February 2023

An Icon Blue-Chip Pharma Selling At Discounted Price

Pfizer (PFE) possibly contributed more than any other business in getting the world back to normal from the pandemic. It was rewarded with an impressive windfall courtesy of its twin COVID-19 programs: the blockbuster vaccine and the top-selling treatment, Paxlovid.

However, the world has already stopped fretting over COVID. As expected, Pfizer is paying the price for this turn of events. Sales of its COVID blockbusters are estimated to decline by more than 60% in 2023 after raking in a total of roughly $57 billion in 2022.

The company projects that Comirnaty vaccine sales would fall from $37.8 billion in 2022 to $13.5 billion in 2023, while Paxlovid would drop from $18.9 billion to $8 billion. After all, the United States and several countries already have massive stockpiles of the Pfizer vaccine and Paxlovid, recorded under the 2022 revenue. It would take until June 2023 to work through them.

In effect, Pfizer and other COVID plays like Moderna (MRNA), Novavax (NVAX), and BioNTech (BNTX) have fallen out of favor.

Still, Pfizer remains positive about the future of its COVID franchise. The company anticipates that 24% of Americans, or about 79 million, will get a COVID vaccine in 2023. In comparison, 31% or roughly 104 million, received the vaccine in 2022. Pfizer also expects to sustain its dominance, with a 64% market share for the vaccine alone.

Moreover, Pfizer has a robust pipeline—and pipelines are the driving force behind drug stocks.

With mRNA technology's momentum, Pfizer is optimistic about its combined flu-COVID vaccine. The company foresees around 132 million Americans lining up for this two-disease vaccine, which it hopes to launch by 2026.

Shifting the discussion away from COVID, Pfizer estimates non-COVID revenue to increase by 6% annually through 2025, then projects a similar trajectory or better every year through 2030 to hit at least $70 billion.

Announcing these projections is a bold move, especially since Pfizer faces one of the most significant patent cliffs starting 2025 to 2028. Several top-selling treatments, which generate roughly $17 billion in yearly sales, will lose patent protection and face generic competition.
Pfizer is aggressively filling these anticipated voids with acquisitions, including three exciting companies: Global Blood Therapies, Biohaven Pharmaceuticals, and Arena Pharmaceuticals.

In 2022 alone, the company spent $26 billion, which granted Pfizer access to promising drugs for sickle-cell anemia, migraines, and ulcerative colitis.

By 2030, the company projects these and its subsequent acquisitions to generate at least $25 billion in annual revenue. This means it’s still on the lookout for more acquisitions.

Actually, the company estimates that it’s just 40% on the way to hitting its target of $25 billion in 2030 revenue coming from acquired treatments. This means the company would most likely spend another $50 billion in acquisitions to reach its goal.

In terms of its internal pipeline, Pfizer’s candidates can rake in at least $20 billion in sales by 2030. Some of its key launches include vaccines for the flu, meningitis, and respiratory syncytial virus (RSV). It also has treatments targeting blood cancer and atopic dermatitis.

Meanwhile, its oral diabetes and obesity products, which are currently in clinical trials, have the potential to generate roughly $10 billion in annual sales. If approved, these would allow Pfizer to go head-to-head against Eli Lilly (LLY) and Novo Nordisk (NVO).

Overall, Pfizer is an “iconic, blue-chip company” that’s on a discount these days. It is down roughly 15% this 2023, offering an excellent window for investors who want to buy the stock.

The company trades for 13 times its estimated earnings in 2023 and yields 3.7%, which is over double the S&P’s dividend rate. With this payout, along with its solid earnings and one of the best balance sheets across the industry, Pfizer looks incredibly safe.

However, it’s essential to be realistic. Pfizer’s goal is to go through this year minimally unscathed. Although its performance in 2022 was impressively strong, with revenue surging to a whopping $100 billion compared to $42 billion in 2020, the year 2023 is a reset period for the business.

Trade Alert - (ZM) February 7, 2023 - STOP LOSS - SELL

Tech Alert

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

Trade Alert - (TSLA) February 7, 2023 - BUY

Trade Alert

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

February 7, 2023

Jacque's Post

Sunday afternoon
February 6, 2023

Good morning/afternoon,

The next time that there is a Fed statement, non-Farm payrolls and earnings reports from big tech all in one week, John will probably take the week off and fly to a Pacific Island. You wanted volatility, you certainly got it.

The safest thing to do would be to go to cash and sit on the sidelines and watch the show.

So, what’s the market telling us now? John says that the market doesn’t care about interest rates anymore, as it believes there will be a soft landing. Large parts of the economy can operate without outside money and big tech will always make money but will rotate from large profits to smaller ones and then back to outrageously large ones again.

Furthermore, John points out that the Fed Chairman doesn’t have a clue what’s happening either, along with his 100 or so PhD’s in economics on his staff. Who foresaw the January Nonfarm Payroll Report that came in at 2.5X expectations on top of 4.5% in interest rate hikes?

It seems a new type of economy has emerged out of the ashes of the pandemic, and no one has quite figured it out yet.

Big tech appears to be replacing the Fed with an immense supply of free money in the form of immense profits.

John has met 9 of the last 13 Presidents. Eisenhower was his favourite. I’ve included here his writing about his experiences and views of each President. Worth a read.

As for me, the telephone call went out amongst the family with lightning speed, and this was back in 1962 when long distance cost a fortune. President Dwight D. Eisenhower was going to visit my grandfather’s cactus garden in Indio the next day, said to be the largest in the country, and family members were invited.

I spent much of my childhood in the 1950s and 1960s helping grandpa look for rare cactus in California’s lower Colorado Desert, where General Patton trained before invading Africa. That involved a lot of digging out a GM pickup truck from deep sand in the remorseless heat. SUVs hadn’t been invented yet, and a Willys Jeep (click here) was the only four-wheel drive then available in the US.

I have met nine of the last 13 presidents, but Eisenhower was my favorite. He, who I remember as a kindly old man, certainly made an impression on me as a ten-year-old boy.

I walked with Eisenhower and my grandfather plant by plant, me giving him the Latin name for its genus and species, and citing unique characteristics and uses by the Indians. The former president showed great interest and in two hours, we covered the entire garden. I still make my kids learn the Latin names of plants.

Eisenhower lived on a remote farm at the famous Gettysburg, PA battlefield given to him by a grateful nation. But the winters there were harsh so he often visited the Palm Springs mansion of TV Guide publisher Walter Annenberg, a major campaign donor.

Eisenhower was one of the kinds of brilliant men that America always comes up with when it needs them the most. He learned the ropes serving as Douglas MacArthur’s Chief of Staff during the 1930s. Franklin Roosevelt picked him out of 100 possible generals to head the allied invasion of Europe, even though he had no combat experience.

After the war, both the Democratic and Republican parties recruited him as a candidate for the 1952 election. The latter prevailed, and “Ike” served two terms, defeating the governor of Illinois Adlai Stevenson twice. During his time, he ended the Korean War, started the battle over civil rights at Little Rock, began the Interstate Highway System, and admitted Hawaii as the 50th state.

As my dad was very senior in the Republican Party in Southern California during the 1950s, I got to meet many of the bigwigs of the day. New York prosecutor Thomas Dewy ran for president twice, against Roosevelt and Truman, and was a cold fish and aloof. Barry Goldwater was friends with everyone and a decorated bomber pilot during the war.

Richard Nixon would do anything to get ahead, and it was said that even his friends despised him. He let the Vietnam War drag out five years too long when it was clear we were leaving. Some 21 guys I went to high school with died in Vietnam during this time. I missed Kennedy and Johnson. Wrong party and they died too soon. Ford was a decent man and I even went to church with him once, but the Nixon pardon ended his political future.

Peanut farmer Carter was characterized as an idealistic wimp. But the last time I checked, the Navy didn’t hire wimps as nuclear submarine commanders. He did offer to appoint me Deputy Assistant Secretary of the Treasury for International Affairs, but I turned him down because I thought the $15,000 salary was too low. There were not a lot of Japanese-speaking experts on the Japanese steel industry around in those days. Biggest mistake I ever made.

Ronald Reagan’s economic policies drove me nuts and led to today’s giant deficits, which was a big deal if you worked for The Economist. But he always had a clever dirty joke at hand which he delivered to great effect….always off camera. The tough guy Reagan you saw on TV was all acting. His big accomplishment was to not drop the ball when it was handed to him to end the Cold War.

I saw quite a lot of George Bush, Sr. who I met with my Medal of Honor Uncle Mitch Paige at WWII anniversaries, who was a gentleman and fellow pilot. Clinton was definitely a “good old boy” from Arkansas, a glad-hander, and an incredible campaigner, but was also a Rhodes Scholar. His networking skills were incredible. George Bush, Jr. I missed as he never came to California. And 22 years later we are still fighting in the Middle East.

Obama was a very smart man and his wife Michelle even smarter. Stocks went up 400% on his watch and Mad Hedge Fund Trader prospered mightily. But I thought a black president of the United States was 50 years early. How wrong was I. Trump I already knew too much about from when I was a New York banker.

As for Biden, I have no opinion. I never met the man. He lives on the other side of the country. When I covered the Senate for The Economist, he was a junior member.

Still, it’s pretty amazing that I met 9 out of the last 13 presidents. That’s 20% of all the presidents since George Washington. I bet only a handful of people have done that and the rest all live in Washington DC. And I’m a nobody, just an ordinary guy. It just makes you think about the possibilities.

Really.

It's Been A Long Road

Happy Monday.

Have an extraordinary week.

Cheers,

Jacque

Trade Alert - (ZM) February 7, 2023 - BUY

Tech Alert

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

February 7, 2023

Diary, Newsletter, Summary

Global Market Comments
February 7, 2023
Fiat Lux

Featured Trade:

(THE MAD HEDGE DICTIONARY OF TRADING SLANG)

CLICK HERE to download today's position sheet.

Note: We are moving webinar platforms to Zoom for the February 8, 12:00 EST Mad Hedge Biweekly Strategy

Webinar. To join, please click here.

The Mad Hedge Dictionary of Trading Slang

Diary, Newsletter, Research

The Diary of a Mad Hedge Fund Trader is read in 140 counties. About a quarter of our readers run the letter through a Google Translator before reading.

That has created a problem.

Stock trading is probably the most slang and acronym-ridden profession on the planet, second only to the United States Marine Corps. (Semper Fi).

And guess what? The Google Translator has never worked on the floor of a major stock exchange.

That means its translations often come out as gobbledygook or complete nonsense. So, the customers email me asking what the heck I am talking about in my daily newsletters, eating up a portion of my day.

I am therefore enclosing “The Mad Hedge Fund Trader’s Dictionary of Traders’ Slang” below.

To keep this a PG-rated publication, I have left some terms undefined, but you can make a good guess as to their true meaning. It turns out that most traders never got to finishing school, and many are not even gentlemen.

If any of you out there have additional terms you would like to add, please email them to me at support@madhedgefundtrader.com and put “DICTIONARY” in the subject line. I’ll use them in a future update. No doubt there are hundreds, if not thousands more.

Read, enjoy, and laugh.

Accelerated Time Decay – The increasing decline of the value of a stock option as it approaches its expiration date

Black Swan – A term made popular by Nassim Taleb that refers to a sudden, unexpected, low-probability event that has a disproportionately high impact on your portfolio.

Boredom Trading – reaching for marginally profitable trades during quiet markets because there is nothing else to do. Usually a bad idea.

Bottoming Process – When a market makes several failed attempts to make new lows, creating a medium term bottom

Blow off Top – The top of a price spike upward usually associated with a volume spike as well

Bubble – Any assets class rising in price far above and beyond any rational valuation measures

Buy the Dip – BTD/BTFD/BTMFD - Buy the recent decline in prices.

Don’t Catch a Falling Knife – don’t try and buy a stock in free fall

Don’t be a Hero – keep positions small during volatile markets

“Be greedy when others are fearful, and fearful when others are greedy” is a classic Benjamin Graham quote which means “buy bottoms and sell top.”

Pigs Get Slaughtered – Buy a position that is too big for you and it will turn around and bite you

Bull Trap – a strong market move up that sucks in buyers and then dies as soon as the last one is in

Bear Trap – A strong market move down that sucks in lots of short sellers and turns around as soon and the last one sells

Buy When There is Blood in the Streets – Buy stocks at market bottoms

Capitulation Bottom – The last bull throws in the towel, gives up, and dumps all his stock, making the final bottom of a major move

Capitulation Top – The last bear throws in the towel, gives up, and jumps into the market late, making the final top of a major move

Choppy – sudden and erratic price moves within a narrow range

Contrarian – one who trades against the general market consensus

Dead Cat Bounce – A brief rally in s stock that has just seen a sharp drop

Dialing for Dollars – Calling brokerage house customers to sell stocks for commissions

Don’t Fight the Fed – Don’t expect markets to fall when interest rates are falling

Don’t Fight the Tape – Don’t trade against the market trend. Comes for the paper ticker tapes that once transmitted stock prices by telegraph

Dry Powder – Keeping cash in reserve for better trading opportunities

Dumb Money – what inexperienced retail investors are doing. Thanks to the internet, they’re not as dumb as they used to be

Get Filled – Your order is executed

Growing Hair on It – Keeping a position for too long

The Greeks – Greek alphabet letters that refer to option valuation components, such as delta, theta, gamma, and vega

High-Frequency Traders (HFT) – Firms using sophisticated computer programs to take positions for infinitesimally short periods of time taking microscopic profits in enormous volumes. They account for roughly 70% of daily trading volume

Holding the Bag – you are left holding stock in a falling market or short in a rising one

Honor Your Stops - don’t make excuses for ignoring stop losses. This is where the really big hits come from

Killing It – Making a series of successful trades

Locked Market – When the bid and offer are identical

Market Makers – firms that provide market liquidity with two-sided bids and offers, now largely replaced by computers

Melt Up – A straight line move upward in shares with no pullbacks whatsoever, usually triggered by a news or earnings release

Momo – Momentum-based trading, buying rising markets and selling falling ones

Never Short a Dull Market – Quiet markets can often rally sharply because the selling is done

Noise – Random media reporting that has no true impact on the direction of stock prices

Pain Trade – the market is moving against the positions of the trading community

Permabear – A persona who is always bearish, usually driven by some bizarre Armageddon-type ideology, or suffering from paranoia

Permabull – a person who is always bullish, despite deteriorating fundamental conditions

Picking Up Pennies in Front of a Steamroller – Sell short naked put options

Pump and Dump – Unethical brokers run of the prices of small illiquid stocks and then sell them to clients at market tops. The shares usually collapse afterwards. See the movie Wolf of Wall Street

Resistance Level – A price on a stock chart offering technical resistance to further price appreciation

Sell in May and Go Away – The preference for selling shares ahead of a period of seasonal weakness

Sell the Rip – STR/STFR/ STMFR

Short Squeeze – A sharp run-up in share prices that forces short sellers to buy to avoid accelerating losses.

Smart Money – what the best informed, most experienced investors are doing. Not as smart as they used to be.

Snakebit – A surprise news development that comes out of the blue and costs you money

Spoofing – entering orders without any intention of executing them and cancelling them before they can be executed. It is a common tactic of high-frequency traders

Spoos – S&P 500 futures contracts

Squak Box – A small loudspeaker on a desktop in a trading room constantly broadcasting news reports and large trades

Support Level – A price on a stock chart offering significant technical support

Stop Loss - a price at which, when reached, a liquidation of the position is automatically triggered

The Trend is Your Friend – Trade with the market direction, not against it

Theta Burn – Time decay on options

Ticker Tape – A white ¾ inch wide paper tape used to transmit stock prices by telegraph at the rate of 500 characters a minute that was used until the 1950s to transmit stock prices. See ticker tape parade and delayed tape.

Topping Process – occurs when a market makes several failed attempts to make a new high, creating a medium term top

Turnaround Tuesday – the tendency of markets to reverse direction after the markets digest weekend news on a Monday

Yellen Put – an assumption that the Fed will come to the rescue with a monetary easing on any substantial market selloff

February 7, 2023 - Quote of the Day

Diary, Newsletter, Quote of the Day

“If one of my competitors were drowning, I’d throw them an anchor,” said the legendary Ray Kroc, the founder of McDonald’s.

February 6, 2023

Tech Letter

Mad Hedge Technology Letter
February 6, 2023
Fiat Lux

Featured Trade:

(PLATOONING AND TECH IS A MATCH MADE IN HEAVEN)
(ODFL), (CVLG), (ARCB), (ULH), (SNDR), (WERN)

Platooning and Tech is a Match Made in Heaven

Tech Letter

If trucks drive themselves, what will happen to long-distance drivers?

Self-driving cars are still a little ways off - but I do believe it will happen.

What will become of long-distance drivers?

Actually, self-driving cars should have been part of the street scene for a long time, at least according to Twitter CEO Elon Musk's forecasts.

In 2015, the Tesla founder predicted that two years later fully autonomous cars would be driving around.

Not so fast.

Since then, he has adjusted the forecast year after year. Musk recently said that 2023 will finally be the day.

But it's not just Musk who has butchered it when it comes to self-driving cars. Many car producers have announced autonomous cars every year, but they are still a long way off.

Many questions remain unanswered and will still remain unanswered for the foreseeable future.

No wonder, because the technical and social challenges involved in getting fully autonomous cars on the road are enormous.

Then there is the legislation of it – can an industry that is tilted towards benefitting Elon Musk really expect any Democratic legislation that is positive?

The consensus is that anything he will try to do will get delayed and he will need to wait for the Republicans.

What about the technical level?

What happens in unforeseen traffic situations? What if the human has to take the wheel, but his driving skills have long since atrophied? What do autonomous vehicles mean for traffic and urban planning? Who is liable in case of accidents?

Is "platooning" revolutionizing the forwarding business?

In the short term, there are traffic situations that are manageable in their complexity and in which autonomous vehicles could definitely play an important role in the future.

For example, experiments with automated truck convoys have long been carried out on freeways and highways. In this so-called "platooning", several trucks drive behind one another, with only the first vehicle in the column having to be driven by a person.

"Platooning" is intended to save fuel, since the vehicles' slipstream can be used more efficiently. But there is also the suspicion that staff could also be saved because fewer long-distance drivers are needed.

Last but not least, last year’s trucker protests in Canada highlight how governments can quickly turn authoritarian in nature, in this case, by closing truckers’ bank accounts.

Nobody in their right mind can say that’s pro-business and who in their right mind would want to open a new Canadian trucker business after that.

In the U.S., the truck driver is the most common occupation in 26 out of 50 US states. There is a 67% chance of it disappearing completely in the next twenty years because artificial intelligent solutions will deliver us a timely way to replace the driver.

The economist John Maynard Keynes predicted in 1930 that by 2030 we would only be working 15 hours a week. In an essay entitled "Economic Possibilities for our Grandchildren," the Brit didn’t consider that these gains would be pocketed by corporations and not the people.

It’s highly possible that within 10 years, humans won’t be driving groceries or other goods across states and this function will be replaced by an algorithm. If not that, then products will be platooned to a destination headed by one driver followed by a herd of self-driving trucks behind him or her.

Instead of passing on the cost savings to the end consumer, the gains will materialize in increased buybacks, higher dividends, higher stock prices, higher executive compensation, increased operational efficiencies, and decreased wage expenses.

Some of the winners of this A.I. revolution will be public trucking names such as Old Dominion Freight Line (ODFL), Covenant Logistics Group (CVLG), Arcbest (ARCB), Universal Logistics Holdings (ULH), Schneider National (SNDR), Werner Enterprises (WERN).