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Circle of Competence Issue #55


"If you are distressed by anything external, the pain is not due to the thing itself, but to your estimate of it; and this you have the power to revoke at any moment." - Marcus Aurelius, Meditations



I try to read through one 10-K a day as a habit that keeps the boundaries of my circle of competence expanding constantly. Sometimes I come across a company that I like for one reason or another and going forward, I will try to post interesting ideas from time to time. If you are interested in my latest ideas, check out issue 51 on Appfolio and Planet Fitness as well as one of my favorites, issue 33 on (Brookfield Asset Management's CEO) Bruce Flatt's talk at Google.

This week, I wanted to share a few notes on Illumina ($ILMN), but first a shout out to Nusair Bawla for the tip as well as David Gardner for connecting us through the Motley Fool podcast!

At a high level, Illumina sells genetic sequencing machines, consumable products that are used in the sequencing process, and ancillary services to researchers and clinicians (medical as well as agricultural). In trying to understand a new company in a new industry that I am admittedly a know-nothing in, I have relied on a few reports Nusair sent me to get up to speed on the basics of the genetic sequencing market as well as the latest 10-K. The biggest questions that will impact Illumina as a company in my mind are if 1) the market for genetic sequencing will continue to grow significantly and 2) if Illumina can capture a meaningful, profitable piece of the growth. 

Market growth

We are just beginning to unlock the potential for genetic research to impact medicine and agriculture as the cost of genetic sequencing continues to fall due to technological breakthroughs from the likes of companies like Illumina. Per Grand View Research's piece on next generation genetic sequencing, the NGS market is poised to grow over 10% annually go