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Tested and Proven COVID-19 Stock for These Uncertain Times

As we hold our breath for the results of the presidential election, it’s no surprise that investors are wondering how their portfolios will be impacted.

That’s why now is the right time to pick a stock or two that can thrive regardless of who emerges as the victor.

To do this, it’s wise to look at a company that has already experienced a boost under Trump’s presidency and could continue to enjoy the rewards even with a Joe Biden administration.

The obvious common denominator is Trump and Biden’s goal to be aggressive in COVID-19 testing for as long as the virus is around.

Pfizer (PFE), AstraZeneca (AZN), and Moderna (MRNA) are undoubtedly three of the most widely reported coronavirus stocks in the past months.

These companies were the first to launch their COVID-19 vaccine candidates in human trials and are the leaders in the race towards the finish line.

However, long-term investors may find more value betting on one of my preferred COVID-19 stocks: the $188 billion healthcare behemoth Abbott Laboratories (ABT).

Let me tell you why.

In either Trump’s or Biden’s presidency, Abbott stands to benefit.

Regardless of the winner of the 2020 election, Abbott remains a winner for as long as COVID-19 continues to threaten the world.

While the majority of COVID-19 vaccine companies have yet to generate income from their coronavirus programs due to pending FDA approvals, Abbott has been leveraging its pipeline to boost its growth even with the pandemic.

Since the early days of this health crisis, Abbott has been working to stay ahead of the pack.

To date, the company has at least seven COVID-19 tests with emergency use authorization from the FDA and are available in the market.

These tests, which boosted Abbott’s diagnostics sales by 39% in the third quarter, range from detecting active cases to identifying whether a person has been infected with the virus in the past.

The latest swab test to join Abbott’s growing lineup of COVID-19 products is called the antigen test and is designed to deliver results in as fast as 15 minutes and costs only $5.

To add convenience, this test is connected to a mobile to allow users to access their results right away.

Prior to the antigen test, Abbott launched a rapid detection test called BinaxNOW. This test can also return results on-site within 15 minutes. It has a free digital app, which sends users with negative results a “digital health pass” right on their phones.

When BinaxNOW was launched in August, the Trump administration spent $760 million for 150 million tests.

This company has supplied over 100 million COVID-19 tests and generated roughly $881 million in sales in the third quarter, up from the $615 million it reported in the second quarter.

Abbott is one of the safer stocks to own in the healthcare sector, with sales estimates for this company expected to grow by 14% in 2021 and 2022.

So far, Abbott shares have climbed 22% this year. Even amidst the pandemic, Abbott raised its full-year guidance for its earnings per share from $3.25 to $3.55.

While the company has been focused on its COVID-19 programs, this strategy is not a one-time deal.

On the contrary, the popularity of its COVID-19 testing kits serves as the much-needed door-opener for Abbott to expand its medical venues—an effort that generally takes years to develop.

For instance, its diabetes care segment alone managed to achieve a 26.9% year-over-year jump in sales to reach $843 million in the third quarter.

On top of that, Abbott has an incredibly diverse pipeline with over 100 new products across its different business units.

Abbott is a widely known dividend aristocrat, paying quarterly dividends consistently since 1924. It has a proven track record of solid performance and a carefully curated suite of businesses that promises future rewards.

At the rate the company is growing and the future projects it has in its pipeline, this dividend aristocrat would no doubt continue with this proud tradition of rewarding its investors generously.

October 22, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
October 22, 2020
Fiat Lux

FEATURED TRADE:

(IS THIS COVID-19 VACCINE OUTLIER ON THE FAST LANE?)
(NVAX), (PFE), (AZN), (JNJ), (SNY), (MRNA), (TAK)

Is this COVID-19 Vaccine Outlier in the Fast Lane?

Biotech Letter

It is not at all surprising that the biggest names in the healthcare industry are dominating the COVID-19 vaccine race.

After all, Big Pharmas such as Pfizer (PFE), AstraZeneca (AZN), Johnson & Johnson (JNJ), and Sanofi (SNY) are backed with vast resources that even media favorites like Moderna (MRNA) find challenging to compete against.

For months now though, going head to head with these big-name frontrunners is a clear outlier: Novavax (NVAX).

So far, there are only 10 COVID-19 vaccine candidates that have reached late-stage testing and Novavax’s NVX-CoV2373 has been performing at par (if not better) than its rivals—and the market has definitely noticed.

When 2020 started, Novavax’s market capitalization was less than $130 million and traded at roughly $4 per share.

Ten months into the pandemic, this small biotechnology company’s market cap grew to over $6.5 billion and has been trading at $110 per share—and that is already after a price decrease in the past weeks.

Given the disparity in its size and resources compared to its competitors, it’s safe to say that Novavax has been punching way above its weight class particularly in terms of landing supply agreements for its COVID-19 program.

Novavax first received a CEPI grant in March worth $4 million, which was immediately dwarfed by the $384 million the biotech company got in May.

In a matter of months, Novavax joined the major league players and secured a $1.6 billion funding courtesy of the US government’s Operation Warp Speed program.

In exchange, the biotech company will supply 100 million doses of NVX-CoV2373 to the US upon approval.

Novavax also inked an agreement with the UK for 60 million doses and another with Canada for 76 million doses.

Novavax has also landed deals with Japan through Takeda Pharmaceutical (TAK) and India via the Serum Institute of India.

As expected, the grants and supply agreements were perceived as votes of confidence on Novavax’s work and the company reaped the rewards.

In March, the prices started moving from less than $10 per share to almost $50.

By May, the price moved up to roughly $80 per share.

After its Operation Warp Speed contract in July, Novavax’s price per share soared all the way to $189 before eventually falling to $110 this October.

Novavax has only conducted late-stage testing in the UK. But, Phase 3 is expected to begin in the US soon as well.

Admittedly, a lot is riding on NVX-CoV2373.

However, the company has actually offloaded the majority—if not all—of its financial risks linked to the program.

Riding the momentum of its COVID-19 vaccine candidate, Novavax has been working on a related influenza vaccine called Nanoflu.

Given the market size for this, Nanoflu is estimated to rake in an annual revenue somewhere between $550 million and $1.7 billion.

Another potential blockbuster is respiratory syncytial virus (RSV) vaccine ResVax, which is projected to reach peak sales of $2 billion.

Novavax is also working on a vaccine candidate for the Ebola virus, the Middle East Respiratory Syndrome (MERS-CoV), and Severe Acute Respiratory Syndrome (SARS).

While NVX-CoV2373 is anticipated as Novavax’s moneymaker in the coming years, the biotech company can only realistically expect massive sales from this until 2023.

Looking at the company’s manufacturing partnerships and the aggressive timeline it has taken, Novavax is expected to produce 2 billion doses of its COVID-19 vaccine by mid-2021.

This is great news for its investors because of Novavax’s smaller market capitalization compared to its competitors.

Since the biotech company is projected as one of the first companies—if not the first—to offer a vaccine, then it can cover a substantial market share before its bigger rivals take over the market.

Even if Novavax prices its COVID-19 vaccine cheaply, say, $10 per dose, it can still generate $20 billion in annual sales.

Moreover, the late-stage success of NVX-CoV2373 will definitely cause Novavax’s stock price to skyrocket.

Despite this potential though, it’s important to keep in mind that this biotech company still has a way lower market cap than its rivals.

That means its share price will move a lot higher compared to the stocks of the other vaccine leaders.

Therefore, Novavax’s small size is not a negative for its investors—it is actually an advantage.

So for biotech investors who are searching for a promising COVID-19 vaccine stock, there’s nothing cheaper and more promising than Novavax.

October 15, 2020

Diary, Newsletter, Summary

Global Market Comments
October 15, 2020
Fiat Lux

Featured Trade:

(OCTOBER 14 BIWEEKLY STRATEGY WEBINAR Q&A),
(VXX), (INDU), (TLT), (GLD), (IB), (XPEV),
(TSLA), (MRNA), (AMD), (SDS), (ITB)

October 14 Biweekly Strategy Webinar Q&A

Diary, Newsletter, Research

Below please find subscribers’ Q&A for the October 14 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: Do you think Interactive Brokers (IB) will give better executions?

A: No, these executions are all done by identical computers with identical programs now, across eleven differences of electronic exchanges. It’s like trying to decide whether to buy Exxon or Mobile gas. It’s all the same stuff. The only real difference in brokers these days is in customer service; and you really have to shop around there and find what you like. Even on customer service, most brokers have cut back staff to a minimum. In the end, the only difference among brokers may be “hold” times.

Q: What are your thoughts on Xpeng, Inc. (XPEV), the Chinese electric car manufacturer?

A: The Chinese have actually had electric cars longer than Tesla (TSLA) has and I have visited their factories in China, like BYD Auto (https://en.wikipedia.org/wiki/BYD_Auto). The problem has always been quality—the batteries tend to catch on fire, the cars fall apart—and that’s why they have never exported an electric car to the U.S. I don't expect that to change. What’s more likely is Tesla building more factories in China, where they overwhelmingly have the technology, brand, and quality lead. I don't think any electric car company can threaten Tesla now that they’re so far ahead.

Q: Is it a good time to buy the iPath S&P 500 VIX Short Term Futures ETN (VXX)?

A: No, because you only make money on the (VXX) when you get a volatility increase almost immediately after you buy it. So, if you have some great insight on the next volatility explosion, try it; otherwise, the time decay will kill you. By the way, everyone knows there is going to be a presidential election in three weeks so it’s already in the price.

Q: What is the likelihood of a financial transaction tax, and how would it affect our trading?

A: It wouldn't hurt our trading, because we’re mostly small fry. It would wipe out high-frequency trading where they’re trading for a penny with no transaction costs. And that, in fact, would be the goal: to wipe out high-frequency trading. Unfortunately, they’re about 80% of the market now, so I’m not sure who would step in and fill in that space. But there’s always someone.

Q: What about Moderna (MRNA)?

A: Yes, I like it for the long term. I think next year will be another golden age for biotech, and they have had a great rally so I’d be looking to buy on dips. MRNA is certainly going to participate. After Corona, there are 100 other diseases they could be working on. It’s not a COVID-19-only story, which is what some of the short sellers got wrong.

Q: How far does Gold (GLD) go down before it goes up?

A: Probably not much more; we have had a decent 10% correction. I was actually thinking about buying gold today, but I also hate leaning into a downtrend. So, any downtrends are temporary, we're looking at new highs in gold next year. This is a QE (quantitative easing) trade, not a risk-off trade like it used to be. So, the continuation of QE for years means that gold goes higher.

Q: When is it time to trade bonds (TLT) again?

A: Bonds just had their narrowest trading range in years in the last month. We only want to play on the short side; it broke down last week so we don't want to do anything here.

Q: Is a 1% drop in Advanced Micro Devices (AMD) a dip?

A: No, a 10% drop in AMD is a dip. Buying a 1% drop is a chase, which is an invitation to a lot of pain.

Q: Have SPACs (Special Purpose Acquisition Corporation) replaced IPOs?

A: I think SPACs are one of the greatest scams of all time. Everybody will get ripped off after paying enormous fees, and once these things go illiquid, no one will be able to get out, so I would not chase the SPAC game. They are only created to dodge the investor protections in the IPO process, I've seen too many of these fads happen over the last 50 years. They always end in tears.

Q: I think there will be another surprise Trump win similar to 2016. How would the market react to a Trump win?

A: It would crash because the market has built in a Biden win and chased up Biden sectors. So, if that doesn’t happen, the market has to give up all those gains and reorient itself. Trump had a 2-3-point polling deficit last time, and now he has to overcome a 17-point deficit or whatever the number is depending on the poll you look at. So, I don’t think so. Remember, Trump only won the election by 78,000 votes in three states. The 220,000 who have died from the pandemic are definitely NOT voting for Trump, nor are their 10X family members. That’s 2.2 million votes lost. Remember, the Corona death rate in red states is far higher than in blue states.

Q: Do you think a Bollinger Band squeeze is forming in Tesla right now?

A: Yes, even though this stock has had a prolific run, it looks like it wants to go higher. I wouldn’t go short.

Q: What about over issuance of US debt?

A: Any concerns about over issuance of debt won’t hit for a while because the Fed is going to keep the short-term rates at zero, which will anchor everything else at low levels. The initial heat will be felt in the ten- and 30-year bonds where you should be permanently short.

Q: Reminder that 4 years ago, you said a Trump win would crash the market.

A: Yes, I did say that, and it did crash the market—it dropped 1,000 points overnight and made it all back the next morning. I spent that entire night rebuilding portfolios which then had a massive run, so I remember that very well. That is the only election I was wrong on in 50 years. So, the lesson is don’t bet against the guy who's only wrong once in 50 years and count on him being wrong again. There are hundreds of data points now which show that Trump has no chance of winning and he’s acting in a way that backs that up.

Q: Is there a second COVID wave priced in yet?

A: No, the way these things work is scientists predict waves, traders say no it will never happen, then it happens and the traders puke out. And if that happens, we will know that is the buying opportunity of the century because that is exactly what we got on the last puke out in March. And yes, I was wrong; I said the stocks would double in two years and instead they doubled in three months.

Q: Do you think a real estate bubble is forming?

A: Yes, but it may not pop for another 10 years because we have 85 million millennials trying to buy housing right now, with interest rates near zero. I just refinanced my home at 2.75%. And only 65 million Gen Xers have homes to sell them, which is being expressed in higher home prices. That’s why I love the homebuilders (ITB).

Q: What about ProShares Ultra Short S&P 500 2X bear ETF (SDS)?

A: I would bail on that because the long-term trend is still up. Dow 120,000 here we come! You only want to use the (SDS) on short term dips, and then come out at the bottom.

Good Luck and Stay Healthy

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

October 15, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
October 15, 2020
Fiat Lux

FEATURED TRADE:

(KEEP AN EYE OUT ON THE SLOWER RUNNERS IN THE COVID-19 VACCINE RACE)
(SNY), (GSK), (MRNA), (FPE), (AZN), (PRNB)

Keep an Eye Out on the Slow Runners in the COVID-19 Vaccine Race

Biotech Letter

Under normal circumstances, it would be unheard of for a biotechnology or pharmaceutical company to begin the construction of manufacturing facilities for any drug that has not gained approval from the US Food and Drug Administration (FDA).

However, the year 2020 has been anything but “normal.”

In fact, the US government has already released billions of dollars to companies working to create a COVID-19 vaccine well ahead of their candidates’ approvals by the FDA.

While we have yet to determine which vaccine candidates would work, the amount of money pouring into these programs give us a very real sense of the size of the vaccine market.

Among the companies working on a vaccine, Sanofi (SNY) and GlaxoSmithKline (GSK) emerged as early favorites.

Even without any candidate in late-stage trials, the two drug makers landed a $2.1 billion deal with the US government for their COVID-19 vaccine candidate in July.

This will cover 100 million doses initially, which would put the vaccine cost at $21 per dose.

If all goes well, the US government has the option to buy an additional 500 million doses of the Sanofi-GSK vaccine. The two companies are also negotiating terms with other countries particularly in Europe and Asia.

Sanofi is the lead partner in this program, with the company producing the COVID-19 vaccine itself. As for GSK, it will be adding an adjuvant which would boost the immune response.

Initial data from this study is expected to be released by December 2020, with the duo hoping to receive regulatory approval not later than June 2021.

The goal is to manufacture up to 1 billion doses annually from the time of its approval in 2021.

One of the reasons Sanofi and GSK candidate attracted attention despite the companies’ less aggressive timeline compared to competitors, like Moderna (MRNA), Pfizer (PFE), and AstraZeneca (AZN), is that it uses a protein-based technique already used in their flu vaccine called Flublok.

Using a tried and tested technology affords COVID-19 vaccine investors a safety net in case the newer and untested technologies of Moderna and Pfizer stumbles. For context, Flublok was approved by the FDA in 2013.

Aside from its COVID-19 vaccine program with GSK, Sanofi is working on a separate candidate with Massachusetts-based company Translate Bio.

This candidate, which uses mRNA technology, is expected to start human trials by November.

If all works out, Sanofi and Translate Bio estimate that they can produce 90 million to 360 million doses of this two-dose COVID-19 candidate in 2021.

Sanofi is no stranger to the vaccine market. In 2019, the company enjoyed a 4.8% year-over-year jump in its net sales and over 9% increase in the sales of its vaccines.

While Sanofi’s net sales slid by 4.9% in the first six months of 2020, the company still reported a healthy 9.2% growth in its earnings per share in the same period.

Thanks to its top-selling eczema drug Dupixent, the company’s specialty care segment rose by more than 17%.

In fact, the drug generated over $1 billion in sales in the first half of the year—a stunning 70% jump from its 2019 performance.

Riding this momentum, Sanofi has been aggressively adding new approvals for Dupixent and expanding its reach not only in the US but also in China.

Speaking of expansion, Sanofi recently completed a $3.7 billion acquisition of Principia Biopharma (PRNB) in August. This deal is a strong indicator that the company aims to focus more on its cancer and autoimmune sectors.

This also marks the second major acquisition of Sanofi in less than a year, with the company striking a $2.5 billion deal to acquire another cancer-focused biotechnology company Synthorx last December 2019.

Looking at the timeline of Sanofi compared to its competitor reminds me of the classic Aesop story, “The Hare and the Tortoise.”

However, the race for a COVID-19 vaccine is definitely not a winner-take-all scenario.

Sanofi and its partner GSK may look far behind the frontrunners, but these mega-companies have such extensive experience in developing and testing vaccines that they could easily close the gap in the next few months.

A successful COVID-19 vaccine would definitely be a gamechanger for Sanofi’s pipeline. The competition is stacked – several other resource-rich companies are also working on similar programs – and Sanofi’s candidates are nowhere near the finish line.

If Sanofi’s COVID-19 vaccine candidate is effective, however, there is really no good reason why it cannot snatch a piece of the pie.

Sanofi stock has not experienced any massive gains or losses since the pandemic started, and it probably will not make any investor get rich quick. But even without its COVID-19 vaccine candidate, this company is a tried-and-tested, reasonably priced value stock that any investor could simply buy and hold for decades.

October 6, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
October 6, 2020
Fiat Lux

FEATURED TRADE:

(CAN THIS DIVIDEND KING BE THE NEXT VACCINE KING?)
(JNJ), (MRNA), (PFE), (BNTX), (AZN), (INO), (NVAX), (SNY)

Can this Dividend King Be the Next Vaccine King?

Biotech Letter

One area that Johnson & Johnson (JNJ) has not been a leader in for the past years is vaccine development.

That could change soon however.

Among the healthcare companies racing to develop a COVID-19 vaccine these days, JNJ has been a heavy favorite to come up with the most potent candidate.

Although the company started its clinical trials two months after Moderna (MRNA) and the partners Pfizer (PFE) and BioNTech (BNTX) started theirs, JNJ might release results even earlier than November.

This is because JNJ’s vaccine candidate, called Ad26.COV2.S, worked quickly on the patients after only a single dose.

In comparison, Moderna and Pfizer’s candidates need a first dose and then, after a month, a second dose or a booster shot.

While it could take a month or two for Moderna and Pfizer’s vaccines to take effect, those given Ad26.COV2.S could be protected after two weeks.

Moderna and Pfizer both use messenger-RNA technology for their vaccines, while JNJ utilizes a hollowed-out virus to deliver the DNA instructions to the relevant cells to trigger a protein spike and provoke an immune response.

This is the same method the company used in its Ebola vaccine, which has been instrumental in the immunization programs in Africa.

Inasmuch as Ad26.COV2.S offers incredible potency compared to other candidates, there is one potential trade-off: our immune system might later on start to resist the drug.

However, JNJ is attempting to resolve this issue by developing a booster shot for future use.

Meanwhile, Moderna and Pfizer’s vaccine candidates could be given as many times as possible without that risk.

JNJ’s vaccine can also be distributed and stored without any special handling unlike its rivals, which require lower temperatures. This means that the vaccine can be delivered to even the less-developed facilities.

Other than eliminating the logistical problem of people failing to get a second shot of the vaccine, JNJ’s one-shot regimen can guarantee that governments can vaccinate 1 billion people annually.

Only a handful of the manufacturers can match that claim, offering JNJ an edge regardless of the seven-month head start of the other developers.

Apart from JNJ, Pfizer, and Moderna, more companies have started their late-stage vaccine trials. The list includes AstraZeneca (AZN), Inovio Pharmaceuticals (INO), Novavax (NVAX), and Sanofi (SNY).

Outside its COVID-19 programs, JNJ has been delivering solid results despite the ongoing crisis.

The company’s pharmaceutical division showed notable growth in the second quarter, with its immunology drugs leading the charge.

In terms of sales in this quarter, rheumatoid arthritis and Crohn’s disease drug Remicade raked in $935 million while severe rheumatoid, psoriatic, and ankylosing spondylitis injection Simponi brought in $526 million.

Meanwhile, psoriasis medicines Stelara and Tremfya generated an impressive $1.7 billion and $342 million, respectively.

JNJ is also expanding its portfolio to cover the biotechnology market. So far, one of its most telling moves is its $6.5 billion all-cash acquisition of Momental Pharmaceuticals.

Buoyed by these promising results, JNJ boosted its full-year revenue guidance for 2020 with operational sales estimated to reach somewhere between $81 billion and $82.5 billion.

JNJ has been widely known for its consumer products, but the truth is that the company’s forte is actually healthcare.

In 2019, JNJ’s pharmaceutical sector comprised nearly 50% while medical devices generated roughly one-third of the company's total sales. These figures may very well be the reason why this stock is gaining traction among retirees.

After all, healthcare is where the money lies – and JNJ is now the biggest healthcare conglomerate in the world.

In fact, the company serves over 1 billion patients on a daily basis and 12 of the products in its portfolio can easily generate $2 billion in sales annually.

The company’s cash flows have also been steadily increasing, setting off an impressive 58-year streak of consistent and consecutive dividend boost every year.

Needless to say, JNJ has been hailed the “Dividend King” in the healthcare sector for decades now.

Simply looking at JNJ profile, track record, and pipeline, it’s clear to see that buying and holding JNJ shares and reinvesting the dividends you receive along the way could give your portfolio a substantial boost.