Anthony Orphanos has had a distinguished career on Wall Street having been a Managing Director at Warburg Pincus Asset Management as well as holding senior investment positions at Howard Capital, Austin Investment and Carret Asset Management. Tony currently manages money for his private clients through his firm Blacksmith Advisors.
Tony recently spoke with Streetwise Reports about his investment philosophy and current portfolio. "I begin from a macro perspective to identify those sectors of the economy that I find the most attractive before researching individual companies," he explained. "I then concentrate my investments in those sectors with usually less than 15 positions. With respect to both sectors and companies I am a value oriented contrarian looking for extremes in either valuation or growth potential."
A number of years ago he concluded that record debt, the internet and barriers to free trade would be headwinds to economic growth. While there would be a growth spurt after the coronavirus induced contraction, improving growth to historical norms was unlikely. Tony wanted to concentrate on those sectors and companies where the demand for products and services was not influenced by macro activity whether recession or recovery. He identified four sectors whose growth prospects were accelerating independent of the economy—healthcare, technology, biotech and financial services.
"The total addressable markets for Bion's technology is in the multi-billions." - Tony Orphanos, Blacksmith Advisors
Tony's largest position at 18% of assets is in the financial services company Blackstone Group (BX:NYSE). He was first attracted to BX as more institutional money was going into alternative assets—real estate, private equity, venture capital. At the time, BX was organized as a partnership, a structure that was not attractive to many investors. "I made BX a large position because I felt it was only a matter of time before it converted to a C corp, which would increase the valuation placed on its already successful business model," he said.
In the technology sector Orphanos holds Apple (AAPL:NASDAQ) and Amazon (AMZN:NASDAQ), which form the second and third largest position at more than 10%+ in his accounts.
In healthcare Orphanos believes the future lies in personalized medicine. "Not so long ago there might be only one treatment for any particular diagnosis," he explained. "Now with the advances made in genetic research there could be several different treatments depending on the profile of the disease. Roche Holdings (RHHBY:OTC) is one investment in this area. Roche has been making biotech acquisitions both large and niche for the past decade. It was because of this increased biotech exposure that I favored Roche more than the U.S. pharma companies." Another investment in biotech is Guardant Health (GH:NYSE), which has developed a liquid biopsy for cancer screening.
"In researching businesses, the priority is now the potential for growth especially because I believe it will be hard to come by given the macro trends." Orphanos said. "I am interested in any disruptive technology that has unlimited upside potential. I have made large bets in BX, AAPL, AMZN and biotech companies because they will be able to grow faster over a longer period by virtue of their technology or market dominance. The point is to avoid the 'buggy whip' businesses of previous business cycles."
The only small cap among Orphanos' otherwise large-cap holdings is a cleantech company called Bion Environmental Technologies Inc. (BNET:OTCQB). Orphanos was introduced to the company by Bion CEO Dominic Bassani whom he knew from an earlier successful investment. He started with a small initial investment, which was increased about five years ago to the current 5%+ in his portfolios. The clincher for him was that it was in agriculture, already an underinvested sector of the market, and that it all begins with water. Given water quality issues in Michigan and Ohio, not to mention the drought conditions west of the Mississippi, he believes water could well become the equivalent of the energy crisis.
"Water quality has become a major problem in the U.S. and most of that pollution comes from animal waste," he said. "Bion's patented technology is designed to eliminate the environmental impacts of large scale livestock production and deliver a USDA certified sustainable product to the consumer. The platform recovers high value coproducts and renewable energy and can provide a pathway to branding in the premium sector of the $200 billion livestock industry. The company plans to establish joint ventures to produce sustainable and organic meat and dairy products. The pelletized nitrogen crystals will support organic grain production that can be used as feed to produce organic corn fed beef that will command a substantial price advantage as there is nothing comparable in the market today."
"The business model is being driven by the consumer who wants food that is not only healthy and safe but also produced in an environmentally friendly manner," Orphanos noted. "Bion has applied to the Organic Materials Review Institute for a listing of its solid ammonium bicarbonate crystal that is water soluble, readily available pure nitrogen, easily applied. The company will subsequently apply for certification of a verified sustainable brand from the USDA."
"Improving water quality, environmentally friendly livestock production, the premium pricing commanded by branded products—the total addressable markets for Bion's technology is in the multi-billions. Bion is in the final phase of transitioning from R&D to an operating company with several revenue streams," Orphanos said.
1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, securities of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Bion Environmental Technologies. Please click here for more information. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Tony Oprhanos: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Blackstone, Apple, Amazon, Roche Holdings, Guardant Health, Bion Environmental Technologies. I, or members of my immediate household or family, are paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Accounts managed by Blacksmith Advisors hold securities of the following companies mentioned in this article: Blackstone, Apple, Amazon, Roche Holdings, Guardant Health, Bion Environmental Technologies. I determined which companies would be included in this article based on my research. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Bion Environmental Technologies, a company mentioned in this article.