Mad Hedge Bitcoin Letter
October 19, 2021
Fiat Lux
Featured Trade:
(TRANSCENDING ITS COVID-19 VACCINE POTENTIAL)
(SNY), (PFE), (BNTX), (MRNA), (JNJ), (GSK)
Another day. Another COVID-19 vaccine could be out on the market.
Although hundreds of millions of individuals across the globe have already received their shots from approved vaccines of Pfizer (PFE) - BioNTech (BNTX), Moderna (MRNA), and Johnson & Johnson (JNJ), there are still several COVID-19 vaccine candidates undergoing late-stage testing.
This is important news for the companies.
After all, the COVID-19 vaccine market is projected to become a fundamental driver of share price growth.
From what we know about the virus so far, there is a huge possibility that people will need to be vaccinated annually at the very least.
If that’s the case, then the demand for COVID-19 vaccines yearly would reach roughly 8 to 10 billion doses. This could translate to sales between $80 billion and $100 billion.
The latest to potentially join the list is the joint candidate of Sanofi (SNY) and GlaxoSmithKline (GSK), which is anticipated for approval by the fourth quarter of 2021.
While Sanofi and GSK are practically a year behind their competitors, the high efficacy of their vaccine candidate—roughly 95% to 100%—makes them potential frontrunners in the near future.
Given that we can expect many competitors to enter the fray in the coming months, we can conservatively assume that Sanofi takes at least 3% to 5% of the market.
That would generate approximately $2.4 billion to $5 billion in annual revenue.
Since Sanofi holds a number of competitive advantages, such as solid experience in manufacturing and development and a strong geographical presence across critical markets, the company can ease out the competition.
Riding the momentum of the COVID-19 vaccines, particularly the mRNA candidates, Sanofi has been working with Seqirus to develop flu vaccines as well.
As the world struggles to deal with the effects of COVID-19, the more common flu isn’t receiving that much attention these days.
However, the impact of this disease worldwide is shocking: 3 million to 5 million people suffer from severe cases annually, with up to 650,000 individuals dying from the flu.
More alarmingly, a new flu strain spreads from animals and causes a pandemic every few decades.
The death toll associated with the flu becomes even more staggering when you think about the fact that we’ve been working on vaccines to get rid of its for eight decades now.
Despite the ongoing and long-term efforts, all flu vaccines available in the market are mediocre at best.
In fact, a flu shot is only effective within a single flu season. Moreover, its effectiveness is only within the range of 40% and 60%. There were even years when the number was as low as 10%.
Now, though, we might have a better shot at developing more effective flu vaccines thanks to the emergence of mRNA technology.
In theory, mRNA vaccines can trigger a stronger response from patients' immune system compared to the traditional flu vaccines.
To date, two companies are working on mRNA-based flu vaccines: Moderna and Sanofi.
Sanofi is collaborating with England-based vaccine developer Seqirus, with the two companies aiming for another mRNA flu test by early 2022. This will be in addition to the four flu vaccine candidates they have in the pipeline.
While the results for Sanofi’s flu vaccine efforts remain to be seen, experts are optimistic that it can drastically lower the number of deaths and severe cases annually.
For context, the most popular flu vaccine in 2018-19 flu season only had an efficacy rate of 29%.
Even with such low effectiveness, this vaccine prevents roughly 4.4 million flu cases in the United States alone. It also prevented 58,000 hospitalizations and 3,500 deaths.
Now, imagine how many lives a stronger candidate can save.
Although Sanofi appears to be late to the party in terms of its COVID-19 vaccine, the sheer efficacy of the company’s promising candidate with GSK makes it a powerful future contender as the leader of the pack.
Moreover, Sanofi is on the verge of resolving a pain point in the healthcare sector: the absence of a robust flu vaccine.
With its lineup of mRNA-based flu vaccine candidates, Sanofi is poised to discover potential game-changers in the industry and save millions of lives in the process.
Overall, Sanofi is a promising company sold at a reasonable price. More importantly, it prides itself on remarkable dividend history, paying and increasing dividends for 27 consecutive years.
Therefore, this dividend aristocrat is a good addition for investors on the lookout for quality and dependable stocks.
Mad Hedge Bitcoin Letter
October 19, 2021
Fiat Lux
Featured Trade:
(A MAJOR CATALYST FOR HIGHER BITCOIN PRICES)
(BITO)
(BITO) — remember that ticker symbol — it’s the first Bitcoin ETF listed in the U.S.
After a nearly decade-long campaign to get crypto onto a legitimate exchange — the wait is finally over.
The desire for an ETF specifically began in 2013, and in the eight years since, nervous traders have watched the Securities and Exchange Commission reject numerous applications.
“2021 will be remembered for this milestone,” says ProShares CEO Michael Sapir. For investors still on the fence about dabbling in the unregulated cryptocurrency market, he adds that his company is giving them “convenient access to Bitcoin in a wrapper that has market integrity.”
Bitcoin hit a six-month high and was within striking distance of its all-time peak giving a thumbs up to a new U.S. ETF that started trading today.
Bitcoin has risen by some 40% which could see billions of dollars managed by pension funds and other large investors flow into the sector.
ETFs are securities that track an asset and can be bought or sold on a stock exchange.
Many institutions are banned or not authorized from buying assets that aren’t insured and assets on crypto exchanges like Binance and Kraken aren’t insured by the federal government.
This definitely makes it a whole lot simpler to just open a vanilla E-trade account and pour money into a Bitcoin ETF, then ta-da, you own part of the Bitcoin story.
Not only will this benefit institutions, but retail traders will be able to sleep well at night if they decide to pull the trigger on this ETF, also the ease of buying is up there as another major bonus.
Just be aware that this fund will not invest directly in Bitcoin, rather in Chicago-traded futures, and so there won’t be a 1:1 correlation of the market price.
In general, this fortifies sentiment around any cryptocurrency asset giving a signal that adoption rates are exploding, and the future in-flow pipeline is robust.
So we have seen a rising tide lift all boats with other currencies doing well in the short-term like Ethereum.
Crypto ETFs have launched this year in Canada and Europe amid surging interest in digital assets. VanEck and Valkyrie are among fund managers pursuing U.S.-listed ETF products, although Invesco on Monday dropped its plans for a futures-based ETF.
Just take for instance Invesco QQQ ETF — which offered diversification among the top tech names at a time when investors already had the ability to invest in tech stocks.
It saw inflows of $36 billion in the ETF's first year.
I expect the same type of fund flow into this Bitcoin ETF.
From a regulatory perspective, this offers more clarity from the SEC that they are willing to accommodate Bitcoin ETFs that are tied to the Bitcoin futures.
SEC Chairman Gary Gensler recently reiterated that the crypto sector needs to be more heavily policed, and I believe this is all bark and no bite with many politicians and elites already fully invested in crypto assets.
I believe Gensler will continue to tell us how important it is to regulate the industry, but I doubt he wants to be the one that kills the golden goose that lays the golden eggs.
In other words, it’s too big to kill at this point as we surge past the $1.2 trillion market cap for all crypto assets.
Just another funny fact, Gensler once taught a class at MIT’s Sloan School of Management called “Blockchain and Money.”
We could even guestimate that Gensler is highly supportive of Bitcoin on a personal level.
Another side note, Grayscale, the world's largest digital currency manager, is planning to convert its Grayscale Bitcoin Trust into a spot bitcoin ETF, and that application was filed this morning.
If one thought this was the first and last Bitcoin ETF product to grave the public markets, let me tell you, when it rains — it pours.
All these companies understand first-mover advantage is vital.
Look at today and Invesco QQQ Trust (QQQ), the de-facto Nasdaq ETF is still one of the leaders of the tech trade.
Many involved understand, there is a big difference from becoming the 2nd Bitcoin compared to the 50th Bitcoin ETF and a race against time is happening as we speak to get products into the bloodstream.
As for investors, we just pick the winner and the first one is ProShares Bitcoin Strategy ETF (BITO).
“Be fearful when others are greedy and greedy when others are fearful.” – Said American Investor Warren Buffett
Global Market Comments
October 19, 2021
Fiat Lux
SPECIAL BITCOIN ISSUE
Featured Trade:
(WHERE DOES BITCOIN GO FROM HERE?)
($BTCUSD), (ETH), (CRPT), (BLOK), (MSTR)
I first got involved with bitcoin in 2011, when a subscriber wanting to thank me for a spectacular investment performance GAVE me ten Bitcoin. They were then worth $1 each.
Then, I forgot about them. When they appreciated to $100 in 2013, I decided to sell them and take the family out to dinner at The French Laundry, the best restaurant in California’s Napa Valley. I thought I was a genius.
Back then, early in the life of Bitcoin, theft was rampant, and exchange regularly went bankrupt. So cashing in on my windfall wasn’t such an unreasonable thing to do.
That turned out to be the most expensive dinner of my life. If I had kept the ten Bitcoin, they would be worth today over $600,000. Maybe I’m not such a genius after all.
Unless you have been living in a cave for the past five years, you have probably heard of Bitcoin.
By now, you have decided that it is the greatest money-making opportunity of all time or the greatest scam since Carlo Ponzi amassed a fortune selling international postal coupons in 1922.
Some things are certain. Bitcoin will change the financial system beyond all recognition. It will revolutionize banking and investment. And it will vastly accelerate the digitization of the global economy to everyone’s benefit.
After reading this book, you may or may not want to invest in Bitcoin. However, a working knowledge of what it is and how it works will become essential for everyone as the 21st century unfolds.
For s start, Bitcoin, other cryptos, and future cryptos yet to be invented will save $1 trillion a year in transaction costs in the global economy. Who will be the beneficiary of this bounty? You, me, and all the companies we invest in.
It is certain that some form of current or future crypto will be a stepping stone to a global digital currency, not just for emerging nations like El Salvador, but all nations.
And here is the most interesting thing. The eventual impact of crypto on our lives hasn’t even been imagined yet.
Going back to my Defense Department days, I was one of a handful who was present at the birth of the Internet and the similarities are legion. A few clever people were aware of bits and corners of the Internet back in 1989, but nobody had a big picture.
Long term predictions might as well have been science fiction. Insiders were buying up domain names for a dollar each, such as Mcdonalds.com, whitehouse.com, and sex.com. The MacDonald’s site was later sold to the fast-food company for $10 million.
When the Internet began mass adoption in 1995, no one imagined that every taxi company in the world would be out of business in 15 years. New York City taxi medallions once worth $1 million became worthless, prompting many suicides.
Nor did prime downtown apartment owners all over the world expect they could rent their homes for astronomical daily rates through Airbnb (ABNB). They didn’t even expect that a small startup named Netflix (NFLX) would stream videos online, wiping out Blockbuster Video.
Bitcoin was created by Satoshi Nakamoto, a pseudonymous person or team who outlined the technology in a 2008 white paper. Nobody knows for sure. It might even be a US government agency that invented Bitcoin. It’s an appealingly simple concept: bitcoin is digital money that allows for secure, trustless, peer-to-peer transactions on the internet.
Unlike other payment services, like PayPal’s Venmo (PYPL), which rely on the traditional financial system for permission to transfer money and on existing debit/credit accounts, bitcoin is decentralized: any two people, anywhere in the world, can send bitcoin to each other without the involvement of a bank, government, or other institution.
Every transaction involving Bitcoin is tracked on the blockchain, which is like a bank’s ledger, or log of customers’ funds going in and out of the bank. In simple terms, it’s a record of every transaction ever made using bitcoin. Think of blockchain as a chain of blocks of code, each one of which contains millions of lines of code.
Unlike a bank’s ledger, the Bitcoin blockchain is distributed across the entire network. No company, country, or third party is in control of it; and anyone can become part of that network. The Mad Hedge Fund Trader is part of that network, otherwise known as a “node.”
There will only ever be 21 million Bitcoins. This is digital money that cannot be inflated or manipulated in any way.
It isn’t necessary to buy an entire bitcoin: you can buy just a fraction of one if that’s all you want or need. To open my own crypto wallet, I started with an initial buy of one ten thousand of a Bitcoin, or $10. Now, I’m trading in the millions.
Whatever the outcome of Bitcoin is, one thing is certain. None of our lives will be the same.
Mad Hedge Technology Letter
October 18, 2021
Fiat Lux
Featured Trade:
(THE BEST CLOUD SECURITY GROWTH STOCK TODAY)
(CRWD)
Today’s sophisticated hackers are going “beyond malware” to breach organizations.
These hackers are increasingly relying on hard-to-detect methods such as credential theft and tools that are already part of the victim’s environment.
Falcon is the preeminent security platform built by CrowdStrike (CRWD) to stop breaches via a unified set of cloud-delivered technologies that prevent all types of attacks.
Falcon is the major reason why this tech stock is growing so rapidly and why many investors are jumping on the bandwagon.
The stock is up over 400% in the past 5 years, and this is just the beginning of its growth.
CrowdStrike Falcon responds to malicious challenges with a powerful yet lightweight solution.
It unifies next-generation antivirus, endpoint detection and response, cyber threat intelligence, and managed threat hunting capabilities.
Management’s approach to stopping breaches with the Falcon platform is foundational to CrowdStrike's leadership position and maintaining the overperformance which many investors have been impressed with.
Using AI, machine learning, and an intelligent lightweight agent, the Falcon platform defends against today's most sophisticated threats with unmatched speed and simplicity.
Simply put, companies need to employ a holistic breach prevention strategy rather than overly relying on malware prevention.
Nearly every breach you have ever heard of had two things in common, the victims had both a firewall and an antivirus solution, which is why management decided to build the Falcon platform from the ground up to stop breaches and not just prevent malware.
Meanwhile, competitors have fallen further behind as they continue to blindly promote a strategy that relies on malware prevention versus a comprehensive solution, focused on people, process, and technology that stops breaches.
Today, more than half of the detections analyzed were not malware-based.
Attackers are increasingly attempting to accomplish objectives without using malware.
They are exploiting the proliferation of vulnerabilities and abusing systemic weaknesses in identity architecture to get on the system and then move laterally.
This makes it more difficult for legacy and next-gen malware-focused products to be effective because they are not focused on breach prevention.
To further demonstrate my point, I'd like to share a situation with a certain unnamed company using Microsoft's legacy security products that failed to rise to the challenges of today's adversaries and ended up unnecessarily costing them.
This company experienced a long and difficult deployment process, particularly in low bandwidth environments where endpoint performance was critical.
Notably frustrated, this company began to evaluate alternatives when it was unfortunately hit by ransomware that encrypted their primary and backup data, causing weeks of business disruption and a financial impact estimated to be in the tens to hundreds of millions of dollars.
This is a typical story that is told to CrowdStrike and more will follow as the volume of companies ill-prepared is voluminous.
Many of these damaging experiences by companies are then followed by their in-house IT teams connecting with CrowdStrike’s incident response team to remediate and stabilize their IT operations — followed up with deploying Falcon Complete across their environment.
The Falcon platform processes approximately 1 trillion events per day from millions of agents, delivering unprecedented security insights.
This empowers Falcon to benefit from crowdsourcing and economies of scale unlike any other solution on the market today, which I believe enables AI algorithms to be uniquely effective.
CrowdStrike’s success hinges on growing leadership as the trusted security partner of choice and especially growing the Falcon platform.
Several outside reports have praised Falcon Complete and recognized its strength in its breach prevention warranty, fully remote automated remediation, breadth of threat hunting capabilities, and strong machine learning and artificial intelligence capabilities for detection and response.
The net result of focusing on the Falcon platform to increase revenue upside is the subscription revenue growing 71% over Q2 to reach $315.8 million.
While it’s understandable that subscription gross margin fluctuates quarter to quarter, management expects it to remain solidly within an increased target model range of 77% to 82%.
For the next quarter, CrowdStrike expects total revenue to be in the range of $358 million to $365.3 million, reflecting a year-over-year growth rate of 54% to 57%.
Management has reaffirmed that demand for their Falcon platform is still hot, but I am not thrilled that the total revenue growth is expected to drop to the mid-50% from 70%.
Even though this drop is a seasonal adjustment, it was only just in 2018 when the company was doing $100 million in total revenue, and we are talking now about reaching $2 billion per year after almost surpassing $1 billion per year in 2020.
The stock has substantially more upside and any significant drop should be bought.
We are hovering near all-time high’s so any 5-10% drops should be bought into.
I am still highly bullish on this cloud security company and believe its best days are ahead of them.
“The right moral compass is trying hard to think about what customers want.” – Said CEO of Google Sundar Pichai
