Mad Hedge Biotech and Healthcare Letter
March 21, 2024
Fiat Lux
Featured Trade:
(THE COMEBACK STORY WE'RE ALL HERE FOR)
(PFE), (GSK), (LON)
Well, well, well. Pfizer (PFE) has been on a bit of a wild ride lately, hasn't it? Its shares have taken a nosedive, dropping over 50% since the company’s glory days in late 2021.
But before you start yelling "timber!" and running for cover, hear me out. I have a hunch that Pfizer's still got a few tricks up its sleeve that might just turn this ship around.
First off, let's talk about the elephant in the room: Pfizer's been playing a little corporate cost-saving efforts with its recent dealings with Haleon (LON), aka the Advil folks.
Remember when Pfizer and GlaxoSmithKline (GSK) decided to spin off their consumer health bits into Haleon back in 2022?
Well, now Pfizer's looking to offload a chunk of those Haleon shares for a cool $3 billion. That would take their stake from a whopping 32% to a more manageable 24%.
And as for GSK? This British biopharma is doing the same, slimming down to just 4.2%. It's like a corporate weight loss challenge, and both are ready to get lean and mean.
That's not all though. Pfizer has been on a shopping spree, dropping a jaw-dropping $43 billion on Seagen, a rising star in the cancer game.
Admittedly, this is a bold move. But, Pfizer's betting big that Seagen's going to be the game-changer they need.
And with Seagen's lymphoma drug, Adcetris, already knocking it out of the park for certain cancer patients, it might just be a bet that pays off big time.
Now, let's talk strategy. Pfizer execs recently revealed that the company would be all about innovation and pinching pennies this year.
Post-Seagen acquisition, they're laser-focused on making oncology the star of the show while also hunting down a whopping $4 billion in savings in 2024.
It's like they're trimming the fat to build some serious financial muscle, even as they brace for some of their cash cows to start slowing down.
Now, I know what you might be thinking. "But what about that Super Bowl ad? How does that fit into Pfizer's grand plan?" Honestly, I'm not entirely sure.
But what I do know is that Pfizer's oncology game is looking stronger than ever. With the FDA giving the green light for one of their leukemia treatments, Besponsa, for the kids, it's clear that Pfizer's cancer-fighting future is as bright as Times Square on New Year's Eve.
Still, Pfizer's not just relying on cost-cutting and its Seagen acquisition to weather the storm. They've got a pipeline bursting with potential, with 31 projects in phase 3 alone, which is corporate-speak for "almost ready to blow your socks off."
That's like having 31 lottery tickets, and you've got to believe that at least a few of them are going to hit the jackpot.
And with new stars like Padcev from the Seagen deal and their shiny RSV vaccine Abrysvo hitting the market, the sales needle is looking to jump up, not down.
I've been singing Pfizer's praises for a while now, and I still stand by that. Sure, their stocks have taken a hit, but that doesn't mean the fat lady's singing just yet.
If anything, it's just the intermission before the big finale. Pfizer's gearing up for a second act that's going to have us all on the edge of our seats, popcorn in hand, ready for the comeback of the century.
So, what's the bottom line here? Well, I think Pfizer's playing the long game. With a dividend yield that's like finding a twenty in your old coat pocket, they're saying, "Stick with us, we've got plans." And from where I'm sitting, those plans look pretty darn good.
Global Market Comments
March 21, 2024
Fiat Lux
Featured Trade:
(REVISITING THE FIRST SILVER BUBBLE),
(SLV), (SLW)
(NVDA), (AMD), (INTC), (QCOM), (GOOGL), (MSFT), (AMAZN)
You know, I was just thinking about how history has a funny way of repeating itself.
Take Samuel Brannan, for example. This guy had some serious guts and vision. He made an absolute killing during the California Gold Rush back in the 1800s, but not by getting his hands dirty in the goldfields. Oh no, he was way too smart for that.
Instead, he invested in the tools that the miners needed to pan for gold. And you don’t need me to tell you that Brannan’s idea paid off big time. At the time, he was raking in the equivalent of $43 million a year in today's money. Overnight, he became the richest man in California.
Now, you might be thinking, "That's great, but what does this have to do with me?"
Well, we are in the middle of a new kind of gold rush — the AI gold rush. Analysts say this could create a mind-boggling $1.5 trillion in market value by 2030 — that's trillion with a "T.”
As expected, you've got giants such as Microsoft (MSFT) and Google (GOOGL) scrambling to integrate AI into their search engines. Understandably, investors are just itching to get a piece of the action.
But just like in Brannan's day, a real opportunity also lies in those providing the tools that make AI possible. So far, one name stands out above the rest: Nvidia (NVDA). Basically, what this company does is cranking out the chips that power AI technology.
And since big companies and startups need hundreds or even thousands of these chips to create their chatbots and image generators, Nvidia has become much like how John D. Rockefeller's Standard Oil dominated the oil refining game, or how Netflix revolutionized the streaming world. It's that big.
In fact, it already has a whopping 95% of the market for graphics processors used in machine learning, which is a big part of AI That's right, 95%!
But Nvidia isn't the only one in this arena. Advanced Micro Devices (AMD), Intel (INTC), Qualcomm (QCOM), Google, and Amazon (AMZN) all want a piece of the AI pie.
AMD has been nipping at Nvidia's heels with its fancy CDNA accelerators and Instinct GPUs. Meanwhile, Intel's going all-in with its Habana Gaudi chips. Even Qualcomm, the mobile chip giant, is getting in on the action with its Cloud AI 100 accelerators.
And don't even get me started on Google and Amazon.
Google has been developing its very own Tensor Processing Units that it could start selling, and Amazon Web Services is probably cooking up some custom AI chips as we speak.
The point is, the AI revolution is just getting started. Sure. Nvidia might be leading the pack now, but this race is definitely far from over.
As AI becomes more and more a part of our lives, we're going to see new startups and innovators coming out of the woodwork with mind-blowing hardware and software.
So, what should you do? Spread your bets, my friends. Get some skin in the game with pure-play AI companies like Nvidia, but don't put all your eggs in one basket. Diversify with some of these other potential winners.
So aside from panning for gold, it’s also strategic to find those "pick and shovel" companies that are making all these advancements possible.
Think of Nvidia and its competitors as your discoveries as the modern-day Samuel Brannans, with these companies providing the essential tools for this 21st-century gold rush. And just like in 1849, the smart money can also be found on the toolmakers, not the miners.
After all, while history doesn't repeat itself, it often rhymes.
Mad Hedge Technology Letter
March 20, 2024
Fiat Lux
Featured Trade:
(A NEW SET OF CHIPS ARE COMING)
(NVDA)
The accolades keep raining down on Nvidia (NVDA) CEO Jensen Huang. I even heard one person say he is the new Steve Jobs.
Those are quite lofty compliments for a guy who has been under the radar for quite a long time. However, he can’t hide anymore as NVDA’s share price has skyrocketed and the valuation today stands at over $2.2 trillion.
NVDA should be at the heart and core of every tech portfolio. They are critical to the facilitation of AI in the present and the future. So when he talks publicly, people listen and that’s what just happened.
Jensen Huang described what he sees ahead for artificial intelligence and Nvidia. He believes it is something so vast and transformative that computing and how we use it will never be the same.
Huang gave the keynote address on Monday to open Nvidia's GTC 2024 conference. Huang focused on what he insisted was the coming transformative influence that his company's Blackwell program of chips and related systems would have on technology and artificial intelligence at the first level and the entire economy beyond.
The audience at the SAP Center in San Jose was waiting for his every word.
Huang focused on Nvidia's new generation of chips and the two factors that make AI work: the training (or programming) that enables the semiconductors to receive data, recognize and organize it, and send it back out to a client in usable form; and the brute computing power to make it all happen.
Nvidia's influence on artificial intelligence is already substantial, thanks to its H100 GPU chips and related products which power most AI applications now.
The Blackwell platform, expected to be available toward the end of 2024, will use a new series of chips, the B200 family, combined with new components and software to get the most out of the chips.
The goal is to let a user pack more training onto chips so these chips and the components built around them can recognize data more quickly.
The chips are supposed to access more inference — the capacity to know how to analyze the data to produce usable conclusions to queries and questions.
Blackwell is supposed to offer 4 times the capacity of Nvidia's wildly popular A100 chip to program the training aspects in the chips themselves and 30 times the inference output.
Add more of these chips into the system, and you can gather more data and translate it into more usable information almost instantaneously.
Nvidia is developing other equally fast components into the platform system so that the information flows in and out swiftly and, as importantly, smoothly, all the while using a lot less power.
Many can see how these cut across a slew of industries by making them more productive and efficient. The head and brains of an operation for most corporations will be an algorithm facilitated by an Nvidia chip.
The demand for these products will be out of the roof coming from industries like logistics, industrial, transport, consumer products, finance, and so on.
Nvidia will supercharge business everywhere.
I will keep tabs on how the Blackwell platform performs, but it is hard to envision it failing because Nvidia’s reputation precedes itself.
This also could trigger another leg to the bull market in tech stocks.
“Economies of scale are a good thing. If we didn't have them, we'd still be living in tents and eating buffalo.” – Said JP Morgan CEO Jamie Dimon
(PALANTIR IS A STANDOUT WHEN IT COMES TO IMPROVING U.S. SECURITY & THE MILITARY)
March 20, 2024
Hello everyone,
PALANTIR(PLTR)
It is a promising AI investment.
It has links to defence and intelligence.
Involved in cyberspace for the government.
Producing AI applications for military and defence.
Holds an Artificial Intelligence Platform (AIP)
Palantir’s future looks bright.
Shares of Palantir jumped nearly 10% on March 6 after Palantir announced its Tactical Intelligence Targeting Access Node was selected by the U.S. Army. TITAN uses artificial intelligence to provide targeting information for missiles.
The bulk of Palantir’s revenue comes through government contracts. Its government segment makes up nearly 56% of total sales. The rest of sales are commercial.
Analysts believe that their strong product portfolio together with AI will produce a meaningful share of a $1 trillion AI Global TAM as enterprise and government ecosystems rush to implement useful platforms for automating complex workflows.
Analysts have given the stock a target of $37.00. Shares of Palantir are up around 41% year-to-date.
The global energy sector is cheap relative to the broader market. I recommended to everyone to average into this sector earlier in the year. Analysts at Berenberg Investment Bank among others, argue that on a global basis, energy trades at relative valuation levels only seen three times in the past 40 years: the late 1980s, 2000, and 2020.
The bank pointed out that investors in oil and gas stocks on those three occasions outperformed the market by an average of 108% - or more than doubled their money – from the depressed valuation levels.
Analysts at Berenberg used a proprietary metric based on a combination of price-to-earnings multiples, dividend yields, and price-to-book multiples to determine the sector’s valuation.
For investors looking to increase their energy exposure, Berenberg named several stocks as their “top picks.” (Shell (SHEL) ($66.47), Total Energies (TTE) ($68.40), and Harbour Energy (HBR.L) ($274.80).
You can buy any of these stocks in small parcels or choose to pass. You could also choose to do an option instead of buying stock. Or, as I point out next, you could buy an energy ETF. Totally up to you. I know many of you are holding (XOM), that I recommended earlier in the year. Great job!
An alternative to buying energy stocks is to take a position in an energy ETF. The one I am thinking of here is the Energy Select Sector SPDR Fund (XLE) (Price $92.18). This ETF offers exposure to the entire energy sector, including both oil and natural gas companies, as well as renewable energy companies. (XLE) offers a diversified approach to the energy industry.
Here is the link to the Zoom monthly meeting held in early March. Enjoy!
https://www.madhedgefundtrader.com/meeting-replay-march-2024/
Cheers,
Jacquie
Global Market Comments
March 20, 2024
Fiat Lux
Featured Trade:
(WELCOME TO THE DEFLATIONARY CENTURY),
(TLT), (TBT), (AAPL), (MSFT)
Ignore the lessons of history, and the cost to your portfolio will be great. Especially if you are a bond trader!
Meet deflation, upfront and ugly.
If you look at a chart for data from the United States consumer prices are rising at an annual 3.2% rate. The long-term average is 3.0%.
This is above the Federal Reserve’s own 2.0% annual inflation target, with most of the recent gains coming from housing costs.
We are not just having a deflationary year or decade. We may be having a deflationary century.
If so, it will not be the first one.
The 19th century saw continuously falling prices as well. Read the financial history of the United States, and it is beset with continuous stock market crashes, economic crises, and liquidity shortages.
The union movement sprung largely from the need to put a break on falling wages created by perennial labor oversupply and sub-living wages.
Enjoy riding the New York subway? Workers paid 10 cents an hour built it 125 years ago. It couldn’t be constructed today, as other more modern cities have discovered. The cost would be wildly prohibitive. Look no further than the California Bullet Train, now expected to cost $100 billion. A second transbay tube in San Francisco will cost $29 billion.
The causes of the 19th-century price collapse were easy to discern. A technology boom sparked an industrial revolution that reduced the labor content of end products by ten to a hundredfold.
Instead of employing 100 women for a day to make 100 spools of thread, a single man operating a machine could do the job in an hour.
The dramatic productivity gains swept through the developing economies like a hurricane. The jump from steam to electric power during the last quarter of the century took manufacturing gains a quantum leap forward.
If any of this sounds familiar, it is because we are now seeing a repeat of the exact same impact of accelerating technology. Machines and software are replacing human workers faster than their ability to retrain for new professions. If you want to order a Big Mac at McDonald’s these days, you need a PhD in Computer Science from MIT. The new stores have no humans to take orders.
This is why there has been no net gain in middle-class wages for the past 40 years. That is until the pandemic hit which created labor shortages that are still working their way out. It is the cause of the structurally high U-6 “discouraged workers” employment rate, as well as the millions of millennials still living in their parent’s basements.
To the above add the huge advances now being made in healthcare, biotechnology, genetic engineering, DNA-based computing, and big data solutions to problems. Did anyone say “AI”?
If all the major diseases in the world were wiped out, a probability within 10 years, how many healthcare jobs would that destroy?
Probably tens of millions.
So the deflation that we have been suffering in recent years isn’t likely to end any time soon. In fact, it is just getting started.
Why am I interested in this issue? Of course, I always enjoy analyzing and predicting the far future, using the unfolding of the last half-century as my guide. Then I have to live long enough to see if I’m right.
I did nail the rise of eight-track tapes over six-track ones, the victory of VHS over Betamax, the ascendance of Microsoft (MSFT) operating systems over OS2, and then the conquest of Apple (AAPL) over Motorola. So, I have a pretty good track record on this front.
For bond traders especially, there are far-reaching consequences of a deflationary century. It means that there will be no bond market crash, as many are predicting, just a slow grind up in long-term bond prices instead.
Amazingly, the top in rates in this cycle only reaches the bottom of past cycles at 5.49% for ten-year Treasury bonds (TLT), (TBT).
The soonest that we could possibly see real wage rises will be when a generational demographic labor shortage kicks in during the late 2020s.
I say this not as a casual observer, but as a trader who is constantly active in an entire range of debt instruments.
I just thought you’d like to know.
Hey, Have You Heard About John Deere?