Mad Hedge Biotech & Healthcare Letter
July 20, 2021
Fiat Lux
FEATURED TRADE:
(A SNAPSHOT ON HOW TO LIVE A BETTER LIFE)
(DXCM), (CVS), (WBA), (RAD), (MDT), (ABBT), (SENS),
(TDOC), (AMWL), (AMZN), (AAPL), (GOOGL), (GRMN)
Tag Archive for: (GOOGL)
The routine medical check-ups we have today are primarily based on physical exams that were developed way back in the 1820s, utilizing tools that haven’t been upgraded for over a century.
More alarmingly, all we go through is a “comprehensive” health check once every year, offering us just a snapshot of what’s truly going on in our bodies.
If anything, we monitor the releases of new software for our phones and laptops more than we pay attention to our own bodies.
As we’ve proven with the COVID-19 pandemic, so much can happen in a year
Truth be told, our bodies can deteriorate at lightning speed and without any warning. That’s why it’s terrifying to think that we’re not doing as much to monitor our health.
So, what can we do to change this? How can we be more proactive when it comes to our health?
The COVID-19 pandemic has brought many changes into our lives, and this is one of the biggest transformations it has done: an exponential spike in demand for telehealth services.
One of the major issues between patients and doctors at the height of the pandemic was how to go through the physical exams without actual physical contact.
Clearly, it’s not possible to hear a heart murmur or irregular breathing over a video call.
This is where a lot of innovative companies come in.
For a more specialized exam, HD Medical released a credit card-sized device called HealthyU.
Patients simply touch it with their finger, and the device can instantaneously measure their heart rate and sounds, temperature, and even oxygen saturation.
All these data would then be sent to their doctors or health providers in real-time.
HealthyU also has a remote EKG, which effectively allows it to serve as a portable roadmap to a patient’s heart health and helps doctors monitor for signs of heart attacks and arrhythmias.
For example, there’s this handheld exam kit called Tyto that patients can use to perform their own guided medical exams.
This palm-sized gadget is linked to an app, so your doctor can monitor you remotely.
Patients suffering from a sore throat can use Tyto’s camera to let the doctors see the back of their throats, while those struggling from chest pains can easily use the stethoscope to help their physicians listen to their lungs and hearts.
And these are just for physical exams. There are more advancements in health monitoring, and this is where wearable technology comes in.
Wearable technology is considered one of the most promising growth drivers, largely due to the health sector.
The market size for this segment is estimated to rise from $116.2 billion in 2021 to $265.4 billion by 2026, showing off an 18% CAGR growth within a 5-year period.
Applications for wearables have expanded to areas including medical surgery as well as internables and implantables or sensors, which can be fitted into our bodies to help doctors observe various health parameters.
It’s no wonder brands like Apple (AAPL) with Apple Watch, Google (GOOGL) with Fitbit, and Garmin (GRMN) have been working overtime to try to cover as much of the wearable health market as possible.
So far, these products provide extensive data ranging from calories burned to our heart rates.
Aside from them, there are other wearables in the market today that could change the landscape of the health industry.
One of them is the Oura Ring, which was first introduced in 2013.
Designed to be worn 24 hours a day, this device measures the bodily functions of the user. It gathers data through infrared light sensors that touch the finger arteries.
One of the most impressive things it can do is monitor your sleep movements to help determine early onset of some neurodegenerative diseases like Parkinson’s.
The information is all sent to the app, which users can access via their smartphones. The Oura Ring is somewhere between $299 and $999, depending on your preferences in style and color.
Although it’s yet to be a mainstream product, the Oura Ring was provided to NBA players when they resumed their season amid the COVID-19 pandemic.
The device was used to help the basketball stars monitor their health.
In fact, a joint study with the University of California San Francisco showed that the Oura Ring was able to help detect the common symptoms of COVID-19 three days earlier and with as high as 90% accuracy.
Another impressive health monitoring advancement covers the glucose monitoring product line of Dexcom (DXCM).
The primary goal of Dexcom is to take away the guesswork that comes with finger pricking.
By offering a wearable sensor, people with diabetes can easily and accurately monitor their glucose levels.
What’s even more convenient is that Dexcom’s wearable is available in practically all large pharmacies like CVS (CVS), Walgreens (WBA), and Rite Aid (RAD).
To date, Dexcom’s biggest competitors include Medtronic’s (MDT) Guardian Connect, Abbott’s (ABBT) Freestyle Libre, and Senseonics’ (SENS) Eversense.
These are only some of the emerging technologies that could help us improve the quality of our lives today, with thousands more expected to follow suit in the years to come.
For an endlessly advancing world with smartphones, supercomputers, smart homes, and even self-driving cars receiving software updates virtually every week, it’s absurd to think that we only allot a single check-in on our health annually.
But with the advent of these technologies and the increasing popularity of telehealth services spearheaded by the likes of Teladoc (TDOC), Amwell (AMWL), and even Amazon (AMZN), it looks like we’re starting to finally pay more attention to our health.
Mad Hedge Technology Letter
July 16, 2021
Fiat Lux
Featured Trade:
(THE CLOUD)
(AMZN), (GOOGL), (CRM)
Dealing with the Cloud works and for every relevant tech company, this division serves as the pipeline to the CEO position.
If that’s not the case, then there’s something egregiously wrong!
Take Andy Jassy, the mastermind behind Amazon’s lucrative cloud computing division, and is the man who will succeed company founder Jeff Bezos.
He’s been rewarded this important business based on his performance in the cloud and faces a daunting proposition of following Bezos as CEO.
Bezos incorporated Amazon exactly 27 years ago.
Jassy developed a highly profitable and market-leading business, Amazon Web Services, that runs data centers serving a wide range of corporate computing needs.
Can you believe that Amazon's stock started out at $1.50 per share when adjusting for future equity splits?
It now trades at more than $3,500 per share and is worth over $1.8 trillion, making it one of the most valuable companies in the world.
Amazon's annual profit almost doubled in 2020 to $21.3 billion stoked by the pandemic that forced people to stay home and use Amazon services.
Consumers had no choice but to shop online, helping the company grow revenue 38% to $386.1 billion.
What exactly is the cloud that Amazon created?
Cloud 101
If you've been living under a rock the past few years, the cloud phenomenon hasn't passed you by and you still have time to cash in.
You want to hitch your wagon to cloud-based investments in any way, shape, or form.
Amazon leads the cloud industry it created.
It still maintains more than 30% of the cloud market. Microsoft would need to gain a lot of ground to even come close to this jewel of a business.
Amazon (AMZN) relies on AWS to underpin the rest of its businesses and that is why AWS contributes most of Amazon's total operating income.
Total revenue for just the AWS division would operate as a healthy stand-alone tech company if need be.
The future is about the cloud.
These days, the average investor probably hears about the cloud a dozen times a day.
If you work in Silicon Valley, you can quadruple that figure.
So, before we get deep into the weeds with this letter on cloud services, cloud fundamentals, cloud plays, and cloud Trade Alerts, let's get into the basics of what the cloud actually is.
Think of this as a cloud primer.
It's important to understand the cloud, both its strengths and limitations.
Giant companies that have it figured out, such as Salesforce (CRM) and Zscaler (ZS), are some of the fastest-growing companies in the world.
Understand the cloud and you will readily identify its bottlenecks and bulges that can lead to extreme investment opportunities. And that is where I come in.
Cloud storage refers to the online space where you can store data. It resides across multiple remote servers housed inside massive data centers all over the country, some as large as football fields, often in rural areas where land, labor, and electricity are cheap.
They are built using virtualization technology, which means that storage space spans across many different servers and multiple locations. If this sounds crazy, remember that the original Department of Defense packet-switching design was intended to make the system atomic bomb-proof.
As a user, you can access any single server at any one time anywhere in the world. These servers are owned, maintained, and operated by giant third-party companies such as Amazon, Microsoft, and Alphabet (GOOGL), which may or may not charge a fee for using them.
The most important features of cloud storage are:
1) It is a service provided by an external provider.
2) All data is stored outside your computer residing inside an in-house network.
3) A simple Internet connection will allow you to access your data at any time from anywhere.
4) Because of all these features, sharing data with others is vastly easier, and you can even work with multiple people online at the same time, making it the perfect, collaborative vehicle for our globalized world.
Once you start using the cloud to store a company's data, the benefits are many.
No Maintenance
Many companies, regardless of their size, prefer to store data inside in-house servers and data centers.
However, these require constant 24-hour-a-day maintenance, so the company has to employ a large in-house IT staff to manage them - a costly proposition.
Thanks to cloud storage, businesses can save costs on maintenance since their servers are now the headache of third-party providers.
Instead, they can focus resources on the core aspects of their business where they can add the most value, without worrying about managing IT staff of prima donnas.
Greater Flexibility
Today's employees want to have a better work/life balance and this goal can be best achieved by letting them working remotely which effectively happened because of the public health situation. Increasingly, workers are bending their jobs to fit their lifestyles, and that is certainly the case here at Mad Hedge Fund Trader.
How else can I send off a Trade Alert while hanging from the face of a Swiss Alp?
Cloud storage services, such as Google Drive, offer exactly this kind of flexibility for employees.
With data stored online, it's easy for employees to log into a cloud portal, work on the data they need to, and then log off when they're done. This way a single project can be worked on by a global team, the work handed off from time zone to time zone until it's done.
It also makes them work more efficiently, saving money for penny-pinching entrepreneurs.
Better Collaboration and Communication
In today's business environment, it's common practice for employees to collaborate and communicate with co-workers located around the world.
For example, they may have to work on the same client proposal together or provide feedback on training documents. Cloud-based tools from DocuSign, Dropbox, and Google Drive make collaboration and document management a piece of cake.
These products, which all offer free entry-level versions, allow users to access the latest versions of any document so they can stay on top of real-time changes which can help businesses to better manage workflow, regardless of geographical location.
Data Protection
Another important reason to move to the cloud is for better protection of your data, especially in the event of a natural disaster. Hurricane Sandy wreaked havoc on local data centers in New York City, forcing many websites to shut down their operations for days.
And we haven’t talked about the recent ransomware attacks by Eastern Europeans on energy company Colonial Pipeline and meat producer JBS Foods.
The cloud simply routes traffic around problem areas as if, yes, they have just been destroyed by a nuclear attack.
It's best to move data to the cloud, to avoid such disruptions because there your data will be stored in multiple locations.
This redundancy makes it so that even if one area is affected, your operations don't have to capitulate, and data remains accessible no matter what happens. It's a system called deduplication.
Lower Overhead
The cloud can save businesses a lot of money.
By outsourcing data storage to cloud providers, businesses save on capital and maintenance costs, money that in turn can be used to expand the business. Setting up an in-house data center requires tens of thousands of dollars in investment, and that's not to mention the maintenance costs it carries.
Plus, considering the security, reduced lag, up-time and controlled environments that providers such as Amazon's AWS have, creating an in-house data center seems about as contemporary as a buggy whip, a corset, or a Model T.
Now you might digest somewhat how Amazon built their share price from $1.50 in 1997 to over $3,500 today.
Thanks to the cloud.
Mad Hedge Technology Letter
July 12, 2021
Fiat Lux
Featured Trade:
(RIDE THE MOMENTUM)
(SHOP), (NFLX), (FB), (AMZN), (GOOGL), (NFLX), (AAPL), (MSFT)
Just as millions of people in the United States are sensing that life has returned to something that resembles normalcy, the Coronavirus’ delta variant has emerged as American technology stocks biggest upcoming inflection point.
This certainly ups the ante in the struggle to grapple with the pandemic and has wide-reaching consequences for your technology portfolio.
Fresh data from the U.S. Centers for Disease Control and Prevention shows that more than half of all new cases in the U.S. were attributed to the delta variant, which is believed to be easily transmissible.
About 50% of Americans are fully unvaccinated meaning 50% are not, which could lead to hellacious autumn for the 175 million who are not.
The tech market has sniffed this out.
Data suggesting this variant is three times as infectious as the original coronavirus strain is the catalyst for a massive rotation into premium big tech who boast glamorous balance sheets.
It is still unclear if this virus is actually deadlier or leads to more severe illness, but the health of Facebook, Google, Apple, Microsoft, and Amazon aren’t reliant on the outcome of the delta variant or at least relative to companies that have physical storefronts.
I believe the momentum in these names will continue in the short term as more countries prepare to carve up new movement restrictions and quasi lockdowns to combat the new variant.
The recent tech rotation has been inconspicuous but powerful and the who’s who of big tech are enjoying a stellar run in the past month with FB up 6%, GOOGL up 4.5%, AAPL up 13%, MSFT up 8%, and AMZN up 11%.
These premium tech stocks are acting almost like U.S. treasuries and are increasingly defined as a perceived flight to safety because of
the net high quality of the assets.
Whether there is another virus that kills another 4 million globally again, investors are confident that these prioritized tech stocks are immune to any meaningful weaknesses.
On a granular level, pullbacks are becoming highly rare and mini pullbacks are becoming the only practical entry points into these stocks.
Readers waiting for a 5% drop are still waiting.
Reading waiting for 10% drops risk never getting in when the going is good.
Fresh news of Japan banning spectators for the upcoming and badly organized Tokyo Olympics took down GOOGL and FB 2% intraday only for shares to make up half the losses in one afternoon.
The delta variant has strengthened the “buy the dip” philosophy that is deeply entrenched in these 5 tech names.
The strength of tech can be seen further down the totem pole in inferior names.
Shopify (SHOP), Canada’s ecommerce crown jewel, is another winner with shares up 19% in the past 30 days.
If this rotation continues, I can realistically expect dips or sideways price action in Uber (UBER), Lyft (LYFT), and Airbnb (ABNB) because their investment case weakens relative to the big 5 in a delta variant world.
Netflix (NFLX) is another one that will harvest the low-hanging fruit with strong near-term action resulting in a 9% gain in the past 30 days.
It’s highly likely that in more than several regions around the world, the delta variant will re-silo consumers and hamstring businesses.
Crushing any green shoots that the reopening is supposed to deliver isn’t an ideal runway to growth.
Epidemiologists are starting to come out of the woodwork with Hungarian virologist Ferenc Jakab saying Hungary will be lucky to “get away with August” when referring to a possible 4th wave.
This hasn’t been fully priced into the U.S. tech market and tech will enjoy a full-scale rotation if the 4th wave arrives in full force.
However, I don’t believe we are on the cusp of another $12+ trillion bailout for the delta like last time go around, which does cap momentum to the upside.
There will also be a lack of meme stock profit-taking and bitcoin profit-taking that can be rolled into the big tech safety trade.
Sensibly, this could be a short-term boost for emerging growth tech as well with the likes of DocuSign (DOCU), Zoom Video (ZM), and Teladoc (TDOC) benefiting from investors dusting off the 2020 playbook again.
I forgot to mention that U.S. treasuries falling to $1.36% is the primary reason why at the balance sheet level, growth tech will also get the benefit of the doubt in the short term.
This won’t just be a big 5 momentum encore, others will enjoy the fruits of labor.
Loss-making tech is inordinately reliant on rates being low to subsidize losses and as the 10-year rate has gone from 1.72% to 1.36%, it’s no surprise that growth tech looks like eye candy now too.
Big tech is certainly more durable and has the capacity to navigate around rising rates which is the deal-clincher for me.
I am inclined to get back into the market with any delta scare that cheapens tech before the next leg up.
The embarrassing loss in the judicial system against FB by the Feds is the cherry on top.
I am bullish tech in the short term.
Mad Hedge Technology Letter
July 9, 2021
Fiat Lux
Featured Trade:
(BUYER BEWARE)
(DIDI), (PGJ), (FB), (AMZN), (GOOGL), (NFLX), (AAPL)
Chinese regulators announced on our Independence Day that they were banning downloads of Uber’s China DiDi in the app stores in the country because it poses cybersecurity risks and broke privacy laws.
This was after DiDi raised $4.4 billion by listing its shares in New York.
However, unnamed sources leaked that China's cybersecurity watchdog suggested to DiDi that it delay its IPO before it happened.
Delaying a wealth generating event like the IPO is controversial.
At this point, DIDI, the Uber of China, is worth a speculative trade at $1 and that’s if the Chinese tech firm doesn’t delist before that.
No — scratch that — it’s not even worth your time at $1 if you hold currency denominated in USD or anything even half as credible.
But if you’re from somewhere like Venezuela wielding infamous bolivars then take a wild stab around $1 or double up at $0.50 for a trade.
There is a reason that I have never in the history of the Mad Hedge Technology Letter recommended buying a Chinese technology stock.
The astronomical risk isn’t justified.
The evidence is now out in public with Chinese big tech and the Chinese Communist Party (CCP) airing their dirty laundry.
Most sensitive business dealings are usually dealt with in-house in the land of pan-fried dumplings and Beijing roasted duck, so things must be spiraling out of control on the inside.
No doubt that inflation spikes are causing chaos everywhere, but China is particularly vulnerable because of the high volume of Chinese living in poverty.
It’s unrelated to this IPO, but another valid reason why Chinese “growth” is weakening fast.
Stateside, cashing out is normal for tech growth companies who want to reward earlier seed investors, their own management teams, and in this case the early-stage investors were Japanese Softbank (21.5%), Silicon Valley’s Uber (12.8%), and China’s Tencent (6.8%).
This was pretty much a big middle finger to these three along with the other Chinese investors which were about to profit big.
This is on the heels of the CCP nixing the Jack Ma Alipay IPO.
Chinese big tech has gone from darlings to pariahs in a short time proving that in the U.S., you get too big to fail, but in China, you get too big to exist.
Silicon Valley tech princelings are also validated for leaving China such as Facebook (FB), Google (GOOGL), Amazon (AMZN) and Netflix (NFLX).
If local Chinese tech can’t flourish in China, then forget about foreign tech in China.
It’s a non-starter.
Apple (AAPL) is the only exception because they are grandfathered in when China had no smartphone and now they provide too many local jobs to be kicked out.
There is definitely a plausible case that U.S. retail investors who were part of that $4.4 billion holdings should be refunded their capital because DiDi didn’t truthfully disclose the risk of potential Chinese regulations properly.
There is also the logic that Chinese companies should never be able to list in New York in the first place which would be sensible.
As it stands, Chinese companies don’t need to follow U.S. GAAP accounting standards and cannot be prosecuted by the U.S. legal system if they commit fraud, embezzlement, or any other financial crime and decline to leave Chinese soil.
This incentivizes Chinese companies listed in the U.S. to cheat U.S. investors with fraudulent accounting and deceitful behavior because they aren’t accountable at the end of the day.
The Invesco Golden Dragon China ETF (PGJ), which tracks the performance of US-listed Chinese stocks, has lost more than one-third of its value since February.
I can tell you from close friends who call themselves frontier investors that investing in China is not worth your time and the fear of missing out (FOMO) rationale is all marketing chutzpah and nothing much else.
China’s economy hasn’t had any positive growth in the past 10 years according to Chinese insiders off record.
This FOMO narrative is often peddled by Wall Street “professionals” who are making exorbitant fees for selling retail investors Chinese junk stocks masquerading as real companies.
Out of many financial pros I have talked to, China leads in terms of horror stories from foreign investors.
The Chinese financial system is a hoax created to lure foreign capital in and for it to never leave often viewed as a free lunch for the local recipients.
And I am not only talking about Chinese tech, but this phenomenon also extends to every reach of the financial system there.
At the end of the day, China’s tech aristocracy wished they originated in the United States which is why they went public here because our markets work and theirs don’t.
They got to New York in the first place by marketing false numbers to U.S. investors and concealing regulatory issues, and U.S. investors must not fall for this trap.
If you look at the Shanghai Stock Exchange Composite Index ($SSEC), it’s gone nowhere in the past year and rightly so.
Even Chinese investors don’t buy Chinese stocks because there is no trust in their financial system. They buy property instead or buy U.S. tech stocks.
Don’t be the next sucker.
Mad Hedge Technology Letter
June 30, 2021
Fiat Lux
Featured Trade:
(BIG TECH WINS IN THE COURTROOM)
(AAPL), (AMZN), (GOOGL), (FB), (MSFT)
Federal court dismissed antitrust lawsuits against Facebook that the Federal Trade Commission (FTC) and 48 states seek to pin on the digital ad company.
This isn’t only a feather in the cap for FB, but it’s great news for Google, Snapchat, Twitter and the who’s who of selling digital ads and any tech company that might be perceived as “dominant.”
Many would have been led to believe that big tech and these ad giants were on the cusp of being controlled by legislation, only for the federal court to not even bother with advancing the case.
It means that the law is firmly on the side of big tech and it will be almost impossible to pin charges against big tech unless the law is changed to accommodate a situation that is more conducive to proving that American tech companies abuse their positions in the US economy.
Personally, I do believe they have a monopolistic position against its competitors, but to prove that in court is a different animal with arguments needing to hold up against the test of time.
There is no doubt that the company has a dominant share of the market in the “personal social networking” industry, but market dominance just means they are incredibly good at what they do which is serving ads to targeted audience.
Nothing they do is explicitly illegal and that is the tough part and they do provide “free” services.
Not only that, but Facebook users can also simply not use social media and its various platform as a choice because they can drop it altogether or use a different platform entirely.
The court also dismissed a supplementary complaint by the FTC with the judge ruling that the states had taken too long to take issue with Facebook’s acquisition of Instagram and WhatsApp, which were acquired in 2012 and 2014, respectively.
The ruling made the government’s FTC look bad and tardy.
They also are late to the game, unable to understand the tech of our time and enforce borderline fringe behavior.
This is why anti-trust, which many believe is big tech’s largest existential risk, is not really a risk when politicians fail so miserably at even understanding what they do until 9 years later.
Most tech companies are happy to know they have 9 years to skirt the law and aggressively push their business models until the FTC move their finger an inch.
Might as well bet the ranch, right?
Certainly, there will be another wave of amended filed complaints against Facebook within 30 days, which the court will re-review.
But after some convicting loss, prospects look poor for the FTC.
The way in which the law is worded today means that Facebook has to be on the radar of investors as a premier buy the dip trade now that one of the bigger risks is off the table.
Facebook's valuation has more than doubled since the onset of the pandemic as more people use its diversified network of apps to stay in touch with friends and family in a socially distant world.
The social network had over 2.85 billion monthly active users in Q1 2021 and join other tech firms over $1 trillion such as Apple, Microsoft, Amazon, and Alphabet.
I would execute a bullish position in Facebook after a retracement from the 4% pop on the good news.
Tech is expensive and has had another resurgence over the past few weeks.
It continues to be an industry you cannot bet against and that is why you have to be patient for entry points to come to you.
