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
(DON’T GET TOO COMFY – MORE CHOP & CHURN IS ON THE HORIZON)
August 9, 2024
Hello everyone.
ARE WE THERE YET?
Historically, it is rare for markets to put in correction lows in August. September and October are more likely to see an eventual bottom. So, be ready for equity market volatility in September.
ELI LILLY(LLY)
Eli Lilly reported impressive second quarter earnings. Mounjaro, a prescription medication for Type 2 diabetes, and Zepbound, a prescription medicine for weight loss are two drugs by Eli Lilly seeing incredible demand. In its first full quarter in the U.S. market, Zepbound brought in $517.4 million in revenue. In the second quarter, it generated $1.24 billion in U.S. revenue.
Obesity affects nearly 42% of adults in the U.S. according to the latest data from the Centres for Disease Control and Prevention.
The demand for weight loss drugs in on the rise around the world. The global market for obesity medication is expected to hit $105 billion in 2030, according to Morgan Stanley’s research. That’s up from the firm’s forecast in September of $77 billion.
Drug manufacturers like Eli Lilly and Novo Nordisk, the pharmaceutical company that makes Ozempic and Wegovy, are racing to meet that demand. Both companies are investing billions to build new manufacturing plants to boost supply of the popular medications.
Eli Lilly was founded in 1876 and became a publicly traded company on the New York Stock Exchange in 1952.
$1000 invested in Eli Lilly 10 years ago would now be worth $13,143, an estimated percentage increase of 1,214%.
The lesson here is don’t try and attempt to use a company’s short-term performance to predict how well or how poorly it may do in the future. There will always be market fluctuations. The key is to stay the course and let the growth narrative unfold over time.
This is an item of interest, not a suggestion to buy (LLY) right now. But (LLY) is an excellent stock to hold for the long term.
WHAT SHOULD MY PORTFOLIO LOOK LIKE?
An illustration of asset classes and allocations by age.
It is different for everyone.
So, one example does not fit all.
WHAT IS… FORWARD PRICE/ EARNINGS RATIO?
The forward price/earnings ratio is a measurement of value. It is found by dividing a stock’s most recent price by next year’s earnings per share estimate for the entire year. If that estimate is unavailable, then the estimate for the full current fiscal year is used.
For a better understanding of what forward price-to-earnings means, let’s look at an example. Let’s say a company’s current stock price is $25. Analysts estimate an EPS of $1.50 for the next quarter. Its forward P/E ratio would be 25/1.5=16.
Difference between forward P/E and trailing P/E
The main difference between standard P/E and the forward price-to-earnings definition is that the former uses actual EPS that has already been reported by a company, whereas the latter uses the EPS estimate.
The standard P/E is used to evaluate whether a company is overvalued or undervalued, whereas forward P/E ratio determines future estimated value.
Let’s look at an example. If the current price of a stock is $8 with the EPS of $1, and its earnings are expected to double in the next year to $2, the forward P/E ratio will be 4x, or half of the company’s value when it earned $1.
If the forward P/E is lower than the current P/E, analysts expect earnings to increase. On the other hand, when the forward P/E is higher than the current P/E ratio, analysts expect earnings to decrease.
QI CORNER
SOMETHING TO THINK ABOUT…
Cheers
Jacquie
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
Global Market Comments
August 9, 2024
Fiat Lux
Featured Trade:
TESTIMONIAL)
(AUGUST 15 LONDON ENGLAND STRATEGY LUNCHEON)
Hi, my name is Wilson and I've been with the Mad Hedge Fund Trader, John Thomas, since 2019. I caught the phenomenal returns in 2019 and 2020, somewhere in the order of the 80-90% returns for both of those years. I caught all of those trades—Nvidia (NVDA) the US Treasury bond fund (TLT), Tesla (TSLA), etc. Then in 2021, I started trading in some additional accounts and I have caught almost all of the trades since then as well, getting almost the entire amount of returns that John has received.
It’s been just fantastic!
Wilson
Mill Valley, California
"If you work forever, you can live forever," said my friend and mentor, Blackstone's Byron Wien.
Mad Hedge Biotech and Healthcare Letter
August 8, 2024
Fiat Lux
Featured Trade:
(WHEN A+ PROFITS MEET C-VALUATION)
(AMGN), (ABBV), (GILD)
It's time we talk about Amgen (AMGN), that biotech giant that's been acting more like a sleepy bear than the roaring lion it once was.
Don't get me wrong. I've got a soft spot for Amgen. Having personally witnessed the struggles of cancer survivors who sampled their wares, I can tell you their stuff works. It's like rocket fuel for your immune system.
But as an investor? Well, that's where things get messy.
Amgen's definitely no slouch. It's the 5th largest component of the Dow Jones Industrial Average.
For us dinosaurs who still think the Dow matters (guilty as charged), that's like being the biggest, baddest T-Rex in Jurassic Park. But we all know how that movie ended, don't we?
In the S&P 500 jungle, Amgen's the 40th largest beast and the 9th largest in the healthcare sector. Impressive, sure, but so was the Titanic before it met that iceberg.
Amgen’s work in therapeutics, from Epogen and Aranesp boosting red blood cell counts to Neupogen and Neulasta enhancing immune systems, makes it indispensable in the healthcare sector.
Still, I have to dig deeper. Amgen’s profitability is stellar, boasting an A+ grade, which checks a significant box in my evaluation criteria.
However, the valuation, growth, and momentum reveal a picture that’s less rosy. Amgen isn’t the growth powerhouse it once was compared to its sector peers like AbbVie (ABBV) and Gilead Sciences (GILD), and its valuation is teetering on the edge of extravagant. The price has surged, rendering it "overvalued."
Even when considering its price-to-sales ratio—a favorite metric of mine—Amgen is near its 10-year peak at 6x sales.
That's not just expensive – it's "I'll have what they're having" territory. Sure, lots of big stocks are trading at nosebleed levels, especially in tech. But just because everyone's jumping off the valuation cliff doesn't mean we should join the lemming parade.
Now, everyone knows I’m a dividend junkie. I like my yields high and my risks low. It's a bit like my approach to mountain climbing—I want the view, but I'd rather not plummet to my doom getting there.
At first glance, Amgen looks tempting. The dividend is safe, consistent, and growing. But context is key.
The healthcare sector, using the XLV ETF as a proxy, yields only 1.5%. Amgen's 2.66% yield beats that handily, but it's toward the low end of its 7-year range.
To make it worthwhile as a long-term holding, Amgen would need to offer a yield in the 3.2%-3.5% range and demonstrate a clear bottoming pattern in its stock price. We're not there yet, folks.
Next, let’s talk charts. Looking at its stock price, if this were an EKG, we'd be calling a code blue.
Amgen’s chart shows a stock struggling to breach its trendline, with two potential target zones below the current price that it might hit.
While anything is possible in investing, I see those lower price areas as more likely than Amgen soaring 15% to fresh highs.
Could Amgen surprise us all and rocket up 15%? Sure, and I could win "Dancing with the Stars." Anything's possible, but I wouldn't bet my last dollar on either.
But here’s the kicker—Amgen's not alone in this boat. The whole market seems to have decided to party like it's 1999, forgetting that what goes up must come down. When it does, it'll be faster than my descent from 90,000 feet in that MiG.
Still, I'm not saying Amgen's destined for the biotech graveyard. At this point, it's not a "never buy," but a "not at this price."
I like to think of it as a hibernating bear. When that yield creeps up and the price comes down, it might be time to poke it with a stick.
If it stretches and growls with renewed vigor, you’ll want to be ready to jump in. Until then, let’s enjoy the show from a safe distance.
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