July 2024

Follow The Cell Towers In Tech

I will explain to everyone why the digital revolution is becoming supercharged in the blink of an eye.

Market valuations reflect the state of expected future cash flows in a company.

Under this assumption, some could argue that most big tech companies with staying power are almost a good buy at any price.

No-brainers would include a list of Microsoft, Amazon, Apple, and Netflix.

The global health scare and the carnage associated with it have brought forward revenue and expertise from the tech industry and infused the global economy with more cash.

When you mix that with the Fed playing nice, it sets up conditions for heavy buying in an industry that is going to be king of the global economy anyway.

Tech has been rampant in the first half of 2024 and the brief selloffs we get are only because we are running too hot too fast.

Doing business as we know it has been fast-forwarded by 15 years.

The change took place in a blistering 4 weeks.

The clearest signal of who is really calling the shots in the equity market is looking at which companies are dragging it up.

Technology is shouldering the responsibility of the equity market by outperforming the broader market with many software companies’ share prices higher than before the crisis.

For every Amazon or Microsoft, there is also a Macy’s or JC Pennys showing that this is really a stock pickers market.

We have not only learned that tech companies are critical to our functioning as a society, but that large tech companies will be even more central than ever before.

We are setting up for the Golden Age of tech who are earmarked to capture even more of the broader equity market.

I do agree that currently, the network effect is working in overdrive like a positive force multiplier. The US economy is riding high again, and this cannot be emphasized enough with the US economy printing growth quarter after quarter.

Digital revenue streams will effectively be pumped into every nook and crevice of the digital economy because of current modifications to the business environment.

Tech is destroying literally every sub-sector as we speak.

Take a look at commercial real estate and hotel operators; they have had to fight against the triple whammy of office sharing WeWork, short-term hotel platform Airbnb, and the coronavirus - a lethal three-part cocktail of malicious forces to the “traditional” model.

Any deep-pocketed investors should be cherry-picking every quality cell tower play possible because they are one of the various supercharged sub-sectors of tech.

Obviously, there are other no-brainers like semiconductor chips and certain software companies.

Any long-term investor with a pulse should buy Crown Castle International Corp. (REIT) (CCI) on any and all dips.

They are the largest owner of cell towers owning over 40,000 in the U.S. and the data will flow through these towers juicing the wider economy.

July 19, 2024

Jacque's Post

(AIRSPACE DEVELOPMENT IS GROWING IN AUSTRALIA)

July 19, 2024

Hello everyone,

Adding rooftop units is like making money from air

According to Warren Livesey, Airspace development is growing in Australia. Livesey finds old buildings around Sydney that have the capacity to hold a home or two on top and checks their zoning requirements.

In Sydney alone, the industry is valued at $150bn, with the potential to build homes on top of 90,000 strata buildings. Livesey says that the average strata rooftop is about 300 square metres.

Livesey points out that in Sydney there are about 30 million square metres of unused roof space in urban areas that could be used for housing. He goes on to say that there are about 100 million square metres in Australia above our stratum retail buildings that can be used for new rooftop homes.

Rooftop space is about $2500 per square metre, but in some areas, including Sydney’s eastern suburbs, it could go as high as $10,000.

Livesey explains that if you live in an area where you can build up to 12.5 metres and the building only goes to nine, you have that 3.5 metres of airspace that can actually be sold off and be rebuilt by somebody else.

It’s an industry that is still relatively secretive in Australia. Building owners request buyers’ agents, like Livesey, as well as developers and the new property owner to sign non-disclosure agreements on the deals.

Basically, owners don’t want anyone to know. The fear is that if the neighbours found out they would complain and object to the deal before a development application could be approved by a council.

Livesey has been selling between three and four spaces a month. He runs buyairspace.com.au. He set up the business after he had spent 10 years selling airspace in New York, London, and Paris.

He sees a big opportunity to build thousands of homes on top of existing buildings across Australia and says the fact that the homes are more sustainable is proving popular.

Most projects were for modular homes – homes that are built off-site and often take little to put together once on site – with cranes lifting them on top of properties room by room.

This is what makes them more sustainable – modular homes are built in controlled environments where manufacturers have more control over what products are used and how they are built.

If you want to find investments that are cheap, look abroad.

Europe’s Stoxx 600 index and the Japanese Nikkei 225 hit record highs earlier this year, along with the S&P500. But the Stoxx and Nikkei are trading at much more attractive valuations. FactSet data shows the Stoxx is trading at 15 times trailing 12-month earnings, while the latter has a multiple of 23. The S&P500, meanwhile, has 27 times earnings multiple.

This creates an opportunity for investors to find attractive investments at a cheaper valuation.

Europe has shown resilience in the face of recessionary concerns over mounting Russia-Ukraine tensions and a potential energy crisis.

The Stoxx 600 has gained nearly 8% in 2024, while the UK’s FTSE 100 is up 6%.

Here are exchange-traded funds to look at:

iShares MSCI Japan ETF (EWJ): The fund is up 11% year to date and charges 0.5% in fees.

iShares Core MSCI Europe ETF (IEUR): The ETF has climbed 6% in 2024. It has an expense ratio of 0.11%.

Franklin FTSE United Kingdom ETF (FLGB): The fund has gained 8% this year and has an expense ratio of 0.09%.

iShares Core MSCI Europe ETF (IEUR) Weekly chart

Franklin FTSE United Kingdom ETF (FLGB) Weekly chart

Portfolio Update

Options:

On the 7^{th of} February, I recommended options and stock buys on Microsoft, Exxon Mobile, and Barrick Gold.

(XOM) 105/110 and 110/115 out of the money LEAPS expiring on January 17, 2025. These are well in the money, so if you would like to take profits on these, do so. I know there is still time left in these positions, but when the market is giving you a gift, why not take it? The profit is only realized when the money is taken off the table.

I recommended 15/17 January 17, 2025, out of the money LEAPS in (GOLD). These are also in the money. It is up to you when you choose to take profits from this position. I do see gold continuing to rally.

LEAPS were also recommended on Microsoft (MSFT), but strikes were not specified. Again, it is up to you, when you take profits here, but just be mindful that the position was created when Microsoft was $403.66, so any position would be well in the money.

Cheers,

Jacquie

July 19, 2024

Diary, Newsletter, Summary

Global Market Comments
July 19, 2024
Fiat Lux

Featured Trade:

(THE BARBELL PLAY WITH BERKSHIRE HATHAWAY),
(BRK/B)

The Barbell Play with Berkshire Hathaway

Diary, Newsletter

It’s time to give me another victory lap. Berkshire Hathaway shares are now up 16.55% to a new all-time high. Every call spread and LEAPS I issued on (BRK/B) is now either at max profit or well in the money.

I have been pounding the table all year about the merits of a barbell strategy, with equal weightings in technology and domestic recovery stocks. By owning both, you’ll always have something doing well as new cash flows bounce back and forth between the two sectors like a ping-pong ball.

After all, nobody gets sector rotation right, unless they have been practicing for 50 years, like me.

Full disclosure: I have to admit that after 50 years of following him, I love Warren Buffet. He was one of the first subscribers to my newsletter when it started up in 2008. Some of his best ideas have come from the Mad Hedge Fund Trader, like buying Bank of America for $5 in 2008.

Oh, and he hates Wall Street for constantly fleecing people. Ditto here.

In reading Warren Buffet’s annual letter (click here for the link), it occurred to me that his Berkshire Hathaway (BRKB) shares were in effect a one-stop barbell investment.

For a start, Warren owns a serious slug of Apple (AAPL), some $120 billion worth, or 2.5% of the total fund. That gives (BRKB) some technology weighting. It cost him only $20 billion. The dividends he received entirely paid for the initial cost. So he owns 4% of Apple for free.

I remember the battle over the initial “BUY” in 2015. Warren fought it, insisting he didn’t understand the smartphone business. And he even knew Steve Jobs personally. In the end, he bought Apple for its global brand value alone. His all-in cost as of today, including dividends and splits? Less than zero.

That is Warren Buffet to a tee.

The next five largest publicly listed holdings are Bank of America (BAC), Coca-Cola (KO), American Express (AXP), and Verizon Communications (VZ). These are your classic domestic recovery sectors. And with a heavy weighting in other banks (BK) (USB), Buffet is effectively short the bond market (TLT), another position I hugely favor.

Also included in the package is a liberal salting of pharmaceuticals, Merck (MRK), and AbbVie (ABBV). He has a small energy weighting with Chevron (CVX) and Occidental (OXY). He even has a position in old heavy metal America with General Motors (GM).

Berkshire is also one of the world’s largest property & casualty insurance owners. Its current “float” is $138 billion. You all know his flagship holding, GEICO. And the gecko mascot isn’t going anywhere as long as Warren lives. It was Warren’s idea.

It all seems to work for Warren. In the first quarter of 2023, he earned a staggering $35.5 billion. All told, Berkshire employ 360,000, second to only Amazon (AMZN), and is the largest taxpayer in the United States, accounting for 3% of government revenues. Berkshire is also the largest owner of capital goods & equipment in the US worth $156 billion, topping (AT&T).

Many of Warren’s early 1956 $1,000 investors are millionaires many times over….and over 100 years old, prompting him to muse if ownership of his shares extended life.

Warren’s annual letter, which he spends practically the entire year working on, is always one of the best reads in the financial markets. There isn’t a better 50,000-foot view out there. He also admits to his mistakes, such as his disastrous purchase of Precision Castparts (PCC) in 2016 for $37 billion, which later suffered from the crash in the aerospace industry. In 2020, Buffet wrote off $11 billion of that acquisition.

He can do worse. In 1993, he bought the Dexter Shoe Company for $433 million worth of Berkshire stock. The company went under, but the Berkshire stock today is worth $8.7 billion.

Buffet’s letters always refer back to some of his “greatest hits,” today legends in the business history of the United States: GEICO, Furniture Mart, Berkshire Hathaway Energy, and See’s Candies, one of the largest employers of women in the US using 150-year-old recipes. Its peanut brittle is to die for.

In 2009, Buffet snatched away from me BNSF for a song, now the most profitable railroad in the country, an amalgamation of 360 railroads over 170 years. I say “snatched away” because it was my favorite railroad trading vehicle for decades until he bought the entire company. I hear its trains run by my home every night as a grim reminder.

Another benefit to owning (BRKB) is that Buffet is far and away the largest buyer of his own shares, soaking up $25 billion worth in Q1. And he is buying the shares of other companies that are also aggressively buying their own shares, like Apple ($200 billion last year). It all sounds like the perfect money-creation machine to me.

It gets better. Berkshires “B” shares trade options, meaning you can buy LEAPS (Long Term Equity Anticipation Securities), which by now, you all know and love.

This is how poor people become rich. In fact, my target for (BRKB) was $400 for the end of 2023 and $500 for 2025, right when the two-year LEAPS expires.

One question I often get about Berkshire is what happens when Warren Buffet goes to his greater reward, which is not an impossible concept given that he is 92 years old.

I imagine the shares will have a bad day or two, and then recover. Buffet has been hiring his replacements for a decade or more, and he handed off day-to-day operations years ago (I didn’t want to move to Omaha, no mountains).

When that happens, it will be the best buying opportunity of the year. And another chance to load up on those LEAPS.

July 19, 2024 - Quote of the Day

Diary, Newsletter, Quote of the Day

“Either you figured it out in a day or two or you were dead,” said the late Battle of Britain Spitfire pilot, John Schooling, and my aerobatics instructor in England 40 years ago.

Trade Alert - (JPM) July 18, 2024 - 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

July 18, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
July 18, 2024
Fiat Lux

Featured Trade:

(FROM GOLDEN EGG TO DUD, AND BACK AGAIN?)

(PFE), (LLY), (NVO), (VKTX), (GILD), (GPCR), (BNTX)

From Golden Egg To Dud, And Back Again?

Biotech Letter

Remember when Pfizer (PFE) was strutting around Wall Street like a rooster in a henhouse, clucking about their $10 billion-a-year weight-loss wonder drug?

Well, that golden egg turned out to be a dud, with safety issues and side effects sending their experimental pills to the scrap heap faster than you can say "clinical trial failure."

Just when we thought Pfizer had thrown in the towel, they're back in the ring, swinging with a new once-daily version of danuglipron and pushing it towards bigger studies.

But let me tell you, the market's about as excited as I am for a vegan BBQ. Pfizer's shares nudged up a measly 0.4% upon announcement, after a brief 2.9% spike that fizzled faster than a diet soda.

Now, let's talk about the 800-pound gorillas in the room: Eli Lilly's (LLY) Zepbound and Novo Nordisk's (NVO) Wegovy.

These weekly jabs are the current darlings of the weight-loss world, but everyone and their grandmother are scrambling to get an oral GLP-1 to market. It's like watching a gold rush, except instead of pickaxes, they're wielding pipettes.

Lilly's got orfoglipron in Phase 3, with data coming faster than a day trader's heartbeat. Novo's already peddling Rybelsus, though it's about as effective as a chocolate teapot compared to the injectables.

And don't forget the up-and-comers: Viking Therapeutics (VKTX), Gilead Sciences (GILD), and Structure Therapeutics (GPCR) are all elbowing for a spot at the table.

Now, I know Pfizer's trying to convince us that their once-daily danuglipron is the bee's knees, with "encouraging pharmacokinetic data." But they're as tight-lipped about side effects as a politician at a press conference.

The research world’s not completely buying it, and frankly, neither am I. We might be waiting until the cows come home - or at least until 2026 - before we see if this pill's worth its weight in gold.

Meanwhile, Pfizer's stock has been sagging like a bulldog's jowls, down 1.5% this year and a gut-wrenching 21% over the past 12 months.

They're also staring down the barrel of a $17 billion revenue nosedive by 2030 as their patents fly the coop faster than pigeons at feeding time.

So, what has Pfizer been doing to deal with these? In recent months, the company has been on an acquisition bender that'd make a Vegas high-roller blush.

They snagged cancer specialist Seagen for a cool $43 billion, aiming to have eight blockbuster cancer drugs by 2030.

They're also playing footsie with BioNTech (BNTX) again, cooking up mRNA goodies like a COVID/flu combo vaccine. And let's not forget their partnership with Flagship Pioneering in the weight loss arena.

Over the past five years, Pfizer hasn’t been shy about spending money, securing over 20 new medicine approvals.

But Wall Street's been about as impressed as a cat with a new toy - they sniff at it and walk away. The stock took a 40% nosedive in 2023, partly thanks to their obesity program face-planting.

Still, Pfizer is not giving up so easily. In fact, they’ve worked to give their lineup a facelift. New approvals are rolling in faster than a greased pig at a county fair, and their pipeline's deeper than a philosopher on a bender.

Now, here's the million-dollar question: Is Pfizer a diamond in the rough or fool's gold? The market overreacted to their COVID-19 vaccine success, and now they might be overcorrecting in the other direction.

For those of you with nerves of steel and the patience of a Zen master, Pfizer could be a steal at these prices. If you don’t have the stomach for it, then I suggest you look elsewhere.

Trade Alert - (IBKR) July 18, 2024 - 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

Trade Alert - (CCI) July 18, 2024 - BUY LEAPS

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