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Mad Hedge Fund Trader

February 14, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 14, 2023
Fiat Lux

Featured Trade:

(BETTER SAFE THAN SORRY)
(JNJ)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-02-14 17:02:192023-02-14 18:24:59February 14, 2023
Mad Hedge Fund Trader

Better Safe Than Sorry

Biotech Letter

The market has been unstable but upbeat this year as a mix of optimistic investor sentiment and nagging concerns about the global economy has troubled investors. This is why investing in businesses on a long-term basis appears to be the trend these days.

After all, doing so makes it easier to get past near-term issues and enables investors to focus on excellent companies that can deliver significant returns in the course of more extended periods.

With these in mind, Johnson & Johnson (JNJ) emerges as one of the stable stocks worth consideration not only in the field of biotechnology and healthcare but also across the broader market.

JNJ is one of the biggest healthcare companies across the globe, and it will soon be split into two distinct entities. This spinoff is projected to be completed by November 2023, with both companies being publicly traded and aiming to pay out dividends.

A spinoff is in the works, with the company’s consumer health business turning into a new company named Kenvue. At the same time, its pharmaceutical and medical device sectors will continue under the central umbrella of JNJ.

The company’s consumer health segment historically records moderate growth, which fails to keep up with the more rapid growth experienced by its medical devices and pharmaceutical sectors.

In 2022, JNJ reported its total sales to be $95 billion, which was 1.3% higher than in 2021, with net earnings worth $18 billion. Broken down by division, the operational sales of consumer health climbed by 4%, while the pharmaceutical sector rose by 7%, and the medical devices sector increased by 6% compared to the prior year.

These results are somewhat expected considering the maturity of the consumer health segment along with the profit margins for the products in its portfolio. Nevertheless, having brands like Benadryl, Tylenol, Listerine, and Motrin would undoubtedly boost the consumer health arsenal. These widely known brands would enable this segment to sustain its growth, translating to stable ongoing gains over the long run.

JNJ’s move to buy Abiomed, the developer of the world-famous smallest heart pump, bolstered the company’s medical device sector.

Meanwhile, the company estimates its pharmaceutical sector to reach $60 billion in terms of revenue by 2025 courtesy of top-selling treatments such as cancer drug Erleada and Darzalex and plaque psoriasis medication Tremfya. In addition to the company’s robust pipeline, these projections propel JNJ’s top line forward.

Recently, JNJ increased its investment in biotech stock MeiraGTX (MGTX), lifting its stake from 3.7 million to 6.6 million shares. The two companies have been working together on the central nervous system, salivary glands, and eye treatments since 2019, with JNJ being the second-largest shareholder in this clinical-stage gene-therapy firm.

While its 2022 figures do not seem to be as impressive as others in the sector, it’s nothing to sneeze at either. In fact, it should be appreciated in the context of the longevity of JNJ’s business as well as the company’s long-established ability to continue delivering moderately-paced growth. Reviewing the last five years of JNJ, the business has grown its top and bottom line by approximately 17%.

The sheer size of JNJ and its leadership across practically all critical healthcare sectors ensured solid business and shareholder returns in the past years.

Over the last 10 years, this top-tier stock has delivered a total return of 190% for its shareholders. Meanwhile, its dividend, which the company has boosted for 60 consecutive years and counting, has climbed by 90%. Hence, investors on the lookout for a resilient company to buy and hold for a long time would be hard-pressed to find a more stable stock than JNJ.

 

jnj company

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-02-14 17:00:242023-02-19 20:50:10Better Safe Than Sorry
Mad Hedge Fund Trader

February 14, 2023

Diary, Newsletter, Summary

Global Market Comments
February 14, 2023
Fiat Lux

Featured Trade:

(WHERE THE ECONOMIST “BIG MAC” INDEX FINDS CURRENCY VALUE TODAY),
(UUP), (FXE), (FXY), (CYB)

 

CLICK HERE to download today's position sheet.

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-02-14 09:04:322023-02-14 17:24:56February 14, 2023
Mad Hedge Fund Trader

Where the Economist “Big Mac” Index Finds Currency Value Today

Diary, Newsletter, Research

My former employer, The Economist, once the ever-tolerant editor of my flabby, disjointed, and juvenile prose (Thanks to Peter Martin and Marjorie Deane!), has just released its "Big Mac" index of relative international currency valuations.

Although initially launched as a joke five decades ago, I have followed it religiously and found it an amazingly accurate predictor of future economic success.

The index counts the cost of McDonald's (MCD) premium two beef patty sandwiches around the world, ranging from $8.35 in Venezuela to $1.68 in Lebanon, and comes up with a measure of currency under and overvaluation.

What are its conclusions today?

The Venezuelan Bolivar is wildly expensive, with 235 years of annual per capita income needed to buy a single Big Mac in local currency terms if you can find one. There are currently 4 million Bolivars to the US Dollar in this sadly bankrupt country.

 The Norwegian Kroner, Swiss franc (FXF), and the US Dollar (UUP) are also dear, with the average cost of an American Big Mac at $5.35. Every year I make a ritual visit to what is often the most expensive McDonald’s in the world at Zermatt Switzerland (see pictures below). There the Big Macs taste slightly acidic.

The cheapest currencies are the South African Rand, the Russian Ruble, and the Lebanese Pound, a Big Mac coming in at $1.68 in Beirut.

I couldn't agree more with many of these conclusions. It's as if the august weekly publication was tapping The Diary of a Mad Hedge Fund Trader for ideas.

I am no longer the frequent consumer of Big Macs that I once was, as my metabolism has slowed to such an extent that in eating one, you might as well tape it to my ass. Better to use it as an economic forecasting tool than a speedy lunch.

 

 

 

 

 

The Big Mac is a Steal Here in Turkey

 

No Bargain Here in Italy Either

 

And Costs a King’s Ransome Here in Zermatt

https://www.madhedgefundtrader.com/wp-content/uploads/2021/08/zermatt-mcdonalds.png 488 652 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-02-14 09:02:022023-02-14 17:23:40Where the Economist “Big Mac” Index Finds Currency Value Today
Mad Hedge Fund Trader

February 14, 2023 - Quote of the Day

Diary, Newsletter, Quote of the Day

“I’ve drunk to your health in company. I drank to your health alone. I’ve drunk to your health so many times that I’ve damn near ruined my own, said WWII Admiral “Bull” Halsey.

 

https://www.madhedgefundtrader.com/wp-content/uploads/2021/08/halsey.png 294 238 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-02-14 09:00:162023-02-14 17:23:17February 14, 2023 - Quote of the Day
Mad Hedge Fund Trader

February 13, 2023

Tech Letter

Mad Hedge Technology Letter
February 13, 2023
Fiat Lux

Featured Trade:

(ECOMMERCE TAKES A BACK SEAT)
(CPNG), (AMZN)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-02-13 15:04:212023-02-14 00:47:52February 13, 2023
Mad Hedge Fund Trader

Ecommerce Takes A Back Seat

Tech Letter

American ecommerce companies are certainly feeling the pinch of high inflation as many US consumers tighten up their purse strings.

Ecommerce was one of the few growth engines for tech before 2020, now it’s harder to move the needle for many subsectors.

Just take a look at the giant ecommerce company Amazon (AMZN) whose stock price was higher in August 2018 compared to today.

Between now and 2018, Amazon experienced a pulsating melt-up due to a business boom, low interest rates, and positive global growth.

On the way down, the reverse has taken place.

We, as investors, just cannot assume tech will go from the bottom left to the top right anymore.

So if ecommerce companies of Amazon’s ilk are struggling to navigate tighter conditions, imagine how bad it is for ecommerce flagship companies in an Asian third-world backwater like South Korea.

The ecommerce company I am talking about is Coupang (CPNG), which I’ve been highly negative of since public inception, and rightly so.

CPNG's share price has done nothing but drop since its IPO from its $50 peak and now stands at $15 after bottoming out at $9.

What next for CPNG?

CPNG the South Korean e-commerce pioneer has lost billions of dollars since its inception but is rolling out an army of robots at fulfillment centers in the hope of achieving profitability.

They burned cash by building distribution centers throughout South Korea that could help it push the boundaries of speedy delivery with a broad selection.

Now the company is almost breaking even, with analysts projecting it will turn a profit for the second straight quarter and then report its first annual operating profit in 2023.

Coupang has used private venture capital to fund this expansion combined with a 2021 initial public offering to build logistics domestically.

Coupang is also pushing to expand new markets in Taiwan and Japan. I see that as a hard endeavor because legacy ecommerce like Rakuten is quite entrenched there.

I think they will be unable to outmaneuver local competition.

Strategies like cash burning to seize market share don’t work anymore because of the high cost of capital.

CPNG needs to optimize what it can in South Korea even if the country presides over one of the worst demographics in the world, with the average age of customers approaching the age of nursing home residents.

CPNG has more than 100 fulfillment and logistics centers in South Korea, but no footprint overseas.

Barreling into mature markets is a marginal strategy for CPNG today because they are 10 years too late.

Yet, I do really like what they are doing on the automation front domestically integrating automated robots into their operation.

The lack of workers and consumers in South Korea is another headwind due to poor demographics.

Externally, they also face various headwinds from the global backdrop souring.

I do believe in the short term as tech equities benefit from the disinflation narrative, there is a narrow path to a higher market share for CPNG to around $25 per share in 2023.

Anything higher I would avoid because it’s not worth paying a premium for this ecommerce company.

Relying on a “tide lift all boats” strategy is not ideal in today’s tech world, because that isn’t for sure anymore.

Long term, my assessment of CPNG is less rosy. This could be a good buyout ticket for a bigger fish because, at some point, they will realize that they were late to the party and might as well sell it off for whatever it's worth.

 

cpng

 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/02/help-wanted.png 780 1556 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-02-13 15:02:242023-02-19 22:22:55Ecommerce Takes A Back Seat
Mad Hedge Fund Trader

Quote of the Day - February 13, 2023

Tech Letter

“Price is what you pay, value is what you get.” – Said Legendary American Investor Warren Buffett

 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/02/warren-buffett.png 540 450 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-02-13 15:00:062023-02-13 16:19:45Quote of the Day - February 13, 2023
Mad Hedge Fund Trader

February 13, 2023

Diary, Newsletter, Summary

Global Market Comments
February 13, 2023
Fiat Lux

Featured Trade:

(HOW CRISPR TECHNOLOGY MAY SAVE YOUR LIFE)
(TMO), (OVAS), (CLLS), (SGMO)

 

CLICK HERE to download today's position sheet.

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-02-13 09:04:092023-02-13 15:35:12February 13, 2023
DougD

How CRISPR Technology May Save Your Life

Diary, Newsletter

When I was a DNA scientist at UCLA 50 years ago, the team used to slack off whenever our professor was attending an out-of-town conference.

We used to take pure 200 proof ethanol the university kept on hand “for research purposes,” used it to bring our beer up to 100 proof, and then speculate about the future of our obscure, neglected field.

With the technology at hand, we predicted it would take 3,000 years to fully decode the 3 billion base pairs of a length of human DNA. It then might take another 1,000 years to manipulate our genes to accomplish something useful, like curing cancer.

Maybe it was our “enhanced” beer talking, but we were off on our bold forecast by only 2,970 years.

Dr. Craig Venter published a map of his own DNA in 2001 using sophisticated algorithms to vastly accelerate our own snail-like progress.

The second step, that of functional genetic engineering, took only another decade instead of a millennium.

Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR).

Memorize this term, write it in your diary, and put it on a post-it note on your computer.

It may save your life someday, if not add decades to your life. And it could also make you a multimillionaire if you play your cards right. More on that below.

And I count myself on becoming one of its fortunate users, once the technology goes retail, which should be soon.

If you are another DNA scientist, all I need to tell you is that CRISPR is used to manipulate segments of prokaryotic DNA containing short repetitions of base sequences.

Each repetition is followed by short segments of spacer DNA from previous exposures to a bacteriophage virus or plasmids. The protein fragments that identify and snip these crucial gene segments are called CRISPRs.

If you are the average Joe stock trader, which most of you are, suffice it to say that CRISPR technology is being developed that will enable you to edit your own DNA on a customized basis and then pass the changes on to your future generations.

This will eventually allow you to become immune to all diseases, increase your intelligence, and possibly live forever. Just cut out a bad gene and put in a new one and you and all your future decedents are fixed for good.

You only have to make it five or ten more years at the most with your current vintage DNA, and you can easily live another century.

Oh, and by the way, the company that successfully brings CRISPR products to market in an economical, cost affordable way should see its stock price rise tenfold, if not one hundredfold.

Interested?

Reading up on the research for this piece, one thought kept recurring in my mind: “I can’t believe they are already doing this NOW!”

CRISPR technology was first mooted by a Japanese researcher in 1987. It turns out that the Japanese have a huge head start in developing DNA technologies thanks to a 300-year track record in brewing potent rice wines, like sake.

By 2007, CRISPR went mainstream, attracting funding from a broad range of industries. There was initial heavy interest from the food producers, which sought to make plants and their seeds immune to common crop-destroying diseases.

Their work is partly responsible for the record crop yields that are presently crushing agricultural prices across the board.

As of today, there have been over 3,000 peer-reviewed papers published about CRISPR, each one taking us an infinitesimal step forward.

Currently, there are clinical trials underway employing CRISPR technology to fight multiple forms of cancer, herpes viruses, and advance immunosuppression in human organ transplants.

A legal battle broke out over who owns the rights to CRISPR technology, with Thermo Fisher Scientific (TMO) holdings several key patents.

OvaScience Inc. (OVAS) has started applying CRISPR to human embryos. It didn’t take long to ignite a firestorm of controversy over the prospect of permanently altering the human germline.

Will the wealthy buy their way into genetic superiority and immortality? Or will we accidentally create an organism that could wipe out the human race? Cries of “Social Darwinism” are everywhere.

Or worse, what if the Chinese make their own population immune to bioweapons which they then unleash on the rest of the world?

What if a gene treatment that cures cancer also makes individuals, aggressive, paranoid, or violent?

Talk about letting a genie out of a bottle while also opening Pandora’s Box!

Some leading scientific journals, like Nature and Science, have refused to publish some CRISPR paper over ethical concerns. Unsurprisingly, Chinese scientists have the lead in the most controversial applications.

It’s all way beyond my pay grade.

During my lifetime, I have seen science drop some real clangers.

While in Europe this summer, I saw a Thalidomide baby grown up, now in his fifties. The anti-morning sickness drug developed by a German company produced children with horrifying flippers instead of arms.

Even today, Thalidomide is held out as an example of the need for enhanced drug regulation in the US.

In the early 1950s, one doctor developed the bright idea of giving newborn babies pure oxygen. Everyone who received this treatment went completely blind for life.

And then the CIA developed LSD as a potential weapon, testing it on its own unwitting employees, who developed an unfortunate tendency to jump out of windows from high floors. We all know how that one worked out.

We already know what genes people will choose when given the opportunity to do so, instead of using the ones they inherited, the old-fashioned way.

The unregulated human artificial insemination industry makes available genotypes of every race and nationality in abundance. More than 90% choose tall, blonde, intelligent donors, inadvertently creating a financial windfall from the UC Berkeley Men’s Water Polo Team.

It is an outcome Adolph Hitler would have been proud of, as more than 1 million of these children have been born in the US alone.

Some prolific water polo players have sired more than 100 children, which are now using websites like 23andMe and Ancestry.com to find each other and socialize.

It was not in the game plan.

As is always the case with new, cutting edge, groundbreaking technologies, it is hard to find a rifle shot investment that gives you a pure play.

Many such efforts are subsumed inside huge companies where a specific technology never moves the needle. Starts ups often go bust because they can’t keep up with rapidly evolving technology.

That’s what happened to the 3D printing industry, and I can’t remember how many hard drive companies and PC makers that have gone under.

Editas (EDIT), Caribou Biosciences (CRBU), Intellia (NTLA), CRISPR Therapeutics (CRSP), and Precision Biosciences (DTIL) have all gone public over the last five years. Here is your bite of the apple.

Cellectis (CLLS) is a $1.1 billion French company that is involved in both gene editing and cancer immunotherapy. The Company has improved the quality of crops for the food and agriculture industries.

And here is the really good news.

Many of these shares have dropped 70%-80% in the last year, thanks to the generalized biotech meltdown and the wholesale flight from profitless companies. Crisper alone fell 77% top to bottom, much to my own personal financial destruction.

Many will find the prospect of living another century enticing. I might be interested if I could get back the body I has when I was 25 but still know what I know now.

The possibility of finding a stock that could rise 10 or 100 times is MUCH more interesting.

 

 

 

 

 

 

 

Cell Membrane

 

CRISPR

Putting Another 100 Years on the Clock?

https://www.madhedgefundtrader.com/wp-content/uploads/2017/12/john-old-car-e1512925077646.jpg 316 400 DougD https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png DougD2023-02-13 09:02:132023-02-13 15:39:00How CRISPR Technology May Save Your Life
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