“Real Estate is the new gold. It is the gold of 2025,” said Jeffrey Gundlach of Doubleline Capital
Mad Hedge Biotech and Healthcare Letter
April 22, 2025
Fiat Lux
Featured Trade:
(NO MORE TEARS)
(JNJ)
Remember when your mom told you to eat your vegetables? "They're boring but good for you," she'd insist while you eyed that chocolate cake across the room.
Well, in today's market, Johnson & Johnson (JNJ) is that plate of nutritious broccoli – not the sexiest option on the table, but exactly what your financial diet needs.
And if Q1 earnings are any indication, this particular vegetable is secretly packed with more flavor than the market gave it credit for.
Their recent earnings report confirms what I've been telling anyone who would listen: this pharmaceutical tortoise is quietly outpacing flashier hares.
Sales increased 2.4% year-over-year to $21.9 billion, exceeding analyst expectations and demonstrating that steady growth doesn't need to make headlines to fill portfolios.
While the headline diluted EPS was an eye-popping $4.54 (up over 235%), those savvy enough will look at the adjusted figure of $2.77 (excluding one-time charges) for a more realistic picture of operational performance.
Diving deeper into the numbers reveals a company firing on multiple cylinders.
The MedTech division grew 4.1% to $8 billion, with cardiovascular products leading the charge at 17.7% growth.
Meanwhile, Pharmaceuticals grew 4.2% to $13.87 billion, with oncology growing an impressive 20% to $5.68 billion.
Multiple myeloma therapy Darzalex continues its blockbuster trajectory at $3.24 billion, while the approval of Rybrevant in non-small-cell lung cancer adds yet another potential multi-billion dollar earner to the medicine cabinet.
Now, let's talk about pharmaceutical patent cliffs.
Stelara, JNJ's immunology golden goose, is mid-plummet, with Q1 revenues down 33% to $1.63 billion. As expected, though, JNJ has been quietly lining up replacements.
Their immunology bullpen includes nipocalimab (sporting FDA Fast Track status) and icotrokinra (which cleared skin in 84% of adolescent psoriasis patients).
You can actually practically smell the confidence wafting from management's quarterly statements.
They've bumped their full-year revenue guidance to $91.6-$92.4 billion and hiked the quarterly dividend by 4.8% to $1.30 per share. That makes 63 consecutive years of dividend increases.
I'd be remiss not to mention the twin storm clouds hovering over our healthcare heavyweight.
First, there's the $6.97 billion charge for talc lawsuits after a bankruptcy judge essentially told JNJ their "Texas two-step" legal maneuver was more of a stumble.
Second, the Trump administration's threatened 25% pharmaceutical tariffs. With roughly 44% of Q1 revenues coming from overseas ($9.6 billion compared to $12.3 billion domestic), JNJ isn't completely sheltered from cross-border economic squabbles.
But here's where JNJ's strategic thinking earns my respect: they're doubling down on America with a $55 billion U.S. expansion planned over the next four years.
Back when I was launching hedge funds in the late '80s, I quickly learned to separate companies that merely react to policy changes from those that anticipate and adapt. JNJ falls firmly in the latter category.
For the number-crunchers among you (my people!), JNJ trades at 25.6 times earnings with a price-to-free-cash-flow ratio of 19.95. I ran this through my DCF model using a 10% discount rate.
The math suggests JNJ needs approximately 5% annual free cash flow growth to justify today's price.
With MedTech projected to grow 5-7% annually and Pharmaceuticals showing similar potential, plus those steady share buybacks reducing the float at 1.14% yearly, my spreadsheets spit out an intrinsic value of about $168.39 per share – roughly 7% above where we stand today.
Not a screaming bargain, but a fair price for a company that's mastered the art of sustainable growth.
JNJ won't make you the star of your next cocktail party investment brag-fest. But when markets start convulsing like they've touched a live wire, these steady healthcare veterans tend to keep their vital signs stable.
While your trendier holdings might need intensive care during volatility, JNJ has spent over a century perfecting the art of financial first aid.
In a market that often leaves investors reaching for tissues, JNJ's steady performance lives up to its most famous promise: no more tears.
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
April 22, 2025
Fiat Lux
Featured Trade:
(THE GOVERNMENT’S WAR ON MONEY)
(TESTIMONIAL)
"Sometimes we stare so long at a door that is closing that we see too late the one that is open," said Alexander Graham Bell, inventor of the telephone.
The legal system, a cornerstone of societal order, is on the cusp of a profound transformation. Artificial intelligence (AI), with its rapidly advancing capabilities in data analysis, natural language processing, and pattern recognition, is poised to permeate nearly every aspect of how laws are made, interpreted, and enforced. While the full extent of this influence remains to be seen, the trajectory suggests a future legal landscape significantly shaped by algorithmic intelligence. This article delves into the potential ways AI could influence the future legal system, exploring both the opportunities for increased efficiency and access to justice, as well as the inherent challenges and ethical considerations that must be addressed.
I. AI in Legal Research and Discovery: Unearthing the Truth with Unprecedented Speed
One of the most immediate and impactful areas where AI is already making inroads is legal research and discovery. Traditionally, lawyers spend countless hours sifting through vast volumes of case law, statutes, regulations, and other documents to find relevant precedents and evidence. AI-powered legal research tools can analyze these massive datasets with unprecedented speed and accuracy, identifying key information and connections that human lawyers might miss.
Imagine a future where AI algorithms can instantly scan millions of documents to identify all relevant case law on a specific legal issue, complete with summaries and analyses of how different jurisdictions have approached similar matters. This could drastically reduce the time and cost associated with legal research, allowing lawyers to focus on more strategic and nuanced aspects of their cases. Similarly, in the discovery phase of litigation, AI can be used to efficiently review and categorize vast amounts of electronic documents, identifying key evidence and potential inconsistencies far more effectively than manual review. This could streamline the litigation process, reduce discovery costs, and potentially lead to faster resolutions.
II. AI in Contract Drafting and Analysis: Automating the Mundane, Enhancing Precision
Contract drafting and analysis are other labor-intensive areas ripe for AI disruption. AI-powered tools can analyze existing contract templates, identify common clauses, and even suggest optimal language based on specific legal requirements and industry standards. This can automate the creation of routine contracts, reducing the risk of errors and freeing up lawyers to focus on negotiating complex terms and addressing unique circumstances.
Furthermore, AI can be used to analyze existing contracts for potential risks, inconsistencies, or non-compliance issues. Imagine an AI system that can quickly review a portfolio of hundreds of contracts, flagging clauses that deviate from standard terms, identify potential breaches, or highlight areas of contractual ambiguity. This could significantly enhance risk management for businesses and provide lawyers with valuable insights for advising their clients.
III. AI in Predictive Analytics: Forecasting Legal Outcomes and Informing Strategy
Perhaps one of the most transformative potential applications of AI in the legal system lies in predictive analytics. By analyzing historical case data, judicial decisions, and even the behavior of individual judges, AI algorithms could potentially forecast the likely outcomes of ongoing or future legal cases.
Imagine a lawyer being able to use an AI tool to assess the probability of success in a particular lawsuit based on the specific facts, the jurisdiction, and the presiding judge's past rulings. This could provide invaluable insights for advising clients on whether to settle a case, proceed to trial, or pursue a particular legal strategy. While the legal system is inherently complex and influenced by numerous unpredictable factors, AI-powered predictive analytics could introduce a new level of data-driven decision-making into legal strategy.
IV. AI in Dispute Resolution: Facilitating Efficiency and Access to Justice
AI could also play a significant role in transforming dispute resolution mechanisms. Online dispute resolution (ODR) platforms, powered by AI, could facilitate negotiation, mediation, and even arbitration processes more efficiently and accessibly.
Imagine AI-powered chatbots guiding parties through initial negotiation stages, identifying potential areas of compromise based on their stated positions. AI algorithms could also analyze past mediation outcomes to suggest settlement ranges or even act as neutral facilitators in certain types of disputes. For individuals who cannot afford traditional legal representation, AI-powered ODR platforms could provide a more affordable and accessible means of resolving conflicts.
V. AI in Criminal Justice: Balancing Efficiency with Fairness and Equity
The application of AI in the criminal justice system presents both significant opportunities and profound ethical challenges. AI-powered tools are already being used in areas such as risk assessment, predictive policing, and forensic analysis.
Imagine AI algorithms analyzing vast datasets of criminal records to assess the likelihood of a defendant reoffending, informing decisions about bail, sentencing, and parole. Predictive policing algorithms could analyze crime data to identify potential hotspots and allocate law enforcement resources more efficiently. AI is also being used to enhance forensic analysis, such as analyzing DNA evidence or identifying patterns in crime scene data.
However, the use of AI in criminal justice raises serious concerns about bias, fairness, and due process. AI algorithms are trained on historical data, which may reflect existing societal biases, potentially leading to discriminatory outcomes. Ensuring transparency and accountability in these AI systems is crucial to prevent the perpetuation or even amplification of inequalities within the legal system.
VI. The Ethical and Legal Challenges of AI in Law: Navigating the Algorithmic Frontier
The increasing integration of AI into the legal system brings forth a host of complex ethical and legal challenges that must be carefully considered:
- Bias and Discrimination: AI algorithms are susceptible to biases present in their training data, which could lead to discriminatory outcomes in legal decision-making. Ensuring fairness and equity requires careful attention to data quality, algorithm design, and ongoing monitoring for bias.
- Transparency and Explainability: The "black box" nature of some AI algorithms can make it difficult to understand how they arrive at their decisions. In the legal context, transparency and explainability are crucial for ensuring accountability and due process.
- Accountability and Responsibility: Determining who is responsible when an AI system makes an error or causes harm in a legal context is a complex issue. Clear legal frameworks for accountability will be necessary.
- Data Privacy and Security: Legal data often involves sensitive personal information. Robust data privacy and security measures are essential to protect this information when using AI systems.
- The Role of Human Judgment: While AI can automate tasks and provide valuable insights, the legal system ultimately relies on human judgment, empathy, and the ability to interpret nuanced situations. Preserving the crucial role of human lawyers and judges in the legal process is paramount.
- Access to Justice: While AI has the potential to enhance access to justice, there is also a risk that it could exacerbate existing inequalities if not implemented thoughtfully and equitably.
VII. The Future of the Legal Profession: Collaboration Between Humans and Machines
The future legal system is unlikely to be one where AI completely replaces human lawyers and judges. Instead, a more probable scenario is a collaborative partnership between humans and machines. AI will likely handle routine tasks, analyze vast amounts of data, and provide valuable insights, while human legal professionals will focus on strategic thinking, complex legal reasoning, client interaction, and ethical considerations.
The legal profession of the future will require lawyers to develop new skills in working with AI tools, understanding their capabilities and limitations, and critically evaluating their outputs. Legal education will need to adapt to equip future lawyers with the knowledge and skills necessary to navigate this evolving landscape.
Conclusion: Embracing the Potential, Navigating the Perils
Artificial intelligence holds immense potential to transform the future legal system, offering opportunities for increased efficiency, enhanced access to justice, and more data-driven decision-making. However, realizing these benefits while mitigating the inherent risks requires careful consideration of the ethical and legal challenges that accompany this technological revolution. By proactively addressing issues of bias, transparency, accountability, and the preservation of human judgment, we can strive to create a future legal system where AI serves as a powerful tool for upholding the principles of justice and the rule of law. The algorithmic scales of justice are being calibrated, and it is our responsibility to ensure they weigh fairly for all.
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