(AAPL) Archives - Page 56 of 112 - Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or Time for a Break

I know you’re not going to want to hear this. I might as well be trying to pull your teeth, lead you down a garden path, or sell you a high-priced annuity.

But there is nothing to do in the market right now. Nada, diddly squat, bupkis, and for all you Limey’s out there, bugger all.

For during the first six weeks of 2021, we have pretty much squeezed all there is out of the market.

Not only did we nail the timing and the direction, we also got the lead sectors, financials, brokers, chips, and short bonds (MS), (GS), (BLK), (AMD). We also chased the Volatility Index (VIX) down from $38 to a lowly $20, baying and protesting all the way.

That enabled us to extract a 28.29% profit so far in 2021, the best return in the 13-year history of the Mad Hedge Fund Trader. The only other time you see numbers this high is when Ponzi schemes get busted. And not a dollar of this was earned from the really marginal plays like Bitcoin, SPAC’s, GameStop (GME), or pot stocks.

If I feel like I did a year’s worth of work during the first seven weeks of 2021, it’s because I have, issuing 60 trade alerts since January 1.

However, bonds (TLT) are reaching the end of their current leg down. The 1.34% yield we saw on Friday is suspiciously close to the 1.36% yields we saw during the 2012 and 2017 market double bottom.

So, there may be some wood to chop around these, levels, possibly for weeks or months.

This is important because a collapsing bond market has been the principal driver of the winning trades of 2021, such as in banks, brokers, money managers, and other domestic recovery plays.

And when one side of the barbell goes dead, what do you do? You buy the other side. FANGs are just completing a six-month “time” correction where they have gone absolutely nowhere. So, Facebook (FB), Amazon (AMZN), and Apple (AAPL) may be getting ready for a roll.

One other sector that might keep running is the SPDR Mining & Metals ETF (XME), and Freeport McMoRan (FCX). That’s because it's not just us buying metals to front-run a recovery, it’s the entire world. What do you think a $2 trillion infrastructure budget will do to this area?

New lows for bonds, as the ten-year US Treasury yield hits 1.26%, up 38 basis points since January 1 and a one-year high. 1.50% here we come! Ever hear the expression “Don’t fight the Fed”? All financials are off to the races, where we were 60% long. Biden’s $1.9 trillion rescue package will be 100% borrowed and take total US borrowing to a back-breaking 55% of GDP. I hate to sound like a broken record but keep selling rallies in the (TLT), buy (JPM), (BAC), (GS), (MS), and (BRK/B) on dips.

Volatility index hit a one-year Low, which is what you’d expect at the dawn of a decade-long bull market in stocks. The (VIX) may flat line here for a while before the next out-of-the-blue spike.

The Nikkei Stock Average topped 30,000, for the first time in 31 years, Yes, it’s been a long haul. I was heavily short in the initial 1990 meltdown from 39,000 to 20,000 and many fortunes were made. The top marked the end of the Japanese company’s ability to copy their way into leadership. After that, rapidly advancing technology made copying too slow to compete in a global economy.

A midwest storm upended energy markets, with oil popping $8 to $67 and gas deliveries spiking from $4 to $999. It would have gone higher, but the software only provided for three digits. Electricity prices are all over the map. Some 4 million Texas customers are without power. Fracking has ground to a halt. Windfarms are frozen solid. If you are a net producer (as I am), you are in heaven. The turmoil is expected to be gone by the weekend. It’s another high price paid for ignoring global warming.

Weekly Jobless Claims soared, to 861,000, casting a dark cloud over the economic recovery. The news took a 300-point bite out of the Dow. Illinois and California saw the biggest gains. We are not out of the woods yet.

SpaceX was valued at $74 Billion, according to an $850 billion venture capital fundraising round this week. However, Elon Musk’s rocket company won’t go public until men are landed on Mars. The company is also the launching pad for its Starlink global WIFI project, which will cost at least $10 billion to build out. Blowing up rockets is not a good backdrop for an IPO.

Cash is still pouring off the sidelines, with equity mutual funds attracting some $7.8 billion last week. As long as this is the case, which could be for years, any market corrections will be limited. Strangely, bond funds are still pulling in money too, some $5.7 billion. It’s called a liquidity-driven market, silly!

When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!

My Mad Hedge Global Trading Dispatch earned an amazing 17.27% so far in February after a blockbuster 10.21% in January. The Dow Average is up a trifling 2.92% so far in 2021.

This is my fourth double-digit month in a row. My 2021 year-to-date performance soared to 27.28%. After the February 19 option expiration, I am now 80% in cash, with a single long in Tesla (TSLA) left.

That brings my 11-year total return to 450.03%, some 2.05 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an Everest-like new high of 40.30%.

My trailing one-year return exploded to 94.09%, the highest in the 13-year history of the Mad Hedge Fund Trader. We have earned 109.00% since the March 20, 2020 low.

We need to keep an eye on the number of US Coronavirus cases at 28 million and deaths approaching 500,000, which you can find here. We are now running at a heart breaking 3,000 deaths a day. But that is down 35% from the recent high.

The coming week will be a boring one on the data front.

On Monday, February 22, at 8:30 AM EST, the Chicago Fed National Activity Index is out. Zoon (ZM) reports.

On Tuesday, February 23 at 9:00 AM, the S&P Case-Shiller National Home Price Index for December is announced. Square (SQ) and Intuit (INTU) report.

On Wednesday, February 24 at 8:30 AM, New Home Sales for January are printed. NVIDIA (NVDA) reports.

On Thursday, February 25 at 9:30 AM, Weekly Jobless Claims are printed. US Durable Goods for January and Q4 GDP are out. Salesforce (CRM), (Moderna (MRNA), and Airbnb (ABNB) report.

On Friday, February 26 at 8:30 AM, US Personal Income and Spending are published. DraftKings (DKNG) reports. At 2:00 PM, we learn the Baker-Hughes Rig Count.

As for me, if you want to see what it is like to work at Amazon, watch the movie Nomadland. It’s an artsy Francis McDormand film made with a $4 million budget about the end of life, which I caught over the weekend on Hulu.

It covers a contemporary trend in US society where retirees with no savings move into RVs and live off the grid, working occasionally to earn gas money. They raved about it in Europe.

If I don’t keep those trade alerts coming, that could be me in a couple of years.

Stay healthy.

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

February 18, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
February 18, 2021
Fiat Lux

FEATURED TRADE:

(WARREN BUFFETT’S BIOPHARMACEUTICAL BETS)
(MRK), (ABBV), (BMY), (PFE), (NKTR), (VZ), (CVX), (AAPL), (BRK.B)

Warren Buffett’s Biopharmaceutical Bets

Biotech Letter

Aside from the recent big moves involving Verizon Communications (VZ), Chevron (CVX), and Apple (AAPL), Warren Buffett has also been busy with biopharmaceutical stocks.

Just before 2020 ended, Berkshire Hathaway (BRK.B) made notable changes in its positions particularly in Merck (MRK), AbbVie (ABBV), Bristol-Myers Squibb (BMY), and Pfizer (PFE).

Berkshire boosted its investment in Merck by 28.1% to reach 28.7 million shares.

Meanwhile, its AbbVie holdings were increased by 20% to hit 25.5 million shares.

It also added 11.2% in its investments in Bristol, totaling to 33.3 million shares.

In contrast, the company cut 3.7 million shares from its Pfizer holdings.

In terms of growth potential, these biopharmaceutical companies hold the most promising prospects in the next decade.

Merck, hailed as a vaccine stalwart, is behind the blockbuster cancer treatment Keytruda.

For context, Keytruda generated $14.4 billion in sales in 2020 alone.

Despite fears over the expiring patent exclusivity of this drug, the company still trades at roughly 11.5 times earnings and is actually projected to achieve 11% long-term EPS growth rate.

Merck also continues to leverage Keytruda in the development of the next generation of treatments in its pipeline.

In fact, the company recently sealed a clinical collaboration with Nektar Therapeutics (NKTR) to assess the effectiveness of Keytruda when combined with Nektar’s own bempegaldesleukin in the treatment of squamous cell carcinoma.

Other than expanding its oncology sector, Merck has been developing its animal health business as well. So far, this particular segment has grown by 7% year over year, reaching $4.7 billion in 2020.

If things work out, then Merck could emerge as a huge competitor against Pfizer’s own animal healthcare spinoff, Zoetis (ZTS), in the future.

To date, Merck has at least 31 candidates in Phase 2 trials and 25 more undergoing Phase 3 studies.

Needless to say, these will be valuable in enriching the company’s lineup especially with the challenges that Keytruda will face in the next years.

As for AbbVie, this company trades at approximately 8.3 times the earnings estimated in the next 12 months. This is well below its five-year average of 10.4 times earnings.

However, the company is projected to show at least 13% EPS growth rate in the long term.

Despite the challenges of 2020, with the company going down 2.6%, the long-term prospects for AbbVie remain positive.

Although AbbVie broke through the dermatology market following its acquisition of Botox-maker Allergan in the past year, it still has to contend with a major problem: arthritis medication Humira.

Humira is not only AbbVie’s top-selling treatment but also the best selling drug in the world today.

In 2020 alone, this anti-inflammatory treatment raked in $19.8 billion in sales. However, AbbVie might soon lose this edge since its exclusive rights to Humira in the US will expire in 2023.

Amidst the anxiety over this issue though, AbbVie continues to defy expectations.

Last year, the company reported a 65.9% growth in its net revenue despite the overall slowdown caused by the pandemic.

As for 2021, AbbVie is anticipating an even better year thanks to its portfolio diversification efforts.

To date, the company’s lineup now spans neuroscience, immunology, eye care, women’s health, and of course, aesthetics.

Meanwhile, Bristol Myers has been pegged to achieve roughly 8% growth rate in the long term. Right now, the stock trade at 7.9 times earnings estimated over the next 12 months.

Like AbbVie and Merck, Bristol has been dealing with patent expiration issues—a problem that pushed its stock down by 4.1% so far this year.

One of the major updates involving Bristol is its massive $74 billion acquisition of Celgene in 2019.

While the deal raised a lot of eyebrows at the time, it brought cancer blockbuster Revlimid into the company’s fold.

Revlimid, which still enjoys protection from a flood of generics for a few more years, has been pumping up sales for Celgene nonstop for over a decade. The drug is expected to generate the same, if not higher, profits for Bristol.

Two more blockbuster drugs in Bristol’s lineup are facing impending patent exclusivity issues, Opdivo, which would expire in 2028, and Eliquis in 2026.

Nonetheless, the positives outweigh the negatives for Bristol. After all, this company invested so much in diversification.

Sales of Opdivo, Revlimid, and Eliquis continued to trend upwards last year.

Opdivo alone managed to generate $7 billion in annual revenue, prompting Bristol to expand the indications for this product.

However, the more promising news lies in the updates that the recently launched products, like multiple sclerosis drug Zeposia and anemia treatment Reblozyl, are gaining traction in the market.

Thanks to the development of its pipeline, the company expects that its new product lineup would account for roughly 27% of its total revenues by 2025.

Overall, Berkshire’s choice of biopharmaceutical companies are offering promising growths in the next several years despite the setbacks they are facing today.

While some investors get alarmed over negative updates, it looks like the Oracle of Omaha is following his own advice: “Whether we're talking about socks or stocks, I like buying quality merchandise, when it is marked down.”

February 17, 2021

Diary, Newsletter, Summary

Global Market Comments
February 17, 2021
Fiat Lux

Featured Trade:

(HOW TO HANDLE THE FRIDAY, FEBRUARY 19 OPTIONS EXPIRATION),
(TSLA), (MS), (BA), (BLK), (GS), (AMD), (KO), (BAC), (NFLX), (AMZN), (AAPL), (INTU), (QCOM), (CRWD), (AZN), (GILD)

How to Handle the Friday, February 19 Options Expiration

Diary, Newsletter

Followers of the Mad Hedge Fund Trader Alert Services have the good fortune to own no less than 16 deep in-the-money options positions, all of which are profitable. All but one of these expire in two trading days on Friday, February 19, and I just want to explain to the newbies how to best maximize their profits.

It was time to be aggressive. I was aggressive beyond the pale.

These involve the:

Global Trading Dispatch

(TSLA) 2/$650-$700 call spread 20.00%
(TSLA) 3/$600-$650 call spread
(MS) 2/$55-$60 call spread 10.00%
(BA) 2/$150-$160 call spread 10.00%
(BLK) 2/$640-$660 call spread 10.00%
(GS) 2/$240-$260 call spread 10.00%
(AMD) 2/$75-$80 call spread 10.00%
(BAC) 2/$28-$30 call spread 10.00%
(KO) 2/$44-$47 call spread 10.00%

Mad Hedge Technology Letter

NFLX 2/ $510- $515 call spread 10.00%
AMZN 2/ $3,095- $3,100 call spread 10.00%
AAPL 2/ $126-$129 call spread 10.00%
INTU 2/ $340-$345 call spread 10.00%
QCOM 2/ $135-$140 call spread 10.00%

Mad Hedge Biotech & Healthcare Letter

(AZN) 2/$46.50-$49.50 call spread 10.00%
GILD 2/ $57-$60 call spread 10.00%

Provided that we don’t have a huge selloff in the markets or monster rallies in bonds, all 15 of these positions will expire at their maximum profit point.

So far, so good.

I’ll do the math for you on our oldest and least liquid position, the Tesla February 19 $650-$700 vertical bull call spread, which I initiated on January 25, 2021 and will definitely run into expiration. At the Friday high, Tesla shares were at a lowly $816, some $53 lower than the $869.70 that prevailed when I strapped on this trade.

Provided that Tesla doesn’t trade below $700 in two days, we will capture the maximum potential profit in the trade. That’s why I love call spreads. They pay you even when you are wrong on the direction of the stock. All of the money we made was due to time decay and the decline in volatility in Tesla stock.

Your profit can be calculated as follows:

Profit: $50.00 expiration value - $44.00 cost = $6.00 net profit

(4 contracts X 100 contracts per option X $6.00 profit per options)

= $2,400 or 20% in 18 trading days.

Many of you have already emailed me asking what to do with these winning positions.

The answer is very simple. You take your left hand, grab your right wrist, pull it behind your neck, and pat yourself on the back for a job well done.

You don’t have to do anything.

Your broker (are they still called that?) will automatically use your long position to cover your short position, canceling out the total holdings.

The entire profit will be credited to your account on Monday morning February 22 and the margin freed up.

Some firms charge you a modest $10 or $15 fee for performing this service.

If you don’t see the cash show up in your account on Monday, get on the blower immediately and find it.

Although the expiration process is now supposed to be fully automated, occasionally machines do make mistakes. Better to sort out any confusion before losses ensue.

If you want to wimp out and close the position before the expiration, it may be expensive to do so. You can probably unload them pennies below their maximum expiration value.

Keep in mind that the liquidity in the options market understandably disappears, and the spreads substantially widen, when security has only hours, or minutes until expiration on Friday, February 19. So, if you plan to exit, do so well before the final expiration at the Friday market close.

This is known in the trade as the “expiration risk.”

If for some reason, your short position in your spread gets “called away,” don’t worry. Just call your broker and instruct them to exercise your long option position to cover your short option position. That gets you out of your position a few days early at your maximum profit point.

If your broker tells you to sell your remaining long and cover your short separately in the market, don’t. That makes money for your broker, but not you. Do what I say, and then fire your broker and close your account because they are giving you terrible advice. I’ve seen this happen many times among my followers.

One way or the other, I’m sure you’ll do OK, as long as I am looking over your shoulder, as I will be, always. Think of me as your trading guardian angel.

I am going to hang back and wait for good entry points before jumping back in. It’s all about keeping that “Buy low, sell high” thing going.

I’m looking to cherry-pick my new positions going into the next month-end.

Take your winnings and go out and buy yourself a well-earned dinner. Just make sure it’s take-out. I want you to stick around.

Well done, and on to the next trade.

February 12, 2021

Diary, Newsletter, Summary

Global Market Comments
February 12, 2021
Fiat Lux

Featured Trade:

(TEN STOCKS TO BUY BEFORE YOU DIE)
(MSFT), (AAPL), (GOOGL), (QCOM), (AMZN),
(V), (AXP), (NVDA), (DIS), (TGT)

Ten Stocks to Buy Before You Die

Diary, Newsletter

A better headline for this piece might have been “Ten stocks to Buy at the Bottom”, except that you have to redefine the word “bottom.”

The rules of the greatest liquidity-driven market of all time demand a different explanation of The NEW bottom, and that is something that hasn’t gone up lately.

And that would be big tech, which appears ready to blast out to the upside from a six-month long sideways “time” correction.

It would be a perfectly rational thing to see in these highly irrational markets. After all, these names just announced blockbuster earnings presaging greater things to come. And these companies actually HAVE earnings, compared to recent market frontrunners, which have none at all.

Coming in here and betting the ranch is now a no-lose trade. If I’m right, the pandemic ends in three months, stocks will soar. If I’m wrong and the global epidemic explodes from here, you’ll be dead anyway and won’t care that the stock market crashed further.

Needless to say, I have a heavy tech orientation with this list, far and away the source of the bulk of earnings growth for the US economy for the foreseeable future. If anything, the coronavirus will accelerate the move away from shopping malls and towards online commerce as consumers seek to shy away from direct contact with the virus.

What would I be avoiding here? Directly corona-related stocks like those in airlines, hotels, casinos, and cruise lines. Avoid human contact at all cost! There is no way of knowing when or where these stocks will bottom. Only the virus knows for sure.

Microsoft (MSFT) – still has a near-monopoly on operating systems for personal computers and a huge cash balance. Their inroads with the Azure cloud services have been impressive.

Apple (AAPL) – Even with the Coronavirus, Apple still has a cash balance of $225 billion. Its 5G iPhone launches in the fall, unleashing enormous pent-up demand. Apple’s rapid move away from a dependence on hardware to services continues.

Alphabet (GOOGL) – Has a massive 92% market share in search and remains the dominant advertising company on the planet.

QUALCOMM (QCOM) – Has a near-monopoly in chips needed for 5G phones. It also won a lawsuit against Apple over proprietary chip design. In the very near future, you won’t be able to do ANYTHING without 5G. It’s also not a bad idea to own a chip stock during the worst global chip shortage in history.

Amazon (AMZN) – The world’s preeminent retailer is growing by leaps and bounds. Dragged down by its association with the world’s worst industry, (AMZN) is a bargain relative to other FANGs.

Visa (V) – The world’s largest credit company is a call on the growth of the internet. We still need credit cards to buy things. And guess what? Coronavirus will accelerate the move of commerce out of malls where you can get sick to online where you can’t.

American Express (AXP) – Ditto above, except it charges higher fees and has snob appeal (read higher margins). Its stock has lagged Visa and MasterCard in recent years.

NVIDIA (NVDA) – The leading graphics card maker that is essential for artificial intelligence, gaming, and bitcoin mining. Another great chip play that has flatlined for half a year.

Advanced Micro Devices (AMD) – Stands to benefit enormously from the chip shortage created by the coming 5G and the explosion of the cloud.

Target (TGT) – The one retailer that has figured it out, both in their stores and online. It can’t be ALL tech.

Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

Looks Like a “BUY” Signal to Me

February 11, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
February 11, 2021
Fiat Lux

FEATURED TRADE:

(WHEN TECHNOLOGY MEETS HEALTHCARE)
(TDOC), (FB), (AAPL), (AMZN), (NFLX), (GOOGL)

When Technology Meets Healthcare

Biotech Letter

The decision to invest in FAANG stocks—Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (GOOGL)—is basically a no-brainer.

These are some of the most highly rated stocks to date, and these companies continue to grow in value.

In fact, they managed to soundly outperform the 16% returns of the S&P 500 in 2020, with the weakest stock in the list, Google’s Alphabet, climbing 31% while Apple rose by an impressive 81%.

Outside of FAANG, those who read my Mad Hedge Technology Letter know of the advantages of Software-as-as-a-Service (SaaS) and the growth of the companies behind it.

I’ve always been a fan of emerging innovations, and this is one of the reasons why I’m excited about the collaboration between technologies like SaaS to bolster age-old industries like the healthcare field.

It’s dubbed healthcare-as-a-service (HaaS).

So far, one promising stock comes to mind when it comes to HaaS: Teladoc Health (TDOC).

Teladoc is one of the companies that benefited massively from the COVID-19 lockdowns.

So far, this healthcare stock is up by over 40% year to date after skyrocketing 139% in 2020.

During the first nine months of 2020, it recorded a whopping 163% rise on virtual visits compared to the same period in 2019. Meanwhile, its revenue rose by 79%.

The convenient technology it offers, which allows patients to connect with physicians without physically visiting the doctors’ offices, allowed Teladoc to enjoy strong growth amid the pandemic.

However, Teladoc isn’t merely a reasonable investment during the COVID-19 pandemic.

The company has been quietly gaining traction in the past years.

In its 2015 to 2019 reports, Teladoc reported an impressive growth in its revenues at 78%, 59%, 89%, 79%, and 32%, respectively.

The telehealth market is projected to grow to nearly $560 billion by 2027—an estimate that’s over 9 times the $61.4 billion the industry was worth in 2019.

Needless to say, the growth in the telehealth industry is just beginning, and Teladoc is well-positioned to take advantage of the momentum.

In 2020, it has strengthened its position with its massive $18.5 billion merger with Livongo Health.

Given Livongo’s more specialized portfolio, which puts a premium on chronic care and diabetes, the newly combined companies can offer a more extensive scope of telehealth services.

By 2023, the combined Teladoc and Livongo is estimated to generate more than $3 billion in sales alone.

As for its 2021 plans, Teladoc welcomed the new year with a partnership with continuous glucose monitoring (CGM) systems manufacturer DexCom.

With this collaboration, the company would be able to offer its users “CGM-powered insights.”

In other words, patients would be able to conveniently see and monitor their own glucose levels.

While Teladoc clearly benefited from its partnerships with Livongo and DexCom, its core business continues to show strong growth.

In its third quarter earnings report, which was released days before its Livongo merger, it more than doubled its $138 million sales in 2019 to $288.8 million in 2020.

Meanwhile, the total number of its telehealth visits increased by a staggering 206% to reach 2.8 million.

With the addition of new services in its roster, Teladoc is presented with a considerable growth opportunity just by simply boosting the usage of its current clients.

To give you a better picture of how big this could get, the company recorded a total of 73 million members by the end of the third quarter last year.

Following the mergers and the new deal last January 2021, Teladoc is anticipating an additional 65 million clients.

Teladoc is one of the most exciting healthcare stocks out there today. Its move to combine technology and doctor’s visits make it a uniquely innovative and stand-out business in an age-old industry.

More importantly, it has shown that its growth is not solely reliant on the demands brought about by the COVID-19 pandemic. Instead, it has made key moves to fortify its market share.

teladoc

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Looks Like a “BUY” Signal to Me