'Paper money is made of cotton, and I'm long cotton. One reason I'm long cotton is because Dr. Bernanke is out there running the printing presses as fast as he can', said noted commodity bull and former George Soros partner, Jim Rogers.
(SERV), (NVDA), (UBER), (DASH)
Well, it looks like Nvidia's (NVDA) not content with just ruling the AI chip roost. They've decided to take a stroll down Robotics Lane, and boy, is it turning heads.
Remember when I told you about the barbell strategy, balancing tech and recovery stocks? Well, Nvidia's playing its own version of financial Twister, with one foot firmly planted in AI chips and the other testing the waters of autonomous delivery.
The chip giant just converted a promissory note faster than you can say "burrito delivery," snagging over a million shares in Serve Robotics (SERV).
This brings Nvidia's total investment to l $12 million, giving it a 10% stake in the company. And, when the news broke, Serve's stock shot up 225%.
But let's rewind a bit. Serve actually has quite the pedigree.
Serve Robotics is the wonder child of the delivery world. It started life as Postmates X, the robotic brainchild of Postmates. But in 2020, Uber (UBER) crashed the family reunion, adopting Postmates for a cool $2.65 billion.
In the ensuing chaos, little Serve was spun out faster than you can say “emancipation,” becoming the independent robot delivery wunderkind we know today.
At Serve's public debut, Nvidia already owned 2.614 million shares. They then snagged another 62,500 shares in a private placement.
This latest move adds another 1.050 million shares to their collection, bringing the total to 3.727 million.
Now, Serve's little R2D2s aren't just eye candy. They've been zipping around Los Angeles since 2020, completing over 10,000 deliveries for Postmates by year's end.
Fast forward to 2023, and they've expanded to a fleet of 100 robots, completing over 50,000 deliveries for 300 restaurants with a jaw-dropping 99.94% success rate.
That's more reliable than my Swiss watch - and trust me, that thing's outlasted relationships.
These sidewalk warriors boast Level 4 autonomy, meaning they can navigate sidewalks using AI without human intervention. It's like giving a Roomba a promotion and a delivery bag.
The company's got big plans as well, aiming to deploy 2,000 of these mechanical meal couriers by 2025 in cities like San Diego, Dallas, and Vancouver.
They've even got Magna International (MGA), a $12 billion auto parts bigwig, signed on to manufacture these robots exclusively.
But let's zoom out for a second. Serve's management is betting on a global market for robotic and drone delivery worth a staggering $450 billion in annual revenue by 2030.
That's no small potatoes. Just look at DoorDash (DASH), which saw its revenue skyrocket by 200% from 2020 to 2023.
The US food delivery industry alone is set to generate over $353 billion in revenue this year. DoorDash leads the pack with a 67% market share, followed by Uber Eats at 23%.
Both rely on human drivers, but Serve is asking the million-dollar question: Why use a 2-ton car to deliver a 2-pound burrito?
Now, you might be thinking, "John, this sounds like the next big thing." And you might be right... eventually.
But before you rush to jump on this robotic bandwagon, let's take a closer look at what we're dealing with here.
Serve's revenue last year was a modest $207,545 - less than I spend on vintage wine. Sure, they're growing. Q1 2024 saw them rake in $946,711, but $850,000 of that was from the Magna licensing deal.
Their actual delivery business though? It's pulling in about as much as a lemonade stand in a desert.
And here's where it gets dicey: Serve is burning through cash faster than a sailor on shore leave. They lost $9 million in Q1 2024 alone, with $8.3 million in operating costs.
At this rate, they're on track to lose significantly more than the $20.7 million they hemorrhaged in 2023.
But hey, they've got some heavy hitters in their corner. Besides Nvidia's $12 million investment since 2018, Uber has thrown in $11.5 million. Even Delivery Hero (DLVHF) and 7-Eleven are getting a piece of the action.
Now, don't get me wrong. I love new tech as much as the next guy. Heck, I've flown MiG-25s at the edge of space and climbed Everest. But even I know that sometimes, the view from the top isn't worth the climb if your gear's not up to snuff.
Sure, Nvidia's backing is a nice vote of confidence. But let's put this in perspective: Nvidia's $12 million investment is like me losing the change in my couch cushions. It's a rounding error for a $2.9 trillion behemoth.
What's the play here then? Well, as much as I'd love to tell you to go all-in on robot deliveries, I'm going to have to curb your enthusiasm (get it?) and pour some cold sake on that idea.
The robot revolution in last-mile delivery is coming, no doubt about it. But at the moment, investing in Serve is like trying to deliver a souffle by drone - it might work eventually, but there's a good chance it'll end up a mess on your doorstep.
So, for now, Serve Robotics is a "watch and wait" situation.
Mad Hedge Technology Letter
August 2, 2024
Fiat Lux
Featured Trade:
(BAD NEWS IS BAD NEWS FOR TECH)
($COMPQ), (FXY)
Tech stocks ($COMPQ) won’t be down for too long. It’s been a while since we were caught by a right hook to the jaw, but it still hurts nonetheless.
The myriad of weakness was triggered by weakening employment numbers suggesting the internals of the US economy are falling apart.
Some of the big names are down, but that doesn’t mean they are down and out.
In fact, big tech didn’t fare that badly during earnings even though lots of little software companies were crushed.
It is true that forecasts have been substantially weak as enterprise spending is reigned in and belts tightened.
Then to really cap it off, the Japanese yen (FXY) strengthening via an unexpected interest rate hike by the Bank of Japan, sparked an unwind that really gutted tech stocks in the short-term.
Much of the liquid capital used to bid up tech stocks originated from Japanese banks who lent in Yen only for private funds to buy tech stocks in dollars.
That trade has gotten clobbered in the past few weeks.
There is a strong chance that the Bank of Japan could be out of bullets for now and this isn’t the death of tech.
We are just resting.
The unemployment rate cooling and tech stocks selling off finally means that bad news is bad news.
That translates into a manifestation of an upcoming recession or at least tech investors firmly believe so.
New signs of a cooling labor market are stoking fears that the Federal Reserve may have waited too long to start lowering interest rates.
We are in full-blown risk-off mode.
The US economy added 114,000 nonfarm payroll jobs in July, fewer than the 175,000 expected by economists. The unemployment rate rose to 4.3% — its highest level since October 2021.
Fed chair Jerome Powell said Wednesday that a cut in September was “on the table.”
Powell also said "the question really is one of are we worried about a sharper downturn in the labor market. The answer is we are watching carefully for that."
I still believe we will experience some sort of bounce back from tech stocks.
There is no way we go from soft landing to hard landing in a matter of three days.
What does this do for tech stocks?
With data points of this magnitude, it’s normal for a sharp rotation to occur.
The thing we have here is that we are at all-time highs so the profit-taking can become very vicious and hasty.
But if you want to ask me if the tech rally is over, no, it isn’t but we will need to go into consolidation mode to absorb poor revenue guidance.
The dip will be bigger than a mini-dip so as investors, we need to allow this underperformance to work itself through the system before we are off to the races again.
In the end, lower rates are the most advantageous for tech stocks, but conditions need to stabilize for tech stocks to reap those benefits.
“Rule No. 1: Never lose money.” – Said American Investor Warren Buffett
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
(WHAT IS REALLY CHURNING THE MARKET)
August 2, 2024
Hello everyone,
Is the economy slowing much faster than most realize?
Let’s check out the ISM data.
(ISM) Institute for Supply Management
The ISM manufacturing index, also known as the purchasing managers’ index (PMI) is a monthly indicator of economic activity based on a survey. The Purchasing Managers’ Index (PMI) is an indicator of economic health for manufacturing and service sectors.
The ISM release was weak overall, but it is the employment component that should be the talking point. If we cut the GFC and the pandemic from the picture – this is the weakest the series has been in over 20 years. The trend is very clear.
This is a sign of cooling domestic growth conditions. A recessionary breeze is starting to pick up, and if this is the case, one rate cut is not going to dent this trend.
Downbeat economic data is making gold upbeat
The metal has found support against a backdrop of slowing economic data, central bank buying, weakness in the dollar, and tensions in the Middle East. Going forward, expect a new range between $2,500 and $2,700 as the metal navigates a turbulent backdrop. Keep scaling into GLD on pullbacks and SLV.
Good news may not be far away for Aussies
Relief could be on the way for mortgage holders across the country as experts tip a rate cut might be on the table before Christmas.
Inflation figures released on Wednesday aren’t considered high enough to warrant a rate hike.
More than 80% of the surveyed economists predict the cash rate will be held at 4.35% when the board meets next week.
Australia’s core inflation rate, which excludes food and energy, has slowed enough to almost rule out another rate rise.
Some, however, are not ruling out a rate hike. University of Sydney economist, James Morley is among 19% of economists predicting an interest rate hike is likely to arrive in August.
While Mr Morley is anticipating a rate increase in August, he still believes that rate cuts will begin later in the year and well into the New Year.
Homeowners are waiting patiently for relief, as almost 50% of homeowners have struggled to pay their mortgage in July.
QI CORNER
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
Mad Hedge Biotech and Healthcare Letter
August 1, 2024
Fiat Lux
Featured Trade:
(THE PLAYBOOK FOR A BIOTECH TRIPLE CROWN)
(ABBV), (TEVA), (PFE), (AMGN), (AZN), (BGNE), (LLY), (CERE)
AbbVie (ABBV): A biotech stock that's been on my radar longer than most. If I could travel back to my UCLA biochem days, I'd tell young John to ditch the petri dishes and buy shares in this pharma giant. Why?
Because AbbVie isn't just another pharma play – it's a masterclass in diversification, innovation, and market-beating performance.
This is the stock that could turn a bright-eyed student into a savvy investor faster than you can say "immunology franchise."
In fact, if you've been paying attention to the market, you might have noticed that AbbVie's stock has been outperforming the broader U.S. market since mid-April, and for good reason.
This is a company that's been running at full throttle, posting some seriously impressive numbers in Q2 2024. We're talking $14.46 billion in revenue, a whopping 17.5% increase from the previous quarter and beating consensus estimates by a cool $430 million.
Earnings per share may have fallen just short of analysts' expectations, but they still climbed by a respectable 34 cents to $2.65.
But here's the thing: AbbVie's success isn't just a flash in the pan. This is a company with a diversified portfolio that's driving growth across multiple fronts.
I'm talking about their immunology, oncology, and neuroscience franchises, which together account for a staggering 75% of the company's total revenue.
Let's start with immunology. Now, I know what you're thinking - isn't that just Humira, AbbVie's blockbuster drug for Crohn's disease and ulcerative colitis? Well, yes and no.
While Humira has been facing some generic competition from the likes of Teva Pharmaceutical (TEVA), Pfizer (PFE), and Amgen (AMGN), resulting in a 30% year-over-year decline in global sales, AbbVie's got a couple of other tricks up its sleeve.
Enter Skyrizi and Rinvoq, two immunology drugs that are picking up the slack in a big way. Sales of these bad boys climbed 45% and 56%, respectively, in Q2 2024.
Skyrizi, in particular, has been an absolute beast, raking in $2.73 billion and growing 44.8% year-over-year. And with the FDA giving it the green light for moderate-to-severe ulcerative colitis in June 2024, the sky's the limit for this game-changer.
But AbbVie's not content to rest on its laurels. They're pushing the envelope with Rinvoq, a JAK inhibitor that's been approved for a wide range of indications and is showing some serious promise.
In Q2 2024, Rinvoq brought in $1.43 billion, a 30.8% quarter-over-quarter increase, thanks to strong demand in the U.S., excellent clinical trial results, and FDA approval for treating children with psoriatic arthritis and juvenile idiopathic arthritis.
And let's not forget about giant cell arteritis, a condition that AbbVie's been targeting with Rinvoq.
Recent trials have shown some impressive results, with 46% of adult patients taking Rinvoq 15 mg experiencing sustained remission, compared to just 29% of those on placebo.
No wonder AbbVie's been submitting applications left and right to get this drug approved for even more indications.
But it's not just immunology where AbbVie's making waves. Their oncology portfolio, bolstered by the acquisition of ImmunoGen in mid-February 2024, is also delivering the goods.
Sure, demand for Imbruvica may be declining due to newer BTK inhibitors from AstraZeneca (AZN), BeiGene (BGNE), and Eli Lilly (LLY), but Elahere, an antibody-drug conjugate for ovarian cancer, is quickly becoming a rising star.
In Q2 2024, Elahere sales jumped 65.4% quarter-over-quarter to $128 million, driven by increased marketing, growing awareness among physicians, and promising data from clinical trials.
Finally, let's not overlook AbbVie's neuroscience franchise, which generated a cool $2.16 billion in Q2 2024, a 14.7% year-over-year increase.
Headlining this portfolio are Qulipta and Ubrelvy for migraine treatment, and Vraylar for a range of psychiatric conditions.
Qulipta, specifically, has been a standout, with sales surging 56.3% year-over-year to $150 million, thanks to its convenient oral administration and long-term efficacy data.
Looking ahead, AbbVie's got even more irons in the fire. Their $8.7 billion acquisition of Cerevel Therapeutics (CERE) is set to close soon, bringing promising neuroscience candidates like emraclidine for schizophrenia and davapidon for Parkinson's into the fold.
With all these positive developments, it's no wonder AbbVie's feeling confident enough to raise its full-year adjusted EPS guidance to $10.71-$10.91, up from the previous range of $10.61-$10.81. Talk about a biochemistry experiment gone right!
So, there you have it. AbbVie: a healthcare powerhouse that's firing on all cylinders and poised for even greater success in the years to come. If only I could've shown this to my younger self back in those UCLA labs – he might've traded his test tubes for trading terminals a lot sooner.
Now, if you're ready to take a ride on this rocket ship, I suggest you buckle up and hang on tight. Because let me tell you, dissecting AbbVie's financial DNA has been more thrilling than any fracking adventure or hedge fund rodeo I've ever been on.
And if there's one thing I've learned in my years hopscotching from biochem labs to Wall Street, it's that the view from the top of a well-diversified, innovative pharma giant is always worth the climb. I suggest you buy the dip.
