Global Market Comments
November 23, 2022
Fiat Lux
Featured Trade:
(HOW TO HEDGE YOUR CURRENCY RISK)
(FXA), (UUP)
(TESTIMONIAL)
Mad Hedge Biotech and Healthcare Letter
November 22, 2022
Fiat Lux
Featured Trade:
(THE STOCK THAT KEEPS ON GIVING)
(MRK), (JNJ), (PFE), (IMG), (ABBV), (AZN)
Although the broader market has been experiencing the worst year in a very long time, some businesses still manage to deliver excellent results.
One of them is Merck (MRK).
This biotechnology and healthcare giant has been defying gravity this 2022. While the Health Care Select Sector SPDR (XLV) has slid by quite a substantial margin this year, with the likes of Johnson & Johnson (JNJ) and Pfizer (PFE) succumbing to the pressure, Merck bucked the trend. Its shares have been up by 31% since early January.
Amid the economic and financial crises, Merck remains a promising stock with a number of factors going its way. More importantly, there is a high probability that it can sustain its momentum regardless of what happens to the broader market or the economy.
Merck’s determination to keep this momentum has once again become apparent in its recent announcement.
Earlier this week, the biotech giant disclosed that it would acquire a biopharmaceutical company called Imago BioSciences (IMG) for $1.35 billion.
This would translate to $36 in cash for every share of Imago, which is about twice its recent closing price of $17.40. The deal is anticipated to be completed by March 2023.
Like its large competitors, Merck also has a portfolio of treatments that continue to aid in the growth of its top and bottom lines.
In the third quarter of this year, the biotech’s revenue climbed by 14% year-over-year to reach roughly $15 billion. Meanwhile, its adjusted net income was $4.7 billion, showing a 4% increase compared to the same period in 2021.
Among its products, Merck has been most closely associated with the cancer drug Keytruda. So far, this treatment is on track to rake in $20 billion in net sales this year alone.
In fact, it’s expected to surpass AbbVie’s (ABBV) Humira as the top-selling drug by 2026.
With Keytruda’s patent exclusivity lasting until 2028, Merck has more than sufficient time to prepare for it. Moreover, that means the company can still rely on Keytruda as a strong growth driver for at least five more years.
However, astute investors would point out Merck’s reliance on Keytruda and the risks that come with this arrangement. With the mega-blockbuster’s $5.4 billion net sales, which comprised 36.3% of Merck’s $15 billion total sales in the third quarter, this is a legitimate concern.
It should be noted that Keytruda isn’t the only promising moneymaking treatment in Merck’s portfolio.
One of its promising treatments is its collaboration with AstraZeneca (AZN), which resulted in another cancer medicine called Lynparza. Another is Merck’s HPV vaccines, which continue to rise at a good pace. Finally, the company’s vaccine portfolio has been expanding, with its pneumococcal vaccine recently gaining approval.
Most of its therapies and even its vaccine franchises are on pace to surpass at least $1 billion in net sales this 2022. Needless to say, Merck has been successful in its quest to become more than just a cancer therapy leader.
On top of these, another good reason to take Merck into consideration is its dividend yield.
Merck’s current dividend yield is at 2.8%, which outpaces the 1.6% average yield of the S&P 500. Aside from its top-selling products and robust pipeline that easily support this payout, the company’s dividend is well-covered as well.
Overall, Merck is one of the handful of companies across all industries that has been breaking the norm of poor stock performance in this highly challenging year.
The company can offer a strong shield for wary investors as we deal with the onset of yet another recession. Not only is this biotechnology and healthcare company part of a naturally defensive sector, but its outlook also remains positive amid the issues plaguing the world.
Tuesday morning
November 22, 2022
Hello everyone,
The markets are in holiday mode as it is Thanksgiving Week here in the U.S.
For those of you who love to cruise, why not join John on the Queen Mary II for his Seminar at Sea Strategy Update. The ship departs July 7, 2023 from New York and arrives at Southampton on July 14. The Cunard cruise number is M319. The Black Friday sales are on, so you are likely to get a nice discount on regular prices. Customers are responsible for booking their own cabins and return flights from England. Dinner is black tie every night, so you had better visit Saks before you board the ship to make sure you have suitable attire. What a nice highlight in 2023 to look forward to.
A cruise highlight aside, what will be the highlights in the market? Will there be any? Let’s be clear, the markets are being tossed about by interest rates and inflation. Until the Fed starts to reduce interest rates or hints strongly about this, the markets will be under pressure, and at best, go sideways. Don’t worry, that scenario is great for option spread trading. Time decay here works in your favour, so the markets can muddle along all they like, and you will still make money.
So, maybe not much pain in 2023, but also not much growth.
It will depend on whether we have a soft or hard landing recession. Every analyst has a different idea. John believes the recession will be shallow and short. Whatever happens, it’s the ability to trade the market that is in front of you that counts. So, hone those skills.
As I was saying the other day, it doesn’t hurt to tilt your portfolio toward defensive sectors when we are facing headwinds of unknown velocity. Goldman Sachs, for instance, recommends consumer staples and healthcare (which I spoke of as well). These tend to outperform amid slowing growth and rising real rates. Goldman also recommends telecommunication services as well as consumer durables and apparel.
John has just sent out an excellent piece on Silver to his Concierge clients. It is a detailed report showing which sectors have a practical application for the metal and where the demand for it will be in the future. The principal use is in electronics. Think electric vehicles, for example. If you believe that electric vehicles will be the car of the future, then there is a very good case for owning silver right there. In the last few years, Silver has been battered and bruised, but a low-interest rate environment will see it rally again. It’s not time to invest yet. Ways to play the new rally include buying silver coins, buying ETFs of which the most liquid is the iShares Silver Trust (SLV), which trades options. You could also consider the Van Eck Vectors Silver Miners ETF (GDX). Or there is the Wheaton Precious Metals (WPH). You could spread your risk and buy a small parcel of each.
That’s the news for today.
Hope the rest of the week is amazing for all of you.
Take care.
Cheers,
Jacque
"A life spent making mistakes is not only more honourable, but more useful than a life spent doing nothing." - George Bernard Shaw
Global Market Comments
November 22, 2022
Fiat Lux
Featured Trade:
(QUEEN MARY II SEMINAR AT SEA)
“Judgement comes from experience, and experience comes from making bad judgments,” said US Army general Simon Bolivar Buckner, the most senior Army officer to die in WWII.
Mad Hedge Technology Letter
November 21, 2022
Fiat Lux
Featured Trade:
(ROBOTICS-AS-A-SERVICE)
(RaaS)
I know tech stocks are down on their luck these days as external forces suppress the appreciation of their stock prices.
However, we need to look to the future to better understand what is next after software-as-a-service (SaaS).
Technology never keeps still and evolves.
Even giant busts like what the metaverse appears to be means that countless numbers of dollars and man-hours are invested into these projects for little profit.
I do believe the next iteration and extension of technology services will be accretive to the tech ecosystem and help boost stock shares and that piece of technology will come in the form of Robotics-as-a-Service (RaaS).
The RaaS market size is expected to grow by US$1.23 billion from 2021 to 2026 at 18.12%.
Like a number of other shared services, RaaS is becoming increasingly popular due to its convenience and flexibility, as well as being cost-effective and easy to implement.
Remember that human workers get sick, like to take days off, shout to the rafters about promotions, better pay, and more benefits.
Robots don’t do that.
RaaS also allows a company to have the benefits of robotic process automation by leasing robotic devices and accessing a cloud-based subscription service.
You will own nothing and be happy.
By not having to purchase the equipment outright, organizations can avoid the downsides of ownership and maintain their bottom line.
Cloud computing solutions are already in place for many organizations, so the foundation for RaaS has been perfectly set for the model’s increased use.
As adopting smart robotic technologies requires companies to part with a significant chunk of their financial resources, a RaaS solution also means companies have no need to invest in costly infrastructure.
Remote services and IoT are major growth, but lack of awareness and acceptance pose challenges
A major driver of the market is going to be the increased remote services provided by vendors in the market.
Companies are moving away from the physical approach of providing break-and-fix services to incorporate services that are predictive and proactive by combining the remote service platform with the Internet of Things.
The reason why uptake won’t be higher is because in some settings that require a personal touch like healthcare, companies will be hesitant to adopt robots because customers could feel alienated.
We are still in the early innings.
As the tech ecosystem advances, the integration of robots into this industry is inevitable.
Yes, they will be relied on to perform mundane tasks at first like Amazon’s warehouse robots who move around large amounts of packages.
We need to start somewhere.
In the future, robots will increasingly start to reach further up the value-added chain to offer some quite impressive set of skills to contribute to the labor force.
Rome wasn’t built in one day.
Some stocks to be on the lookout in the RaaS space are:
Rockwell Automation (ROK) is a leader in industrial-grade technology. Its systems, components, and software help manufacturers develop smarter and more efficient machines.
Zebra Technologies (ZBRA) is a longtime player in the automation space. The firm develops mobile computing devices to help employees of a company work more efficiently.
Teradyne (TER) is a developer of industrial equipment that helps automate repetitive tasks.
Intuitive Surgical (ISRG) is a pioneer of robotic-assisted surgery. Its da Vinci system made its commercial debut in 2000 and has since expanded across the globe.
Lastly, a second derivative play powering these robots will be Nvidia (NVDA) chips.
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