Global Market Comments
August 6, 2020
Fiat Lux
Featured Trade:
(HOW TO FIND A GREAT OPTIONS TRADE)
Mad Hedge Technology Letter
August 5, 2020
Fiat Lux
Featured Trade:
(MICROSOFT GOES FROM STRENGTH TO STRENGTH)
(MSFT), (GOOGL), (FB), (AMZN)
Microsoft (MSFT) is on the cusp of becoming the best tech company in America and that is the reward they get for staying out of the data privacy quagmire that the other tech titans find themselves in.
A TikTok acquisition would offer a major platform to rival Facebook and Google-owned YouTube and will revamp its image with young people.
TikTok itself will grow into a $300 billion company in the next 5-7 years just by itself.
This purchase is a massive blow to Facebook (FB) and Google’s (GOOGL) prospects as their once-fortified duopoly morphs into a 4-way race between Microsoft, Amazon (AMZN), Google, and Facebook (FB).
This would make up for all the prior missteps with Nokia’s handset business and Skype.
This could be described as the "crown jewel" snapped up at a discount.
This is essentially an asset with 100 million users, massive momentum, engagement, advertising revenue, and something they could cross-sell into the broader Microsoft base.
The treasure trove of data is what makes this deal a can’t-miss proposition.
Think about Microsoft in building software and hardware projects, and not just Xbox. For the first time, it would have proprietary data on a level that they can understand consumer behavior and not just with their enterprise customers.
Data privacy is Microsoft’s biggest selling point to the Trump administration which is concerned about TikTok’s ties to the Chinese government.
TikTok, which is currently owned by a Chinese company, has come under scrutiny and investigation in the U.S. over allegations it is supplying user data to Beijing, a charge that company officials have denied, but have no way to prove that they don’t bend to the whims of the Chinese Communist Party.
This episode follows on the heels of the U.S. effectively banning Chinese telecom giant Huawei in the U.S.
TikTok represents the dual threat of destroying America's edge in technological dominance.
TikTok has become the fastest-growth social platform in history and its inception as a Chinese technology threatens the U.S. reputation.
What specific data is TikTok able to aggregate from U.S. users?
Personal location, app usage, behavioral trends, thematic trends, and economic indicators.
This personal data could be used to take advantage of the American population through military or economic means.
India was first to ban TikTok and didn’t allow a sale of the Indian data to a local firm. They didn’t want money flowing back into Chinese hands.
China is notorious for the mishandling of data and most of the data is resold infinitely inside of mainland China.
How will Microsoft earn dollars from TikTok?
Digital ads.
TikTok would boost Microsoft’s share of the U.S. digital display ad market.
This year, eMarketer predicts Microsoft to hold just 1.5% of that market, slightly ahead of Snapchat but well behind Facebook’s 42% and Google’s 10.4%.
That is about to change.
Just how popular is TikTok?
TikTok is a disruptive force in social media and video.
In the second quarter, TikTok had 30% penetration of U.S. respondents 18 and older in a survey of 2,500 U.S. consumers.
Among respondents 18 to 24, TikTok's popularity is even greater, at about 42%, versus 65% for Facebook, 78% for Instagram and 63% for Snapchat.
Along with this, Microsoft finally gets the “cool factor” they have been missing for generations.
What are the chances of Microsoft buying TikTok?
I would put it at 85%-90%.
ByteDance needs to seal a deal or they leave the table with zilch and at the same time kicked out of America.
The company, a massive social media player in China, is valued at about $100 billion, half of which is due to TikTok.
The deadline gives Microsoft the added effect of increased negotiating leverage and it will be interesting to see what concessions they get from TikTok.
No other major tech company has been given the green light to make the deal and Microsoft has plenty of cash available to make this deal happen.
The deal could be especially beneficial for Microsoft because the TikTok business in the U.S. is valued in the $40-billion range but could eventually reach $300 billion if they nurture it properly.
I would be shocked if Microsoft flubs this golden opportunity to add a trophy asset to put in their trophy cabinet.
CEO Satya Nadella is too shrewd to let this once-in-a-lifetime chance to cement Microsoft as the top dog go to waste.
I was highly bullish on Microsoft before this news, and I can easily say now that this is not only the best American tech company but the best company overall in the world.
“Our industry does not respect tradition – it only respects innovation.” – Said Current CEO of Microsoft Satya Nadella
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 5, 2020
Fiat Lux
Featured Trade:
(A NOTE ON OPTIONS CALLED AWAY),
(MSFT), (TLT), (BA), (GOOGL), (SPY)
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
August 4, 2020
Fiat Lux
Featured Trade:
(MERCK’S SLOW BUT STEADY COVID-19 HEADWAY)
(MRK), (GILD), (REGN), (AZN), (PFE), (MRNA), (ABBV), (BMY), (RHHBY)
Is it truly better late than never?
Merck has been decisively cautious in its approach of potential COVID-19 treatments and even more so when it comes to their vaccine candidates.
Recently though, the company has finally offered a glimpse of its progress.
The first promising update is Merck’s work on MK-4482, which is an antiviral candidate aimed at treating COVID-19 patients. Basically, this candidate works by preventing the SARS-CoV-2 from replicating.
The laboratory results showed that an increasing dose of MK-4482 can effectively halt the progress of the virus in a patient’s system.
Judging from the timeline followed up to this point, Merck plans to begin huge trials by September.
The MK-4482 is expected to compete with Gilead Sciences’ (GILD) Remdesivir, with the Merck candidate possibly edging out the latter.
This is because the SARS-CoV-2 tends to mutate, rendering Remdesivir less potent the next time it is administered to patients. In comparison, MK-4482 has demonstrated an ability to fight off the mutated versions of the virus.
MK-4482 also comes in tablet form, making it a preferable and more convenient option compared to Gilead’s intravenous infusion and even Regeneron’s (REGN) injectable antiviral cocktail REGN-COV2.
On the COVID-19 vaccine front, Merck has been working with Thermis Biosciences in developing a candidate based on a measles virus vector platform originally developed by the Institut Pasteur researchers.
However, this is not Merck’s only shot on goal.
The company is also collaborating with the International AIDS Vaccine Initiative to develop another vaccine candidate, V590.
The two are using the same platform that Merck created for its already approved Ebola vaccine. The goal is to start human testing by the third quarter of 2020.
Merck is also looking into offering a single-dose vaccine instead of the double dose shots its competitors are working on, with one of its candidates developed to be taken orally instead of via injectibles.
If they succeed, then Merck’s vaccines will be more accessible and convenient for a lot of patients.
Aside from developing V590, Merck plans to use the same approved technology to advance its other antivirals in its clinical testing pipeline.
In fact, Merck’s move to acquire Thermis Bioscience demonstrates the company’s resolve to focus on strengthening its vaccine program. The primary expectation for this newly formed partnership is to come out swinging and eventually win big on the COVID-19 vaccine race.
The victory will then serve as a springboard for a new and powerful revenue stream for Merck, which would serve to quiet the fears of the company’s investors fretting over the patent expiration of blockbuster drug Keytruda.
The impending loss of exclusivity for cancer treatment Keytruda has been hanging over Merck’s head for quite some time now.
Aside from the potential biosimilar competition, Keytruda has been facing stiff competition against biotechnology giants like Bristol Myers Squibb (BMY), Roche (RHHBY), and Regeneron.
Needless to say, fears over this have been overshadowing the company’s impressive internal pipeline – a reaction that pretty much mirrors the experience of AbbVie (ABBV) on the pending patent loss of its blockbuster Humira.
However, Merck has been working on products that could rake in an additional $13 billion to $18 billion to its sales every year.
The list includes immuno-oncology antibody candidates, additional vaccines, and even HIV treatments.
The company also has more than $40 billion on its balance sheet, putting it in a favorable position to acquire more companies or products that could bolster its franchise.
Since the pandemic broke out, Merck has lagged behind its COVID-19 rivals AstraZeneca (AZN), Pfizer (PFE), and Moderna (MRNA).
Looking at its progress and future plans though, it looks like the company has set out to achieve a tortoise over the hare victory particularly in the COVID-19 vaccine race.
With incredible uncertainty hovering over the rest of 2020, it is only natural to seek stocks for an all-weather portfolio.
While there are many factors to consider, looking at businesses that allocated sensibly to capital expenditures and R&D is definitely a great way to start.
Merck’s strategic partnerships with companies like Thermis Biosciences, Taiho Pharmaceuticals, and Astex Pharmaceuticals also play significant roles in this aspect.
Although Merck has not provided a particularly strong performance so far this year, this biotechnology and health care giant is poised to stage a strong comeback when the dust settles.
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