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
Mad Hedge Biotech and Healthcare Letter
September 5, 2024
Fiat Lux
Featured Trade:
(A VERY STRONG CELL-ING POINT)
(TXG), (NSTG), (BRKR), (ILMN), (BMY), (GILD), (BIO)
I've been tracking the biotech sector for decades now, and let me tell you, we're on the cusp of something big. Single-cell and spatial genomics are shaking up cancer research like nothing I've seen before.
Remember when we used to look at tumors as one big blob of cells? Those days are gone.
Now, it's not just about understanding tumors anymore – it's about dissecting them cell by cell, mapping them out like uncharted territories.
Single-cell genomics is giving us a front-row seat to the cellular soap opera playing out in every cancer.
From where I'm sitting, this is the kind of revolution that separates the wheat from the chaff in my portfolio. We're not just identifying the players anymore. Instead, we're mapping out their positions and interactions with unprecedented precision.
Take what's happening at St. Jude Children's Research Hospital. They're using single-cell genomics to crack the code on why some stages of B-cell acute lymphoblastic leukemia thumb their noses at chemotherapy.
And this isn't just academic navel-gazing. It's actually paving the way for treatments that pack a real punch.
Or look at what Fynn Biotechnologies is doing with 10X Genomics' (TXG) Xenium In Situ platform.
They're peering into breast cancer tumors and finding that the neighborhood where immune cells hang out can make or break immunotherapy.
This is the kind of insight that turns the one-size-fits-all approach to cancer treatment on its head.
Now, let's talk turkey. Where's the money in all this? I've got my eye on a few players.
First up, 10X Genomics. These folks aren't just dipping their toes in the single-cell and spatial genomics pool; they're doing cannonballs.
Their Chromium and Xenium platforms are becoming the go-to tools for researchers and clinics alike.
And the numbers don't lie – they pulled in $156 million in Q2 2024, up 25% from the year before.
NanoString Technologies (NSTG) is a bit of a different story. They've been a big name in spatial biology with their GeoMx Digital Spatial Profiler, but they've hit some rough waters.
Filing for Chapter 11 in early 2024 wasn't on anyone's bingo card. Despite a solid Q4 2022 with $36.2 million in revenue (up 29% year-over-year), their legal tussle with 10x Genomics and other financial headaches have put them in a tight spot.
But don't count them out yet – Bruker Corporation (BRKR) swooping in to buy up their assets might just be the lifeline they need.
Illumina Inc. (ILMN) is another heavyweight worth watching. I’ve said it before, and I’ll say this again – this biotech is the reigning 800-pound gorilla in DNA sequencing. And now, they're muscling into single-cell genomics.
Their acquisition of GRAIL shows they're serious about early cancer detection. Sure, they've had some regulatory speed bumps, but with a market cap of about $33 billion in Q3 2024, they're not going anywhere.
Don't overlook the big pharma players either. Bristol-Myers Squibb (BMY) is betting big on precision medicine, teaming up with 10X Genomics to bring single-cell analysis into their drug development pipeline.
With BMY’s oncology portfolio raking in $17.3 billion in 2023, they've got the cash to make big moves.
Gilead Sciences (GILD) is another one to keep an eye on. Their purchase of Kite Pharma put them in the cell therapy game, and they're not shy about using genomic data to develop new cancer treatments. In fact, their cancer segment grew by 22% in 2023.
And let's not forget Bio-Rad Laboratories (BIO). They might have seen a slight dip in net sales from $2.9 billion in 2022 to $2.68 billion in 2023, but their Single-Cell ATAC-Seq Solution is still a key player in epigenomic analysis.
Now, let's zoom out and connect the dots. The genomics market is on a tear.
We're looking at a jump from $18.85 billion in 2020 to a projected $62.9 billion by 2028. That’s a massive growth, and it's directly impacting companies across the board.
Take 10X Genomics, for instance. Their Q2 2024 revenue hit $156 million, a 25% year-over-year increase that's directly tied to the surging demand for their single-cell and spatial genomics tools.
The single-cell genomics market alone was worth $2.4 billion in 2022 and is looking at a CAGR of 16.7% from 2023 to 2030.
Meanwhile, the precision medicine market, fueled by these genomic advancements, is projected to balloon from $66.1 billion in 2023 to $140.6 billion by 2030.
Let's not kid ourselves, though. Biotech investing is not for the faint of heart. You've got to have the stomach for high R&D costs, regulatory labyrinths, and cutthroat competition.
Just look at NanoString Technologies - one minute they're reporting a 29% revenue increase, the next they're filing for Chapter 11. It's a rollercoaster, but for those who can hang on, the potential payoff is enormous.
So, where does this leave us? Well, I didn't spend decades in this game to tell you to play it safe, but I'm not here to see you bet the farm either. Instead, I’m here to tell you to play it smart.
Add those nimble upstarts like 10x Genomics to your watchlist - they're the racehorses that could leave the pack in the dust.
And when the market gets jittery, that's your cue to swoop in on steady workhorses like BMY and Gilead. They might not be as sexy, but they’ve got the tried-and-tested staying power.
Remember, in biotech, today's underdog can become tomorrow's alpha faster than you can sequence a genome.
So stay alert, keep your powder dry, and for Pete's sake, don't wait for a gilded invitation to buy the dip.
Global Market Comments
September 5, 2024
Fiat Lux
Featured Trade:
(COFFEE WITH RAY KURZWEIL)
(GOOG)
After spending better than a half-century in the investment business, I see all decisions boiling down to a single issue: Artificial Intelligence.
Speaking to people at the local PTA, American Legion, the VFW, the Commonwealth Club, people sitting next to me at high school football games, and even my own readers, this is the impression I get.
AI is rapidly working its way into every aspect of our lives. But then I live in Silicon Valley where everyone works in tech or in supporting service industries.
Companies that lead with AI, such as NVIDIA (NVDA), Google (GOOG), Amazon (AMZN), Facebook (FB), and Microsoft (MSFT) will prosper mightily. Those that don’t will disappear.
Technology companies now comprise an amazing 30% of U.S. stock market capitalization and 50% of corporate profits. They are on their way to 100% on both counts. Other industries may see the occasional brief, frenetic stock market rallies, which will quickly fade away.
Investing now is really ALL about technology with the exception of biotech and health care, which you really can consider “soft” technology.
So, I thought it timely to catch up with my old friend, Dr. Ray Kurzweil, head of engineering at Google (GOOG), the co-founder of the Singularity University, and an early AI evangelist.
Some 25 years ago, Kurzweil pitched Google co-founder Larry Page for a venture capital investment in an AI start-up. Larry responded by buying the entire company, even though it was only two weeks old. That brought Kurzweil in-house and gave him the first call on Google’s prodigious resources.
To understand the recent spate of AI breakthroughs you have to go back years ago and see how a computer beat a human in the traditional Chinese game of Go. Long a goal of AI developers, Go is the most complex game ever played by humans, with 324 squares (18 X 18) and 361 stones. That means there are 2.08 X 10 to the 170th power possible moves or more than double the number of electrons in the universe.
Scientists downloaded all known online Go moves in history, of which there were about 1 million. They then programmed a superfast mainframe to simulate 1 billion more Go moves. After that, beating all humans was a piece of cake.
You can apply this approach to more than just games. Google’s Waymo autonomous driving division let cars drive themselves 8 million miles and then simulated another 1 billion miles. That’s why they are so far ahead in the field. 1,000 robotaxis in San Francisco agree with this.
You can also employ the same strategy when asking computers to identify new drugs by running simulations against a decoded human genome. The possibilities boggle the mind.
And the stock market? How about the accuracy of the Mad Hedge Market Timing Index, which takes market data from the last 400 years and then simulates another 1,000 years on top of that? And you wonder why it’s always right, and why I’m up 60% this year.
The fruits of those labors are found today in many Google services, such as Google Assistant and Google Home, which are growing smarter by the day. “Semantic Search” is the order of the day whereby searches are made on the basis of meaning and context, instead of my keywords alone. I work with Google all day long and the progression has been nothing less than astounding.
Just around the corner are “Smart Replies.” Google will be able to read 120,000 books, or 600 million sentences, in ½ second, and come up with the best three possible answers to every question of yours. If you’re willing to wait a few minutes, you can get the best three answers from every book ever written.
The term “AI” was coined at a famed conference at Dartmouth College in 1956. Don’t be intimidated. AI is simply super fast pattern recognition that any off-the-shelf Excel spreadsheet can accomplish done on ever-faster supercomputers.
Kurzweil believes computers will pass the Turing Test by 2029 when their answers to any questions will be indistinguishable from humans. Miniaturization is another exponential trend that will place human intelligence on any smartphone by the 2030s.
Create a bionic link between your smartphone and your brain and the “singularity” is here, which Kurzweil believes will take place by the 2040s.
Kurzweil is a firm believer in the “Law of Accelerating Returns,” whereby the productivity of technology doubles every year. Costs drop by a similar amount, creating a radical deflation. So am I.
He argues that modern economic theories are broken, and I have argued this myself in the past. So much of technology’s output is free, and therefore immeasurable, that true GDP growth has been wildly underestimated.
And you wonder why inflation has been near zero for a decade, while the value of your home has doubled, and the efficiency of your cell phone has improved by a trillion-fold for a lower real price. Kurzweil expects 5 billion cell phones to be in circulation by 2025.
Moore’s law, where semiconductor price/performance doubled every year, reached its theoretical limits in 2016. All of the growth in processing power since then has been due to “3D Stacking,” where layers of processors are piled one on top of the other. The current generation of processors will see a once unimaginable 96 layers.
And if you think this is all very interesting, wait a few years until we get economic quantum computers, which will increase computing power by a trillion-fold at no cost. Quantum computers rely on the infinite number of directions electrons can spin, rather than the simple on-or-off gates of traditional legacy computers. To learn more about quantum computing, please read my last piece on the subject by clicking here.
Sometime in 2019, Kurzweil will publish a sequel to his last book called “The Singularity is Nearer.” It will no doubt be the AI blockbuster of the year.
Before then he is launching into fiction for the first time, publishing “Danielle”, which is about a girl who solves all the problems of the world by the age of 22 with the tools we have available to us today. To learn more about this project and to pre-order the book, please visit www.danielleworld.com .
(AI), (AMZN), (GOOG), (MSFT), (ACN), (BAH), (MTCH), (PLTR), (SPLK), (SNOW)
The other day, I overheard my kids explaining AI to their friends using the video game they’re playing.
By the time they finished, I realized two things: One, I'm never going to understand Fortnite. Two, if a preteen gets the potential of AI, we'd better pay attention.
Now, you might be thinking, “John, haven't we heard enough about AI?” Well, let me ask you this: Have you ever had enough money? Didn't think so.
So, as I was saying, the AI market is set to explode from a measly $136 billion last year to a mind-boggling $827 billion by 2030.
And here's the thing - we're still in the early innings of this game. It's like we've just finished the national anthem and the first pitch hasn't even been thrown. And in this ballgame, I've got my eye on a player that might just hit it out of the park: C3.ai (AI).
Now, before you roll your eyes at another ".ai" company, hear me out. This isn't just another tech firm slapping "AI" onto its name to ride the hype wave.
C3.ai is positioning itself as a one-stop-shop in the AI world. They're not just selling software; they're selling the picks and shovels for the AI gold rush.
And let me tell you, in a gold rush, you want to be the one selling the tools, not the one with blisters on your hands from digging. Let’s look at the company’s recent performance, shall we?
Based on their reports, C3.ai’s revenue jumped 16% to $310.6 million in fiscal 2024. I know that 16% might not sound like much to you youngsters used to seeing crypto coins go up 1,000% overnight, but in the real world of enterprise software, that's solid growth.
And they're projecting $382.5 million for the current fiscal year - a 23% increase.
Now, here's where things get interesting: C3.ai's customer agreements surged by 52% to 191, thanks largely to their powerhouse partner network.
This network features big names like Amazon (AMZN), Alphabet (GOOG), Microsoft (MSFT), Accenture (ACN), and Booz Allen Hamilton (BAH), which helped drive much of this growth.
In fact, 115 of those agreements came through these partners, marking a 62% jump from last year.
That's like your Tinder (MTCH) matches suddenly going through the roof (yes, I know how it works, I'm not living under a rock) — it means you're doing something right.
Next, let's talk valuation. C3.ai is trading at 9 times sales. Is that cheap? Not by your grandfather's standards. But we're not buying IBM here, folks.
We're buying a ticket to the AI revolution. And compared to some of the frothy valuations I've seen in my time, it's not that outrageous.
Sure, they're not profitable…yet. But neither was Amazon for years, and look how that turned out.
Actually, the Street expects C3.ai's bottom line to grow at a 51% clip for the next five years. That's the kind of growth that can turn a modest investment into a down payment on that beach house in Malibu you've been eyeing.
But let's not get ahead of ourselves. While the growth story is compelling, there are some wrinkles to consider. That is, C3.ai remains a speculative play at this point.
Right now, I’m treating C3.ai like that brilliant but erratic friend from college - tons of potential, but you're never quite sure if they're going to end up as a tech billionaire or living in their parents' basement.
For one, I know that C3.ai’s transition to a pay-per-use model is smart. But, it's also disruptive. Because while their subscription revenue growth of 41% is impressive, it's also volatile.
If you review their reports, it’s easy to spot that this shift might be causing some growing pains. Just look at their latest fiscal quarter.
While C3.ai’s revenue grew 20% annually, its operating costs also jumped by 11%. That's not exactly the kind of cost control that gets investors excited.
And let's not forget the competition. This is the world of AI, where everyone and their grandmother is trying to get a piece of the pie. That means C3.ai needs to keep innovating faster than its peers just to stay ahead.
There's also the question of valuation. When compared to peers like Palantir (PLTR), Snowflake (SNOW), and Splunk (SPLK), C3.ai is trading at a premium. This suggests that a lot of the growth potential might already be baked into the stock price.
And, of course, let's not forget about those earnings estimates. For the current fiscal year, analysts are expecting a loss of $0.54 per share.
The next fiscal year looks better with an expected loss of $0.23 per share - an improvement of 56.7%, but still in the red.
So, what's the play here? Well, if you've got the stomach for it, C3.ai could be a worthy addition to the speculative portion of your portfolio. It's not for your widow and orphan money, mind you.
But for those of you looking to spice up your investments with a dash of AI hot sauce, C3.ai might just fit the bill.
Mad Hedge Technology Letter
September 4, 2024
Fiat Lux
Featured Trade:
(FEDS KNOCK THE WIND OUT OF TECH)
(AI), (NVDA), (MSFT), (META)
The U.S. Federal government just took the air out of the tech market rally in the short term.
Good thing the market usually has a short memory.
Mr. Market did not expect the US Justice Department to barge in and subpoena Nvidia (NVDA).
Nvidia is the gem of the tech industry and the leader of the cutting-edge generative artificial intelligence sub-sector.
To take out Nvidia and destroy it, the tech market would be valued at significantly less than it is today.
Not to mention we are just 2 months away from the U.S. election, this sounds and feels like a bold political move behind the scenes.
Why not wait until after the election?
As it stands, the timing is pretty terrible for tech stocks as the amount of catalysts to take us to new highs has disappeared.
The past earnings seasons were nothing stellar and many tech companies sold off on poor forward guidance.
It is no joke that we have been waiting for over 4 years for the recession that still hasn’t come.
However, it seriously looks like we won’t be able to kick the can down the road anymore and the job market is starting to fall apart to the point where we will need rate cuts.
The DOJ believes Nvidia is too dominant and appears to look like a monopoly and the government is inching closer to filing a formal complaint.
Antitrust officials are concerned that Nvidia is making it harder to switch to other suppliers and penalizes buyers that don’t exclusively use its artificial intelligence chips.
Nvidia has drawn regulatory scrutiny since becoming the world’s most valuable chipmaker and a key beneficiary of the AI spending boom. Sales have been more than doubling each quarter.
Regulators also are digging into whether Nvidia gives preferential supply and pricing to customers who use its technology exclusively or buy its complete systems.
Nvidia Chief Executive Officer Jensen Huang said he prioritizes customers who can make use of his products in ready-to-go data centers as soon as he provides them, a policy designed to prevent stockpiling and speed up the broader adoption of AI.
Microsoft (MSFT) and Meta (META) spend more than 40% of their budget on hardware on the chipmaker’s gear. During the peak of shortages of Nvidia’s H100 accelerator, individual components were retailing for as much as $90,000 each.
There also are broader regulatory questions about Nvidia’s practices. Access to AI capabilities has become a key focus for governments around the world, with the technology becoming increasingly vital to economic strength and national security.
If NVDA shares drop to anything close to the $100 level, I do believe that is a great entry point to add to shares.
Much of the bad news has been priced in and at the end of the day, even if NVDA is broken up, it will happen 10 years later.
As for the larger tech story, September could be a weak month for tech stocks and it is a seasonably slow month.
However, the infrastructure build for AI data centers relentlessly continues, and from my channel checks, I see tech firms increasing their purchases of Nvidia AI chips.
This bodes well for the future and explains why sales keep doubling and doubling like it never ends.
“I've actually not read any books on time management.” – Said Elon Musk
