Global Market Comments
June 12, 2019
Fiat Lux
Featured Trade:
(MONDAY, JUNE 24 MELBOURNE, AUSTRALIA STRATEGY LUNCHEON)
(AMGEN’S BIG LUNG CANCER BREAKTHROUGH),
(AMGN), (GSK), (MRTX)
Global Market Comments
June 12, 2019
Fiat Lux
Featured Trade:
(MONDAY, JUNE 24 MELBOURNE, AUSTRALIA STRATEGY LUNCHEON)
(AMGEN’S BIG LUNG CANCER BREAKTHROUGH),
(AMGN), (GSK), (MRTX)
Come join me for lunch at the Mad Hedge Fund Trader’s Global Strategy Update which I will be conducting in Melbourne, Australia on Monday, June 24, 2019 at 1:15 PM.
An excellent meal will be followed by a wide-ranging discussion and an extended question-and-answer period.
I’ll be giving you my up to date view on stocks, bonds, currencies commodities, precious metals, energy, and real estate.
I also hope to provide some insight into America’s opaque and confusing political system. And to keep you in suspense, I’ll be throwing a few surprises out there too.
Tickets are available for $232.
I’ll be arriving at 1:00 and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at a downtown five-star hotel, the details of which will be emailed with your purchase confirmation.
I look forward to meeting you and thank you for supporting my research.
To purchase tickets for this luncheon, please click here.
I recently heard that some of my hedge fund friends were loading up on Amgen (AMGN) and now I know why. It’s a company I know well because my UCLA biochemistry professor was its first chairman.
Amgen has accomplished a major medical breakthrough. The company has revealed that its experimental drug, AMG 510, exhibited the ability to significantly shrink the size of tumors by 50%. The results were obtained from early-stage trials performed on advanced lung cancer patients.
In a nutshell, AMG 510 could become the first-ever approved treatment that can target a mutated gene called KRAS which is one of the most common mutations involved in non-small cell lung cancer (NSCLC). The American Cancer Society identified NSCLC as the leading cause of cancer death, accounting for a stunning 85% of lung cancers.
For decades, researchers have been searching for ways to address KRAS mutations, with the sought-after solution dubbed as the "the great white whale of drug discovery." With the first proof-of-concept presented a mere six years ago, the rapid development of Amgen’s new drug has impressed researchers in the field.
Simply put, this drug will be a game changer for particular types of cancer. Subsequently, its success would mean massive profits for Amgen shareholders.
The announcement of AMG 510’s promising results saw a jump in Amgen shares of 6.1% delivering a new two-year high. While this product remains in its initial phase, the fact that this cancer drug addresses a vital unmet need in oncology makes it a prime candidate in becoming the next blockbuster drug for Amgen.
Aside from lung cancer, this drug is also aimed at providing treatment for colorectal cancer and nearly uncurable pancreatic cancer (of which Steve Jobs died). To date, AMG 510 sales are estimated to initially reach more than $1 billion a year and peak at $2 billion.
With the extremely massive market for this particular drug, it comes as no surprise that Amgen is not alone in the race.
So far, two more biopharma companies are looking to develop similar medications: GlaxoSmithKline Plc (GSK) and Mirati Therapeutics (MRTX). While the former has yet to reveal the covalent inhibitor drug it’s currently developing, reports indicate that Mirati’s work involves a drug called MRTX849. Aside from these, no other information has been released by the two companies.
While these are encouraging results vis-à-vis its oncology department, how is Amgen doing so far this year with the rest of its business?
Based on its earnings report in the first quarter of 2019, Amgen recorded $5.6 billion in total revenues. This matches the amount the company reported during the same quarter in 2018. Despite the promising projects in its pipeline, Amgen’s product sales saw a 1% dip globally.
However, its new products showed double-digit increases in the first quarter. Osteoporosis and hypercalcemia drug Prolia reported a 20% increase while cardiovascular medication Repatha also showed a 15% revenue jump during the first quarter. Even the revenues for relapsed multiple myeloma treatment Kyprolis showed a 10% rise in this period.
As for its earnings per share (EPS), Amgen is coming in at $12.53. This indicates an EPS growth of 14.8% this year, which could lead to a projected 5.25% EPS growth for 2020.
Meanwhile, Amgen’s positive outlook particularly with AMG 510 as an additional blockbuster drug in its portfolio prompted the company to adjust its earnings expectations for this year. In terms of its expected revenue, Amgen raised it from $21.8 billion to $22.9 billion range to $22 billion to $22.9 billion.
Mad Hedge Technology Letter
June 11, 2019
Fiat Lux
Featured Trade:
(BIG TECH’S FEEDING FRENZY)
(CRM), (DATA), (GOOGL), (NFLX)
The start of the cloud consolidation is upon us.
The cloud kings, in order to stay ahead of the competition, are resorting to acquiring growth through M&A.
We are still in the sweet part of the growth phase with companies showing they can pull off a mid-20% annual growth rate.
Salesforce (CRM), the leader in client relationships management platforms, took this cue to add to its army of software cloud options by snapping up Tableau (DATA).
What does Tableau do?
Tableau software takes the inputs of raw data and transforms it into easily decipherable dashboards and diagrams.
The company has been expanding its product line to include data cleanup and machine learning tools, enabling it to compete in the wider data-warehousing business.
It has more than 86,000 customers, including Verizon Communications Inc. and Netflix (NFLX).
Let me remind you why big data companies are the golden goose of the technology industry and why they are intrinsic to the fortunes of tech companies.
The idea of big data has been around for years; most organizations now are acutely aware that if they capture all the data that flows into their businesses, they can apply data analytics and generate value creation by making the best strategic decisions suggested from the underlying data.
If upper management hasn’t figured this out yet, they are probably out of business by now.
Let’s roll back to the 1950s, decades before anyone coined the term “big data,” businesses were using rudimentary analytics, basically numbers in a spreadsheet that were manually registered, to unearth paradigm shifts and market opportunities in their industry.
The smorgasbord of goodies that big data analytics offer the world is legendary.
Speed and efficiency are at the top of the list.
Whereas a few years ago, collecting vital information that could be used for future decisions took pace much slower than today.
Identifying insights for immediate actionable business implementation is happening in real time now.
This new mode of execution and organization offers firms an outsized competitive edge they could only dream of.
Harnessing data and utilizing it in the best way in order to monetize its business model is now the norm.
The end result is repeatedly higher trending profits and better customer experience.
Companies and its expenses were also reaping the rewards of this new model with major cost reduction.
Big data technologies can expect significant cost advantages when it comes to storing large amounts of data – plus they can identify more efficient ways of doing business.
Companies now have the pulse of the market and demonstrate the ability to gauge customer needs and satisfaction allowing the company to identify new markets.
This, in turn, has firms often migrating into completely different parts of the economy.
Salesforce’s deal with Tableau isn’t the first and won’t be the last cloud deal.
This is just the beginning.
The decision comes after Google (GOOGL) agreed to buy Looker Data Sciences Inc. for $2.6 billion last week, a move to expand Google’s offerings for managing data in the cloud.
I envision Google wading further into the enterprise software waters as they attempt to relieve their reliance on Search as the primary money maker.
Acquiring the best software then spreading its application through its other assets would be a great initiative too.
For example, creating an enterprise service for YouTube channels and charging YouTube creators a fee to operate a cloud-based product that specializes in optimizing their YouTube channel would be a compelling idea.
There are a million different machinations that Google could elect for, and letting the genie out of the bottle in a good way will do wonders.
After all, global spending on technologies and services that enable digital transformation will surpass $2 trillion in 2022 serving up a long and wide runway for companies that can hunker down and carve out premium enterprise software on the cloud.
As for Salesforce, the stock sold off on anxiety that Salesforce is overreaching to add growth.
There is definitely some truth behind this weakness.
Could this be the end for Salesforce’s growth supercycle?
Salesforce is a pure software growth strategy and the stock has gone nowhere trading sideways for the past 6 months.
Make no bones about it, Salesforce absolutely overpaid for Tableau and even announced that its second headquarter will be stationed in Seattle, a stone’s throw from the headquarter of Tableau.
Founder and Co-CEO of Salesforce Marc Benioff is betting the ranch on data analytics and hopes the subsequent synergies will result in cost savings, better cloud products, a resurgence in revenue growth while wielding a first-rate army of software engineers.
As for now, even the tech market is single-handedly propped up by the Fed who have signaled even more dovish monetary policy.
Wait to read the tea leaves on whether these new additions to Salesforce will meaningfully result in growth or not.
For the time being, Salesforce and tech remain in a precarious position whipsawing because of Trump’s high-risk geopolitical strategy and the Fed attempting to cushion any economic blows from an administration hellbent on tariffs.
“I couldn't imagine a more incompetent politician than myself.” – Said Founder and Co-CEO of Salesforce Marc Benioff
Global Market Comments
June 11, 2019
Fiat Lux
Featured Trade:
(BEYOND RATIONAL), (BYND)
(PLEASE USE MY FREE DATA BASE SEARCH)
(HOW TO AVOID PONZI SCHEMES)
Mad Hedge Technology Letter
June 10, 2019
Fiat Lux
Featured Trade:
(WILL REGULATION KILL TECHNOLOGY?)
(FB), (MSFT), (GOOGL)
The Technology Hunger Games of 2019 is best viewed through the lens up top - the 30,000-foot view will offer insight into how the cookie will crumble.
Understanding the mechanisms which will either stop the Silicon Valley tech renaissance in its wake or deliver a supercharged boost to this sector is essential to dissecting the U.S. economy moving forward.
Silicon Valley has experienced a sensational generation by any yardstick and sometimes that is lost in the fog of war with the 24-hour news cycle hellbent on stealing the mojo of the tech industry.
Do or die regulation is shaping up to be the most critical acid test in the tech industry since the creation of the internet.
How will big American tech firms adjust to this new normal of government intervention forcing them to meaningfully alter their DNA?
Is a paradigm shift in store for the relationship that is the consumer and a tech company?
The American economy is probably the closest thing that can be passed off as unfettered capitalism.
This type of capitalism is predicated on scarce regulation which is an important part of the underlying theory.
With thin regulation, “animal spirits” can mushroom industries and its underlying companies to superstardom, we have seen this over and over again with companies like Google and Facebook.
On the flip side, we have austerity and economic vigilance.
Just to take a look around the globe and you will understand what I mean.
Germany is the economic gem of Europe and its namesake union motoring the 28-country block as the mainstay hub of innovation and value creation in the region.
But that does not mean they condone unfettered capitalism.
This is the same government that buttressed the call for austerity for the Greek and Italian government when these two entered uncontrollable debt cycles.
Deutsche Wohnen SE fell 8.7% in Frankfurt, while Vonovia SE dropped 5.5% whom are Germany’s largest residential landlords.
I thought buy to let was a guaranteed cash cow? What happened?
Germany’s largest residential landlords publicly traded shares cratered on the anxiety that Berlin will enact a rent freeze for the next five years in reaction to a surge in rental prices.
Deutsche Wohnen who owns 112,000 units is fighting fiercely to overturn this piece of legislation as they are the main recipient or culprits of the housing renaissance causing residential property opportunities or challenges to explode in the artsy Germany city.
Although residential property income is hardly connected to the fortunes of global technology, the regulation sets the tone for other pieces of the economy as a whole.
Take a quick rundown of other European nation states and the red tape is slapped around in abundance.
The end result is that Europe, even with German ingenuity, has been unable to deliver a tech company that can look the Silicon Valley FANGs in the eye and regulation is a big reason why.
Europe is essentially America with no tech companies because of it.
If you want to shovel through the recycling to pick up a name or two, then Swedish-based Spotify, the music streaming platform, would be apt and on the chips side, ARM Holdings, a British semiconductor company with many of its chips installed inside of Android systems.
These names are few and far between.
ARM Holdings was acquired by Softbank for $23 billion in 2016, a bargain buy at 2019 standards.
While America has privatized away many industries, take a look at other countries like China, who are propping up zombie banks and other state-owned companies accumulating more junk-graded debt.
I would argue that centrally planned economies like China and North Korea possess governments who get in the way of their economy more often than not to maintain strict control over its populace.
This is why private businesses often get the shaft of the top-down way of governing which hurts the free or not so free markets.
The biggest event in tech in the next 2 years will be if the big tech giants break up or not because of anti-trust tinged worries.
Microsoft’s regulatory mess was the last time the American government rolled up their sleeves and intervened this boldly into the tech sector and the functioning of it.
Remember that Microsoft missed search.
They allowed Google and then Facebook to launch and now we are back at the anti-trust table figuring out again if a reset is necessary or not.
This happened to Microsoft because they were scared to go into that part of tech for fear of more anti-trust scrutiny.
If the government does pound Silicon Valley with harsh anti-trust rulings, these big platforms won’t be able to lean on its richer parent companies to bail them out since they will be separate.
I believe that if Google, Apple, and Amazon are cut apart and set free into the world, it will incite another technological renaissance for another thirty years.
Competition mixed with free markets has a funny way of working itself out.
As I see it, these monstrous platforms are stifling innovation now and choking off smaller companies in the incubation stage that could become the next Google.
Releveling the playing field will spur economic innovation, improve technological techniques, boost job creation, and deliver even better customer experience and prices to the consumer.
Another development which is just as interesting is the market for big data.
Data could be rerouted from the proprietary black boxes of Google and Facebook and into a public market that puts a price on data.
If big data ever became a commodity sold from a market, it would mean that the accuracy of data would improve, and companies would be able to produce better products.
As it stands, big companies receive free data by the gimmick of giving away free services, these companies, in turn, manipulate and slice up the data any way they see fit to monetize.
I believe that the ad marketplace for Facebook and Google is somewhat of a broken and disconnected experience with many third-party companies questioning if it is a black hole that ad budgets are disappearing into.
The digital ad industry will undergo a serious facelift because of government regulation.
If big tech is divvied up, there will be winner and losers.
Not every tech company will survive the breakup because not every tech company is created equal.
A new type of digital marketplace will be formed once again allowing small business to bypass Facebook creating another tsunami of wealth creation.
If the FANGs aren’t broken up, then expect unfettered capitalism to go unperturbed, albeit with slow to moderate growth, instead of the renaissance I mentioned above.
Incremental gains cannot supplant wholesale enhancements.
This all means that your only choice is to own technology stocks in both scenarios – particularly the best of breed with the most cutting-edge technology.
The only way to suppress tech shares in the long run is if the American economy decides to socialize or nationalize big swaths of the private economy.
Let’s hope Washington doesn’t kill the goose that lays the golden eggs.
“I want to put a ding in the universe.” – Said Co-Founder and Former CEO of Apple Steve Jobs
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