Is Recursion Pharmaceuticals a Warren Buffett Stock?

Recursion Pharmaceuticals (NASDAQ: RXRX) doesn't look like a stock that legendary investor Warren Buffett would usually be interested in. It's in the biotech industry, which tends to be volatile and often difficult to understand, without significant recurring revenue or any profits for many of the newer stocks in the sector. To complicate matters further, Recursion is engaged in the emerging field of artificial intelligence (AI)-enabled drug discovery and development, which means it lacks any of the long history of consistent performance that Buffett typically looks for in an investment.

But, if the company achieves its ambitions, it could become something a lot closer to what the Oracle of Omaha prefers. Here's why it's possible and how it can happen.

Traditionally, Buffett doesn't favor businesses that need to spend a big proportion of their revenue on research and development (R&D) expenses. High R costs imply that the company doesn't have a strong enough competitive advantage with which to protect its market share from competitors. After all, if it needs to constantly improve its products or invent new ones to maintain earnings growth, it could only be a matter of time before the engine of innovation sputters out and leaves investors wanting growth.

Continue reading

Source Fool.com