand
Thanks to Illumina’s (ILMN) short-read next-generation sequencing (NGS) instruments, the cost to sequence a whole human genome has dropped from $3 billion in 2003 to $600. As a result, against all expectations 15-20 years ago, NGS has subsumed the role of microarrays in the molecular diagnostics space.
NGS skeptics argued that short-read sequencing would be too expensive, too error-prone, and produce superfluous data. Now, skeptics of long-read sequencing are making the same arguments in support of short-read sequencing.
Pacific Biosciences (PACB) pioneered long-read sequencing with its HiFi sequencing method. Unlike short-read NGS, long-reads can detect difficult-to-sequence mutations known as structural variants (SVs). SVs are critical to understanding and diagnosing conditions within oncology, rare disease, hereditary disease predisposition, and neurology. In our view, Illumina’s recent decision to repurchase GRAIL and focus on multi-cancer screening, effectively competing with its customers, will galvanize PacBio’s acceptance in the clinical market.
In line with Wright’s Law, for every cumulative doubling in the data produced on PacBio’s instruments, unit costs have declined consistently at a 28% rate. According to our research, during the next two to three years, as PacBio continues to optimize its HiFi chemistry, the cost of long-read sequencing could approach that of short-read sequencing, causing an inflection in clinical demand for PacBio’s technology.
Unlike other NGS vendors, PacBio designed its Sequel II system to be field-upgradable, enabling increased access to state-of-the-art sequencing. With its Sequel IIe system, PacBio has cut the time for downstream analysis by 70% and the cost of data storage by 90%, making it easier for diagnostic providers to integrate it into their sequencing clusters.
Recently, in the PrecisionFDA 2.0 challenge, PacBio HiFi reads, aided by Google’s (GOOGL) DeepVariant interpretation pipeline, produced more accurate data than either Illumina or Oxford Nanopore, suggesting that PacBio now is the industry leader in complete, highly accurate sequencing. This success already is bearing fruit. For certain clinical workflows, genomic innovators like Invitae (NVTA) and Children’s Mercy Hospital are migrating from short-read to long-read sequencing. In our view, as costs continue to fall, more diagnostic providers will follow suit, ushering in the age of third-generation sequencing.
3. Preparing for the Launch of ETH 2.0, The Ethereum Foundation Releases Staking Deposit Address
Ethereum’s long awaited transition from proof-of-work to proof-of-stake has achieved an important milestone. To improve the scalability, security, and programmability of Ethereum during the next few years, the Ethereum Foundation released the specs for ETH 2.0, including a mainnet deposit contract address that allows validators to begin the staking process.
In contrast to the current Ethereum chain, ETH 2.0 uses proof-of-stake (PoS) to secure its network. To make the transition possible, ETH 2.0 recruits active participants, or validators, to help the network reach consensus. In return for staking assets to validate the network, participants will receive continuous payouts based on the assets they have staked.
The deposit address invites participants to become validators and commit to staking. To launch the first of four network phases, ETH 2.0 needs validators to stake a minimum of 32 ether each, totaling at least 524,288, seven days prior to December 1. If the validators do not meet the 524,288 threshold initially, the network will launch seven days after meeting it. As of this writing, potential validators have staked ~40,000 ETH.
To monitor staking participation, please visit the ETH 2.0 launchpad here.
4. Tesla’s Rate of Innovation Is Leaving Other Electric Vehicle Manufacturers in the Dust
To hit a particular price-point, EV manufacturers typically face a tradeoff between efficiency (range/kWh) and performance (seconds to accelerate from 0 to 60 miles per hour). Because auto design cycles in the gas-powered era have spanned three to four years, traditional auto manufacturers typically have delivered significant improvements only with new model releases.
When it launched the Model 3 in 2017, Tesla was well ahead of the competition and, thanks to constant innovation, it has pulled further ahead of the pack on both efficiency and performance. That said, while its cars can be and probably have been reverse engineered, Elon Musk claims that Tesla’s secret sauce is its factory, the machine that makes the machine at scale, which will be much more difficult to replicate.