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
December 11, 2019
Fiat Lux
Featured Trade:
(WHAT TO BUY AT MARKET TOPS?),
(CAT), ($COPPER), (FCX), (BHP), (RIO),
(EUROPEAN STYLE HOMELAND SECURITY),
(TESTIMONIAL)
Mad Hedge Technology Letter
December 11, 2019
Fiat Lux
Featured Trade:
(CHERRY-PICKING IN TECH TODAY)
(ZM), (CRM), (GOOGL), (AAPL)
The valedictorian of the IPO class Zoom Video Communications, Inc. (ZM) is finally on sale at a discount.
If readers want to indulge themselves in a high caliber tech growth stock to buy and hold stock, this is the one for you.
This one has no regulatory headwinds as well as an added bonus.
Zoom’s share price has dropped 40% since hitting the heights of $102 in July which was coincidentally the high for most post-IPO tech stocks of 2019.
It’s been an elevator straight down to no man’s land since then, but investors would be foolish to paint all hyper-growth companies with the same brush.
Filtering out the wheat from the chaff is critical and Zoom is the stock that still has the gloss on its outside package buttressed by its best in show video conferencing software.
There are no other proper alternatives in this sub-sector of software.
A few days ago, the stock slid 9% even though the company crushed expectations with its latest quarterly result and outlook.
Zoom generated revenue of $166.6 million representing a growth rate year on year of 85%.
The company then offered a forecast of $175 million next quarter when analysts only estimated $165 million.
Remember that this company grew 96% just 2 quarters ago and it would be illogical to believe that the stock is being penalized from faltering to 85% today.
Any tech company would give a left leg for 85% growth.
Zoom was trading at 33.5 times my calendar 2020 estimates compared to the fast growth software as a service (SaaS) median at 12.9 times.
Then software stocks started indiscriminately selling off on earnings over the past few weeks irrelevant to the quality of news because of worries to the broader bull market in tech stocks.
It’s true that tech stocks aren’t cheap now, and the skittishness rears its ugly head when bullet-proof earnings’ results are met with a cascade of selling.
Salesforce (CRM) was a software company that was penalized for pricey M&A because the company has been unable to organically grow forcing them to buy growth.
Buying growth is not necessarily a bad strategy but buying growth at this point in the economic cycle naturally means that companies will need to overpay for growth because of expensive valuations.
Zoom is perfectly positioned to outperform in the next 2-3 years.
The advancing runway is wide open with no competition in sight and a generous growth trajectory is firmly on their side.
We Company singlehandedly destroyed positive biased market momentum for any tech growth stock this summer, but on the bright side, quality post-IPO growth stocks are more reasonably priced with compelling entry points.
At around $60, Zoom looks appetizing and is a convincing buy and hold. At some point, this software company could become a takeover target for a larger corporate because companies such as Google (GOOGL) and Apple (AAPL) will need to acquire growth moving forward.
I am impressed with Zoom's superior products, growth prospects, and scalable business model, and the stock’s near-term risk/reward trade-off is attractive after the 9% haircut this past week.
There is an actionable and manageable clear path to a $2 billion revenue run rate with strong margin expansion potential and with its flagship product growing around 80-90%, its next growth driver in Zoom Phone could translate well into a meaningful revenue stream.
Zoom Phone is the next springboard to further success for this company.
Anyone that has used Zoom as a product can confirm the veracity of its superior performance standards.
This isn’t the type of stock to trade short-term, the volatility undermines any potential entry points.
If the broader market holds up in 2020, and Zoom isn’t a $100 stock by yearend, then the stars should align by 2021 because the value extraction potential is substantially robust in Zoom’s business model.
We finally have a reasonable level to scale into Zoom, and if it drops into the $50 range, it’s not just a scale-in type of scenario, investors should buy as much as they can with two hands.
Growth stocks can only be pinned down for so long and the best and brightest have been unfairly penalized with the rest. And let me remind you, this patch of softness in shares is only ephemeral and now is the time to act.
“When we launch a product, we're already working on the next one. And possibly even the next, next one.” – Said CEO of Apple Tim Cook
Global Market Comments
December 10, 2019
Fiat Lux
Featured Trade:
(MAD HEDGE FUND TRADER ANNOUNCES STRATEGIC PARTNERSHIP WITH TASTYTRADE),
(A NOTE ON OPTIONS CALLED AWAY),
(MSFT), (TLT), (BA), (GOOGL), (SPY)
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 Biotech & Healthcare Letter
December 10, 2019
Fiat Lux
Featured Trade:
(SANOFI’S RETREAT FROM THE DIABETES MARKET),
(SNY), (NVO)
Investors on the lookout for a large-cap biotech investment have several options, with Sanofi SA (SNY) being one of the most captivating companies to consider.
The French multinational pharma giant has a diverse drug portfolio which has been attracting attention recently thanks to its focus on the lucrative market of diabetes treatments.
Unfortunately, the diabetes project hasn’t been working as well as Sanofi had hoped this year. Earlier in 2019, the FDA rejected the company’s new diabetes candidate Zynquista. Despite this setback, the company announced more promising Phase 3 results from another diabetes treatment, Toujeo, which is aimed at children and adolescents with Type 1 diabetes.
Regardless of the roadblocks encountered by Sanofi in its bid to dominate this lucrative market, the company has been insistent in this endeavor -- a determination that’s actually understandable given that the diabetes market covers over 425 million people worldwide.
So far, Sanofi has managed to be one of the leaders in this sector, with insulin injection pen Lantus working as a stable revenue driver for the biopharma for years now.
To offer a clearer perspective on the promising diabetes sector, Lantus raked in $3.95 billion in sales for 2018 alone -- impressive growth that has been attracting competitors left and right.
In fact, this Sanofi diabetes moneymaker has been experiencing steep competition with sales slipping by over $1.17 billion largely due to the emergence of cheaper and stronger rivals in the market.
Nonetheless, Sanofi wants to maintain its stronghold so new deals are expected to crop up soon in an effort to shore up its declining Lantus revenue.
Among the drugs in its portfolio, Toujeo has actually been doing quite well, raking in $930 million in sales in 2018. While this doesn’t really cover the $1.17 billion slip from Lantus sales over the same period, the figure is close enough to bring hope to investors and keep competitors at bay.
Sanofi’s strongest competitor, particularly in the diabetes market, is Novo Nordisk (NVO). The latter’s diabetes drug, Tresiba, has actually accounted for 84.2% of its overall sales.
While this is daunting for Sanofi, the sales performance of Tresiba can also highlight a key differentiator between the two. That is, Sanofi offers a more diversified portfolio especially in terms of revenue sources. Meanwhile, Novo Nordisk is focused on the diabetes market alone.
Although both Toujeo and Lantus have been remarkable in sales thus far, Sanofi has a number of other top-performing drugs in its portfolio. After all, Sanofi isn’t just about diabetes treatments.
In terms of growth, eczema treatment Dupixent has shown a remarkable 142% jump in sales over the past year. Its revenues rose to $628 million for the third quarter in 2019. In comparison, the overall sales for Sanofi’s diabetes treatments declined by 18% since the third quarter of 2018.
While it’s easy to get distracted by the allure of the lucrative diabetes market, these treatments actually comprise a small portion of the French biopharma’s drug portfolio.
To date, Sanofi has 85 up-and-coming drugs, with 51 of these already sent to early clinical tests and the remaining 34 either in Phase 3 trials or sent for approvals.
To provide a more direct comparison, reports show that only two drugs in the pipeline are aimed towards the diabetes market. The rest of Sanofi’s portfolio has 28 oncology candidates and 18 immuno-inflammation drug prospects.
Overall, Sanofi has a stable, well-rounded portfolio to offer its investors. However, stiff competition can prove to be a huge obstacle, especially in the high-growth diabetes space. Its revenue growth in this sector isn’t also as remarkable as its competitors.
This doesn’t take away from Sanofi’s other products though. What it means is that it would be a better call to buy Sanofi stock once prices fall at a cheaper valuation.
