“I wouldn’t want to see everyone get down to where Detroit is before we declare a bottom in residential housing,” said David Blitzer, former chairman of the S&P 500 Index Committee.
Mad Hedge Biotech and Healthcare Letter
May 23, 2024
Fiat Lux
Featured Trade:
(A DIVIDEND DERBY WINNER)
(ABT)
When you're at a racetrack, eyeing the horses before the big race, you're not just looking for a quick win. You want a stallion that'll keep delivering, race after race.
Well, that's exactly what we're hunting for in the stock market – companies that can keep those dividend payouts growing year after year. And if there's one thoroughbred you won't want to miss, it's Abbott Laboratories (ABT).
This biotech and healthcare giant isn't just keeping pace; it's setting the darned pace. Abbott is dominating the medical devices arena, a sector projected to skyrocket from $518.5 billion in 2023 to a whopping $886.8 billion by 2032. That's a steady 6.3% annual growth rate.
However, Abbott's not content with just one race – they've got their fingers in the lucrative pies of diagnostics and nutritional products, too.
But hold your horses, partner. Abbott isn't some one-trick pony. They've got their fingers in the lucrative pies of diagnostics and nutritional products too. Earlier this year, I gave this stock a thumbs-up, and it's only become more of a hot ticket since.
Fresh off their first-quarter reveal in April, Abbott's core business – think medical devices, diagnostics, and even baby formula – grew organically by an impressive 10.8% year-over-year.
This marks the fifth consecutive quarter of double-digit growth, so we're not just talking about a lucky streak here.
From what I can see, their Medical Devices segment is the real workhorse, surging 14.2% over the previous year. Their FreeStyle Libre device isn't just flying off the shelves, it's practically teleporting, with sales up 23% from last year. And with the FDA's recent green light for innovative products like TriClip and Amulet, Abbott isn't just playing in the major leagues, they're calling the shots.
Their Nutrition sector wasn't a slouch either, pulling in $2.1 billion in sales, a 5.1% increase over last year. Abbott's new Protality shake, launched in January, is specifically designed for those on weight loss journeys, adding another feather to their growth cap. Needless
Even their Diagnostics segment, which saw a dip due to the waning of COVID-19 testing, showed underlying strength in non-COVID testing. Their recent clearance for a concussion diagnostic test proves they're not slowing down on the innovation front.
When it comes to financials, Abbott is built like a brick house. With rock-solid interest coverage and debt servicing capacity, it's no wonder analysts are predicting a steady climb in their earnings. They've got a pipeline of new products and a market that's bouncing back from the pandemic, creating a recipe for success.
And don't even get me started on the dividends. Sure, Abbott's 2.1% yield might seem modest, but it's the growth story that's truly captivating.
Over the past decade, they've seen a staggering 11.4% annual growth in dividends. This ain't no stagnant stock, folks; it's a purebred built for speed.
Of course, no investment is without its bucking broncos. Abbott's still wrestling with the drop-off in pandemic-related revenues, and while their R&D spending is admirable, there's no guarantee those investments will always pay off. And let's not forget the ever-present threat of cyberattacks—a risk for any big player in today's world.
Still, while there might be a few hurdles in the race, Abbott Laboratories is a thoroughbred built for the long haul. With a rock-solid balance sheet, a track record of innovation, and a dividend that's been growing faster than a foal in springtime, this is a stock that's hard to beat.
And right now, the odds are in your favor. This company’s shares have been trading at a discount. So if you're ready to saddle up with a dividend growth thoroughbred, it's time to consider adding Abbott Laboratories to your stable. Because when it comes to the dividend derby, this is one horse you'll want to back.
Global Market Comments
May 23, 2024
Fiat Lux
Featured Trade:
(BEHOLD THE POWER OF THE NVIDIA LEAPS)
(NVDA)
I know that most of you bought my recommendation on September 29, 2022, to buy the NVIDIA (NVDA) January 2025 $270-$280 out-of-the-money vertical Bull Call spread LEAPS at $0.50 or best, so I thought I’d give you an update.
Since I sent out this trade alert, (NVDA) shares have catapulted from $127 to $1,050, a gain of 8.27 times, or 827%. Today, the middle market for the LEAPS is $9.20, a gain of 18.4 times, or 1.840%. And this is a position where you never risked more money than you put up.
Those of you who bought this in size have already retired and will never work another day in their lives.
Such is the incredible power of LEAPS.
Of the 38 LEAPS I have issued over the past three years, 36 are at max profit. Only (UNG) and the last (TLT) are sucking hind tit. But they still have eight more months to run. The final bell has not been rung….yet.
There are many more LEAPS recommendations to come from the Mad Hedge Fund Trader. However, you will find I issue many more of these at market bottoms than tops. Timing is everything.
For your edification, I have included the original trade alert below.
Trade Alert - (NVDA) – BUY
BUY the NVIDIA (NVDA) January 2025 $270-$280 out-of-the-money vertical Bull Call spread LEAPS at $0.50 or best
Opening Trade
9-29-2022
expiration date: January 17, 2025
Number of Contracts = 1 contract
Keep in mind that NVIDIA is one of the most volatile stocks in the market. You don’t have to buy it today. A big selloff would be ideal. But it should be at the core of any long-term LEAPS portfolio.
If you are looking for a lottery ticket, then here is a lottery ticket.
While the chance of winning a real lottery is something like a million to one, this one is more like 2:1 in your favor. And the payoff is 19:1. That is the probability that NVIDIA shares will double over the next two years and four months.
Santa Clara-based NVIDIA designs and manufactures high-end, top-performing graphics cards or GPUs. There is probably one in your PC. They are essential in the artificial intelligence, automobile, PC, supercomputing, cybersecurity, and gaming industries.
They are also crucial for national defense. The Biden administration recently banned NVIDIA from exporting high-end chips and their manufacturing equipment to China, which they were using to build sophisticated weapons to use against us. This revenue loss is what has taken the shares down to their current low levels, down 65% in six months.
NVIDIA has long been one of the fastest-growing US companies, Since 2005, its annual net income has soared from $89 million to $9.7 billion. Its NVIDIA Titan V graphics processing unit used for supercomputing architecture sells for an eye-popping $2,999.
And before you ask, NVIDIA is an abbreviation for the Latin word for “envy.”
To learn more about the company, please visit its website at https://www.nvidia.com/en-us/
I am therefore buying the NVIDIA (NVDA) January 2025 $270-$280 deep out-of-the-money vertical Bull Call spread LEAPS at $0.50 or best.
Don’t pay more than $1.00 or you’ll be chasing on a risk/reward basis.
January 2025 is the longest expiration currently listed. Please note that these options are illiquid, and it may take some work to get in or out. Executing these trades is more an art than a science.
Let’s say the NVIDIA (NVDA) January 2025 $270-$280 out-of-the-money vertical Bull Call spread LEAPS are showing a bid/offer spread of $0.50-$1.50. Enter an order for one contract at $0.50, another for $0.60, another for $0.70, and so on. Eventually, you will enter a price that gets filled immediately. That is the real price. Then enter an order for your full position at that real price.
Notice that the day-to-day volatility of LEAPS prices is minuscule since the time value is so great. This means that the day-to-day moves in your P&L will be small. It also means you can buy your position over the course of a month just entering new orders every day. I know this can be tedious but getting screwed by overpaying for a position is even more tedious.
Look at the math below and you will see that a 112% rise in (NVDA) shares will generate a 1,900% profit with this position, such is the wonder of LEAPS. That gives you an implied leverage of 19:1 across the $270-$280 space.
(NVDA) doesn’t even have to get to a new all-time high to make the max profit. It only has to get back to $270 where it traded last March.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Just enter a limit order and work it.
This is a bet that NVIDIA will not fall below $280 by the January 17, 2025 option expiration in 2 years and 4 months.
Here are the specific trades you need to execute this position:
Buy 1 January 2025 (NVDA) $270 calls at………….………$11.00
Sell short 1 January 2025 (NVDA) $280 calls at…………$10.50
Net Cost:………………………….…….…..…………...........….....$0.50
Potential Profit: $10.00 - $0.50 = $9.50
(1 X 100 X $9.50) = $950 or 1,900% in 2 years and 4 months.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Debit Spread” by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep-in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
"I had no idea Amazon would produce this kind of performance. I blew it," confessed Oracle of Omaha Warren Buffett.
Mountain View, California – In a groundbreaking move poised to reshape the digital landscape, Google has unveiled a series of ambitious initiatives harnessing the power of artificial intelligence (AI) to redefine search and elevate user experiences. With a multi-pronged approach, the tech giant aims to make search more intuitive, informative, and personalized, all while laying the groundwork for a future where AI-powered assistants like the enigmatic "Astra" become integral to our daily lives.
AI-Powered Search: The Next Frontier
At the heart of Google's AI-driven transformation lies a paradigm shift in how search engines operate. Traditionally, search engines have relied on keyword matching and website ranking algorithms to deliver results. While effective to an extent, this approach often falls short when faced with complex queries or the need to understand nuanced user intent.
Google's new AI-powered search algorithms are designed to bridge this gap. By leveraging advanced natural language processing (NLP) and machine learning models, the search engine can now better comprehend the context of user queries, discern the intent behind them, and deliver more relevant and informative results. This means that users can ask questions in natural language, just as they would to a human, and receive answers that are tailored to their specific needs.
The Rise of "Astra" and Conversational AI
While the current AI enhancements are already making a significant impact, Google's vision for the future extends far beyond improved search results. The company is actively developing an AI-powered conversational assistant codenamed "Astra." This sophisticated AI aims to revolutionize how we interact with technology by enabling seamless, natural language conversations that go beyond simple queries.
Astra is designed to be a versatile and knowledgeable companion, capable of understanding complex requests, answering questions in-depth, and even engaging in meaningful dialogue. With Astra, users could potentially book flights, order food, get personalized recommendations, or even learn new skills, all through natural language conversations.
While Astra is still under development, its potential applications are vast and could fundamentally change how we interact with information and services online. Google envisions Astra as a platform that can be integrated into a wide range of devices and applications, from smartphones and smart speakers to cars and wearable technology.
Challenges and Considerations
As with any technological advancement, Google's AI initiatives raise important ethical and societal questions. The potential for AI to amplify biases, spread misinformation, or be misused for malicious purposes is a significant concern. Google has acknowledged these challenges and is committed to developing AI responsibly and ethically.
Another consideration is the impact of AI on the wider internet ecosystem. As AI-powered search becomes more prevalent, it could potentially disrupt the traditional web traffic model, which relies heavily on users clicking on links to websites. Google is aware of this potential disruption and is actively working with publishers and content creators to develop new business models that can thrive in an AI-driven landscape.
The Path Forward
Google's journey into the realm of AI is just beginning, and the company is investing heavily in research and development to push the boundaries of what's possible. The company has already made significant progress in areas such as computer vision, natural language understanding, and machine learning, and it continues to explore new frontiers in AI research.
In the years to come, we can expect to see even more sophisticated AI-powered features in Google Search, such as personalized recommendations, interactive knowledge panels, and perhaps even the ability to generate creative content like poems or code.
A Glimpse into the Future
As Google continues to innovate in the field of AI, the lines between search, information retrieval, and conversational interaction are likely to blur. The future of search may not be a list of links, but rather a dynamic, interactive experience where AI acts as a knowledgeable guide, helping users navigate the vast landscape of information and complete tasks efficiently.
With Astra and other AI-powered initiatives, Google is not just improving search; it's reimagining how we interact with technology and access information. The journey is fraught with challenges and ethical considerations, but the potential rewards are immense. As we move into this new era of AI-powered search, one thing is clear: Google is leading the charge, and the future of search has never looked more exciting.
Mad Hedge Technology Letter
May 22, 2024
Fiat Lux
Featured Trade:
(THE AI DATA CENTER COOLING STOCK)
(VRT), (NVDA), (AI)
Not every winner from the artificial intelligence revolution will be in Nvidia (NVDA).
Let me be clear about that.
Others will wriggle their way into the group that can admire their success over time.
Here is one for you.
Readers need to look at a company that is literally collaborating with Nvidia to position themselves closest to Nvidia’s business model.
Aligning themselves with the hottest stock in the best sub-sector in the industry that grows the fastest isn’t a bad idea.
That’s why readers should take a peek at Vertiv (VRT) shares which have gone absolutely ballistic over the past year.
VRT is a provider of coolant distribution infrastructure for data centers.
IT cooling challenges continue escalating as new server-accelerated compute technologies, machine learning, artificial intelligence, and high-performance computing drive higher heat densities in the data center environment. Liquid cooling is rapidly emerging as the technology for efficiently handling power-dense hot spots.
These massive data centers require significantly more electricity to operate.
That offers an upside to industrials, utilities, and commodities, according to the firm.
GPUs need 2-2.5x more power than CPUs, and expected power usage for US data centers under construction is equivalent to more than 50% of the power currently used by US data centers.
Here is how Vertiv aids the technological revolution:
High-Density Power and Cooling Solutions: The ever-growing processing power of AI requires robust power and cooling infrastructure.
Vertiv's data center solutions are designed to handle the intense heat generated by AI workloads, ensuring optimal performance and preventing overheating.
Technical Partnerships: Vertiv actively collaborates with leading AI chipmakers like Nvidia. These partnerships ensure their solutions are specifically tailored to meet the unique power and cooling demands of cutting-edge AI hardware.
End-to-End Expertise: Vertiv doesn't just provide individual components. They offer comprehensive solutions that manage power delivery and heat rejection from the power grid all the way to the individual chip. This holistic approach streamlines AI infrastructure deployment and optimizes performance.
Their scalable solutions can adapt to the ever-increasing power and cooling needs of AI applications.
Organic orders increased by 60% compared to the same period last year and net sales reached $6.82 billion.
Operating profit for the quarter was $203 million, while adjusted operating profit stood at $249 million, reflecting a significant year-over-year growth of 42%.
The company also began returning cash to shareholders, repurchasing approximately 9.1 million shares at an average price of $66 per share.
Its strong performance is due to robust demand, particularly in AI-driven deployments and liquid cooling technologies, positioning VRT for continued growth and operational improvement in the evolving digital infrastructure landscape.
The necessity of power usage also makes these GPUs considerably hotter, putting pressure on firms such as VRT to improve cooling systems in data centers.
VRT shares have essentially gone up in a straight line in the past 1.5 years from $12 per share to $100.
That type of return has been entirely justified.
Moving forward, I believe the stock will behave in a similar fashion as the demand for its products grows strongly.
Under no scenario do I find a way that its cooling technology will go by the wayside.
In fact, they could have such a great product that it might fuel speculation of getting acquired which would fuel an even higher share price.
I am bullish VRT.
(FIRST FLYING VEHICLES TO BE DELIVERED IN 2026)
May 22, 2024
Hello everyone,
Xpeng AeroHT, an affiliate of Xpeng, aims to deliver its flying car to customers in 2026.
In 2023, Xpeng AeroHT introduced the Land Aircraft Carrier – a large truck with a flying two-seater passenger electric drone inside. The flying car can detach from the truck, and people can then get into the drone and fly it.
Brian Gu, co-president of Xpeng is confident about its uptake. He argued that this vehicle is not for use in urban centres, but mainly for the outskirts in scenic areas. He went on to say that “we will work with municipalities to create flying parks and flying zones that allow people to enjoy flying without the hassle of getting all the complicated approvals.”
Xpeng stated that the flying car is currently going through a certification process with the Chinese aviation regulator.
It’s been made clear that passengers will not require a special license to fly the drone for initial use.
The company is using leisure and sports-related use cases for the initial use of that flying device. Of course, if you move closer to an urban area then you do need special licenses. Securing approval gets complicated then.
Robotics and flying cars are part of Xpeng’s long-term goal.
Most people don’t use the term “flying car”, rather the acronym, eVTOL is used, which stands for:
electric
vertical
Take
Off and
Landing
Interestingly, more than 400 companies and innovators have registered eVTOL designs and they have attracted billions of dollars in funding over the last decade. Amongst the investors are famous people including LinkedIn co-founder, Reid Hoffman, and musician, WILL.I.AM, and F1 champion, Nico Rosberg.
Companies investing in this space include Uber, Airbus, Toyota, and American Airlines among others.
If forecasts are correct the eVTOL market will grow from $ 1.2 billion in 2023 to $22.4 billion in 2030. That equals an annual average growth rate of 52%.
To reach that target, companies need to work with regulators – the Civil Aviation Administration of China, the US Federal Aviation Administration, and the European Union Safety Agency have laid out various certifications these vehicles will need to meet before taking to the skies.
Type certification- refers to the model design.
Production- Regulators will also want oversight on the production of the vehicles.
Operational Authorization - Pilots may need a special license to operate them.
Air Traffic Infrastructure – how do we fit these vehicles into the skies?
Infrastructure is also paramount – eVTOLS will need a place to take off and land and recharge.
Microscale airports have been proposed.
The final barrier to this industry taking off is public acceptance. eVTOLS won’t truly take off until people feel comfortable stepping into one.
Portfolio Update
Take profits on
STOCK TICKER DATE Recommended BUY PRICE May 21
Salesforce CRM 01/06/24 $260.00 $283.76
United Airways UAL 01/08/24 $41.76 $53.03
Humacyte HUMA 01/31/24 $3.19 $7.03
Stop out of
SoundHound SOUN 03/13/24 $5.86 $5.12
Li Auto LI 03/15/24 $36.47 $20.96
Innoviz
Technologies INVZ 12/13/23 $2.30 $1.15
Cheers,
Jacquie