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
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
Mad Hedge Biotech & Healthcare Letter
January 21, 2020
Fiat Lux
Featured Trade:
(WHY THERE’S ANOTHER DOUBLE IN CRISPR THERAPEUTICS)
(CRSP), (BLUE), (EDIT), (NVS), (GILD)
Biotech investors, take note: 2019 was a great year for the industry, but the best is yet to come.
In the final three months of 2019, the biotech sector grew by 32% -- notably outpacing the pharmaceutical industry, which only recorded a 9.5% gain.
However, the biotechnology sector is estimated to grow substantially in 2020, and reach over $775 billion in revenue by 2024 as more and more treatments for previously incurable diseases get discovered.
Looking at all the progress in the biotechnology space, this could even be the year we’d finally discover the cure to many life-threatening and debilitating conditions like cancer and Alzheimer’s disease.
With all these technological advancements, two revolutionary tools have been overhauling the entire biotechnology and healthcare industry from the ground up: precision medicine and CRISPR. Actually, the impressive growth of the biotechnology industry has been largely attributed to the excitement generated by the gene-editing sector.
While the majority of companies concentrating on the human genome are still in the research phase, the growth of this industry is undeniable.
Here’s tangible proof.
Just 20 years ago, reading all the DNA of a single person cost approximately $3 billion. Now, this price is down to only $1,000. In the future, this number will go even lower at $100. There are now gigantic factories in China sequencing DNA for companies like Ancestry.com and 23andMe.
This is just one example of how the biotechnology industry has grown by leaps and bounds. It’s also the reason behind the surge of CRISPR shares.
In effect, the specialists in this niche, including Crispr Therapeutics (CRSP), Bluebird Bio (BLUE), and Editas Medicine (EDIT), are amplifying their efforts in 2020.
Among the specialist companies, CRISPR Therapeutics is considered as one of the frontrunners -- if not the top stock. This is because compared to its rivals, which are still in preclinical phases of development, CRISPR Therapeutics’ already has two drugs going through Phase 1 trials: CTX001 and CTX110.
The promising results of the company’s research resulted in a 113% rise in shares last year, with the bulk of the surge starting in October. In fact, CRISPR Therapeutics’ performance had been so impressive that its market cap reached $3.4 billion.
CTX001 is created to target patients suffering from genetic blood disorders, specifically sickle-cell disease and transfusion-dependent beta-thalassemia.
Meanwhile, CTX110 is a CAR-T treatment. The process involves the extraction of immune cells from the patient. These are then retrained and later re-introduced to the human body.
CRISPR Therapeutics’ CAR-T treatment is anticipated to be offered at a cheaper price compared to the other CAR-T therapies.
Both Novartis (NVS) and Gilead Sciences (GILD) are pursuing the same treatment. However, the cost of the therapy from the latter two is expected to reach as much as $475,000 for every patient annually.
Apart from CTX001 and CTX110, CRISPR Therapeutics has two more immunology candidates, currently dubbed CTX120 and CTX130.
If both phase trials succeed, these will bring massive home runs for CRISPR Therapeutics, especially since the cancer immunology market is expected to reach $127 billion by 2026. Over the next 10 years, this niche is estimated to reach $25 trillion in sales.
Among the gene-editing treatments under development today, CRISPR is projected to grow tenfold in the number of applications and potentially curing 89% of disease-causing genetic variations by 2026.
Taking this pace into consideration, the valuation for this market is expected to grow from $551 million in 2017 to reach roughly $3.1 billion by 2023 and $6 billion by 2025.
Meanwhile, precision medicine as a whole is estimated to show a significant jump from $48.6 billion in 2018 to $84.6 billion by 2024. In 2028, this market is expected to rake in $216 billion.
Hence, further success with CTX001 and CTX110 along with additional treatments in the drug pipeline would all but guarantee that Crispr Therapeutics could beat the market again in 2020.
Global Market Comments
January 21, 2020
Fiat Lux
Featured Trade:
(LAST CHANCE TO ATTEND THE WEDNESDAY FEBRUARY 3 BRISBANE, AUSTRALIA STRATEGY LUNCHEON)
(MARKET OUTLOOK FOR THE WEEK AHEAD, or DOW 120,000 HERE WE COME!)
Come join me for lunch at the Mad Hedge Fund Trader’s Global Strategy Luncheon, which I will be conducting in Brisbane, Australia on Monday, February 3, 2020 at 12.30 PM.
An excellent meal will be followed by a wide-ranging discussion and a 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 $234.
The lunch will be held at an exclusive hotel in downtown Brisbane, the location 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.
Let me make this clear.
My forecast for the Dow Average for 2030 is 120,000, which I have been predicting since the market bottomed in March, 2010, up 313% from here.
My problem is that so many people have recently come over to my own line of thinking that it has become impossible for me to take advantage of it.
The only chance you had to get into the market in 2020 was when the president ordered the execution of an Iranian general. Even then, the Dow dropped only 400 points, a miniscule 1.4%, and the Mad Hedge Market Timing Index backed off a smidgen, from 93 to 87. It then took off again like a scalded chimp.
Every professional trader I know to a man and woman is out of the market, stunned by euphoria run amok. We all know this ends in tears. The only question is how many pennies you can pick up before the steamroller runs you over. Option implied volatilities are at five-year lows, never a good place to trade.
I’ve been telling big hedge funds to give control of their funds over to their youngest, least experienced, and dumbest traders. It is only they who can make money in this environment, those who have never seen markets go down. I gave the same advice in 2007, 1999, and 1987. Before that, nobody cared what I thought.
So there is nothing left for us to do here but exercise rock-solid discipline, while many others are dancing on the tables. You can take solace in the knowledge that those buying stocks here will be puking them back out when markets are down 5%-10%. Whether that takes place next week or next month is anyone’s guess.
US stocks have risen 40% in 12 months on falling earnings, taking earnings multiples from 14 to 20. And the Volatility Index (VIX) stands at a near-decade low of $12. Am I missing something?
Risk is extreme, with Wharton’s Uber bull, Jeremy Siegal expecting the Dow Average to hit 30,000 in the next ten days. The top five stocks are posting most of the gains. With the Mad Hedge Marketing Timing Index at a lofty 93 last week, how many pennies can you pick up in front of the steamroller? I’m staying in cash with a small long volatility position I bought at a half-decade low.
It’s Q4 Earnings Season, with the big banks kicking off on Tuesday, generally bringing in satisfying result. Will aggregate earnings be flat or show a small gain? Most companies have already cut forecasts enough so 80% will beat predictions. The problem is how much is in the price?
Tesla hit $550, as the stock continues its parabolic run. It’s definitely getting overcooked here with a nonstop $320 run since June. Look for a Q1 sales pullback as the steroids of the rush to beat the 2019 end of federal subsidies wears off. That will be your next chance to buy. My decade target is $2,500 a share.
The Big biotech & healthcare conference last week in San Francisco organized by JP Morgan usually marks an interim top for this sector. If you need short term profits, better now than never. Some of our names have doubled and many are up 25% since the launch of the Mad Hedge Biotech & Healthcare Letter in September. Click here to subscribe.
US Consumer Prices rose in December, up 0.2%, following hotter months. The CPI is up a miniscule 2.3% YOY. With inflation moderating, Goldilocks lives!
Blackrock says climate change will remake investment. The $7 trillion manager is rolling out a new line of ETFs focusing on ESG, or Environmental, Social, and Governance investing. ESG has risen from 1% to 3.6% of all funds in a year. Investing in traditional carbon-based companies is essentially banned.
The Trade wars are still costing us money, with the World Bank cutting growth forecasts for 2020 and 2021. Almost every economic data point is weaker than two years ago. Only jobs remain robust. The Fed says that manufacturing has been hardest hit. How long will the pain continue?
Student debt tops $1.6 trillion making it the next subprime crisis. Most borrowers are only paying monthly interest and not a penny towards principal. That’s millions of consumers that are out of the economy and not spending. I paid off my loans 40 years ago with a single check. The loan officer asked, “You want to do what!?”
Housing starts soared to a 13-year high, up a blockbuster 16.9% in December to 1.608 million units. The industry is cashing in on massive Fed expansion of the monetary base and ultra-low interest rates. Buyers recently enrich by rocketing stock prices are stepping up as the “wealth effect” explodes.
My Global Trading Dispatch performance held steady at +356.91% for the past ten years, an all-time high. My 2019 year-to-date came in at a final +55.86%. We closed out December with a market beating +4.97% profit. My ten-year average annualized profit ground back up to +35.28%.
Option values are at five years low, making the call and put spreads I usually do the least attractive since 2015. My true risk-free trades take place when the Volatility Index (VIX) rises above $20. It has been hugging $12 for the past two weeks.
You don’t need me, or any other advisor, when markets rise every day. When they don’t, you financial life depends on me.
The coming week will be pretty dismal on the data front, with a national holiday and some other minor releases.
On Monday, January 20, market was closed for Martin Luther King Day.
On Tuesday, January 21, no data releases of note take place.
On Wednesday, January 22, at 8:00 AM, Existing Home Sales for December are out, the most important housing number of the month.
On Thursday, January 23 at 8:30 AM, Weekly Jobless Claims are announced.
On Friday, January 24, The Baker Hughes Rig Count is released at 2:00 PM.
As for me, I spent Saturday hiking 12 miles around San Francisco with 20 Boy Scouts, instructing them on the finer points of navigating by compass. I found a lot of lesser sights I had never seen before and stumbled across several charming postage stamp-sized community parks. We ended up at Ghirardelli Square where we consumed a celebratory hot fudge sundae.
And what did we come across during our explorations? A naked man with a selfie stick walking down the Embarcadero making a YouTube video!
Only in San Francisco.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
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
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
Dollar General (DG) has made a nice run since I recommended it 8 days ago and is now trading around $160.
Our calls are now deep in the money and this will allow us to pull the trade off early. The expiration I suggested was January 31st, which is two weeks from now.
Let's close the trade and book the profit. This is how you do it.
Sell to Close January 31st - $152.50 call @ $8.00
Buy to Close January 31st - $155.00 call @ $5.60
The net credit will be $2.40 per spread. The debit when the trade was placed was $1.20 per spread, so this results in a $1.20 per spread profit, or a 100% return for the 8 days the position was held.
If we held for another two weeks, it would only increase the profit 10 cents per spread, so I would prefer to close the deal early.
The cash gain will be $720 if you traded the suggested 6 lot.