“An S&P 500 index fund never beats the index. There’s fees, there’s friction costs, and other costs involved,” said Robert Reynolds, a manager at Putnam Investment Fund.
Mad Hedge Biotech and Healthcare Letter
September 19, 2024
Fiat Lux
Featured Trade:
(THE KING’S SPEECH)
(ABT), (DXCM), (LLY), (NVO)
Warren Buffett once said, “Time is the friend of the wonderful company.” If that's true, Abbott Laboratories (ABT) must be Father Time's BFF because this centenarian healthcare heavyweight has been befriending our wallets for longer than most of us have been alive.
First things first: Abbott's not just any dividend stock. It's a bona fide Dividend King, having hiked its payout for over 50 consecutive years. But let's not get too misty-eyed about history.
What's got my attention is Abbott's current form. This isn't your typical sleepy pharma stock. Abbott's been flexing its muscles across multiple segments, showing growth that could very well be a worthy competition against any Silicon Valley startup.
In the first half of this year, Abbott saw positive growth in all but one segment. The laggard? Diagnostics, which took a hit as COVID-19 testing went the way of the dodo. But hey, you can't win 'em all, right?
Now, let's talk dividends. Abbott's currently yielding a respectable 1.9%, outpacing the S&P 500's measly 1.3%. With a payout ratio of 67%, there's still room for this dividend to grow.
But where's the real excitement? Two words: diabetes care.
Abbott's continuous glucose monitoring devices are hotter than a two-dollar pistol, driving 19% organic growth in the first two quarters. With diabetes becoming a bigger epidemic than we anticipated, this could be Abbott's golden goose.
Just look at the skyrocketing stocks of diabetes-focused companies like Eli Lilly (LLY) and Novo Nordisk (NVO). Different products, same lucrative market.
Abbott's FreeStyle Libre CGM system isn't just some gadget. It’s actually a genuine life-changer that's raking in $1.6 billion in quarterly sales and growing 20% year-over-year. In a market where DexCom (DXCM) is nipping at their heels, that's no small feat.
But Abbott's not resting on its laurels. They're expanding into over-the-counter CGM systems like Lingo and Libre Rio, leveraging a decade of international experience to capture more U.S. market share. It's like they're aiming to slap a diabetes monitor on every wrist in America.
And here's the kicker: the number of people living with diabetes is projected to hit 643 million by 2030 and a whopping 783 million by 2045. If that’s not the definition of a growing market, then I don’t know what is.
But Abbott isn't a one-trick pony. While they're busy trying to corner the diabetes market, they're also cooking up a storm in other areas.
Take their cardiac care lineup, for instance. Abbott's dabbling in electrophysiology with their EnSite X EP System, equipped with something called Omnipolar Technology. Sounds like something out of a sci-fi flick, right? Well, it's making cardiac mapping more precise than a Swiss watchmaker, giving arrhythmia patients a fighting chance.
But that’s not where it ends. Abbott's TriClip system is tackling tricuspid valve repair like a pro wrestler pinning an opponent. And don't get me started on their Esprit dissolvable stent. It's like the James Bond of the vascular world - it does its job and then disappears without a trace.
So, while diabetes care might be Abbott's current chart-topper right now, they've got a whole album of potential hits in the works. From glucose monitors to heart repair, Abbott's making moves that could have investors' portfolios beating as steadily as a healthy heart.
And as for you nervous nellies out there, Abbott's beta value of 0.7 suggests it's more stable than a three-legged stool. Perfect for those of you who break out in hives at the mere mention of volatility.
Now, it hasn't all been smooth sailing. Abbott recently faced a trial over claims its preterm infant formula caused a dangerous disease. But don't start panic-selling just yet.
JPMorgan and Barclays reckon the liability is likely to be smaller than a gnat's appetite. Abbott's management is confident, too, probably because the product in question accounts for a whopping... wait for it... $9 million in revenue. That's pocket change for a company like Abbott.
Looking ahead, Abbott's firing on all cylinders. They're seeing 9.3% organic revenue growth (excluding their COVID products), and they're so confident they've raised their full-year guidance.
Meanwhile, valuation-wise, Abbott's looking pretty good. With double-digit earnings growth expected and an AA-credit rating (better than some countries I could name), this stock could easily outperform the market.
So, what's the bottom line? Abbott's got the stability of a Dividend King, the growth potential of a tech startup, and more irons in the fire than a blacksmith's shop.
It's trading at a fair price, and with its track record of innovation and dividend growth, this could be your ticket to a healthier portfolio. After all, in the race for returns, slow and steady often wins more than just participation trophies. I suggest you buy the dip.
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
September 19, 2024
Fiat Lux
Featured Trade:
(THE BEST LEAPS TESTIMONIAL EVER)
Thank you for your sage advice and ability to leave the corporate grind. I work from home and trade from anywhere in the world. I'm on my way to becoming a full-fledged Mad Hedge Fund Trader!
Now that I've been a Mad Hedge subscriber for five years, I've experienced trading with you in a world of extreme market volatility and global turmoil, many market rotations, and have mastered options strategies I had never deployed. I've made more than my healthy annual salary in one month.
I've also strengthened my understanding of economics, geopolitics, and the global marketplace, all while enjoying your amazing life stories and travels. I still make costly, stupid mistakes now and then, but I'm not a professional trader. Thanks for telling me I'm now a semi-professional!
Today, I'd like to share my first round of amazing LEAPS performances. Thanks again for your advice to take profits, reinvest, and when to go to cash for the next round of opportunities.
I entered my first LEAPS in October 2022, when you called the market bottom (amazing), and added more in December 2022 on a dip, and all your LEAP alerts since then.
NVDA Jan 17, 2025 call spread: Took profits of 482% at 46% max profit on May 23, 2023, to cover LEAPs cost, leaving only pure profit in the trade.
My LEAP cost on the $10 spread was $0.88. Are you kidding me? Sold @ $5.10.
NVDA Jan 17, 2025 call spread: Took remaining profits of 811% at 78% max profit on Jan 19, 2024, even though waiting to expiration would yield an outstanding 1,040% return! The risk/reward was no longer in our favor. Sold at $7.99 one year before expiration.
BRKB Jan 17, 2025 call spread: Took profits of 421%
JPM Jan 17, 2025 call spread: Took profits of 412%
PANW Jan 17, 2025 call spread: Took profits of 394%
VRTX Jan 17, 2025 call spread: Took profits of 350%
SLV Jan 17, 2025 call spread: Took profits of 113%
JPM Jan 19 2024 call spread: Took profits of 87%
PANW Jan 17, 2025 call spread: Took profits of 85%
X Dec 19 2025 call spread: Took profits of 70%
All of these LEAPs had much more room to run, but we're not here to post "glamor" returns; we're here to make money, and, more importantly, your pal Warren Buffet's rule #1: never lose money! Don't ignore your stops! Lock-in hefty profits early and reinvest when the underlying prices spike.
Don't be greedy. Mr. Market is always right. Sell when the market is over-exuberant and complacent. Buy when there's blood in the street, and you want to puke it's so frightening.
These are just some of my LEAPS profits, and I'm currently holding many more. I have so many more amazing trades to report and stories to tell. Coming soon.
Happy Trading!
Bill from Mill Valley, CA
'If you can get a dividend higher than the yield on ten-year debt, it's an opportunity we haven't seen in our lifetime. On a five-year horizon, investing in large multinationals with high dividends will have a large payday' said Lawrence Fink, CEO of Black Rock.
A Bold Step Towards the Future of Finance
In a move poised to solidify its position as a global financial leader, Hong Kong is set to unveil its first-ever policy statement on the use of Artificial Intelligence (AI) in finance. This landmark decision, anticipated eagerly by industry insiders, could catapult the adoption of AI technologies across various financial domains - from trading and investment banking to the burgeoning world of cryptocurrencies.
A Proactive Stance on AI Regulation
The forthcoming policy statement is expected to outline a comprehensive regulatory framework for AI deployment in financial services. This proactive approach to AI regulation could set a benchmark for other financial hubs worldwide, demonstrating Hong Kong's commitment to nurturing innovation while ensuring the stability and integrity of its financial ecosystem.
The Transformative Power of AI in Finance
AI has the potential to revolutionize the financial landscape in myriad ways. From automating routine tasks to providing real-time insights and bolstering risk management, AI can streamline operations, enhance efficiency, and drive innovation. The integration of AI in finance is already gaining momentum globally, and Hong Kong's forward-thinking approach could position it at the vanguard of this technological transformation.
Key Areas of AI Implementation in Finance
The policy statement is expected to address the utilization of AI in several critical areas within finance, including:
- Trading: AI can be leveraged to analyze vast swathes of market data, identify trends, and execute trades at lightning speed. This can lead to improved trading strategies, amplified profitability, and mitigated risk.
- Investment Banking: AI can automate due diligence processes, analyze investment opportunities, and provide personalized financial advice. This can result in accelerated deal execution, enhanced investment decisions, and superior client service.
- Cryptocurrencies: AI can be employed to analyze blockchain data, detect fraudulent activity, and forecast market trends. This can lead to increased transparency, improved security, and more informed investment choices.
The Advantages of Embracing AI in Finance
The integration of AI in finance can yield a multitude of benefits, including:
- Enhanced Efficiency: AI can automate tasks, streamline processes, and reduce the need for manual intervention. This can translate into substantial cost savings and optimized operational efficiency.
- Improved Risk Management: AI can analyze massive datasets, identify potential risks, and provide early warning signals. This can empower financial institutions to proactively manage risks and minimize potential losses.
- Elevated Customer Experience: AI can be utilized to offer personalized financial advice, customized investment recommendations, and round-the-clock customer support. This can foster improved customer satisfaction and loyalty.
Addressing Challenges and Concerns
While the potential advantages of AI in finance are undeniable, there are also challenges and concerns that warrant attention. These include:
- Data Privacy: The utilization of AI in finance involves the collection and analysis of substantial amounts of personal and financial data. It is imperative to ensure that this data is handled securely and in accordance with privacy regulations.
- Algorithm Bias: AI algorithms can be susceptible to bias, leading to discriminatory outcomes. It is crucial to ensure that AI systems are designed and trained in a manner that minimizes bias and promotes fairness.
- Job Displacement: The automation of tasks through AI could lead to job displacement in certain sectors of the financial industry. It is essential to address this potential impact and provide support to affected workers.
Hong Kong's Unique Position
Hong Kong's status as a global financial hub, combined with its robust technological infrastructure and supportive regulatory environment, makes it an ideal breeding ground for the development and adoption of AI in finance. The government's proactive stance on AI regulation could further cement Hong Kong's position as a trailblazer in this arena.
The Global Perspective
The integration of AI in finance is rapidly gaining traction worldwide. Several countries and regions are actively exploring the potential of AI in the financial sector and formulating regulatory frameworks to govern its use. Hong Kong's forthcoming policy statement could contribute significantly to the ongoing global dialogue on AI regulation and offer valuable insights for other jurisdictions.
Conclusion
Hong Kong's contemplation of rules for AI use in finance marks a significant stride towards embracing the future of finance. The government's proactive approach to AI regulation could propel Hong Kong to the forefront of this technological revolution, fostering innovation while safeguarding the stability and integrity of its financial system. The adoption of AI in finance has the potential to unlock a plethora of benefits, from heightened efficiency and improved risk management to an elevated customer experience. While challenges and concerns persist, Hong Kong's unique position as a global financial hub, coupled with its robust technological infrastructure and supportive regulatory environment, equips it well to navigate this new frontier. The forthcoming policy statement is eagerly awaited by the industry and could serve as a blueprint for other jurisdictions as they grapple with the complexities of AI regulation in the financial sector.
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 Technology Letter
September 18, 2024
Fiat Lux
Featured Trade:
(ORACLE’S PLAN TO DOMINATE AI)
(ORCL)
