“The business model of social media companies, of pure advertising, is problematic. It turns out the huge winner is low-quality content.”– Said Founder of Wikipedia Jimmy Wales
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
November 15, 2019
Fiat Lux
Featured Trade:
(NOVEMBER 13 BIWEEKLY STRATEGY WEBINAR Q&A),
(FCX), (TSLA), (FXI), (SPY), (AAPL), (M), (BA), (TLT)
Below please find subscribers’ Q&A for the Mad Hedge Fund Trader November 13 Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!
Q: Has the multiyear decline in commodities ended, such as for Freeport McMoRan (FCX)?
A: Yes, for the short term. However, we will almost certainly have another recession scare—or even election scare—sometime next year. That will cause a retest of the recent lows in commodities. The volatility will continue, but the long-term trend is up. The next recession will likely be so short that people will start discounting the recovery now. If you’re only looking for a 2-quarter recession and have a long-term view of your stocks, you probably want to use any kind of dips to buy now. A lot of the recent buying in Tesla (TESLA), by the way, has been of that nature.
Q: Will the US eventually drop all tariffs on Chinese imports (FXI), or do you see the US raising them?
A: I think eventually they will solve the trade war next year, right in front of the election—maybe June/July/August—so that Trump has something to run on. It’s too early to solve it now for political purposes. The whole trade war was essentially designed to depress the economy and then bring in Trump as the savior right before the election, and that has all tariffs disappearing sometime next year. By the way, some of the buying in the market now is discounting the end to the uncertainty of the trade war. So, either that or it ends when Trump leaves office—in either case, that’s 15 months off. Many big institutions think in timeframes much longer than that.
Q: Can the US consumer bring us through the holiday season to have equities (SPY) finish at all-time highs?
A: Yes, they can; I thought we might get a dip to trade off of in Oct/Nov, but we haven't gotten it. It’s looking more and more like a melt-up into year-end, even though it’s a slow-motion melt-up of 50 or 100 points a day.
Q: Will Apple (AAPL) keep going up every day forever?
A: No, don’t forget that Apple can have 40% pullbacks at any time without warning. Usually, they happen with new product launches. I would think we’re getting overextended here. If we somehow get a 10% or 20% pullback in Apple next year, I’d be jumping back into that for the product launch next September when we’ll likely hit $200, which has been my target for Apple for a very long time.
Q: Is it time to make a short term buy of beaten-down retail names like Macy’s (M)?
A: No, I am a person who trades with the long-term trend at all times. Most people are not agile or smart enough to do counter-trend trades and make money, and the risk/reward is also terrible—you make a mistake, you get killed on those. I think this company’s having a going-out-of-business sale, unless we enter a major increase in economic growth in this country, which is nowhere in the cards. If anything, I’m looking for a sharp rally to sell into. Macy’s might want to test that 200-day moving average up there at $20 at some point; that would be a great selling place. But no, we don’t want to touch the retailers right here, and retailers have been very kind to us this year on the short side.
Q: Do you see the United States US Treasury Bond Fund (TLT) as a safe-haven buy at today’s prices, or are bonds overpriced?
A: I think we’re getting the safe-haven bid as a hedge against stocks selling off. Wildly overbought Mad Hedge Market Timing Indexes are also great places to buy bonds because when you finally get the correction in the stock market, money piles into bonds, and you want to be buying the (TLT) before it does that.
Q: Is Boeing (BA) a short for the next 6 months?
A: No, I think the short play on Boeing is over. If we do get another run down to $325, take it as a gift and load the boat. I think the next major move in Boeing is to $400. Buy the dips.
Q: Do you think the Fed will cut one more time before the year is over, or will they hold off?
A: They will hold off—Powell said as much in this morning’s speech. He really said that not only will there be no more cuts this year, but next year as well, because we are essentially eating our seed corn when it comes to the next recession if we do cut rate because that means there will be no tools with which to get out of the recession.
Q: Are you seeing stocks rising to the end of the year, into the first of next year? If so, will there be a pullback during November before a final rise?
A: Yes we are seeing stocks rise to the end of the year; and you would think we will see some kind of pullback, but we have so much liquidity chasing so few stocks now, any pullbacks may be limited.
Q: (TLT) is called the iShares Barclay 20+ year bond fund. In your trade alerts, you talk about 10-year yields. How are the 10-year yields linked to the (TLT)?
A: There isn't a liquid 10-year bond ETF. There are ETFs but they’re fairly illiquid, so I put everyone into the 20-year (TLT) purely for liquidity reasons.
Q: What about going outright long on the (TLT)?
A: That’s not a bad option; the only problem with outright longs is you make no money if we grind sideways for a while, whereas with the options trade, you get in all the time decay. And we only did the December's, which have about 27 days left in them in trading time.
Q: Tesla just announced it will open a Berlin factory—what does this mean for Tesla and the share providers?
A: Well, it creates the means by which Tesla can increase its production from 400,000 cars this year to 5,000,000 cars a year in 10 years. And it’s just one other factory; expect more to come. Interestingly, their first choice was actually Great Britain, but Brexit scared them out of there.
Q: Do you think Silicon Valley should be a judge on political advertising?
A: I think Silicon Valley should not allow publication of obviously false content which they do now. That’s something the mainstream media are not allowed to do or they will get fined by the Federal Communications Commission. That ban does not apply to social media companies like Facebook (FB) and Twitter (TWTR) but should be as they are vastly more powerful than conventional media. Without it, you'll continue to see massive amounts of false information put out on the Internet. I can see the fake info clearly, but most can’t. I saw a statistic yesterday saying that roughly 50% of all information you read on the internet is false.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
November 14, 2019
Fiat Lux
Featured Trade:
(WHY TECHNICAL ANALYSIS IS A DISASTER)
(SPY), (QQQ), (IWM), (VIX),
(TESTIMONIAL), (NVDA)
Mad Hedge Biotech & Healthcare Letter
November 14, 2019
Fiat Lux
Featured Trade:
JUMP ON THE ASTRAZENECA BANDWAGON
(AZN)
AstraZeneca plc (AZN) has shown a dramatic turnaround over the past three years, crushing its close competitors in the big biopharma landscape. Posting growth for the fifth straight quarter for both profit and sales, the stock has gained more than 10% in the run-up to its latest earnings report.
This pushed the company’s total stock market gains for 2019 to a stellar 33.4%. From a forward-looking price-to-earnings perspective though, investors must remain cautious as the stock also now sports a high valuation.
One of the reasons for the stock’s soaring performance this year is the promising cancer drug lineup, which is the result of AstraZeneca’s risky move to splurge on the development of these products way back in 2014.
Now, although no hard data has been disclosed to the public to date, AstraZeneca’s oncology lineup has been pegged to give Merck & Co.’s (MRK) Keytruda and Bristol-Myers Squibb Co.’s (BMY) Opdivo a run for their money in the lucrative lung cancer drug market.
AstraZeneca is anticipated to release survival data by 2020, with its acquired company Pearl Therapeutics taking charge of testing the effectiveness of Imfinzi to treat non-small cell lung cancer. The robust competition presented by both Bristol’s Opdivo and AstraZeneca’s Imfinzi is projected to carve out $2.5 billion from the sales of Merck’s cash cow Keytruda from 2021 to 2028.
Aside from Imfinzi, AstraZeneca has also raked in increasing revenue from another NSLC drug Tagrisso and ovarian cancer medication Lynparza.
Sales of AstraZeneca’s cancer drugs jumped 48% to hit $2.3 billion in the third quarter of 2019. In the first half of the year, total revenue from the company’s oncology lineup alone soared 52% year over year.
AstraZeneca’s largest moneymaker at the moment, Tagrisso, contributed more than $1.4 billion in the first six months of the year, jumping by 86% compared to the same period in 2018. The surge brought about by this strong cancer drug lineup resulted in a 16% rise in the company’s earnings in the third quarter, hitting $6.1 billion.
While these results are impressive, AstraZeneca’s cancer drug sales have yet to reach their peak. As impressive as Tagrisso has been in the first half of 2019, the other two cancer drugs of the company are actually outperforming this product.
One is Imfinzi, which saw its sales skyrocket by 248% during the same period, raking in $633 million. Meanwhile, Lynparza sales practically doubled to reach $520 million.
While its US sales remain competitive with the company achieving 17% revenue growth, AstraZeneca’s initiatives to expand to the Chinese market have also started to pay off. In fact, earnings from this East Asian country account for almost a fifth of the company’s revenue.
Sales in China continued its positive streak, rising 40% to reach $1.28 billion. To sustain this momentum and strengthen its stronghold in the market, the company recently announced its move to invest $1 billion to develop healthcare startups in the Middle Kingdom. This makes AstraZeneca the latest biopharma behemoth to place a bet on the second-biggest pharmaceuticals market in the world.
With all these in mind, it’s almost impossible to handicap the long-term outlook for AstraZeneca. The company currently has an impressive nine-drug lineup all set to turn into blockbusters this year.
Although the loss of patent exclusivity for cardiovascular disease moneymaker Crestor definitely affected the company, its move to transform its cancer drugs into core growth drivers has been quite successful thus far.
Bolstering its pillars of growth is AstraZeneca’s focus on building on its high-value lung cancer lineup particularly on Imfinzi and Tagrisso. Its emerging cardiovascular drug line has also been garnering attention, making heart medication Brilinta and diabetes treatment Farxiga the next blockbusters for the company.
On top of these, AstraZeneca has been actively developing potent combinations involving mantle cell lymphoma treatment Calquence and Lynparza. Needless to say, the company’s clinical pipeline has presented itself as one of the most promising in the biotech world today.
From where things stand at the moment, AstraZeneca appears to be vindicated in fighting for its standalone strategy and pushing back from the $118 billion hostile takeover attempt of Pfizer in 2014.
In increasing its footprint in emerging markets, AstraZeneca has transformed itself into a biotech company with the potential to dominate the industry in the years to come.
Buy AstraZeneca with both hands on the next dip.
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
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to the 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
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