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July 17, 2019

Global Market Comments
July 17, 2019
Fiat Lux

SPECIAL BIOTECH ISSUE

Featured Trade:
(FIVE BIOTECH STOCKS TO BUY AT THE BOTTOM),
(SPY), (VRTX), (JNJ), (ISRG), (CELG), (BMY), (AMGN), (ILMN)

May 22, 2019

Global Market Comments
May 22, 2019
Fiat Lux

SPECIAL ARTIFICIAL INTELLIGENCE ISSUE

Featured Trade:

(HERE’S AN EASY WAY TO PLAY ARTIFICIAL INTELLIGENCE),
(BOTZ), (NVDA), (ISRG)
(FRIDAY, JULY 5 CAIRO, EGYPT GLOBAL STRATEGY DINNER)

Here's an Easy Way to Play Artificial Intelligence

We are now in the throes of a market correction that could last anywhere from a couple of more week to a couple of months. So, generational opportunities are starting to open up in some of the best long term market sectors.

Suppose there was an exchange-traded fund that focused on the single most important technology trend in the world today.

You might think that I was smoking California’s largest export (it’s not grapes). But such a fund DOES exist.

The Global X Robotics & Artificial Intelligence ETF (BOTZ) drops a golden opportunity into investors’ laps as a way to capture part of the growing movement behind automation.

The fund currently has an impressive $2.2 billion in assets under management.

The universal trend of preferring automation over human labor is spreading with each passing day. Suffice to say there is the unfortunate emotional element of sacking a human and the negative knock-on effect to the local community like in Detroit, Michigan.

But simply put, robots do a better job, don’t complain, don’t fall ill, don’t join unions, or don’t ask for pay rises. It’s all very much a capitalist’s dream come true.

Instead of dallying around in single stock symbols, now is the time to seize the moment and take advantage of the single seminal trend of our lifetime.

No, it’s not online dating, gambling, or bitcoin. It’s Artificial Intelligence.

Selecting individual stocks that are purely exposed to AI is a challenging endeavor. Companies need a way to generate returns to shareholders first and foremost, hence, most pure AI plays do not exist right now.

However, the Mad Hedge Fund Trader has found the most unadulterated AI play out there. A real diamond in the rough.

The best way to expose yourself to this AI trend is through Global X Robotics & Artificial Intelligence ETF (BOTZ).

This ETF tracks the price and yield performance of ten crucial companies that sit at the forefront of the AI and robotic development curve. It invests at least 80% of its total assets in the securities of the underlying index. The expense ratio is only 0.68%.

Another caveat is that the underlying companies are only derived from developed countries. Out of the 10 disclosed largest holdings, seven are from Japan, two are from Silicon Valley, and one, ABB Group, is a Swedish-Swiss multinational headquartered in Zurich, Switzerland.

Robotics and AI walk hand in hand, and robotics are entirely dependent on the germination prospects of AI. Without AI, robots are just a clunk of heavy metal.

Robots require a high level of AI to meld seamlessly into our workforce. The stronger the AI functions, the stronger the robot’s ability, filtering down to the bottom line.

AI-embedded robots are especially prevalent in military, car manufacturing, and heavy machinery. The industrial robot industry projects to reach $80 billion per year in sales by 2024 as more of the workforce gradually becomes automated.

The robotic industry has become so prominent in the automotive industry that they constitute greater than 50% of robot investments in America.

Let’s get the ball rolling and familiarize readers of the Global Trading Dispatch with the top 5 weightings in the underlying ETF (BOTZ).

Nvidia (NVDA)

Nvidia Corporation is a company I often write about as their main business is producing GPU chips for the video game industry.

This Santa Clara, California-based company is spearheading the next wave of AI advancement by focusing on autonomous vehicle technology and AI-integrated cloud data centers as their next cash cow.

All these new groundbreaking technologies require ample amounts of GPU chips. Consumers will eventually cohabitate with state of the art IOT products (internet of things), fueled by GPU chips coming to mass market like the Apple Homepod.

The company is led by genius Jensen Huang, a Taiwanese American, who cut his teeth as a microprocessor designer at competitor Advanced Micro Devices (AMD).

Nvidia constitutes a hefty 8.70% of the BOTZ ETF.

To visit their website, please click here.

Yaskawa Electric (Japan)

Yaskawa Electric is the world's largest manufacturer of AC Inverter Drives, Servo and Motion Control, and Robotics Automation Systems, headquartered in Kitakyushu, Japan.

It is a company I know well, having covered this former zaibatsu company as a budding young analyst in Japan 45 years ago.

Yaskawa has fully committed to improving global productivity through automation. It comprises the 2nd largest portion of BOTZ at 8.35%.

To visit Yaskawa’s website, please click here.

Fanuc Corp. (Japan)

Fanuc was another one of the hot robotics companies I used to trade in during the 1970s, and I have visited their main factory many times.

The 3rd largest portion in the (BOTZ) ETF at 7.78% is Fanuc Corp. This company provides automation products and computer numerical control systems and is headquartered in Oshino, Yamanashi.

They were once a subsidiary of Fujitsu, which focused on the field of numerical control. The bulk of their business is done with American and Japanese automakers and electronics manufacturers.

They have snapped up 65% of the worldwide market in the computerized numerical device market (CNC). Fanuc has branch offices in 46 different countries.

To visit their company website, please click here.  

Intuitive Surgical (ISRG)

Intuitive Surgical Inc (ISRG) trades on Nasdaq and is located in sun-drenched Sunnyvale, California.

This local firm designs, manufactures, and markets surgical systems and is completely industriously focused on the medical industry.

The company's da Vinci Surgical System converts surgeon's hand movements into corresponding micro-movements of instruments positioned inside the patient.

The products include surgeon's consoles, patient-side carts, 3D vision systems, da Vinci skills simulators, da Vinci Xi integrated table motions.

This company comprises 7.60% of BOTZ. To visit their website, please click here.

Keyence Corp (Japan)

Keyence Corp is the leading supplier of automation sensors, vision systems, barcode readers, laser markers, measuring instruments, and digital microscope.

They offer a full array of service support and closely work with customers to guarantee full functionality and operation of the equipment. Their technical staff and sales teams add value to the company by cooperating with its buyers.

They have been consistently ranked as the top 10 best companies in Japan and boast an eye-popping 50% operating margin.

They are headquartered in Osaka, Japan and make up 7.54% of the BOTZ ETF.

To visit their website please click here.

(BOTZ) does have some pros and cons. The best AI plays are either still private at the venture capital level or have already been taken over by giant firms like NVIDIA.

You also need to have a pretty broad definition of AI to bring together enough companies to make up a decent ETF.

However, it does get you a cheap entry into many of the illiquid foreign names in this fund.

Automation is one of the reasons why this is turning into the deflationary century and I recommend all readers who don’t have their own robotic-led business pick up some Global X Robotics & Artificial Intelligence ETF (BOTZ).

And by the way, the entry point right here on the charts is almost perfect.

To learn more about (BOTZ), please visit their website by clicking here.

 

 

 

 

March 11, 2019

Mad Hedge Technology Letter
March 11, 2019
Fiat Lux

Featured Trade:

(THE BEST TECH PLAY IN HEALTHCARE),
(ISRG), (GOOGL), (JNJ)

The Best Tech Play in Healthcare

Seeking for a great long-term buy and hold tech name?

Then look no further than Intuitive Surgical, Inc. (ISRG).

Intuitive Surgical develops and produces robotic products designed to enhance clinical outcomes for patients through minimally invasive surgery, its most well-known product is the da Vinci surgical system.

Healthcare is one sector that I have rarely touched on, but not only will this cross-pollination with tech serve a social good, investors have a chance to rake in future profits.

The da Vinci systems and Intuitive Surgical are the best of breed and have had almost zero competition in the past 20 years.

The systems are placed in operating room used for invasive surgery for various types of ailments from cancer to hernia, and the systems were successfully used over one million times for surgery last year.

The da Vinci systems aren’t cheap – they cost $1.5 million and the customers, usually the hospitals, buy the add-ons of extra parts and supplies that inflate the price another $1,900.

As you would expect, net profit margins are compelling, being over 30% which e-commerce companies would give a left leg for translating into numbers that make the company incredibly profitable.

The story of the da Vinci systems starts way back in the 80s with the Defense Advanced Research Projects Agency (DARPA) hoping it could figure out how to offer surgeons the ability to operate remotely on soldiers wounded on the battlefield.

SRI International (SRI), an American nonprofit scientific research institute and organization took the painstaking time to develop the technology.

SRI's intellectual property was eventually acquired in 1994 and incorporated a new company named Intuitive Surgical Devices by the founders.

It took another 4 years for the FDA (Food and Drug Administration) to finally approve usage of the da Vinci Surgical System.

The first available surgery was for general laparoscopic surgery used to address gallbladder disease and gastroesophageal disease.

The next year saw another harvest of approvals with the FDA giving the green light to use the system for prostate surgery.

The approvals started to flow like a waterfall with thoracoscopic surgery, cardiac procedures performed with adjunctive incisions, and gynecologic procedures also approved by the FDA.

Fast forward to 2019 and the company couldn’t be financially healthier looking back at the year of 2018 in review.

Instruments & Accessories revenues came in at $1.96 billion comprising 52.7% of total revenue.

System sales crushed it with $1.13 billion, growth of 30.3% YOY and service sales amounted to $635.1 million up 17% YOY.

And in the latest quarter, Intuitive Surgical reported 19% YOY growth in worldwide da Vinci procedure volumes which contributed to bumping up revenue 18% YOY in the instruments and accessories segment.

The company is seeing the same type of success abroad with foreign revenues totaling $307 million, up 24% YOY.

Intuitive Surgical installed 115 systems in the previous quarter outside of America compared with 86 in the quarter before last.

55  of these new systems were installed in Europe, 31 in Japan, and nine in Brazil.

Procedure growth is forecasted to expand between 13-17%, fueled by U.S. general surgery and procedures.

Unfortunately, the stock sold off after earnings because adjusted operating expenses are expected to rise 20-28% reminding investors that the stock can’t always move up in a straight line.

The harm to operating margins is a tough pill to swallow in the short-term, but that does not take away the gloss from this leading tech company.

Intuitive Surgical plans to branch out from the da Vinci systems with its new Ion system, a robotic-assisted bronchoscope awaiting FDA clearance, a revolutionary way to kill cancer cells inside the lung.

After decades of unbridled market leadership, there are a few icebergs ahead in the distance in the form of competition.

Verb Surgical, a collaboration between Johnson & Johnson (JNJ) and Alphabet (GOOGL), will enter the healthcare robot surgery market in 2020.

Johnson & Johnson recently indicated it will splurge $3.4 billion in cash for Auris Health, a robotics startup with a device to perform lung biopsies that could compete with Intuitive Surgical’s Ion system.

Auris Health was approved by the FDA in March 2018 for this device that performs lung biopsies and Intuitive Surgical promptly sued citing patent infringement.

Auris Health was established by the co-founder of Intuitive Surgical Dr. Frederic Moll who pioneered the field of surgical robotics but left Intuitive in 2003 after 8 years there.

Intuitive could rub up on some more competition in the future, that is a stark possibility, but the pathway to profits are still open as the company rolls out different systems, services, and has the capital to fund new directions.

Hospitals that already have existing relationships with Intuitive will be less inclined to switch over to competing services if they are satisfied with the quality, service, and price points of the equipment.

This will help Intuitive build on the current strong momentum and ensure their products are in the pipeline to be adopted by the next batch of future demand.

Shares of the company are sky-high and expensive with a PE multiple of 55.

The big investment into R&D is in no doubt to fend off the potential competition around the corner, but I view that as a net positive.

It would be logical to wait for a pullback to buy shares, this one is a keeper.

August 10, 2018

Global Market Comments
August 10, 2018
Fiat Lux

Featured Trade:
(AUGUST 8 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (TBT), (PIN), (ISRG), (EDIT), (MU), (LRCX), (NVDA),
(FXE), (FXA), (FXY), (BOTZ), (VALE), (TSLA), (AMZN),
(THE DEATH OF THE CAR),
(GM), (F), (TSLA), (GOOG), (AAPL)