Mad Hedge Technology Letter
January 22, 2025
Fiat Lux
Featured Trade:
(A.I. BUBBLE CONTINUES TO INFLATE)
(ORCL). (ARM), (NVDA)
Expect a half a trillion dollar investment into data centers.
This should propel AI stocks higher and the new administration understands the last leg the tech market is standing on is the AI bubble.
It is debatable to say if these tech stocks are in a bubble, but they aren’t cheap and today’s announcement puts fuel in the fire forcing stock prices to go nowhere but up.
OpenAI says that it will team up with Japanese conglomerate SoftBank and with Oracle to build multiple data centers for AI in the U.S.
The joint venture, called the Stargate Project, will begin with a large data center project in Texas and eventually expand to other states. The companies expect to commit $100 billion to Stargate initially and pour up to $500 billion into the venture over the next four years.
SoftBank chief Masayoshi Son, OpenAI CEO Sam Altman, and Oracle co-founder Larry Ellison were in attendance.
Microsoft is also involved in Stargate as a tech partner. So are Arm and Nvidia.
The data centers could house chips designed by OpenAI someday. The company is said to be aggressively building out a team of chip designers and engineers, and working with semiconductor firms Broadcom and TSMC to create an AI chip for running models that could arrive as soon as 2026.
Abilene, Texas will be Stargate’s first site, and OpenAI says that Stargate, by 2029, could scale up to 20 data center installations.
Microsoft, which recently announced it is on track to spend $80 billion on AI data centers showing it’s an industry-wide trend.
It’s clear to everyone and also investors that propping up the AI tech world is a must because the drop in shares would be devastating to not only the retail holders but also to corporate America.
Much of the recent inflation has been paid by stock appreciation and history has shown that the current US president highlights accelerating stock prices as a barometer of US economic health.
The interesting part of this is building a slew of data centers doesn’t translate into revenue one-to-one.
The jury is still out there whether there will be a revenue windfall out of it.
At the very minimum, we know that data centers will make the price of electricity higher for everyone because they guzzle energy non-stop.
The revenue accrued will need to be higher than the cost of electricity or this is just another massive transfer from retail consumers to the corporate tech world.
Ironically, Elon Musk tweeted that the money isn’t available right now leading the investor to believe this is more about keeping the AI bubble alive than anything else.
Rumor has it that Musk doesn’t really like OpenAI CEO Sam Altman who took OpenAI from non-profit to for-profit and harvesting a multi-billion dollar payday.
Until now, kicking potential revenue creation can down the road is the order of the day, and as long as investors can buy this idea that AI data centers will mean higher revenue opportunities, then shareholders will still pile into this bubble until they don’t.
That is why stocks like Nvidia, Oracle, and ARM are seeing double digit gains in just one day.
Buy these three companies on the dip until the AI bubble pops.
“Great companies are built on great products.” – Said CEO of Twitter Elon Musk
(TRUMP’S FIRST DAY)
January 22, 2025
Hello everyone
The U.S. now has a convicted felon for a President.
That’s a first.
He has survived two impeachment trials; two assassination attempts and an indictment for trying to overturn his 2020 election loss.
But who cares?
The world keeps turning and businesses, and the country itself, are set to make extra greenbacks with Trump’s business-friendly policies.
So, all is well, right? What could possibly go wrong?
On his first day, Trump did the following:
-declared a state of emergency on the US-Mexico border
-pardoned nearly all those charged with crimes related to the 2021 attack on the US Capitol.
-made the (DOGE) Department of Government Efficiency official
-withdrew from the Paris Climate Agreement
-exited from the World Health Organization
-signed an order(temporarily) suspending the sale of TikTok
-froze government hiring
- drafted measures to support racial equity and combat gender-based discrimination were thrown out
-signed an order “restoring free speech and ending federal censorship”.
-signed an order “protecting women from radical gender ideologies.”
- robustly declared that he was aiming at “defeating America’s enemies.”
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Trump will seek to end birthright citizenship for US-born children whose parents lack legal status.
Trump will restore the death penalty.
Trump will require that official US documents such as passports reflect citizens’ gender as assigned at birth.
Trump said he “was saved by God to make America great again.” We can argue then, that we have a President portraying himself as a national saviour.
On stage with Trump was the business elite
Tesla and SpaceX CEO, Elon Musk, Amazon CEO Jeff Bezos, and Meta CEO Mark Zuckerberg. All had prominent seats on stage, next to cabinet nominees and members of Trump’s family.
Biden’s last official act
Biden pardoned several people, whom Trump has targeted for retaliation, including former White House chief medical advisor Anthony Fauci, former Republican US representative Liz Cheney, and former chairman of the Joint Chiefs of Staff General Mark Milley.
Now, to the markets…
Netflix earnings came out Tuesday, and they were a blockbuster. Stocks rallied strongly.
Do you have this stock in your portfolio?
I recommended it on January 17, 2024, when it was sitting at $480. The stock is now sitting at $994.80 (in extended hours) just shy of $1000.
The company surpassed 300 million paid memberships during the quarter, adding a record 19 million subscribers. The company beat on the top and bottom lines for the 4th quarter and raised its 2025 revenue forecast.
In 2025, the company says it plans to improve its core business with more series and films, enhance its product experience, and continue to grow its ads business. On top of that, Netflix is expected to explore the live event space and games, too.
Portfolio Update
After the holidays, in the first newsletter of the year, (01/06/25) I recommended that you scale into two Uranium Energy plays.
(VST) Vistra Energy at $163.95. At close today (01/21), the stock price is $$185.35.
(SMR) Nu-Scale Power Corporation at $23.66. At close today (01/21), stock price is $25.61
Cheers
Jacquie
Global Market Comments
January 22, 2025
Fiat Lux
Featured Trades:
(TRADING FOR THE NON-TRADER),
(ROM), (UXI), (UCC), (UYG)
I like to start out my day by calling readers on the US East Coast and Europe, asking how they like the service, are there any ways I can improve the service, and what topics they would like me to write about.
After all, at 5:00 AM Pacific time, they are the only ones around.
You’d be amazed at how many great ideas I pick up this way, especially when I speak to industry specialists or other hedge fund managers.
Even the 25-year-old day trader operating out of his mother’s garage has been known to educate me about something.
So when I talked with a gentleman from Tennessee this morning, I heard a common complaint. Naturally, I was reminded of my former girlfriend, Cybil, who owns a mansion on top of the levee in nearby Memphis overlooking the great Mississippi River.
As much as he loved the service, he didn’t have the time or the inclination to execute my market-beating Trade Alerts.
I said “Don’t worry. There is an easier way to do this.”
Only about a quarter of my followers actually execute my Trade Alerts. The rest rely on my research to correctly guide them in the management of the IRAs, 401Ks, pension funds, or other retirement assets.
There is also another, easier way to use the Trade Alert service. Think of it as a “Trade Alert light.” Do the following.
1) Only focus on the four best of the S&P 500’s 101 sectors. I have listed the ticker symbols below.
2) Wait for the chart technicals to line up. Bullish long-term “Golden crosses” are setting up for several sectors.
3) Use a macroeconomic tailwind, like the ramp up from a -31% GDP growth rate to +31% we are currently seeing.
4) Shoot for a microeconomic sweet spot, companies, and sectors that enjoy special attention.
5) Increase risk when the calendar is in your favor such as during November to May.
6) Use a modest amount of leverage in the lowest-risk bets but not much. 2:1 will do.
7) Scale in, buying a few shares every day on down days. Don’t hold out for an absolute bottom. You will never get it.
The goal of this exercise is to focus your exposure on a small part of the market with the greatest probability of earning a profit at the best time of the year. This is what grown-up hedge funds do all day long.
Sounds like a plan. Now, what do we buy?
(ROM) – ProShares Ultra Technology 2X Fund – Gives you double exposure to what will be the top-performing sector of the market for the next six months, and probably the rest of your life. Click here for details and the largest holdings.
(UXI) – ProShares Ultra Industrial Fund 2X – Is finally rebounding off the back of a dollar that will slow down its ascent once the first interest rate hike is behind us. Onshoring and incredibly cheap valuations are other big tailwinds here. For details and largest holdings, click here.
(UCC) – ProShares Ultra Consumer Services 2X Fund – Is a sweet spot for the economy, as tight-fisted consumers finally start to spend their gasoline savings now that it no longer appears to be a temporary windfall. This is also a great play on a housing market that is on fire. It contains favorites like Home Depot (HD) and Walt Disney (DIS) which we know and love. For details and largest holdings, click here.
(UYG) – ProShares Ultra Financials 2X Fund – Yes, after six years of false starts, interest rates are finally going up, with a December rate hike by the Fed a certainty. My friend, Janet, is handing out her Christmas presents early this year. This instantly feeds into wider profit margins for financials of every stripe. For details and largest holdings, click here.
Of course, you’ll need to keep reading my letter to confirm that the financial markets are proceeding according to the script. You will also have to read the Trade Alerts as we include a ton of deep research in the Updates.
You can then unload your quasi-trading book with hefty profits in the spring just when markets are peaking out. “Sell in May and Go Away?” I bet it works better than ever in 2021.
For Those Who Invest at Their Leisure
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
January 21, 2025
Fiat Lux
Featured Trade:
(THE ONLY TIME FIGHTING YOURSELF MAKES MONEY)
(ABBV), (AMGN), (SDZNY), (CHRS), (PFE), (JNJ), (ALVO), (TEVA), (SNY), (BMY)
If I had a dollar for every time someone told me the biotech sector was overvalued, I'd have enough to fund my own drug development program.
Yet here we are, watching the global immunology market rocket from $55 billion to $166 billion in just a decade, with the sector projected to hit $192 billion by 2028.
If you're wondering why big pharma keeps pouring billions into autoimmune research - and believe me, this question came up in every meeting last week - the answer is simple: we've barely scratched the surface.
Despite thousands of PhDs burning midnight oil in labs from Boston to Basel, we still don't have effective treatments for systemic lupus erythematosus, scleroderma, or even something as visible as vitiligo.
Want to see where the smart money is going? Look no further than the biosimilar stampede into AbbVie's (ABBV) Humira territory.
Like bargain hunters at a Black Friday sale, everyone's getting in line: Amgen (AMGN) with Amjevita, Sandoz (SDZNY) with Hyrimoz, Coherus (CHRS) with Yusimry, and Pfizer (PFE) with Abrilada.
And just when you thought the party was over, here comes Amgen's Wezlana challenging Johnson & Johnson's (JNJ) Stelara, followed by Alvotech (ALVO) and Teva's (TEVA) Selarsdi.
But here's where it gets interesting. I've identified four companies that are trading at valuations that would make Benjamin Graham smile.
First up is AbbVie, trading at 15.96x earnings (11.9% below sector median), with projected EPS growth to $15.21 by 2027.
Their dynamic duo of Rinvoq and Skyrizi is performing like a biotech version of Batman and Robin.
Rinvoq sales hit $1.61 billion in Q3 2024, up 45.4% year-over-year, while Skyrizi broke $3 billion, thanks to its mid-2024 FDA approval for ulcerative colitis.
As for Sanofi (SNY)? Now we're talking value. At 11.7x earnings - 35.39% below sector median and 1.3% below its 5-year average - it's like finding a Ferrari priced like a Fiat.
Their star player Dupixent raked in 3.48 billion euros in Q3 2024, up 22.1% year-over-year and 5.2% quarter-over-quarter.
Then, there’s Teva Pharmaceuticals. Trading at a P/E ratio of 7.88x - that's 56.5% below the sector median - while projecting non-GAAP EPS growth to $3.6 by 2028.
But here's the kicker: their clinical trial data reads like a biotech investor's dream. Their new drug duvakitug achieved 47.8% clinical remission in ulcerative colitis patients versus 20.45% for placebo (p=0.003).
In Crohn's disease? Even better - 47.8% endoscopic response compared to 13% for placebo (p<0.001).
Finally, there's Bristol-Myers Squibb (BMY). Yes, it's trading at 47.5x earnings (162.1% above sector median), but here's where patience pays off - their P/E ratio is expected to drop to 8.82x by 2027.
Meanwhile, Zeposia sales jumped 19.5% year-over-year to $147 million in Q3 2024, while Sotyktu showed consecutive quarterly growth.
The cherry on top? These companies are paying you to wait. We're talking dividend yields from 3.8% to 4.41% - try getting that from your savings account.
Looking at these numbers reminds me of the tech sector in the late 1990s, but with one crucial difference - these companies are actually making money, lots of it.
They generate significant cash flow and have strong balance sheets, unlike many of the high-flying tech companies of the dot-com era that were burning through cash with no clear path to profitability.
While others are chasing the next meme stock or crypto moonshot, smart investors are quietly positioning themselves in companies that are literally changing the face of medicine.
Remember, buying umbrellas in the summer heat has always been my style.
Right now, the immunology sector is experiencing its own kind of summer, and these four stocks are your umbrellas.
The forecast? Growth storms ahead.
Global Market Comments
January 21, 2025
Fiat Lux
Featured Trades:
(MARKET OUTLOOK FOR THE WEEK AHEAD or NOW WE ENTER THE GREAT UNKNOWN),
(GS), (MS), (JPM), (C), (BAC) (TLT), (TSLA)
