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Why Teladoc is a Win-Win-Win stock

Digital health was a struggling sector before COVID-19, but the pandemic changed the game, driving customers and even providers to embrace digital health solutions.

As expected, frontrunner Teladoc Health (TDOC) surfaced as a major beneficiary of this booming industry, reporting a record high in the number of virtual care visits during the ongoing health and financial crisis.

While there are concerns that these rewards could be fleeting, COVID-19 appears to have contributed longer-lasting changes, particularly in consumer behavior.

More and more users are opting for digital health solutions, with total virtual care visits up by 206% to hit 2.8 million in the third quarter of 2020 alone.

A noticeable change in Teladoc’s portfolio is the diversity of diseases they handle.

Previously accounting for only a third of its total care visits in 2019, non-infectious conditions like hypertension, depression, anxiety, and back pain now account for half.

As for the virtual care visits for dermatology and behavioral health in their business-to-business transactions, the company enjoyed a 500% boost year over year.

For context, the total number of virtual visits to Teladoc in 2019 was only 4.1 million.

Since the year 2020 started, though, the company has already recorded almost twice that number at 7.6 million—and the fourth quarter is projected to become its best-performing period yet.

The shift was also evident in the third-quarter earnings report of Teladoc, which showed that the company’s top line jumped by 109% year over year to reach $289 million.

This marks the company’s highest quarterly top-line growth rate.

In fact, this growth rate exceeded even the company's expectations.

When Teladoc released its second-quarter earnings, its Q3 projections were only somewhere between $275 million and $285 million.

As the number of COVID-19 cases continues to climb, it is highly possible that the company will once again deliver much better results than the forecasted numbers in the fourth quarter.

In terms of its fourth-quarter projections, Teladoc is expected to reach roughly 3 million virtual visits in the last months of 2020.

The conservative estimate for Teladoc’s total virtual visits this year is at 10 million.

So far, Teladoc shares are up 133% year-to-date, with the company expected to cross the $1 billion revenue mark in 2020—an almost 100% increase from its 2019 projection.

In terms of future growth, Teladoc recently completed an $18.5 billion mega-merger with Livongo Health (LVGO), making it a one-stop-shop for every virtual care need.

As a combined unit, the Teladoc-Livongo partnership is hailed as the next-generation virtual care provider. Simply put, this newly formed company is the future of the healthcare industry in America.

This means that while Teladoc has more than doubled this 2020, the stock is still expected to continue soaring thanks to its recent merger with Livongo.

Here’s a brief background of Livongo.

This company gathers data and sends reminders to its users suffering from chronic diseases to encourage them to implement lifestyle and even behavioral changes that would improve their health.

Prior to its cash-and-stock merger with Teladoc, Livongo was doubling its membership, particularly among diabetes patients.

This deal is anticipated to elevate virtual care and push Teladoc front and center of the $121 billion digital health market in the United States alone—a number that is projected to grow at a rate of 16.9% until 2025.

Needless to say, Teladoc has set itself up to control a huge part of that total value.

So far, the most notable competitors of Teladoc in this space are technology giants like Google (GOOG) via its parent company Alphabet (GOOGL) and Apple (AAPL).

With all the opportunities and even with the challenges of new competitors in the market, Teladoc remains the leader in this explosive digital health industry, making it extremely attractive for investors to ignore.

Looking at its risk-reward proposition, the company is clearly a solid growth pick.

After all, telemedicine offers a long-term win-win-win situation for everyone in the healthcare industry.

It is a win for doctors because they can see more patients.

It’s a win for patients because they get to see doctors with ease and convenience.

Finally, it is a win for insurance agencies because they generally pay lower bills for virtual visits.

November 10, 2020

Diary, Newsletter, Summary

Global Market Comments
November 10, 2020
Fiat Lux

FEATURED TRADE:

(HOW TO EXECUTE A VERTICAL BULL CALL SPREAD),
(AAPL)
(THANK GOODNESS, I DON’T LIVE IN SWEDEN), (EWD),

October 26, 2020

Tech Letter

Mad Hedge Technology Letter
October 26, 2020
Fiat Lux

Featured Trade:

(WHAT DOES DIGITAL UPSKILLING MEAN TO TECH?)
(AAPL), ($COMPQ)

What Does Digital Upskilling Mean to Tech?

Tech Letter

The signals are there offering the impetus to the U.S. workforce to become increasingly tech-savvy in a hurry.

A word was even coined for it: “Digital upskilling.”

The idea of this development in digital skills is, in fact, the reason why every investor needs to look at tech growth stocks as the cornerstone of their investment portfolio.

To understand the trajectory of tech growth stocks, analyzing the entry level of industry employment offers a clearer snapshot of the meat and bones of the industry.

The tech workforce is upskilling precisely because they are incentivized with the opportunity to secure higher salaries.

The higher salaries exist precisely because tech corporations can afford to pay their workers more when they participate in a business cycle that delivers 40% higher revenue than the year before.

It’s a virtuous cycle that not only enriches the shareholder but is a golden chance for U.S. workers to secure a high-quality life when other U.S. industries like retail, hospitality, and energy have crashed and burned.

The very day that tech companies stop doling out larger than life salaries will be the cue that we are at ex-growth and investors must be able to pivot quickly to target the next growth part of the economy.

The great x-factor of technology is that there will always be a new start-up tech reshaping the industry and old technologies just become obsolete like the fax machine and Atari game console.

Therefore, the upskilling at all levels of the tech ladder means the possibility that someone will strike it rich by discovering a new technology that is able to revolutionize the industry.

Companies are even offering in-company courses to encourage employees to hone their skills.

This can often lead to exciting promotions even in a time where the economy has been throttled to a standstill.

The latest accelerator has been none other than the coronavirus as corporations have been forced to continue operations without the help of a physical office.

Corporations are fast-tracking their embrace of digital technologies and enabling workers to learn wherever they are, whenever they want, on any device.

Around 86% of top-performing companies reported that digital training programs boosted employee engagement and performance.

The aim of tech companies is to load itself with employees skilled in data science, data storage technology skills, tech support, and digital literacy.

Other marketable skills include software development, digital marketing, and IT administration.

The real hurdle in digital upskilling lies in execution, making an entire workforce digitally savvy is a tough chore and there will always be stragglers bringing up the rear.

Corporates have ploughed full steam into upskilling and even though Silicon Valley hasn’t moved on from the smartphone, it is squeezing as much juice from this grapefruit as it can.

We are now onto the Apple (AAPL) iPhone 12 and who knows, we might get to the iPhone 20 or 30.

We are onto the Apple iPhone 12 because it’s a cash cow and that won’t stop which is why investors need to feed their appetite for premium US tech stocks.

Stocks are divided into “value” and “growth” halves. The former consists of the stocks that are cheapest in relation to net assets, current cash flow, and so on. These tend to be older, duller, and less exciting companies.

The other half, “growth,” tends to consist of the glamorous companies that have monopolies.

Just look at the performance of value stocks. The average U.S. large company “value” mutual fund has lost 8% so far this year, even including reinvested dividends.

The average growth fund? It’s up a stunning 30%. And this gap has been going on for years: “Growth” funds have beaten “Value” funds since as far back as 2007, market data show.

From the upskilling at entry-level jobs, there are signs everywhere that investing in high growth tech is the way to go and if you compare tech to the rest of the market in 2020, the numbers are a no-brainer.

October 21, 2020

Tech Letter

Mad Hedge Technology Letter
October 21, 2020
Fiat Lux

Featured Trade:

(WILL ANTITRUST PROBLEMS UNLEASH GOOGLE?)
(GOOGL), (AMZN), (FB), (AAPL)

Will Antitrust Problems Unleash Google?

Tech Letter

The Department of Justice and 11 U.S. states filing an antitrust lawsuit against Google isn’t as bad as it seems.

Abusing its monopoly power to make Google the default search service on browsers, mobile devices, computers, and other devices has meant quarter after quarter of cash cow growth.

Alphabet’s cash reserves are to the point where they can fritter away capital on loss-making divisions like autonomous driving technology Waymo.

Yes, it’s true that Google is no longer the scrappy start-up that they once were, but that doesn’t matter, and they certainly have the financial balance sheet to deal with any litigation that might or might not take place.

Part of the Google shares not selling off was validation that they are resourceful enough to get through this unscathed and they certainly have had years to prepare how to defend itself through the courts.

Google let their position known publicly by tweeting that the “lawsuit by the Department of Justice is deeply flawed. People use Google because they choose to — not because they're forced to or because they can't find alternatives.”

The standard corporate speak that Google uses is just a sign of the times where big tech has dwarfed the banks, is too big to fail and of pure clout in American government, business and society.

This has been a long time coming as the firm has been under investigation by the Justice Department, the Federal Trade Commission, and state attorney general that its search engine and digital advertising businesses may operate as illegal monopolies.

The specific lawsuit will likely reference competitors like Bing for denying them access to user data, as well as targeting Google’s “search advertising.”

It was only in July, Alphabet CEO Sundar Pichai, along with the CEOs of Amazon (AMZN), Apple (AAPL), and Facebook (FB) appeared before a hearing of the House Judiciary Committee’s Subcommittee and were made to look bad for their dominant position in the digital ad game.

Google has repeatedly pointed to earlier antitrust investigations by the FTC and state attorney general into its display search business that concluded in 2013 and 2014 without incident but they surely have known that this issue would pop back up time and time again.

The knock-on effects have been drastic with American innovation sapped of its incubatory juices.

In the modern age of tech, it’s almost impossible to build a unicorn from scratch without getting your business model hijacked from one of the anti-competitive tech firms.

And now — there are 6 tech firms that use their scale and power to drag down innovation.

The consequences have been higher share prices for big tech because if they can’t scare competition out of place, they will either buy them or find internal ways to sabotage their business ala Yelp.

Google’s digital advertising business has faced accusations due to its unrivaled size and volume which is also why it makes so much money.

The company controls some of the most important links in the online advertising chain, centrally its DoubleClick platform, a premier tool for online publishers, helping them to create, manage, and track online marketing campaigns.

This is why the “internet” or the companies that have access to tracking technology know everything about you and can front run the marketing process to cater towards you.

Acquired in 2007, DoubleClick was cited by Senator Elizabeth Warren (D-MA) as one of the major acquisitions Google should be forced to unwind to improve competition in the advertising space.

If DoubleClick were to unwind itself from Google, they would be an instant unicorn out of the gate.

And that isn’t just the only unicorn in the stable, there are many stand-alone unicorns in Google’s umbrella of assets — from Gmail, Google Cloud, Google Maps, YouTube, and even Google’s hardware division that manufactures phones such as the Google Pixel line.

I believe in the argument that the sum of the parts is dragging down each segment meaning once broken from the Alphabet death grip, each unicorn would be able to pursue decisions that are best suited for their own division and not just the parent company Alphabet.

There is only so long that each unicorn is willing to play for the team and once they go out into the wild, each will become its own unique growth company.

One possibility is Google’s search business spun out while the other businesses stay inside under parent company which is also viable since the investigations specifically pinpoint Google search.

Google search controls more than 90% of the world’s search traffic market share and most notably, Yelp complain about Google favoring its own products in search results.

In July, a Wall Street Journal investigation found Google’s search algorithm biased towards its own YouTube videos in search results over those of other services.

Google’s repeated abuses would likely be mitigated just by spinning out Google search and not allowing them to favor itself.

It is highly unlikely that a stand-alone Google search business would cede market share because they are simply the best search engine by a country mile.

They would most likely expand on the lead they already have.

In either case, if Google isn’t broken up, they win, and the share price will rise.

If they are broken up, the victory will be even more emphatic while supercharging each individual asset ending up in an even higher share price.

This could finally offer a jolt of innovation into the stagnant tech space which honestly has too many too-big-to-fail companies that are focused more on financial engineering at this point.

October 16, 2020

Diary, Newsletter, Summary

Global Market Comments
October 16, 2020
Fiat Lux

Featured Trade:

(HOW TO GAIN AN ADVANTAGE WITH PARALLEL TRADING),
(GM), (F), (TM), (NSANY), (DDAIF), BMW (BMWYY), (VWAPY),
(PALL), (GS), (RSX), (EZA), (CAT), (CMI), (KMTUY),
(KODK), (SLV), (AAPL)

October 12, 2020

Diary, Newsletter, Summary

Global Market Comments
October 12, 2020
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or BACK TO THE NIFTY FIFTY),
(CAT), (JPM), (BAC), (NSC), (UNP), (V),
(MA), (FDX), (UPS), (IP), (AAPL), (TSLA)

The Market Outlook for the Week Ahead, or Back to the Nifty Fifty

Diary, Newsletter, Research

My daughter needed a desk so she could go to high school from her bedroom. So, I drove around Northern Nevada to get the perfect piece, visiting Reno, Sparks, Carson City, and Minden. It is one of the most conservative parts of the country, probably 90% republican.

What I saw was amazing.

There were Biden/Harris signs everywhere. Yes, there will still some Trump signs, but they were in a definite minority. Four years ago, you only saw Trump signs. The rare Clinton/Kaine sign was full of bullet holes, torn down, or copiously marked with offensive graffiti.

I thought, hmm, there must be a trade here.

We seem to be on the verge of massive changes in the US economy. Get in front of them and you’ll make a fortune. Lag behind, and you’ll be seen driving an Uber cab.

Technology undoubtedly led the decade, bringing in a 30% annual return since 2009. Industrial and other domestic stocks brought in no more than 12%. The “Roaring Twenties” could bring the reverse.

Technology will continue to do OK. Ever falling prices and greater service is a tough business model to beat. But let’s face it, none of these things are cheap. Apple (AAPL) going from a 9X multiple to 45X?

Industrials could be playing a massive catch up game initiating a new supercycle as they did from 2000-2010 when tech lagged in the wake of the Dotcom Bust.

This switch is made easier by the fact that most big industrial companies are now de facto technology ones. They all now use advanced cloud software, sophisticated robots, and state of the art distribution systems. Caterpillar (CAT) even has a 290-ton dump truck that drives itself like a giant Tesla (TSLA)!

Many of these companies I have covered for nearly 50 years, when they last belonged to the Nifty Fifty. So, for me, it’s a matter of dusting off my old research, seeing who is left, and giving them a modern spin. The great thing about these stocks is that many pay decent dividends.

I’ll give you a short list of where to buy the dips.

Banks – JP Morgan (JPM), Bank of America (BAC)
Railroads – Norfolk Southern (NSC), Union Pacific (UNP)
Credit Cards – Visa (V), Master Card (MA)
Couriers – FedEx (FDX), UPS (UPS)
Consumer Discretionary – International Paper (IP)

Hmm, a market where everything goes up. I like it! Dow 120,000 here we come!

Trump ordered all Stimulus Negotiations to cease, and then changed his mind six hours later. Clearly, the president has given up on the election and wants the next administration to inherit a Great Depression. Or is this Covid-19 talking? It’s the perfect scorched earth strategy. Write off another 2 million small businesses. Down ticket republican candidates will be beaten like a red-headed stepchild. Stocks plunged 600, with airlines in free fall, then bounced 700.

Jay Powell REALLY wants a stimulus package, claiming the economy desperately needs fiscal help to maintain a recovery or face a prolonged depression. “The risks of overdoing it seem, for now, to be small,” the central bank chief told the National Association for Business Economics. Are his pleas falling on deaf ears in Washington? Trump just gave our Fed governor the middle finger salute.

Share Buybacks vaporized T\this year and will be miniscule next year, with companies whose earnings have been crushed by the pandemic not participating. The ban on bank share buybacks imposed by the Fed continues. This has been the largest portion of net stock buying for the past decade. The good news is that foreign investors stepped in as big buyers in 2020, taking the indexes to new highs.

Apple to announce new 5G iPhone this week. The release came a month late, thanks to the pandemic. Scheduled for October 13, the event is called “High Speed”. Apple’s biggest sales quarter in history has just begun. Buy dips in (AAPL).

The Election is Noise and its best to focus on the bull market that has just begun, says JP Morgan. Record fiscal stimulus and quantitative easing in the face of near-zero interest rates create a perfect storm in favor of equities. The best stock to own going into the October 13 Prime Day?

Weekly Jobless Claims edged down to 840,000, still missing 200,000 from California, due to an upgrading computer system. California stopped reporting data so they can rebuild the antiquated computer system of the Employment Development Department, which has been breaking down due to overwhelming demand. Some 26.5 million workers are now claiming unemployment benefits.

Banks are making record trading profits on the back of the US Treasury market where volume has exploded. Even though there has been little net movement in prices in six months, the two-way bets have been enormous. It helps to have a massive home refi boom, incredible QE, and a government that is printing new debt like there’s no tomorrow.

When we come out the other side of this, 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% 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.

My Global Trading Dispatch maintained a new all-time high last week by staying 100% in cash. I was just as grateful for having no positions on the up 600-point days as I was on the down 600-point days. Safe to say that I will be an increasingly more aggressive buyer on ever smaller dips.

That keeps our 2020 year-to-date performance at a blistering +35.46%, versus a gain of 0.5% for the Dow Average. That takes my eleven-year average annualized performance back to +36.14%. My 11-year total return stood at new all-time high of +391.37%. My trailing one-year return dropped to +44.26%.

The coming week will be a dull one on the data front. The only numbers that really count for the market are the number of US Coronavirus cases and deaths, now at 210,000, which you can find here.

On Monday, October 12 at 8:30 AM EST, the government is closed for Columbus Day so there will be no data releases, even though the stock market is open.

On Tuesday, October 13 at 9:00 AM EST, the US Inflation Rate for September is out.

On Wednesday, October 14, at 8:30 AM EST, The Producer Price Index for September is released. At 10:30 AM EST, the EIA Cushing Crude Oil Stocks are out.

On Thursday, October 15 at 8:30 AM EST, the Weekly Jobless Claims are announced. We also get the Empire State Manufacturing Index.

On Friday, October 16, at 8:30 AM EST, US Retail Sales are printed. At 2:00 PM we learn the Baker-Hughes Rig Count.

As for me, I eventually found the perfect desk on Craigslist Reno. It was from the 1930s and had once occupied the office of the Metropolitan Life Insurance Company of New York, complete with two inkwells.

The company logo was prominently displayed in its wrought iron legs. When the Metropolitan modernized its offices in the 1950s, it sold off its furniture, which has been in circulation in the antique market ever since.

I told the seller, who had just moved from the east coast, of my amazing connection with the company. My Uncle Ed spent three years on a Navy destroyer in the Pacific during WWII. Enlistees in the 1940s were required to take out life insurance policies before they went off to war.

When Ed passed away a few years ago, I went through his papers and what did I find but a life policy from the Metropolitan Life Insurance Company for $1,000.

Ever the history buff, I called the company to find out if the policy was worth anything 70 years later. It turned out to have a cash value of $100,000, which they paid out immediately. I divided the money among my mom’s 20 grandchildren to pay for their college educations. Several now have PhDs. Got to love that compounding of interest.

Stay healthy.

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