Atrophy and an Intriguing IPO: Waystar Holding (WAY)
The case for practicing a skill if only for the purpose of keeping that skill current.
I’ve been thinking a lot about atrophy over the past few days.
Atrophy is often narrowly defined as losing muscle mass, but it can manifest in many ways. After writing about Cavco Industries (NASDAQ: CVCO), the concept of institutional atrophy in the homebuilding industry has been front of mind. The manufactured and modular home industry has declined for decades. I highlighted some of the reasons why, but one that I perhaps didn’t give enough attention to is institutional atrophy.
(Coincidentally, The New York Times profiled the manufactured and modular home industry and how other countries used methods we developed in the 1970s to revolutionize their construction industries.)
You don’t just get up one morning, say, “I’m going to get back to running,” and then rip off a half-marathon before breakfast. Similarly, institutions can’t just wake up and say, “We’re going to [X]” and be experts at it the next. The challenges of overcoming institutional atrophy are all around us:
The Votgle nuclear plant in Georgia, the first attempt to restart America’s nuclear plant-building ability since the 1970s, took a decade longer than expected and cost more than double the initial budget in part because few companies in the U.S. had lost any institutional knowledge on how to build such a facility.
Attempts at passenger rail or new subway lines consistently run into issues, partially because municipalities and construction companies let their permitting and planning functions for these types of projects atrophy.
A fair share of analysts are genuinely concerned that Boeing (NYSE: BA) will lose its institutional knowledge to build new planes because their last built-from-scratch plane (the 787) was 15 years ago.
Companies that do infrequent or one-off M&A deals tend to destroy value, whereas some of the best value-creating companies are the ones who frequently flex that M&A muscle.
We all likely fall prey to institutional or intellectual atrophy as well. I’m certain there is a fair share of high school or university exams that I couldn’t come close to passing today. With enough reflection, I’m sure you will arrive at the same conclusion.
This can also be applied to our investment process. We all have stock analysis muscles, a set of skills or knowledge base to analyze a certain sector or investment type. If we let certain muscles atrophy, it will make it that much harder to re-visit to find good investments.
I confess that I have let my tech stock muscles atrophy. I can try to make excuses, but I’m the one most affected by letting those skills whither on the vine.
So, to rebuild those atrophied tech stock muscles, let’s examine a recent IPO: Waystar Holding Corp. (NASDAQ: WAY). The healthcare payment processing software company went public last week. My knee-jerk reaction was that there was some meat on the bone.
Here are some of the early takeaways and questions from the Waystar prospectus.
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