Dear New World Investor:
On May 14, 2018, the Supreme Court struck down a 1992 Federal law that effectively banned state-authorized sports gambling, opening the door to legalizing the estimated $150 billion in illegal wagers on professional and amateur sports that Americans make every year. Nevada has had legal sports gambling for years, but sensing a new source of tax revenue and an opportunity to deprive criminals of a major source of income, Arkansas, Colorado, Delaware, Mississippi, New Jersey, Pennsylvania, Rhode Island, and West Virginia have legalized sports betting so far.
Of course, legalizing it and actually putting in the systems to make it work are two different things. Three companies with deep experience in legalized gambling have started partnering with US casinos and racetracks to bring their technology to the US. All three are UK companies: Flutter Entertainment (FLTR.L in London; PDYPY in the US), GVC Holdings (GVC.L in London; GMVHF in the US but barely trades), and William Hill (WMH.L in London; WIMHY in the US).
All three of these are making deals and expanding rapidly in the US, but the stock prices mainly are set in London. That’s important because last April 1 the UK government reduced the allowable wager on a fixed-odds betting terminal (similar to a slot machine) from £100 to £2, on the grounds that they are highly addictive and allow a new bet every 20 seconds. Consequently, year-over-year revenue comparisons are under pressure and the stocks were knocked down. Flutter Entertainment and GVC, which may close 1,000 betting parlors, have mostly recovered, but William Hill, closing 700 parlors, has not.
All of these will do well, and a good case could be made for buying all three as a package. But William Hill is still relatively cheap, already a leading operator of sports gambling operations in the UK and US, and already has deals in place to run the sportsbooks for major US casino operators. Their British retail business generated 56% of revenues in 2018, with another 30% from online sports betting. The US contributed 5% with Italy and Spain at 4% each. The company has invested in a digital launch in New Jersey and started operations or expanded in ten US states. This morning they announced the purchase of the sportsbook assets of CG Technology, including its Nevada and Bahamas operations. William Hill is the official sports betting partner of the NHL.I expect the US to become the majority of their revenues over time.
In September, William Hill promoted its head of digital operations to CEO. This morning, WIMHY reported online net revenue rose 26% for the 17 weeks ended Oct. 29, with a 60% jump in net revenue from the US. (Transcript not posted yet.) Retail like-for-like net revenue fell 16% in the period. They reiterated their guidance for full-year adjusted operating profit to be in the middle of a range of £50 million to £70 million. The stock is selling for 26.9x those depressed earnings, so this is an earnings growth story. Comparisons will get very easy beginning in the June 2020 quarter.
Legalized sports betting is going to explode just as legalized marijuana did, and unlike cannabis, I think it will be very profitable from Day 1. William Hill is an excellent way to get exposure. Buy WIMHY under $10 for a run back up to $20 and beyond.
As I’ll explain in more detail in this weekend’s Market Outlook, I am getting worried that the upcoming consolidation may take the form of a scary, fast 5% to 8% decline instead of the high-level churning we’ve gotten used to. That’s one reason I have such a tight buy limit on WIMHY. The Investor’s Intelligence bull-bear sentiment levels are getting ebullient.
The CBOE put/call ratio has fallen to its lowest level in 22 months. The American Association of Individual Investors Investor Sentiment Survey has the most bulls in more than a year. The VIX Fear & Greed Index shows remarkable complacency, and the
dumb money nice folks who short volatility to make easy money have made record bets. CNN’s Fear & Greed Index shows extreme greed. It appears a lot of folks need a sudden comeuppance or, as Uncle Warren says, the tide needs to go out so we can see who’s swimming naked. I am seriously thinking of recommending buying the VIX as short-term portfolio insurance.
With only a little over a month to go, the Atlanta Fed’s GDPNow model is close to a no-growth quarter.
Going forward should be better, even without a trade deal. The US has been supporting global growth through the recent slowdown, but it looks like a rebound in the world economy will soon become a tailwind for the US.
Fitch estimates that 2019 will mark a low point in oil demand growth and forecasts demand to edge higher over the next few years. Gasoline prices with a $2 handle are coming to an end.
All times below are ET, and most of the presentations and slides are archived on the companies’ websites so you can listen to them.
Tuesday, November 26
QUIK – QuickLogic – 11:00am – Special meeting of shareholders – Vote NO
Short Interest – After the close
Wednesday, November 27
September quarter GDP – 8:30am – Second estimate
Radar Report – One day early
Friday, November 29
Stock market closes at 1:00pm
The $20-For-$1 Stocks
Say you put $2,000 into a stock that goes from 50¢ a share to $10. The $2,000 turns into $40,000. Then you put the $40,000 into another stock that goes from 50¢ to $10. That turns the $40,000 into $800,000. You did it with two stocks, and never risked going negative more than $2,000. (Not that you won’t be mad at me if the first one works and then the second one doesn’t, taking your $40,000 to Money Heaven.)
If you can afford it – and it would not be too big a position in your portfolio – putting $2,000 into each of these five speculative biotechs might be a good way to start.
Development-stage biotechs are subject to investor sentiment swings from wildly optimistic to excessively pessimistic – mostly the latter recently. After the Primary Risk for each company, I’ve added the clinical stage of their lead product, the probable time of their first FDA approval, and the probable time of their next financing.
As always, you need to think about an appropriate position size. You could buy a full position upfront and then just hold on, or buy some upfront and leave room to add more on the inevitable financings, transient clinical trial setbacks, and the like.
Aptose Biosciences (APTO – $2.54) Scientific Advisory Board head Brian Druker, M.D., director of the Knight Cancer Institute and JELD-WEN Chair of Leukemia Research in the Oregon Health & Science University School of Medicine, found that a basic tenet in leukemia biology is wrong. The new findings explain why promising treatment approaches may have fallen short. And the results could help guide efforts to develop more effective therapies for acute myeloid leukemia, among the most difficult cancers to treat and a primary target of both CG-806 and APTO-253. APTO is a Buy under $4 for a $5 target after APTO-253 and CG806 are in the clinic and a $25 target in a buyout.
Primary Risk: Either drug fails in clinical trials.
Clinical stage of lead product: Phase 1a
Probable time of first FDA approval: 2025
Probable time of next financing: Mid-2020
Arch Therapeutics (ARTH – $0.17) filed their 10-K and said: “The Company was recently notified by its Notified Body that its review team has completed its review of the Arch’s technical documentation and that it has recommended to its decision making panel that CE Marking be granted. This process is expected to be completed in early 2020.” Although the company can’t put out a press release until the CE mark is granted, I wrote a quick update on SeekingAlpha HERE.
In 2018, CEO Terry Norchi got a $425,000 salary and a $127,500 bonus for total cash compensation of $552,500. In 2019 he got a salary of $429,250, a 1% increase, and no bonus. His cash compensation fell by 22.6%.
In 2018 he got stock and options awards worth $276,984, bringing his total compensation to $829,484. In 2019 he got no stock or options. So his total compensation fell by 48.3%. He must have been reading your comments!
ARTH is a Buy up to $0.70 for a $3.00 target after after a distribution deal is signed and a $10 target in a buyout.
Primary Risk: AC5 fails in clinical trials.
Clinical stage of lead product: External approved. Internal trial 2020
Probable time of first FDA approval: External done. Internal 2021.
Probable time of next financing: December 2019 – January 2020
Biocept (BIOC – $0.55) launched a new assay to detect the presence of NTRK fusions in cancer patients, which are actionable biomarkers that can be used to qualify patients for treatment with TRK inhibitor therapies. The company now offers 20 commercially available liquid biopsy assays including two tumor-specific next-generation sequencing panels that cover the most actionable genomic alterations for solid tumors. BIOC is a Hold for a $15 target in an acquisition.
Primary Risk: They run out of money.
Clinical stage of lead product: NM
Probable time of first FDA approval: NM
Probable time of next financing: December 2019 quarter
CohBar (CWBR – $1.98) is in the driver’s seat for mitochondrial-based medicines. A recent article in Science, Mitocellular communication: Shaping health and disease, said: “Mitochondria have developed a complex communication network, allowing them to stay in tune with cellular needs and nuclear transcriptional programs and to alleviate mitochondrial dysfunction. Here, we review recent findings on the wide array of mechanisms that contribute to these mitocellular communication networks, spanning from well-studied messenger molecules to mitonuclear genetic interactions. Based on these observations and developments, we advocate a broad and inclusive view on mitocellular interactions, which can have profound impacts on physiological, pathological, and evolutionary processes.”
Another article to appear in the Journal of Inflammation after peer review addressed Alzheimer’s: Peripheral administration of a cell-penetrating MOTS-c analogue enhances memory and attenuates Aβ1-42 or LPS induced memory impairment through inhibiting neuroinflammation. CWBR is a Buy under $7 for a very long-term hold.
Primary Risk: Their drugs fail in the clinic.
Clinical stage of lead product: Phase 1
Probable time of first FDA approval: 2025
Probable time of next financing: March 2020 quarter
Invitae (NVTA – $19.62) announced Invitae Discover on the Apple App Store, a clinical research platform that leverages biometric data available through the Apple Watch to provide better understanding of the genetic causes of disease. The first study on Invitae Discover is the Afib CAUSE Study. Patients who have genetic testing through Invitae can enroll in the study via the Invitae Discover app. The study will combine health and activity data from Apple HealthKit with clinical genetic testing results. The platform will evaluate genetics in cardiovascular disease and was announced in conjunction with the American Heart Association’s Scientific Sessions where researchers are presenting data on genetic screening in familial hypercholesterolemia. Buy NVTA under $30 for a first target of $35 and eventually $200 if they become the Amazon of genetic testing .
Primary Risk: A competitor starts taking significant market share.
Clinical stage of lead product: NM
Probable time of first FDA approval: NM
Probable time of next financing: 2021 or 2022
Antares Pharma (ATRS – $4.49) signed a global agreement with a new partner, Idorsia Pharmaceuticals, to develop a QuickShot drug-device product for Idorsia’s selatogrel, a new chemical entity being developed for the treatment of a suspected acute myocardial infarction in adult patients with a history of AMI.
As I said on the Comments Board, Idorsia is going to pay for the development of the combination product, so they will just cover Antares’ expenses in 2020. There won’t be a lot of volume for the Phase 3 trial. So the real payoff is after approval when Antares will sell fully assembled QuickShots at cost plus a margin and get royalties on net sales of the commercial product.
And, as Dr, Laudon added: “ Before everyone gets carried away, I don’t see this as a blockbuster. There are several competitive oral antiplatelet drugs in the same class. The first of them, clopidogrel is now the generic version of Plavix. This new candidate, being injectable, may work faster, but the more effective emergency management drugs are fibrinolytic drugs like thrombokinase. In bad cases, the patient gets taken immediately for catheterization where stents are done with thrombectomy if needed.”
ATRS is a Buy up to $5 for a $10 target price based on Xyosted and EpiPen sales. My ultimate target price is still $50 in three to five years, as they and their partners introduce numerous new products.
Primary Risk: Otrexup prescriptions stop growing or other products don’t sell well.
Clinical stage of lead product: Approved
Probable time of first FDA approval: Approved
Probable time of next financing: Not needed
BioDelivery Sciences (BDSI – $6.21) updated their Investor Presentation. One very interesting slide shows that their share of New-to-Brand retail prescriptions is much higher than their share of total prescriptions, suggesting strong future growth.
Buy BDSI under $9 for a $15 target now that Bunavail and Belbuca are launched.
Primary Risk:Slow sales of either drug.
Clinical stage of lead product: Already approved
Probable time of first FDA approval: Already approved
Probable time of next financing: Not needed
TG Therapeutics (TGTX – $7.84) reported a September quarter loss of $61.9 million or 69¢ a share, almost double the 35¢ loss expectation. About $27 million was due to manufacturing expenses associated with Phase III development and in preparation for commercialization, but the company doesn’t have to pay that bill for a year.
On the conference call (TRANSCRIPT HERE), management said their upcoming milestones include:
* * Initiate a rolling New Drug Application submission for umbralisib to treat adult patients with previously treated marginal zone lymphoma.
* * Report potential top-line progression-free survival results from the Phase 3 UNITY-CLL (chronic lymphocytic leukemia) trial evaluating U2 in patients with frontline and previously treated CLL at the end of 2019 or early 2020. Progression-free survival is the primary endpoint for this trial.
* * Share results from the Phase 2b UNITY-NHL follicular lymphoma cohort with the FDA to determine potential filing opportunities.
* * Top-line data from their two Phase III trials in relapsing forms of multiple sclerosis.
They had $72.5 million in cash at the end of September and have sold $23.8 million in stock through their At-The-Market facility in the current quarter. That is enough to fund them into the December 2020 quarter, past the next two major pivotal data releases including the UNITY chronic lymphocytic leukemia and the ULTIMATE multiple sclerosis Phase 3 trials. Buy TGTX under $15 for a target price in a buyout of $30 or more.
Primary Risk: TG-1101 or TGR-1202 fails in clinical trials.
Clinical stage of lead product: Phase 3
Probable time of first FDA approval: Year-end 2020
Probable time of next financing: Second half of 2020
Biotech & Digital Dominators MegaShift
There are at least four ways to make money in the stocks of these large, growing, dominant companies. You can:
* * Buy a stock and hold it
* * Buy a stock and write a call option against it
* * With a Level IV options account, write an out-of-the-money put option
* * With a Level IV options account, write an out-of-the-money put option and use part of the premium to buy an out-of-the-money call option
Apple (AAPL – $262.01) launched Apple Card with Goldman Sachs, who said it was the most successful credit card launch in history. Rumors are that Apple will release a combination virtual reality/augmented reality headset in 2022 and augmented reality glasses in 2023. I expect the products are real, but they’ll come a year sooner, in 2021 and 2022. AAPL is a Buy under $250 for new iPhone rollouts and augmented/virtual reality products. I think the stock can get to $300 in 2020.
SoftBank (SFTBY – $19.03) plans to combine its Yahoo Japan Internet business with Japan’s leading messaging service, Line Corp., to create a Japanese company that can more effectively compete with global rivals like Google and Amazon. The deal requires shareholder approvals and is scheduled to close by October 2020.
After the WeWork debacle, Softbank is laying off 2,400 WeWork employees to move the company toward profitability. WeWork Japan already is profitable and Softbank CEO Masayoshi Son plans to take that model around the world. The stock is selling at a very deep discount to the sum of its parts. SFTBY is a Buy under $25 for the T-Mobile acquisition of Sprint. My first target is $40 in the next two years.
Gold ($1,464.70) continues to consolidate in a tightening pattern. I think this won’t go on more than another week or so, and then gold will go all the way to and through $1,536.
The long term charts have plenty of headroom:
Miners & Related
Paramount Gold Nevada (PZG – $0.82) submitted its Consolidated Permit Application to the Oregon Department of Geology and Mineral Industries to build and operate the Grassy Mountain mine.
The state has 90 days for the completeness review of the application. When it is deemed complete, Oregon will issue a notice to proceed with the evaluation stage of the process. The state then has 225 days to review the application, complete environmental and socioeconomic assessments, and issue draft permits. Following the issuance of draft permits, they have a maximum of 140 days to complete the public process and issue the final permits. Paramount expects to receive a mining permit in 2020.
This is important because often the very best period for gold stocks is from when they apply to build a mine to when they open it. Paramount is very likely to sign a partnership or sell Grassy Mountain in 2020. PZG is a Buy under $5 for a $10 first target when gold gets over $1,600 an ounce.
Primary Risk: Prices of precious metals fall due to US dollar strength.
Probable time of next financing: March 2020 quarter
Cryptocurrencies are a diversifying asset that offer a unique opportunity to make (or lose!) a lot of money quickly. You can easily buy Bitcoin and other cryptocurrencies in about five minutes with Coinbase’s debit card or Square’s cash app.
Bitcoin (BTC-USD on Yahoo – $7,600.01) will be used in Starbucks next year. Bakkt is starting a Bitcoin merchant network and Starbucks is its first launch partner. The 75 million customers that visit Starbucks each month will be able to walk into the nearest store just a few months from now and buy an espresso with Bitcoin.
Exposing 75 million people to Bitcoin as a payment option will be the biggest public relations boon in cryptocurrency’s history. Not to mention training Starbucks’ 180,000 US employees on processing Bitcoin transactions.
A lot of Starbucks’ customers are younger. An eToro survey found that 43% of millennial online traders trust cryptocurrency exchanges more than they do the US stock market. Americans aged 18 to 34 are 4x more likely to own Bitcoin than those ages 45 to 64, and 10x more likely than folks older than 65. Nearly 30% of them would rather hold bitcoin than bonds or stocks.
In the short-term, though, Bitcoin broke $8,000. I think people will look back at these prices and not believe them. Bitcoin may not hit $1 million in our lifetimes, as some are saying, but it’s going way higher as central banks print and print.
BTC-USD and all my cryptocurrency recommendations are a Strong Buy.
Primary Risk: Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.
International & Other Recommendations
It is important to hold some non-US assets, especially in China, and some diversifying assets like our periodic short against the long bond. Despite the riots, mainland China investors have been buying Hong Kong stocks.
Acreage Holdings (ACRGF – $6.87) is acquiring 100% of Compassionate Care Foundation, a New Jersey vertically integrated cannabis nonprofit corporation. With a population of approximately nine million, New Jersey is estimated to generate $317 million in legal medical cannabis sales by 2022, according to Arcview Market Research. Acreage’s CEO said: “This reorganization will result in increased access to affordable medical cannabis for New Jersey’s existing patients in short order. Moreover, we have long believed that upon adult-use legalization, the New England and Mid-Atlantic regions will be the preeminent cannabis market in the U.S. and Acreage is best positioned of any U.S. cannabis company to benefit.”
ACRGF stock was up 34% today, benefiting from Bank of America upgrading Canopy Growth (CGC) from Neutral to Buy, saying the worst is over. It’s the first major research firm to plant a stake in the ground and that usually causes more upgrades by other brokers who don’t want to be left behind.
The House Judiciary Committee approved a bill by a 24-10 vote that legalizes marijuana on the Federal level, removing it from Schedule 1 of the Controlled Substances Act. Committee Chairman Jerry Nadler (D-NY) sponsored the bill. It also would block federal agencies from denying public benefits or security clearances over marijuana use.
The bill allows states to enact their own policies and gives them incentives to clear criminal records of people with low-level marijuana offenses. It also includes a 5% tax on cannabis products that would provide job training and legal assistance to those hit hardest by the war on drugs. According to the ACLU, marijuana arrests account for more than half of all drug arrests in the US and have a disproportionate impact on communities of color.
It probably will pass in the House, but it’s going to take a full-court press to get it through the Senate. With 67% of Americans now favoring legalization, there’s a chance President Trump will say this is a states’ rights issue and get it through in time to attract younger voters in the 2020 election. Of course, that would trigger Canopy Growth’s buyout of ACRGF. ACRGF is a buy under $6 for a hold for the Canopy Growth merger and beyond.
Primary Risk: Canopy Growth does not acquire the company.
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If you have children or grandchildren wrestling with picking a career, Artificial Intelligence needs them. Recent graduates with no experience are getting $300,000 a year employment packages. That won’t last, but the need for talent will.
Nobody has to go back to college to learn AI, either. Udacity and Coursera offer classes. MIT-, Harvard-, and Berkeley-backed edX has many courses for free. Machine learning, deep learning, natural language processing, AI programming – it’s all there.
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If You Could See Every Satellite, What Would The Sky Look Like?
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Scientists writing in Nature uncovered “a previously unknown regulatory mechanism that connect the DNA repair protein WRN to the anti-aging molecule NAD+. They function together to preserve energy homeostasis through orchestrating the turnover (mitophagy) and functionality of mitochondria.”
The European Member States just voted in favor of listing Nicotinamide Riboside Chloride as a novel food ingredient at a daily serving of 300 milligrams for the healthy adult population. This approval follows a positive opinion issued by the European Food Safety Authority in August 2019. I take 300 milligrams of NAD+ every day. Read more about it HERE.
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Your taking Russel Clark seriously Editor,
Michael Murphy, CFA
New World Investor
Check out the complete Portfolio page HERE.
These are the stocks everyone needs to own because transformative events are happening over the next year or two, and I expect to hold them long-term.
Aptose Biosciences (APTO) – Buy under $4, first target $5
Arch Therapeutics (ARTH) – Buy under $0.70, first target $3.00
Bellerophon Therapeutics (BLPH) – Buy under 75¢, first target $2
CohBar (CWBR) – Buy under $7, hold a long time
Inovio (INO) – Buy under $6, hold a long time
Invitae (NVTA) – Buy under $30, first target $35
ScyNexis (SCYX) – Buy under $4, target price $9
Akebia Biotherapeutics (AKBA) – Buy under $10, first target $25
Antares Pharma (ATRS) – Buy under $5, first target $10
BioDelivery Sciences (BDSI) – Buy under $9, target $15
TG Therapeutics (TGTX) – Buy under $15, target price $30+
Apple Computer (AAPL) – Buy under $250, target price $300
Corning (GLW) – Buy under $33, target price $60
Facebook (FB) – Buy under $180, target price $400
Gilead Sciences (GILD) – Buy under $105, target price $130
SoftBank (SFTBY) – Buy under $25, target price $40
Content On Demand
First Trust NASDAQ Cybersecurity ETF (CIBR) – Buy under $28; 3- to 5-year hold
QuickLogic (QUIK) – Buy under $1, target price $6
A Short-Sale or REO House – Buy while fixed mortgage rates are low
Bag of Junk Silver – hold through silver bull market
Sprott Gold Miners ETF (SGDM) – Buy under $25, target price $50
ALPS Sprott Junior Gold Miners ETF (SGDJ) – Buy under $39, target price $100
Sprott Physical Gold and Silver Trust (CEF) – Buy under $15, target price $30
Global X Silver Miners ETF (SIL) – Buy under $30, target price $50
Coeur Mining (CDE) – Buy under $10, target price $20
First Majestic Mining (AG) – Buy under $10, first target price $16
Paramount Gold Nevada (PZG) – Buy under $5, first target price $10
Sandstorm Gold (SAND) – Buy under $10, target price $25
Sprott Inc. (SII.TO) – Buy under $3, target price $7
Basic Attention Token (BAT-USD) – Buy
Bitcoin (BTC-USD) – Buy
Dash (DASH-USD) – Buy
Ethereum (ETH-USD) – Buy
Litecoin (LTC-USD) – Buy
Monero (XMR-USD) – Buy
NEO (NEO-USD) – Buy
International & Other Recommendations
EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ) – Buy under $38 for a $66 target in 12 to 18 months
KraneShares Bosera MSCI China A Share Fund (KBA) – Buy under $34 for a three- to five-year hold
Morgan Stanley China A-Shares Fund (CAF) – Buy under $24 for a three- to five-year hold
KraneShares CSI China Internet ETF (KWEB) – Buy under $50 for a double over the next three years
iShares MSCI Japan Exchange-Traded Fund (EWJ) – Buy under $56 for a multi-year hold
Global X MSCI Greece Exchange-Traded Fund (GREK) – Buy under $10 for a multi-year hold
Acreage Holdings (ACRGF) – Buy under $6 for the Canopy Growth merger
SandRidge Energy (SD) – Buy under $8.50 for a $34 target
Teucrium Soybean Fund (SOYB) – Buy under $16.50 for a $20 to $22 target
VanEck Vectors Rare Earth/Strategic Metals Exchange-Traded Fund (REMX) – Buy under $14 for a $28 target
William Hill PLC (WIMHY) – Buy under $10 for a $20+ target
These are holds but not sells – yet. They could get moved back to one of the buy categories if their prices drop or outlook improves, or they could become sell recommendations in the future.
Biocept (BIOC) – hold for a target of $15 in an acquisition
Publisher: GwynRose £C, 5348 Vegas Drive, Suite 868, Las Vegas, NV 89108
New World Investor does not act as a personal investment adviser or advocate the purchase or sale of any security or investment for any specific individual. The recommendations and analysis presented to members are for the exclusive use of members. Members should be aware that investment markets have inherent risks and there can be no guarantee of future profits. Likewise, past performance does not assure future results. Recommendations are subject to change at any time. Nothing in this presentation should be considered personalized investment advice. No communication to you by Michael Murphy or any of our employees or contractors should be deemed as personalized investment advice.
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