While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Mad Hedge Technology Letter
August 30, 2019
Fiat Lux
Featured Trade:
(DIVING BACK INTO VEEVA SYSTEMS)
(VEEVA)
A tech company that I won’t hesitate to pull the trigger on new trade alerts is Veeva Systems (VEEVA).
The most recent results illustrate how investors can never discount strong cloud companies even if the elevated levels of risk scare many people out of making committed investments.
Q2 was another strong quarter with total revenue of $267 million, up 27% year-over-year.
Subscription revenue grew 28% year-over-year, and non-GAAP operating margin was 39%.
Veeva has now passed the $1 billion revenue run rate.
This is 1.5 years ahead of the target first laid out in 2015, an influential contributor to this success has been customer satisfaction.
Strong momentum in Commercial Cloud contributed to outperformance in Q2.
In core customer relationship management (CRM), Veeva continues to extend its leadership position with new small and medium business (SMB) customers and additional enterprise expansions.
Customers continue to adopt more CRM add-ons. This happens on a product-by-product and region-by-region basis.
I’ll offer a few pertinent examples.
Veeva CRM Engage had one of its strongest quarters as 4 top 20 pharmas expanded their use of Engage to new field teams.
Customers are attracted by the deep functionality and multi-platform support of Engage and the tight integration with CRM.
Veeva notched some important design wins at the top 20 pharma for Events Management.
A current customer has been using core CRM globally for many years and recently decided to expand their Veeva relationship to include Events Management in more than 90 countries over time.
They chose Veeva because of the deep functionality and professional services capabilities needed for global events management rollout.
They will replace multiple custom systems and spreadsheets leading to a more efficient and compliant global process.
This type of commitment to Veeva’s products is a positive sign as it tries to retain a more long-standing customer.
Who else does Veeva Systems work with?
They recently signed their 10th top 20 Pharma for Vault QualityDocs. Following their success with Vault PromoMats, eTMF and Submissions.
The pharma customers selected QualityDocs as part of their move away from the legacy content management platform.
What is Veeva QualityDocs?
It is software that provides superior ease-of-use and seamless collaboration, Vault QualityDocs reduces compliance risk and improves quality processes.
It accelerates review and approval workflows and facilitates sharing of GxP documents among employees and partners.
The dire need for modernization is driving the move to Veeva in this area as is the benefit of having QMS integrated with QualityDocs and Training on the Vault platform.
This is another great example of the innovation Veeva captures from an underserved market.
There has also been meaningful progress in 3 targeted industries: consumer packaged goods (CPG), chemicals, and cosmetics.
Since announcing the new Vault Claims product last quarter, Veeva now has projects in place at 3 top CPG companies.
Veeva is also making similar inroads in chemicals and cosmetics industries.
In total, Veeva now has major business at a top 20 CPG, a top 20 cosmetics company and 2 major chemical companies.
And this is just the beginning.
I’ll continue to bet on this stock going up.
It’s the best health tech cloud play out there, no reason not to love the direction of the company.
Global Market Comments
August 30, 2019
Fiat Lux
Featured Trade:
(ALL IS WELL AT THE MOUSE HOUSE), (DIS), (NFLX),
(A VERY BRIGHT SPOT IN REAL ESTATE),
I’ll never forget the first time I met Walt Disney. There he was at the entrance on opening day of the first Disneyland in Anaheim, CA in 1955 on Main street shaking the hand of every visitor as they came in. My dad sold the company truck trailers and managed to score free tickets for the family.
At 100 degrees on that eventful day, it was so hot that the asphalt streets melted. Most of the drinking fountains and bathrooms didn’t work. And ticket counterfeiters made sure that 100,000 people jammed the relatively small park. But we loved it anyway. The band leader handed me his baton and I was allowed to direct the musicians in the most ill-tempoed fashion possible.
After Walt took a vacation to my home away from home in Zermatt, Switzerland, he decided to build a roller coaster based on bobsleds running down the Matterhorn on a 1:100 scale. In those days, each ride required its own ticket, and the Matterhorn needed an “E-ticket”, the most expensive. It was the first tubular steel roller coaster ever built.
And investment in Walt Disney was dead money for years.
The main reason has been the drain on the company presented by the sports cable channel ESPN. Once the most valuable cable franchise, the company is now suffering from multiple fronts, including the acceleration of cord-cutting, the demise of traditional cable, the move to online streaming, and the demographic abandonment of traditional sports like football.
However, ESPN’s contribution to Walt Disney earnings is now so small that it is no longer a factor.
All that changed in March when Wall Street got the first whiff of Disney plans to enter the online streaming business. In quick order, it ended its contract with Netflix (NFLX) to stream its movies and announced plans to launch Disney Plus to compete directly with Netflix.
Since then, the shares have risen by an eye-popping 40% and every institutional investor out there is struggling to double up their position. Personally, I think the stock could hit $200 in the next couple of years. That’s why I am trying to run a recurring long in the stock going forward.
In the meantime, a lot has gone right with Walt Disney. The parks are going gangbusters. With two teenage girls in tow, I have hit three in the past two years (Anaheim, Orlando, and Paris, where they serve wine with their $20 cheeseburgers).
The movie franchise is going from strength to strength. Frozen 2 and Toy Story 4 were blockbusters. A new Star Wars films is due in December, Star Wars: Episode IX – The Rise of Skywalker. Its online strategy is one of the best in the business. And it’s just a matter of time before they hit us with another princess. How many is it now? Nine?
It is about to expand its presence in media networks with the acquisition of 21st Century Fox (FOX) assets, already its largest source of earnings. It will join the ABC Television Group, the Disney Channel, and the aforementioned ESPN.
As for old Walt, he died of lung cancer in 1966, just when he was in the planning stages for the Orlando Disney World. All that chain-smoking finally got to him. Despite that grandfatherly appearance on the Wonderful World of Color weekly TV show, friends tell me he was a complete bastard to work for.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Global Market Comments
August 29, 2019
Fiat Lux
Featured Trade:
(HOW THE MARKETS WILL PLAY OUT FOR THE REST OF 2019),
(SPY), ($INDU), (USO), (TLT), (UUP), (COPX), (GLD),
(HOW THE MAD HEDGE MARKET TIMING ALGORITHM WORKS)
We are currently caught between a rock and a hard place.
The whims of one man will dictate whether after a brutal summer, markets recover to new all-time highs, or plunge into the depths of despair in a bear market and recession.
My bet is that the S&P 500 (SPY) will trade between the 50-day moving average at $294 and the 200-day moving average at $278. Right now, we are dead in the middle of that range.
Then on September 18, the Federal Open Market Committee convenes to deliver a decision on interest rates. I believe that no matter what the decision is, whether they cut rates or leave them unchanged, you will see another sharp selloff in stocks, possibly as much as another 2,000 Dow points. That will bring us a December 2018 repeat.
So why does falling interest rates bring cratering stock prices? For a start, you can take your traditional playbook on how markets are supposed to work and throw it in the trash. Low rates USED to bring high stock prices, but no more.
What is driving markets now is not the absolute level of interest rates today, no matter how low they may be historically. It is how many interest rate cuts are left until we get to zero. So an August 1 25-basis point rate cut meant there are fewer rate cuts in the future so a heart-stopping 2,000-point plunge in the Dow average ensued.
The same twisted logic will apply on September 18, only 16 trading days away. By the way, I plan to be 100% in cash by September 18.
Long term, the outlook gets more complicated.
If the trade war ends in September, then the stock market could rocket up to new all-time highs, surpassing 3,200 by the end of the year, up 14.2% from present levels.
If the trade war drags on, a recession is a sure thing in 12-24 months. That means a bear market in stocks is a sure thing in 6-15 months. And that assumes we are not already in a bear market. After all, the major indexes have been unable to top new highs made in January 2018.
The next bear market will likely take the indexes ($INDU) down 40%. They are, after all, the most overvalued assets in the world.
Oil (USO) will plunge to $25 a barrel. Ten-year US Treasury bond yield (TLT) will collapse to 0%, as I have long been advertising. The US dollar (UUP) leaps, deepening the recession. Commodity prices collapse (COPX) and gold (GLD) soars. We might even get into a shooting war in the South China Sea, as there will be nothing for the Beijing leadership to lose.
Again, it all depends on the whim of one man, one who has never done business in China, and who is constantly surprised by Chinese reactions to his own moves. There is no Trump Hotel in Beijing, nor one planned.
Good luck with that.
Just thought you’d like to know.
