Mad Hedge Technology Letter
June 30, 2021
Fiat Lux
Featured Trade:
(BIG TECH WINS IN THE COURTROOM)
(AAPL), (AMZN), (GOOGL), (FB), (MSFT)
Federal court dismissed antitrust lawsuits against Facebook that the Federal Trade Commission (FTC) and 48 states seek to pin on the digital ad company.
This isn’t only a feather in the cap for FB, but it’s great news for Google, Snapchat, Twitter and the who’s who of selling digital ads and any tech company that might be perceived as “dominant.”
Many would have been led to believe that big tech and these ad giants were on the cusp of being controlled by legislation, only for the federal court to not even bother with advancing the case.
It means that the law is firmly on the side of big tech and it will be almost impossible to pin charges against big tech unless the law is changed to accommodate a situation that is more conducive to proving that American tech companies abuse their positions in the US economy.
Personally, I do believe they have a monopolistic position against its competitors, but to prove that in court is a different animal with arguments needing to hold up against the test of time.
There is no doubt that the company has a dominant share of the market in the “personal social networking” industry, but market dominance just means they are incredibly good at what they do which is serving ads to targeted audience.
Nothing they do is explicitly illegal and that is the tough part and they do provide “free” services.
Not only that, but Facebook users can also simply not use social media and its various platform as a choice because they can drop it altogether or use a different platform entirely.
The court also dismissed a supplementary complaint by the FTC with the judge ruling that the states had taken too long to take issue with Facebook’s acquisition of Instagram and WhatsApp, which were acquired in 2012 and 2014, respectively.
The ruling made the government’s FTC look bad and tardy.
They also are late to the game, unable to understand the tech of our time and enforce borderline fringe behavior.
This is why anti-trust, which many believe is big tech’s largest existential risk, is not really a risk when politicians fail so miserably at even understanding what they do until 9 years later.
Most tech companies are happy to know they have 9 years to skirt the law and aggressively push their business models until the FTC move their finger an inch.
Might as well bet the ranch, right?
Certainly, there will be another wave of amended filed complaints against Facebook within 30 days, which the court will re-review.
But after some convicting loss, prospects look poor for the FTC.
The way in which the law is worded today means that Facebook has to be on the radar of investors as a premier buy the dip trade now that one of the bigger risks is off the table.
Facebook's valuation has more than doubled since the onset of the pandemic as more people use its diversified network of apps to stay in touch with friends and family in a socially distant world.
The social network had over 2.85 billion monthly active users in Q1 2021 and join other tech firms over $1 trillion such as Apple, Microsoft, Amazon, and Alphabet.
I would execute a bullish position in Facebook after a retracement from the 4% pop on the good news.
Tech is expensive and has had another resurgence over the past few weeks.
It continues to be an industry you cannot bet against and that is why you have to be patient for entry points to come to you.
“By giving people the power to share, we're making the world more transparent.” – Said Co-Founder and CEO of Facebook Mark Zuckerberg
Global Market Comments
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Mad Hedge Biotech & Healthcare Letter
June 29, 2021
Fiat Lux
FEATURED TRADE:
(BREAKING NEW GROUND WITH THIS BIOTECH STOCK)
(NTLA), (REGN), (PFE), (ALNY), (EDIT), (CRSP)
The biotechnology world started the week right with a milestone announcement from its gene therapy sector.
Intellia Therapeutics (NTLA), along with its partner Regeneron (REGN), developed a potential cure for a genetic liver disease that previously had no cure.
Using the Nobel Prize-winning Crispr technology, Intellia was able to come up with the first-ever treatment for a disease that had been known to be extremely progressive and even fatal.
This achievement has been described to “open up a whole new area of therapies for patients that wasn't there.”
This is because instead of simply treating the symptoms of particular diseases, Intellia was able to demonstrate that it is possible to use gene editing to come up with a cure.
As expected, shares of Intellia shot up the moment the news broke, rising by 40% by the start of the week.
While this is definitely an incredible update for its investors, what’s even more impressive is the fact that this achievement marks the beginning of a revolution in the way we treat diseases.
Intellia’s treatment, called NTLA-2001, is delivered intravenously into the patient’s body. It’s designed to specifically target a progressive form of liver disease called ATTR amyloidosis. This disorder, while rare, is often fatal.
Right now, there are two companies working on this fast-growing segment. Pfizer (PFE) has Vyndagel and Vyndamex, while Alynlam Pharmaceutical (ALNY) has Onpattro. All these treatments are administered through infusions.
At this point, Alnylam holds the gold standard for ATTR treatment with Onpattro, as it delivers 80% capacity for blocking harmful proteins and reducing blood levels. Patients also need to go in every three weeks for dosing.
In comparison, Intellia’s NTLA-2001 is a one-time treatment. That in itself is a massive advantage for the company.
To add to that lead, Intellia’s candidate also showed an ability to drop protein levels by as high as 96% within just a matter of weeks, with no adverse side effects observed in patients.
This is possibly because the gene therapy was delivered directly to the patient’s liver, which is the source of the issue.
While the results are already promising, Intellia believes that it can achieve better outcomes in the future. According to its researchers, the company is looking into using a bone marrow delivery system to boost the efficacy rate of NTLA-2001.
So far, Intellia has received additional funding via a grant from the Bill & Melinda Gates Foundation to pursue the bone marrow delivery system idea.
If that works out, then the same system can be used to develop treatments for reverse sickle cell anemia and even cover other cardiovascular indications.
Although there’s still no word about the pricing for NTLA-2001, we can use Onpattro as reference for now. Alnylam’s treatment is priced at roughly $450,000 annually.
ATTR holds a fairly huge market. Going back to 2020, Onpattro generated over $300 million in revenue and is estimated to rake in more than $400 for 2021.
Considering that Intellia offers a one-and-done option, we can reasonably assume that the demand would be much higher for NTLA-2001.
Overall, ATTR’s total addressable market is estimated to be at $15 billion. However, ATTR is only the tip of the iceberg.
Studying the liver alone would reveal several genetic diseases that Intellia could address with its technology. Other than those, Crispr could still be applied to dozens of disorders linked to solid tumors.
In fact, the market for solid tumors is actually where the fortunes lie in the gene-editing field, with the sector projected to grow to $424.6 billion by 2027.
Another lucrative market is the genetic disorder segment, with estimated sales anticipated to reach $47.7 annually by 2023.
So far, there appear to be only three companies focused on utilizing Crispr technology to develop cures for these diseases: Intellia, Editas Medicine (EDIT), and of course, CRISPR Therapeutics (CRSP).
Considering the incredibly broad market and the limited number of companies addressing these needs, I say there’s more than enough room for all of them to flourish.
If Intellia continues to discover ways to effectively treat these, then this biotechnology company will not only be considered a godsend to humanity as a whole but also transform into a waterfall of cash for its shareholders.
Global Market Comments
June 29, 2021
Fiat Lux
Featured Trade:
(RIGHTSIZING YOUR TRADING)
“The last few years have been periods of high returns and relatively low volatility. I think with the yield curve inversion and the economy slowing, PMI is in contraction in much of the world ... we’re entering a period that’s the opposite of that. We’re going to have lower returns and substantially higher volatility,” said Ben Kirby of Thornburg Investment Management.
Mad Hedge Technology Letter
June 28, 2021
Fiat Lux
Featured Trade:
(HOW TO STOP RANSOMWARE-AS-A-SERVICE)
(CRWD)
The world has changed, and protecting one’s network has been thrusted to the top of every CEO's checklist and the CFO is there to make it happen smoothly as well.
Just how to protect the most critical computer networks is still a work in progress; many firms still haven’t got a clue.
Just recently, oil pipeline operator Colonial Pipeline revealed that it had opted to pay hackers a $4.4 million ransom to regain control of its infrastructure.
Another headline rattler, major meat company JBS learned they, too, had been hacked.
The ultimate cost of all this hacking?
Cybersecurity Ventures currently pegs the annual figure at around $6 trillion, though further estimates that the ransomware "business" will be worth $10.5 trillion by 2025.
Threat actors are well resourced and becoming more sophisticated as we speak.
Crazily enough, ransomware-as-a-service sites are making it simpler for even novice e-criminals to run successful and lucrative campaigns, which is contributing to the proliferation of ransomware activity.
This is highly illegal yet actors from abroad feel almost immune wielding their power from offshore authoritarian strongholds where dictators usually chuckle on the news that western companies have been hacked again.
The 2020 CrowdStrike Global Security Attitude Survey revealed that more than half of organizations surveyed worldwide had suffered a ransomware attack within the previous 12 months.
A scary fact is that many of these ransomware attacks, failures and successes, are not publicly reported because companies don’t want the negative publicity and the accompanying stock sell-off with it.
Some hacks are just too big to hide under the carpet.
At the same time, organizations need to transform their businesses in order to keep up with evolving business needs such as work from anywhere and moving their critical applications and workloads to the cloud.
Naturally, this is the perfect time for hackers, new and old, to pounce on the transitory nature of deploying networks into a work-from-home set-up.
CrowdStrike’s Falcon platform is at the epicenter of restoring trust to the security apparatus of companies worldwide.
The integration of threat intelligence and threat hunting into the Falcon platform provides deep insight into the adversaries and how they operate.
Extensive capabilities of the Falcon platform significantly set CrowdStrike apart from both legacy and next-gen vendors.
This includes their acquisition of Preempt and Humio, which could not have been timelier as companies are discovering new ways to shore up protection of their active directories, stop lateral movement and have even greater real-time visibility and search into their endpoints, identities, applications, network edge and cloud from a single data layer.
CRWD was also recognized as the best cloud computing security solution and best managed security service at the 2021 SC Awards where Shawn Henry, president of services and chief security officer, received a Security Executive of the Year award as well.
This growth company has the accelerating metrics to back up its hubris.
In the first quarter, they reached a new milestone as subscription customers surpassed the 10,000 mark.
They added 1,524 net new subscription customers including the customers CRWD acquired from Humio. On an organic basis, the net new subscription customers added in the quarter grew 69% year over year. In total, they now service 11,420 subscription customers worldwide.
To sum up the positivity, the outperformance is attributed to CRWD’s Falcon platform's ability to fully utilize the power of the cloud and AI to stop breaches and provide community immunity.
Also helpful, is the ability to easily and rapidly deploy lightweight agent at scale across both endpoints and workloads without requiring a reboot, while other next-gen vendors fail to scale and require reboots.
The platform is easy to use and easy to manage all from a single user interface; and their ability to leverage the power of the cloud to collect data once and solve many real-world business problems that deliver better outcomes and immediate ROI for customers.
It is entirely possible that with the rate of ransomware accelerating, CRWD will be able to grow the service base from over 11,000 now to 100,000 in less than 2.5 years.
They should be able to achieve this while accelerating their subscription gross-margin target to 85% which would represent an acceleration of the current gross rate margin of 77%.
This company is growing faster and becoming more profitable, what’s there not to like?
In light of the strength I just mentioned, a pullback to $230 would be a great entry point to ride to over $400.
If the firm can at least deliver 70,000 customers in the next few years, the stock is easily at least $400 which would make it around a $100 billion company.
That is entirely doable for CRWD.
