Renalytix Stock: Where Are the Meaningful Revenues?

One disadvantage of having a living investment methodology is that as things change, you need to go back and revisit previous conclusions that may have changed. For example, we instituted a rule that prevents us from investing in any firm with a market cap of less than one billion dollars. That’s because the smaller a company is, the more likely things can go pear-shaped. Sure, there’s the potential for more upside, but we’re risk-averse investors who are willing to sacrifice some upside in exchange for reduced risk.

Probably the best rule we implemented was not to invest in companies unless they have meaningful revenues ($10 million per annum or more). This weeds out all the business models that can’t achieve product-market fit and end up blowing through loads of capital trying (the MicroVisions of the world). So, what happens when we like a company that’s not only too small but also doesn’t have any meaningful revenues? Well, we need to revisit our thesis. That’s what we’re going to do today for an AI healthcare company called Renalytix (RNLX) which we last looked at in July 2020. Here’s what we said back then.