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
March 14, 2025
Fiat Lux
Featured Trade:
(REMEMBERING THE OLD DAYS AT MORGAN STANLEY),
(MS), (GS), (GLD)
It’s a good thing that the #MeToo movement wasn’t around 40 years ago. For if it was, Morgan Stanley would have been publicly humiliated in the press daily.
The firm was an “old boy” network on steroids. Employees with skirts definitely worked overtime in those prehistoric days.
However, firms evolve over the vast expanse of time. Back then, Morgan Stanley was a 1,000-man private partnership hidden away in the old General Motors building on Avenue of the Americas. Today, it is a 50,000-member global behemoth in your face on Times Square.
The share price has changed a bit, too. The average cost of my original partnership shares is 25 cents. They traded at a split-adjusted $1,000 a share today. My own share has risen 4,000 times from my original cost. And you wonder why brokers are so rich. It’s 100% capital gain now.
And like Warren Buffet, I never sold my shares so I wouldn’t have to pay the capital gains taxes. In fact, my shares cost far less than the company’s 85-cent quarterly dividend today.
It wasn’t always like this. Morgan drank the Kool-Aid big time during the 2000’s real estate bubble. When the bill came due, the firm almost went under, with the stock trading down to $5 (which was still 20 times more than my cost). Only a government bailout in the form of the TARP kept my former partners from losing everything.
The Morgan Stanley of today is a shadow of its former self in other ways. There are no more wild practical jokes, BSD’s, Masters of the Universe, or Liar’s Poker.
I can’t imagine the heads of the various equity trading desks meeting at my Manhattan Sutton Place coop to play high/low poker every Friday night, as they did for years. Carl Icahn lived a couple of floors down.
No one bets the ranch anymore. Morgan Stanley has become boring. However, boredom has a silver lining as it also brings stability, and stock investors absolutely love stability, as we are finding out now. As incredible as it may sound, Morgan Stanley has become the safe play on Wall Street.
While investors considered the immense trading profits the firm once made as coming out of a black box, fee-based earnings are predictable and reliable as a coupon stream.
You can see this newfound boredom in the firm’s employee compensation. A decade ago, it was 78% of investment banking revenue, compared to only 18% now. In my day, the janitor wouldn’t work for that.
You can thank my late mentor, Barton Biggs, for planting the seeds of the modern firm in the early 1980’s. For it was he who founded the firm’s fee-based asset management division, which is the great wellspring of profits today. Since 2005, Wealth Management’s share of profits has leaped from almost nothing during my tenure to 25% to 45% now. Today, Morgan Stanley manages an incredible $6.6 trillion, and 15% more two months ago.
Mortgage loans to customers collateralized by their shareholdings is currently the second largest source of profits. These didn’t even exist in my day (Lou Ranieri at Salomon Brothers had the lock on this business back then).
Morgan Stanley has learned some hard lessons along the way. It was forced by the Dodd-Frank financial regulation act to massively recapitalize. No more 40:1 leverage. 10:1 is much safer.
As a result, its capital position has more than doubled from $35 billion during the dark days of the 2008 crash to an astonishing $180 billion today. Profit margins are the highest since the Dotcom Bubble top in 1999. The firm is even now crafting products and services aimed at the growing band of wealthy Millennials.
Sobriety is in.
Goldman Sachs, on the other hand, has stuck to the old Wild West ways. Its earnings remain volatile, as several recent disappointing quarters of bond trading losses have attested to. The firm is now significantly smaller than Morgan, and its share price has been punished accordingly, lagging the heady appreciation of Morgan shares.
Here’s the main reason I love my old firm. It is in the catbird seat for what I call the “Exploding Deficit” trade, whereby all future investment is driven by the prospect of rising inflation.
Banks are absolutely in the sweet spot for this strategy, as is gold (GLD).
Add all this up and you have my explanation for sending out my past Trade Alerts for a long position in Morgan Stanley. They won’t be the last ones.
As for those poker nights, I think some of you guys out there still owe me a couple of grand.
Not a Bad Play
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
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
March 13, 2025
Fiat Lux
Featured Trade:
(THE 10,000 DAILY CONSULTATIONS YOU'LL NEVER SEE)
(HIMS), (TDOC), (GDRX), (NVO), (LLY)
Did you know that 100 years ago, the average American lifespan was just 54 years? Today, we're approaching 80.
But what's truly remarkable isn't just that we're living longer—it's that a 36-year-old former Tinder executive named Andrew Dudum is revolutionizing how we access healthcare.
His company, Hims & Hers (HIMS), has exploded from a niche men's health startup into a $1.5 billion healthcare powerhouse in just a few years.
What exactly does HIMS do?
HIMS is transforming healthcare with a tech-first approach. They began by solving embarrassing men's health problems like ED and hair loss through an online platform, but have since built a vertically integrated healthcare powerhouse.
Now they handle everything from virtual doctor's visits and AI-powered diagnostics to personalized medication compounding and doorstep delivery.
All without the patient ever leaving their couch or explaining their problems to three different receptionists. It's healthcare reimagined for the digital age—and patients are flocking to it.
The numbers don't lie. By the end of 2024, they hit 10,000 patient visits per day - that's more than some mid-sized hospitals.
Their subscriber base swelled to 2.2 million, up 45% year-over-year. Even more impressive is that 55% of those subscribers are using at least one personalized solution, not just generic treatments.
What makes HIMS so disruptive is their mastery of the tech playbook that Wall Street has been drooling over for years. They're capturing data at every patient touchpoint and have built one of healthcare's largest proprietary datasets.
My sources tell me they've got over 500,000 square feet of compounding pharmacies and fulfillment centers spread across Ohio, Arizona, and California. These aren't your father's drugstores.
Unlike Teladoc (TDOC) and GoodRx (GDRX), who dabble in AI for basic tasks, HIMS goes much deeper.
They're personalizing treatments, fine-tuning dosages, improving adherence, and creating custom supplement plans. Their AI chatbots handle everything from prescription refills to progress tracking.
I met a guy last week who manages a tech fund in Boston who put it best: "Each new subscriber makes their entire system smarter." That's a competitive moat that gets wider by the day.
Revenue has followed this growth trajectory like a heat-seeking missile. In 2024, the company raked in $1.5 billion, a staggering 69% increase year-over-year. Their Q4 revenue hit $481 million, nearly doubling with a 95% year-over-year increase.
But here's where it gets even more interesting. Their weight loss treatments have been absolute rocket fuel for growth.
Their oral-based offering reached a $100 million revenue run rate within just seven months of launch. And their GLP-1 offering (launched in Q2-24) generated more than $225 million in incremental revenue during 2024 alone.
My friend Janet at the Fed would be impressed by their margins, too.
Adjusted EBITDA margins reached 12% in 2024, with adjusted EBITDA increasing by 160% year-over-year to $54 million in Q4.
They hit their first full year of GAAP profitability with net income of $126 million and strong cash flow of approximately $200 million. That's what I call a healthy business.
But here's the rub. HIMS is betting big—perhaps too big—on weight loss treatments.
They generated $225 million from GLP-1 offerings in 2024 and project $725 million in 2025. That's a massive chunk of revenue hanging on one specialty.
The FDA isn't thrilled about compounded semaglutide, which HIMS relies on. If regulators clamp down, they're in trouble.
Worse, supply is controlled by Novo Nordisk (NVO) and Eli Lilly (LLY), creating a precarious position for HIMS. If insurance coverage expands for branded GLP-1s, patients might flee HIMS' alternatives.
They're trying to pivot to oral therapies and AI coaching, but it's a high-stakes gamble. As my hedge fund buddies would say, that's a lot of eggs in one regulatory basket.
So, what about valuation? There's no getting around it—HIMS is trading at premium multiples: 3.76x forward EV/Sales versus the sector median of 3.19x, an EV/EBITDA of 29.69x compared to 12.12x, and a sky-high forward P/E of 65.96x against the sector's more modest 25.46x.
When you stack it up against competitors, the gap grows even wider. HIMS' forward P/E makes GoodRx (29.65x) seem downright affordable, and its EV/Sales ratio towers over both Teladoc (0.74x) and GoodRx (2.42x).
Is that premium justified? With revenue growth cruising at 69%, there's a case to be made—but investors should be cautious. I've watched this story unfold countless times: today's darling of Wall Street can easily turn into tomorrow's cautionary tale.
Still, for those with a strong stomach and the patience to see this through, HIMS is definitely worth a closer look. After all, we're witnessing one of the most significant transformations in healthcare in over a century.
Just think about it – In 1924, Americans relied on house calls and patent medicines. Today, personalized treatments arrive at our doorsteps after a five-minute video chat.
And the company leading this healthcare revolution? Founded by a guy who used to help people swipe right on Tinder.
From patent tonics to AI-prescribed pharmaceuticals in a century. Seems our approach to awkward health problems has evolved even faster than our lifespans.
Who knew swiping right would someday fix more than just your dating life?
