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Dear Red Alert Reader,
In China, Spain, Italy, and across the world, we've seen how quickly and easily medical systems can be swamped by big surges in novel coronavirus cases.
In most places here in the United States, healthcare systems have borne up pretty well, though at times, they've been under punishing pressure.
Officials have had to scramble to keep up with demand for care. Among other things, we've seen hotels in New York City pressed into service as hospitals and dormitories for healthcare providers. In Baltimore, the downtown convention center has become a hospital and testing center. In Bayou Segnette State Park, south of New Orleans, even recreational cabins were used as makeshift isolation wards.
That's just some of the improvisation that's had to take place across virtually the entire country.
Technological and medial improvisation has been a recurring theme in some of our talks about the national COVID-19 response.
So today, I want to tell you about a company working to ease the need for such drastic measures. It's not working on a breakthrough vaccine or therapy, or on a lifesaving machine – though its work, in my view, is every bit as important to the fight.
Rather, this company is working on a more, shall we say, basic, foundational approach. And it has a "secret weapon" that can not only help us beat the disease, but has applications and growth potential far beyond healthcare.
The Folks Who Brought Us the "Hospital in a Box"
Chris Giattina is the CEO of Birmingham, Alabama-based BLOX – a firm hard at work on nothing less than a transformation of America's $3.6 trillion healthcare system.
BLOX aims to make the system more robust and better able to cope with the large waves of patients needing care during big COVID-19 "surges."
That's because, right now, cases have generally plateaued across much of the country, but autumn and winter – and the usual flu season – are fast approaching. In many places, we could see cases grow again in a hurry.
So, for Giattina and BLOX, the clock is ticking.
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It's focused on a technology that can speed up the production of mobile isolation wards, each capable of hosting 16 patients at a time.
With its unique approach, BLOX can help get such a facility built and operational in as little as one week.
Giattina's inspiration for BLOX came when he was the principal architect hired to build an employee training center in Alabama for a Japanese automaker.
The client wanted it done in just nine months, a pace unheard-of in the slow-changing U.S. construction industry. So Giattina looked to the car industry itself for inspiration.
It's the efficiencies he found there that inspired BLOX.
The firm makes standardized pipes, wiring, racks, and so on in its factory, and incorporates them into walls, floors, and ceilings before they are even assembled into buildings. These are then put together into "uber modules."
Much more than isolation wards, we're talking complete trauma centers, break rooms, or patient waiting areas – virtually everything a hospital needs to be a hospital.
A modular hospital, in other words.
Now then, Giattina's BLOX is still privately held. (Rest assured, I'm watching this company like a hawk for any opportunity.)
But its "secret weapon" – the technology that enables BLOX to "do its thing" and do it with excellence – is not only publicly traded, but going at a very attractive price compared to its future potential.
This Technology Has Implications Far Beyond COVID-19
To turn a modular "idea" into concrete reality, engineers and architects turn to Autodesk Inc. (NASDAQ: ADSK).
Take BLOX, for instance. BLOX uses Autodesk's Revit software to design its building components, and it uses Autodesk's Forge and BIM 360 packages to turn that virtual model into a very real fabricated product on the factory floor.
Autodesk has a lineage going back to the 1960s, and a field known by insiders as "CAD/CAM" – computer-aided design/computer-aided modeling.
As soon as it was practical for them do so, designers in the automotive and aerospace industries turned to CAD/CAM to aid them as they took designs from the "drawing board" to the skies and roads.
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But it's become so much more than that. CAD/CAM serves a huge variety of fields – healthcare, construction, the military – it goes on. It's even used in dentistry for its ability to take detailed, 3D images of patients' mouths and teeth, the better to fit them with dentures, bridges, and the like.
As I mentioned the other day, in the early days of the COVID-19 crisis, companies like Medtronic Plc. (NYSE: MDT) publicly and freely published plans for medical ventilators so that anyone with the means could build them and help meet the national shortage.
It was called the "Ventilator Project," and team members all over used the Autodesk Fusion 360 software solution to collaborate online to design and produce ventilators that cost a fraction of traditional machines.
Just as importantly, given the occasionally severe supply chain disruptions America experienced, the team didn't have to rely on parts supply chains. In many cases, they simply used 3D printing.
Similarly, when Kia Motors Corp. asked 3-Dimensional Services Group to make personal protective equipment (PPE) for healthcare workers, the company turned to Autodesk's PowerMill and Moldflow software.
3-Dimensional usually produces prototypes and low-volume parts for the car industry. But the shutdown carmaker pivoted to making face shields.
Autodesk's software helped 3-Dimensional get set up in a day, 40% less time than it would have taken otherwise.
It's very easy to see how and all of these applications could help swing the pandemic fight our way. But with several vaccines on the horizon, we can say with some confidence that the danger will be over someday – though we will certainly need more healthcare facilities.
There's a real and growing need for new housing, new factories, office spaces, and training centers – a huge variety of buildings.
Modular construction is poised to help meet that need. Growth there is accelerating rapidly, at 6.5% a year, to the point where by 2025, the segment will be worth $178.4 billion.
In the 21st century, Autodesk software enables builders to build big and smart.
Autodesk Has Great Bottom-Line Prospects
This company's products have been a favorite among architects and designers for many years, and Autodesk is committed to the innovation needed to keep it that way.
In the past few years, Autodesk has ported all its software into a fully Cloud-based platform where staff and clients alike can truly collaborate and share all key documents delivered via the Web.
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Entering the Cloud also opened the door to a key sales shift. The client base has been prodded to migrate from one-time license fees into a monthly subscription, known as Software-as-a-Service (SaaS).
That approach represents a more accurate cost of all of the features that Autodesk clients tap into each month. But for the firm itself, that means a lot more revenue per client.
In July, Autodesk also acquired Pype, which provides Cloud-based management automation software for construction projects.
It's another part of Autodesk's growing portfolio targeting that quickly growing construction industry. In short, Autodesk is a big help to firms that want to gear up to change course quickly.
Autodesk's cloud-based software can also predict problems in designs, over and above potential catastrophic or deadly failure, like the 1981 Kansas City Hyatt Regency disaster that killed 114 and injured 216. Designers can know immediately whether a design could run afoul of regulations or building code. They can tell in advance that a design could possibly cause production difficulties many steps down the line.
This integration keeps clients subscribing, and spending money on Autodesk's e-store, where new software features can be trialed before buying.
From a stock standpoint, this cloud model is bringing in huge profits and cash flow. I have noticed Autodesk is rather conservative in its business forecasting. It suggests a $33 billion total market for its Cloud and software solutions. I know for a fact that's a vast understatement.
Its latest earnings beat the forecast, but the stock fell on lower guidance. During the pandemic, we've seen many instances of lowered guidance – when it's not omitted altogether.
The stock has come up as high as 65.1% from its March crash lows, but we're smack in the middle of a dramatic buying opportunity right now; the stock is off its 52-week highs by a little over 14%.
Don't let that fool you for a second: Autodesk has grown per-share earnings by an incredible 481%.
If we're conservative and use just 10% of that rate to project when this company will double, we see that happen in just 18 months. Right now is the time to buy or add to a position in this earnings powerhouse sporting one of the most in-demand technologies of the decade.
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