Dear New World Investor:
“It’s crucial to understand that stocks often trade at truly foolish prices, both high and low. ‘Efficient’ markets exist only in textbooks. In truth, marketable stocks and bonds are baffling, their behavior usually understandable only in retrospect.” – Warren Buffett, February 25, 2023
Last Friday’s Personal Consumption Expenditures Index was higher than expected. We are told it’s the Fed’s favorite inflation indicator, so it weighed on the market all week. The problem is services (gray: non-durable goods; black: durable goods; red: services).
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Service inflation is mostly wage inflation. The Employment Cost Index is the index to track for early news on wages:
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A major source of inflation pressure in the Consumer Price Index is rents, where the data lags reality by six to nine months. This shows the CPI’s Owner-Equivalent Rent versus actual asking rents. Since August, “none of the 52-largest metro areas tracked by @ApartmentList experienced positive rent growth over the period.” Let that sink in as the highest supply since 1986 floods the market.
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Rents continue to ease in the real world and continue to rise in the CPI calculations (red and black lines):
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This may be the most important chart about the US economy these days. House prices versus rents. How much will this mean-revert? The process of this mean reversion will take years to play out. Grinding and boring are much more likely than the fireworks last time. It’s also a serious problem for the Fed since upward rent pressure puts more pressure on inflation thereby forcing the Fed to keep rates higher for longer. Which, paradoxically, creates more downside risk for house prices.
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I suspect the Treasury and investors don’t fully understand how big the receipts hole will be on April 17th with no capital gains taxes versus a year ago. That will bring forward the debt ceiling deadline.
In addition to the tax revenue problem the Fed created, check out the interest expense problem. Interest on the Federal debt now is larger than the entire yearly US military budget.
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It’s discouraging, but remember that 25 out of the past 89 years have seen T-bill rates average 5% or more. In those 25 years, the S&P 500 has had average annual returns of 11%.
Market Outlook
The S&P 500 lost 1.5% since last Thursday, slipping below its 50-day moving average but bouncing off the 200-day last Friday, yesterday, and today.
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The Index is up 3.7% year-to-date. The Nasdaq Composite lost 1.1% but is winning the performance derby, up 9.5% for the year. The small-cap Russell 2000 dropped only 0.3% and is up 8.0% in 2023.
BofA said corporate buybacks are the largest equity client flows into the market, and institutional out of the market, during 2023.
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Two of the three largest buybacks in the past year were by two of our stocks: Apple and Meta.
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BofA’s sell-side indicator, SSI, is close to a buy signal (contrarian). The investment bank wrote: “This shift in sentiment is one reason for our more constructive outlook into 2023.”
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And retail is still very cautious.
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The fractal dimension is stalled in consolidation mode, with enough energy to power a big trend in either direction.
Top 5
Changes this week: Removed INO from Near-Term after they reported VGX-31000 results
Near-Term – chronological order
EQT EQT – cold March coming
OIL iPath Pure Beta Crude Oil Exchange-Traded Note – crude should rise quickly
GBTC Grayscale Bitcoin Trust – Bitcoin is coming out of one of its periodic sharp drops
VLD Velo3D – Rapid revenue growth; low market cap
Long-Term – alphabetical order
EQT EQT – largest US natural gas company
NVTA Invitae – the winner-take-most of genetic testing
META Meta – a (the?) leader in the metaverse
RKLB Rocket Lab – #2 to SpaceX in space
VLD Velo3D – Return manufacturing to the US
Economy
Despite all the strong data in January, the consensus expectation for March quarter real GDP growth is still only +0.5%. What”s up with that? The Atlanta Fed’s GDPNow model is at +2.3%.
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Coming Events
All times below are ET, and most presentations and slides are archived on the companies’ websites so you can listen to them.
Monday, March 6
AG – First Majestic – Through 3/8 – PDAC
CMPS – Compass Pathways – 12:50pm – Cowen Health Care Conference: Neuropsych Panel
NVTA – Invitae – 1:30pm – Cowen Health Care Conference
FSLY – Fastly – 1:40pm – Raymond James Institutional Investor Conference
Tuesday, March 7
Powell testimony to Congress – 10:00am
GLW – Corning – 11:00am – Morgan Stanley Technology, Media & Telecom Conference
GILD – Gilead Sciences – 11:10am – Cowen Healthcare Conference
Wednesday, March 8
FSLY – Fastly – 3:55pm – Morgan Stanley Technology, Media, and Telecom Conference
Thursday, March 9
AKBA – Akebia Therapeutics – 8:30am – Earnings conference call
Short Interest – After the close
Friday, March 10
February payrolls – 8:30am – +215,000 expected; was +517,000 in January
ACRDF – Acreage Holdings – Through 3/12 – New England Cannabis Convention (NECANN)
AAPL – Apple – 12:00pm – Annual meeting
The $20-For-$1 Stocks
“My biggest regret in this market isn’t that I started buying biotech too soon into the bear market. It will be that I could not buy much more of these companies when they were so cheap. The next decade will make some fortunes on these cutting-edge technologies.” – @Biotech2k1
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 speculative biotechs might be a good way to start. Buying these out-of-favor, fallen, or forgotten companies that can get important products through the FDA at very low market capitalizations seems like a good strategy to me.
Risks
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.
Algernon Pharmaceuticals (AGNPF – $1.13) reverse-split their stock 100 for 1 on November 24. Their goal was to get the price over $4 so they could uplist to the Nasdaq National Market. Like almost all reverse splits, all they did was hurt shareholder value. The stock hasn’t traded over $4 since September 23.
So now they are splitting the stock four-for-one, effective tomorrow morning. I sympathize with their attempt to find a viable drug by throwing lots of stuff against the wall to see if anything sticks, and even with their doomed attempt to uplist, but…
Guys. It’s all about chronic cough. Conserve your cash and push that forward. It’ll work or it won’t.
I do admire CEO Chris Moreau’s constant effort to stay in the public eye with PR releases and (probably paid-for) video interviews.
AGNPF is a Hold for the Phase 2b IPF/chronic cough results.
Primary Risk: Ifenprodil fails in clinical trials.
Clinical stage of lead product: Phase 2
Probable time of first FDA approval: 2024
Probable time of next financing: 2023
Compass Pathways (CMPS – $8.55) reported a December loss of $30.9 million or 73¢ a share, 11¢ worse than the 62¢ loss estimate. On the conference call (TRANSCRIPT HERE), management
announced important updates to the COMP360 psilocybin therapy in treatment-resistant depression Phase 3 trial that accelerate the placebo-controlled trial pivotal data read-out and streamlines the long-term follow up as an integrated component of the pivotal trials. They are confident that this Phase 3 program should generate the evidence to support a filing for approval.
They now expect Pivotal trial 1 (single dose monotherapy in 255 patients) to have top-line data in mid-2024. Pivotal trial 2 (fixed repeat dose monotherapy in 568 patients) will have top-line data in mid-2025
The company had $142.2 million in cash at the end of the year and expects to use $24 to $32 million in the March quarter and $85 million to $110 million for the full year. I still expect a stock offering around midyear. CMPS is a Buy under $20 for a very long-term hold to a 10x.
Primary Risk: Their drugs fail in the clinic.
Clinical stage of lead product: Phase 2
Probable time of first FDA approval: 2025
Probable time of next financing: Mid-2023
Graphite Bio (GRPH – $2.64) said will continue research to identify another development candidate. associated with their early-stage non-genotoxic conditioning program, with the goal of advancing toward potential development candidates.
At the American Society of Hematology meeting last December, Graphite Bio presented pre-clinical results supporting the use of a single-cell RNA sequencing method to assess gene correction outcomes in patients after treatment with nula-cel (GPH-101).
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GPH-101 is a gene editing autologous stem cell-based therapy designed to directly correct the underlying mutation.
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Their gene correction platform involves editing hematopoietic stem cells found in the bone marrow that develop into various types of blood cells. Because red blood cells lose their genomic DNA during maturation-tracking, gene editing in mature cells via sequencing is impossible.
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The problem of the inability to measure the efficacy of gene editing in sickle cell patients was solved by using immature red blood cells called reticulocytes that retain their RNA and can be sequenced in order to assess the gene correction levels after treatment.
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Based on this knowledge, the company sought to develop a single-cell RNA sequencing method that could measure gene editing outcomes in reticulocytes. It first measured the genetic makeup of reticulocytes from healthy donors (AA in the graphic below), people with sickle cell trait (AS), and those with actual sickle cell disease (SS).
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Results from both experiments demonstrated that the single-cell RNA sequencing method could precisely and reproducibly measure and differentiate the healthy donors, people with SCD trait, and those with sickle cell disease patients.
Click for larger graphic h/t Yair Einhorn
These data support the use of single-cell RNA sequencing of reticulocytes to determine initial gene editing outcomes. Graphite Bio may be able to build a business around this technology. GRPH is a Hold until we find out more in the conference call.
Primary Risk: Their drugs fail in the clinic.
Clinical stage of lead product: Pre-clinical
Probable time of first FDA approval:Unknown
Probable time of next financing:Unknown
Inovio (INO – $1.30) reported December quarter revenues up 479.7% from last year to $10.26 million, essentially right on the $10.32 million consensus estimate. They lost $1.17 a share, a bit worse than the $1.11 loss estimate.
On the conference call (TRANSCRIPT HERE), management said their second Phase 3 trial of VGX-3100 to treat cervical high-grade squamous intraepithelial lesions (HSIL) did not meet the main goal in the biomarker-selected population but did achieve statistical significance in the all-participants population of 203 women. However, an integrated efficacy analysis of the results of both REVEAL1 and REVEAL2 showed statistical significance in both the biomarker-selected and all-participants populations.
In this trial, the percentage of women in the investigational biomarker-selected population meeting the main goal of lesion regression and viral clearance was 28.6% (6/21) in the drug group, versus 0% (0/4) in the placebo group, which was not statistically significant.
The secondary goal of regression of HSIL and clearance of virus in all 203 women (134 in the treatment group, 69 in the placebo group) was statistically significant, with 27.6% (37/134) on the drug meeting the objective, compared to 8.7% (6/69) in the placebo group.
In addition, in the three-dose treatment group, viral clearance was seen in 37.3% (50/134) compared to 8.7% (6/69) in the placebo group.
Management said they are evaluating the results to decide the path forward for VGX-3100 in their HPV programs. The FDA previously asked for one or two more Phase 3 trials before they can file for approval. The Phase 3 trial of VGX-3100 in Greater China is ongoing with ApolloBio, Inovio’s development partner.
The CEO said discussions are underway regarding the next steps for their candidates with the greatest potential for impact, including INO-3107 as a potentially life-changing treatment for Recurrent Respiratory Papillomatosis (RRP) and INO-4201 as an Ebola vaccine booster. They already reported positive preliminary data from their Phase 1/2 trial of INO-3107 for RRP and positive Phase 1b data for INO-4201 as an Ebola booster for Ervebo. INO-4201 was well-tolerated and boosted humoral responses in every one of the 36 people treated.
INO 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 3
Probable time of first FDA approval: 2023
Probable time of next financing: Mid-2024
Invitae (NVTA – $1.82) reported December quarter revenues down 2.9% from last year to $122.45 million, due to discontinued lines of business. That was better than the $120.98 million expected. The pro forma loss of 34¢ per share was much better than the 53¢ loss expected.
Total 2022 revenues grew 12.1% to $516.3 while total active healthcare provider accounts grew 13% from 2021 to 20,929. Their total patient population is more than 3.6 million with over 62% available for data sharing.
On the conference call (SLIDES HERE and TRANSCRIPT HERE), management guided for low double-digit revenue growth and continued expansion of the pro forma gross profit margin in 2023, decreasing their cash burn by over 45% from 2022.
Invitae entered a $336 million transaction with Deerfield, exchanging $306 million of their 2024 convertible notes (96% of the amount outstanding) for $275 million of 4.5% notes due in 2028, plus $30 million in new notes for cash. Then they repaid their 2024 senior secured term loan in full, improving their balance sheet.
They guided for 2023 revenue “over $500 million” compared to the consensus for $518.33 million. They expect to use $250 million to $275 million in cash, 45% less than in 2022. But Wall Street didn’t like it and knocked the stock down 21.9% Wednesday before recovering a bit today. I liked it and believe this deal with Deerfield gives the new management time to show Wall Street they have a path to high-growth profitability and, eventually, the dominant position in genetic sequencing.
They finished the quarter with $557 million in cash, enough to carry them through 2024, Buy NVTA under $10 for a first target of $50 and eventually $100+ when 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: 2024
Biotech MegaShift
Akebia Therapeutics (AKBA- $0.93) got a positive opinion from the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency recommending the European Commission approve vadadustat for the treatment of symptomatic anemia associated with chronic kidney disease in adults on chronic maintenance dialysis. The EC will review the CHMP recommendation and deliver a final decision in approximately two months.
Management said they will get a partner to market the drug in Europe. This is good news, especially with the FDA review underway. AKBA is a Hold for the results of the FDA meeting on vadadustat.
Primary Risk: Vadadustat not approved.
Clinical stage of lead product: Vadadustat NDA filed; CRL
Probable time of next FDA approval: Unknown
Probable time of next financing: Unknown
TG Therapeutics (TGTX – $15.87) reported a December quarter loss of $53.0 million or 39¢ a share, worse than the 25¢ loss estimate. On the conference call (TRANSCRIPT HERE), CEO Michael Weiss said they are only four weeks into the Briumvi launch, but the early feedback is good. (What else would they say?) Their one goal for this year is a successful launch, including broad payer coverage. The first commercial patient was infused on February 1. We’ll see how the March and June quarters go.
Nearly a million Americans are living with MS and roughly 75,000 to 80,000 are seeking new treatment each year. About half of the patients seeking new treatment are currently being prescribed an anti-CD20 therapy. Briumvi is the only anti-CD20 therapy that is administered as at a one-hour infusion twice a year following the starting dose and at the lowest price of any branded MS treatment.
Management said they have coverage policies in place for approximately 35% of covered lives across the US and are on track to meet their goal to have coverage for the majority of covered lives in the US by the end of June.
They had $174.1 million of cash at the end of the year plus $45 million unused on their term loan. They said that plus projected revenues can fund them into mid-2024. Buy TGTX under $7 for a target price in a buyout of $25 or more now that the MS drug is approved.
Primary Risk:Briumvi, the MS drug, fails to sell.
Clinical stage of lead product: Approved
Probable time of next FDA approval: NM
Probable time of next financing: Second half of 2023
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 – $145.91) said their base crossed two billion active devices, up by 10% in 2022 to double Samsung’s base and hit 2/3 of Android’s. AAPL is a Buy under $150 for new iPhone rollouts and augmented/virtual reality products.
Meta Platforms (META – $174.53) won as the Federal Trade Commission dropped its case trying to block Meta’s acquisition of Within, a startup developing the virtual reality workout app Supernatural.
According to a report in The Verge Meta’s plans for the years ahead include the Quest 3, which will be released later this year, and a second-generation version of the company’s existing Ray Ban smart glasses with built-in cameras. In 2025, they’ll launch a third-generation of smart glasses with the ability to display text messages and translate text from other languages. Those glasses will include a wrist-worn band that you will use to navigate various menus.
Finally, in 2027, Zuck will release a version of the smart glasses that can display Augmented Reality holographic avatars of people onto the world around you. Zuckerberg showed off his vision for that technology during a presentation he gave while unveiling the company’s name change from Facebook to Meta in 2021.
According to the report, Meta has sold 20 million Oculus headsets to date. They released the first-generation Oculus in 2019 and the Oculus 2 in 2020.
The rumor in Silicon Valley is Meta is creating a new top-level product group completely focused on Artificial Intelligence. Zuckerberg gets it. META is a Buy under $150 for a $400 target in 2024.
Other Tech
QuickLogic (QUIK – $5.67) reported December quarter revenues up 10.2% from last year and 18.1% from the September period to $4.08 million, just under the $4.33 million consensus estimate. The pro forma loss of three cents a share was a penny better than expected.
On the conference call (JANUARY SLIDES HERE and TRANSCRIPT HERE), management said: “New wins on our eFPGA IP-based products, continued shipments of smart connectivity and display products, and licensing of our SensiML AI Software Platform drove revenue and contributed to our best non-GAAP operating performance in the last ten years. Our ability to offer a full spectrum of solutions ranging from eFPGA IP all the way to full chip designs has helped contribute to the continued growth in our sales funnel, currently over $118 million, positioning us to exceed organic sales growth of 30% in 2023 and report positive non-GAAP operating income for the full year.”
Most of that $118 million funnel will be recognized over the next 24 months, plus they’ll start getting royalties toward the end of this year as customers’ devices finally ship. They guided for March quarter revenue of $4.3 million, ±10%. They expect the other three quarters of 2023 to each be over $5 million, with positive non-GAAP operating income starting in the June quarter and for the full year. They’ll have a four-cent to eight-cent pro forma loss in the March quarter. The Street was looking for $4.83 million and a two-cent loss, but Samsung still has some inventory to work through. QUIK is a Buy up to $10 for my $40 target as their sensor hub is widely adopted in smartphones, tablets, and wearables.
Primary Risk: New sensor hub competitor emerges.
Probable time of next financing: None needed
Rocket Lab USA (RKLB – $4.24) reported December quarter revenues up 88.5% from last year to $51.8 million, well ahead of the $49.24 million estimate. They lost eight cents a share, a penny worse than the consensus estimate for a seven-cent loss.
On the conference call (SLIDES HERE and TRANSCRIPT HERE), management said 2022 was their biggest year yet, with nine Electron launches – all successful – deploying 42 satellites, inducing a mission to the moon for NASA. Electron remains the global leader in dedicated small launch. Between April and November, they had a launch every month.
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Their backlog more than doubled from $241.0 million at the end of 2021 to $503.6 million at the end of 2022.
They guided for March quarter revenues of $51 million to $54 million with a pro forma loss of six cents a share. The Street was expecting a seven-cent loss. The company ended the quarter with $484.3 million in cash. RKLB is a Buy up to $13 for my $30+ target as low earth orbit satellites and space exploration grow.
Primary Risk: A new competitor emerges.
Probable time of next financing: None needed
Velo3D (VLD – $2.83) reported December quarter revenues up 186.1% from last year and 56% from the September quarter to $29.78 million, beating the $28.06 million consensus estimate. The pro forma loss of eight cents was better than the 12-cent loss estimate.
On the conference call (AUDIO HERE and SLIDES HERE and TRANSCRIPT HERE), management said VLD is the largest and fastest-growing company in the highest growth segment – metal additive manufacturing – of the 3D printing industry. They see a significant untapped global market opportunity for high-value metal parts produced by Laser Powder Bed Fusion as the industry grows. Note that the growth rate is accelerating:
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The company is rapidly gaining market share against its competitors:
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Velo3D’s Sapphire systems use unique, differentiated, and patented technology to enable printing parts that can’t be done with legacy additive manufacturing. In the December quarter, they booked $15 million of new orders and have a $43 million backlog. Management said they have a “clear path to profitability.”
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For the March quarter, they guided for revenue of $25 million to $26 million versus $12.22 million last year and the consensus estimate for $27.19 million. They expect a gross profit margin of 9% to 11%.
For the full 2023 year, they guided for revenue of $120 million to $150 million, up at least 50% from $80.8 million in 2022 and ahead of the consensus estimate for $126.55 million. They expect a gross profit margin of 19% to 21% for the year, capped by 30% in the fourth quarter.
The company ended the quarter with $80 million in cash. VLD is a Buy up to $6 for my $50 target as Velo3D’s high-tolerance metal parts printing business grows.
Primary Risk:A new 3D metal printing competitor emerges.
Probable time of next financing: None needed
Inflation MegaShift
Gold ($1,842.10) rose 1.3% since last Thursday. According to an analysis by Gainesville Coins the Chinese central bank owned 4,309 tonnes of gold on December 31, 2022, which is more than double than what is officially disclosed. The People’s Bank of China, the Chinese central bank, prefers to buy gold covertly. If it buys gold abroad with US dollars, the monetary gold is exempt from being reported in international customs data when crossing borders (non-monetary gold is not exempt). Buying abroad allows the PBoC to purchase and repatriate gold without leaving a trace in the public realm.
The gold fractal dimension, like the S&P, is stalled in a high-level consolidation. There will be fireworks – someday.
Miners & Related
First Majestic (AG – $6.28) reported December quarter revenues down 7% from the September quarter to $148.2 million, right on the $148.16 million estimate. Their pro forma loss of seven cents a share was worse than the three-cent loss estimate. Management blamed “unforeseen supply chain issues, a slightly stronger Mexican Peso, and persistent inflation pressures felt across the industry.”
Although it’s trivial, they cut the quarterly dividend by 11.5% from $0.0061 to $0.0054. I don’t think anyone owns First Majestic for the half-cent dividend. They ended the year with $151.4 million in cash. AG is a Buy under $11 for a $23 next target price as production increases and the price of silver rises.
Primary Risk: Prices of precious metals fall due to US dollar strength.
Paramount Gold Nevada (PZG – $0.31) got $10 million to $15 million from Sprott in a Royalty Convertible Note (RCN). The terms are the RCN has a 10% per annum interest rate e payable in cash or shares at a 7% discount to the 10-day volume-weighted average price (VWAP). The RCN may be repaid in cash or through the issuance of a royalty at the earlier of the commencement of commercial production or five years from the RCN closing date.
The RCN is convertible into a gross revenue royalty of 3.17% to 4.75% of the gold and silver produced from the Grassy Mountain gold mine. If a royalty is issued, PZG has an option to buy back 50% of the royalty by paying Sprott Streaming one of the following amounts:
(i) From the second anniversary of the grant of the royalty to the day before the third anniversary: 1.50 multiplied by 50% of the RCN Amount
(ii) From the third anniversary of the grant of the Royalty to the day before the fourth anniversary: 1.75 multiplied by 50% of RCN Amount
The funds will be available once Paramount has received the Notice to Proceed with the development of the project from Oregon state permitting agencies, which is expected in the next few months. PZG is a Buy under $1 for a $10 target as gold moves higher.
Primary Risk: Prices of precious metals fall due to US dollar strength.
Probable time of next financing: 2023
Sprott Inc. (SII – $36.00) reported December quarter revenues of $30.99 million, down 10.4% from last year’s period due entirely to a decline in carried interest, performance fees, and commissions. But Assets Under Management (AUM) rose for the fifth year in a row, up 15% or $3.0 billion from the end of 2021 to $23.4 billion, including $2.4 billion or 11% in the December quarter alone. Their uranium and rare earth products have been well-received.
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They reported quarterly earnings of 29¢ per share, down 28% from last year’s 41. They said: “ Net income was negatively impacted by a combination of weaker equity origination activity in our brokerage segment, unrealized losses on co-investments and legacy digital gold investments, FX losses and non-recurring severance costs.”
Adjusted EBITDA (earnings before interest, taxes, dividends, and amortization) rose 2% from last year to $18.1 million or 72¢ a share. On the conference call (SLIDES HERE and TRANSCRIPT HERE), management said they transitioned their US broker-dealer from a transaction-based business into a fee-based discretionary account management business. They will sell their Canadian broker-dealer operations to the current management team by the end of June.
They said: “…we believe we are in the beginnings of a new commodity supercycle, and that the energy transition is going to be a large part of this one. The energy transition that many governments are actively incenting and mandating by law in some cases will require significant quantities of raw materials for energy generation, transmission and storage. We believe this will be a multi-decade transition, as I mentioned, driven by net zero energy security and even national security considerations.
“If you look at some of the key pieces of legislation that are being passed around the world, such as the Inflation Reduction Act, the Mineral Securities Partnership, and the REPowerEU plan, a key element of these government directives is about the development of local supply chains, which will require reshoring from countries now deemed to be less reliable and friendly to western governments. These legislation – pieces of legislation include significant incentives, tax credits and support in order to enable this transition to cleaner energy from local sources.”
Sprott’s response is their energy transition exchange-traded funds, which I expect to be a major success:
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Buy SII under $40 for a $70 target price.
Primary Risk: Prices of precious metals fall due to US dollar strength.
Cryptocurrencies
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 at Coinbase, Block, or Robinhood.
Bitcoin (BTC-USD on Yahoo – $22,960.07) is clinging to the $23,000 area. I would not be surprised to see a brief but scary drop to $22,000.
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BTC-USD, ETH-USD, GBTC, and ETHE are Strong Buys.
Primary Risk: Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.
Grayscale Bitcoin Trust (GBTC- $11.51) was the subject of an Epoch Times article: Curious Case of Grayscale and the Big Bitcoin Discount (paywall). There are many ways that discount will shrink or disappear. GBTC is a Buy under net asset value.
Primary Risk: Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.
Oil – $77.88
Crude oil inventories rose 6.203 million barrels for the 10th straight weekly build. But gasoline stocks fell by 1.774 million barrels as refineries closed for maintenance. The latest data showed US total oil demand surged in 2022 to an annual average of 20.3 million barrels a day, only 200,000 barrels a day below its pre-pandemic level in 2019. The record for US annual oil consumption was set in 2005 at 20.8 million barrels.
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Meanwhile, US drillers cut the most oil and gas rigs in a month since June 2020. Russia is cutting oil exports by 25%. China is starting to buy up oil in the US. Global oil demand hit a record high in December. And Saudi Arabia continues to warn of shortages due to sanctions.
Refinery throughput is by far one of the more accurate industry figures because of the survey sample size. Production is not, because the EIA monthly oil production always differs versus the weekly numbers.
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A lesser-recognized factor in the oversupply of crude is the flow from floating oil storage (from Iran and others), which averaged about 100,000 barrels a day last year. The International Energy Agency says tankers used as temporary storage facilities held 79.5 million barrels by the end of 2022, down nearly 40% from the year before.
According to Bloomberg, that’s coming to an end soon. At its peak, Iran had more than 100 million barrels in tankers at anchor around the world. Since June, Tehran has sold a significant chunk, according to traders. The IEA estimates that Iranian oil accounts for about 50% of all the crude and condensate that’s left in floating storage.
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The July 2026 Crude Oil Futures (CLN26.NYM – $64.80) are a Buy under $55 for a $200+ target.
The iPath Pure Beta Crude Oil Exchange-Traded Note (OIL – $29.69) is a Buy under $36 for an $80+ target.
EQT (EQT – $33.36) is suffering from low natural gas prices, but that’s about to change. FactSet says If Permian Growth Stops Brace For Skyrocketing Natural Gas Prices. About 50% of the natural gas produced in the US is a byproduct of shale oil wells. If they don’t start drilling again – and soon – that gas supply goes away.
Also, everyone says Europe avoided an energy crisis this winter – did they? No. It was an outright disaster for energy-intensive industries, while everyone else made it through without major distortions.
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Meanwhile, demand for LNG is growing and countries are signing long-term deals for new supply.
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EQT is a buy under $35 for a first target of $70 and a long-term hold for much higher prices.
Primary Risk:Natural gas prices fall.
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Your understanding the mark-to-market problem Editor,
Michael Murphy CFA
Founding Editor
New World Investor
All Recommendations
Check out the complete Portfolio page HERE.
Buys
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.
$20-for-$1
Aptose Biosciences (APTO – $0.59) – Buy under $2.50, ultimate target $30
Bellerophon Therapeutics (BLPH – $1.84) – Buy under $5, first target $30, then $100
Compass Pathways (CMPS – $8.55) – Buy under $20, hold a long time for a 10x return
Inovio (INO – $1.30) – Buy under $7, hold a long time
Invitae (NVTA – $1.82) – Buy under $10, first target $50, then $100+
Medicenna (MDNA – $0.60) – Buy under $3, first target $20, then maybe $40
ScyNexis (SCYX – $1.73) – Buy under $3, target price $20, then $50
Other Biotech
TG Therapeutics (TGTX – $15.87) – Buy under $7, target price $25+
Tech Dominators
Apple Computer (AAPL – $145.91 ) – Buy under $150 for new iPhones
Corning (GLW – $34.51) – Buy under $33, target price $60
Gilead Sciences (GILD – $79.62) – Buy under $70, target price $100
Meta (META – $174.53) – Buy under $250, target price $400
SoftBank (SFTBY – $20.60) – Buy under $25, target price $50
Other Tech
First Trust NASDAQ Cybersecurity ETF (CIBR – $41.73 – Buy under $40; 3- to 5-year hold
Fastly (FSLY – $13.53) – Buy under $20; 2- to 5-year hold to $80+
PagerDuty (PD – $29.57) – Buy under $30; 2- to 5-year hold
QuickLogic (QUIK – $5.67) – Buy under $10, target price $40
Rocket Lab (RKLB – $4.24) – Buy under $13, target price $30+
Velo3D (VLD – $2.83) – Buy under $6, target price $50
Inflation
A Short-Sale or REO House – ($447,000) – Hold
Bag of Junk Silver – ($20.99) – hold through silver bull market
Sprott Gold Miners ETF (SGDM – $24.79) – Buy under $28, target price $50
Sprott Junior Gold Miners ETF (SGDJ – $29.11) – Buy under $39, target price $100
Sprott Physical Gold and Silver Trust (CEF – $17.07) – Buy under $18, target price $30
Global X Silver Miners ETF (SIL – $27.17) – Buy under $30, target price $50
Coeur Mining (CDE – $3.15) – Buy under $5, target price $20
First Majestic Mining (AG – $6.28) – Buy under $11, next target price $23
Paramount Gold Nevada (PZG – $0.31) – Buy under $1, first target price $10
Sandstorm Gold (SAND – $5.23) – Buy under $10, target price $25
Sprott Inc. (SII – $36.00) – Buy under $40, target price $70
Cryptocurrencies
Bitcoin (BTC-USD – $22,960.07) – Buy
Grayscale Bitcoin Trust (GBTC – $11.51) – Buy
Ethereum (ETH-USD – $1,647.171) – Buy
Grayscale Ethereum Trust (ETHE – $7.31) – Buy
International & Other Recommendations
EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ – $31.706) – Buy under $38 for a $66 target in 12 to 18 months
KraneShares Bosera MSCI China A Share Fund (KBA – $26.96) – Buy under $40 for a three- to five-year hold
Morgan Stanley China A-Shares Fund (CAF – $14.59) – Buy under $18 for a three- to five-year hold
KraneShares CSI China Internet ETF (KWEB – $31.49) – Buy under $40 for a double over the next three years
Acreage Holdings (ACRDF – $0.90) – Buy under $2 for the Canopy Growth merger
Mongolia Growth Group (MNGGF – $1.10) – Buy under $1.30; long-term hold
Energy
Crude Oil Futures – July 2026 (CLN26.NYM – $64.80) – Buy under $55; $200+ target
iPath Pure Beta Crude Oil Exchange-Traded Note (OIL – $29.69) – Buy under $36; $80+ target
EQT (EQT – $33.36) – Buy under $35; $70 first target
Energy Fuels (UUUU – $6.50) – Buy under $8; $30 target
Holds
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.
Algernon Pharmaceuticals (AGNPF – $1.13) – Hold for IPF/chronic cough trial
Akebia Biotherapeutics (AKBA – $0.93) – Hold for FDA decision
Arch Therapeutics (ARTH – $4.50) – Hold for buyout
Graphite Bio (GRPH – $2.64) – Hold until they resolve the clinical hold
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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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1st maybe. Like to see more insight on NVTA.
Thanks, MM. Impressive momentum from VLD this quarter, IMO. If the company continues to execute, any thoughts on when they’re likely to turn profitable?
Sometime in 2025; full year 2026
The case for gold and natural resources. One of the best reasons to buy gold is political insurance. Re: Rick Rule. Look what our fearless leaders have done. In 1993 the US government spent 1.4 trillion . In 2022 the US government spent 6.27 trillion. Government spending has more than tripled over that time frame all while the value of the dollar has lost 52 percent of its value. Add to that over 6 percent of inflation and your wallet is in a world of hurt. The current situation is almost identical to those in the 70’s when gold went up from $35 an ounce to over $800 in 1980. Rick Rule is the Warren Buffet of natural resource investments. His prediction is oil is going to make people rich again. Just China’s reopening is going to add a million barrels of demand per day, while investments in new oil well production has fallen off the cliff. More money went into renewables last year than into new oil wells by a long shot. And some of it came from big oil companies!! And commodities like copper are going to go nuts. There is over 400 pounds of copper just in one new house and tons of copper are needed for EV’s. Meanwhile all the major copper mines are decades old and running out. It’s not going to be a smooth ride. There will be speed bumps in the road and it’s a long term outlook so patience is the key. So thanks MM for your oil recommendations.
NVTA
what’s the dilution in the Deerfield deal?
None up front.
MM Any thoughts on what the acrdf merger with canopy might look like ?
MM – ive been a supporter of yours all along but I’m finding it difficult to stay that way. Almost all the recommendations i bought of yours i have big losses, and theres a void of many new ideas to recover my losses. Aldo many of your current recommendations look unattended or updated, you continue to say buy NVTA under $10 but its been below $2.00 for months! We need your expertise, thats what we paid for, and we desperately need a few winners asap to recover losses
MM has checked out. Note that his home page says he was the #1 newsletter in the very difficult 2008-2012 market. That’s over 10 years ago. Might want to update.
I don’t know if he’s checked out, but he hasn’t checked here in a while, and that’s been happening, sometimes whole weeks betw RRs. But whether he’s lost interest in the losers of our portfolio or is distracted by new projects, it’s not like we don’t notice his absence.
Sorry. I’m writing another book. I have to get back in the habit of reading comments every day.
Alas, Hulbert is out of business.
Here are two new recommendations:
ACXP in Phase 2b trial for its pill to clear C Diff infection and restore healthy gut biome (Phase 2a showed 100% success, where std of care is maybe 80%)
NGENF will complete Phase 2 trial this year in Spinal Cord Injury where subcutaneous injection in animal models has shown amazing results.
Thanks Chris, both sound promising, what are the tentative dates for release of data or final P2 results? Is the P2 trial of NGENF on humans or animals?
Chris, I did some digging, looks like ACXP is trying to complete enrollment of P2B and not there yet, I assume its a short trial given the nature of C-Dif? On NGENF, animals given NVG-291 have recovered from spinal cord injuries, strokes, and other cognitive diseases like ALS, ALZ, MS, PD – pretty impressive but also when does P2 start?
Here’s one I’ve had my eye on; ACHV – smoking cessation drug, 2nd P3 data read out in a few months.
Hi, Steve. I will try to address all your questions. If I leave anything out, let me know. The FDA generally requires drugmakers to have Phase 1 trials in healthy volunteers to see what side effect might arise, before the drugmaker advances the drug to Phase 2 which is a small trial in patients with the targeted condition. If there are good results in Phase 2, the FDA gives clearance to do a much larger Phase 3 study where the risks are: 1) some unacceptable side effects may occur or that with a larger sample size (more like the real world); 2) the drug might not work as well as it did in a small carefully controlled sample group. Even after a successful Phase 3 trial, the FDA usually requires a second Phase 3 before determining that a drug is safe and effective.
As to ACHV, you are correct that their second Phase 3 results are due at any time in the first half of this year. I think, given the excellent results in their first Phase 3, that their drug will again show excellent results in the second Phase 3 and that their drug will get approved by the FDA for smoking cessation (which all insurers are required to cover). BUT what I am really looking forward to (also in the next few months) is the result of their Phase 2 trial in vaping nicotine since smoking is becoming less popular in the US and vaping is unfortunately growing in popularity.
As to NGENF, their drug has been repeatedly shown in labs throughout the world to be effective in multiple animal models for multiple problems of the nervous system by helping to restore nerve function due to damage or disease. Unfortunately, during Phase 1 tests a couple years ago some healthy volunteers developed relatively minor side effects and the FDA halted the trial in men and premenopausal women. The company figured out that the side effects were from a bad batch of the drug, the FDA agreed and gave them premission to complete Phase 1 and they did so and are now preparing the data for presentation to the FDA to proceed to Phase 2. During the last 2 years, the company determined that out of all the conditions for which their drug has promise, the first three they will try it in are Spinal Cord Injury (SCI), Alzheimers (AD) and Multiple Sclerosis. They have assembled all-star Advisory Boards for each of these 3 indications consisting of a who’s who in each disease. Since a trial in SCI will be the cheapest and fastest trial to complete, that is the indication they are first moving to Phase 2 in humans with SCI. They expect to begin and complete it in the second half of this year at the Shirley Ryan AbilityLab (f/k/a Rehabilitation Institute of Chicago). Success should enable them to raise more capital at a higher share price and begin Phase 2’s in AD and MS. I really believe each dollar invested here could be worth $50 in a few years.
As to ACXP, when they did their first Phase 2 trial scheduled for 20 patients and the first 10 subjects all had a quick and durable cure for their C Diff infections. They decided to stop the trial and raise more capital for a larger Phase 2 with 64 patients to prove non-inferiority to vancomycin which has a cure rate of about 80%. Even if symptoms abate with vancomycin, the gut biome is destroyed and symptoms often return weeks later. ACXP’s drug targets only C Diff bacteria and so far restores a healthy gut biome with no recurrence. While you are right that treatment of each patient only takes a few days, they are following each one for several weeks after treatment and enrollment in the 64 patient trial has been slow. If results of this trial are as good as the first, I anticipate the company’s drug will be sold to a major pharma player and each dollar invested here could be worth $10 in less than a year.
Chris, pretty awesome DD, thank you! So you buying all 3 or making a big bet on one of them?
I have less $ in ACHV than the other two. Just finished listening to NAT’s earnings call. For a conservative dividend play, it has a very bright future. Will continue to pay 15 cents each Q until debt free in a couple years, then pay more (30 cents likely). At 60 cents over the next year that’s about 14%, then when debt-free 28%. If you can find a better safe investment, I’d love to hear about it. The share price will rise from here, but there will be down days at times to give you chances to invest more at a discount.
Chris, which of these 3 will pop first?
Small-cap biotech has been mercilessly beaten up over the last two years, and tech in general is down sharply. I think they will be the leaders in the new bull market that is underway.
MM or anyone. What do you make of this filing from BLPH Friday? The stock traded as high as the mid $2.40’s in after hours trading.
Item 8.01. Other Events.
On March 3, 2023, Bellerophon Therapeutics, Inc. (the “Company”) suspended, and is not offering any shares of its common stock pursuant to, the prospectus supplement dated January 19, 2023 relating to the Open Market Sale Agreement, dated as of July 17, 2020 (the “Sales Agreement”), by and between the Company and Jefferies LLC. The Company will not make any sales of common stock pursuant to the Sales Agreement unless and until a new prospectus supplement is filed with the SEC; however, the Sales Agreement remains in full force and effect.
This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy any securities of the Company, which is being made only by means of a written prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, nor shall there be any sale of the Company’s securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction..
Thanks for the information. The stock has been up 150 ? Percent the last few days.
MM or anyone, it seems that VGX-3100 had much better results in China. Is it possible that it gets approved in China without any more Phase 3 trials?Phase III clinical results of cervical precancerous lesions have been positive, and the world’s first DNA drug is expected to be on the market
2023-03-03 16:12
Beijing News (Reporter Wang Kala) On March 3, Inovio, a strategic partner of Beijing Oriental Biopharma, announced that the latest data of the second phase III clinical trial (Reveal 2) of the world’s first DNA therapeutic vaccine VGX-3100 (that is, Oriental Strategy’s ABC-3100) has achieved positive results, once again verifying the potential and application prospects of DNA drugs and their technology platforms in the treatment of human tumor virus (HPV) infection-related diseases.
Reveal 2 is a global multicenter, randomized, double-blind, placebo-controlled clinical trial based on the completed Reveal 1 as part of the overall protocol Reveal of VGX-3100 for the marketing application of Phase III clinical trials for the treatment of cervical precancerous lesions associated with high-risk HPV-16/18 infection in adult women, namely cervical HSIL (high-grade squamous intraepithelial lesions). Reveal 2 enrolled a total of 203 patients with cervical squamous intraepithelial neoplasia (CIN) grade 2 and 3, including 134 in the treatment group and 69 in the placebo group. Patients received a dose of VGX-0 or placebo intramuscularly accompanied by electrical impulse administration at 1, 3, and 3100 months, respectively, and observed 40 weeks after the first dose.
The trial results showed that the response rate was higher in the treatment group than in the placebo group. Among them, 27.6% of participants in the treatment group met the primary endpoint (histopathological outcome and viral clearance) compared with 8.7% in the placebo group, achieving a statistically significant difference. In terms of viral clearance in particular, viral clearance was 37.3% in the treatment group compared to 8.7% in the placebo group.
The VGX-3100 was introduced by Beijing Oriental with a slight license. In 2018, Beijing Oriental reached an agreement with Inovio to obtain exclusive rights in the production and sales of VGX-3100 in China (including Hong Kong, Taiwan and Macau), and launched an independent multi-center, randomized, double-blind, placebo-controlled phase III clinical trial in China in 2021. According to the blinded data obtained, VGX-3100 has good safety and tolerability in the Chinese cluster, and the overall response rate is significantly higher than that of Reveal 1 and Reveal 2 in the United States, and also higher than the stage II.b results published in The Lancet, and the response rate of some subgroups is as high as 70%. In response to these positive clinical research results, Beijing Oriental is rushing to enroll patients and strive to complete China’s phase III clinical trial as soon as possible.
High-grade intraepithelial lesions of the cervix are the precursor of cervical cancer, including high-grade squamous intraepithelial lesions of the cervix (HSIL) and adenocarcinoma in situ (AIS), and the vast majority of HSIL and AIS are caused by high-risk HPV, especially HPV16 and HPV18 infection. Standardized management of high-grade intraepithelial lesions is an important part of the secondary prevention of cervical cancer.
MM, any comments on this?
Friday’s February job report expectations are not for a decline of 35,000. The actual consensus expectation is +215,000, less than half of January’s blowout of +517,000. I’ve updated it in the Radar Report coming events..
BLPH is up 80% after announcing a direct placement of $5 million of stock and refunded warrants at $2 a share, a premium of 11% to Friday’s close.
MM, Can you give your thoughts on why this is up so much?
This actually hit a high of $5.12 today. Is there a BO coming?
Based oncurrent price isn;t it like for the price is likely to fall back somewhat – say half the movement – or is the price to move up like a rescued drowning person?
Considering the previous price and movement, is this price likely to retrac
MM, this is a high of $7.44 yesterday. I’m curious of your thoughts on this movement since Monday.
Call me crazy, but I picked up some more today when it pulled back to $6.42. Yes, I know MM has a $5.00 limit currently but I am thinking he will soon update that. Also good new and bad news today. Inflation fell to 1 percent from 2 percent!!! IN CHINA. Good news because it’s falling , but bad news because it means China’s economy is staggering like a drunk sailor. So stand by for some fallout because of that. And finally Joe says he is asking to raise the taxes on the rich. He wants to raise their taxes to 5 percent from 3 percent. And with that he will be able to reduce the US debt by 3 TRILLION $$$$$. Do the math!!
GBTC discount narrows following arguments in Grayscale-SEC lawsuit https://finance.yahoo.com/news/gbtc-discount-narrows-following-arguments-in-grayscale-sec-lawsuit-190422883.html
Largest Bitcoin Fund Soars as Judges Raise Hope for Investor Payday https://finance.yahoo.com/m/ebe87922-26bd-308e-889c-d876e760d837/largest-bitcoin-fund-soars-as.html
I fear that the pop in GBTC is unlikely to persist even if the judge in the case rules favorably….too many obstacles the SEC can continue to throw in the way of the prospective ETF, at least in the short term. Hope I’m wrong, but the Commission seems determined to block progress.
MM – I hope you keep your promise to check in everyday and respond to questions and comments – it part of what we pay for! Here’s a question for you and the board. AI is the new frontier as we all know, growth estimates are over the moon for the next 5 years plus. What are the best investments to make now to profit on this once in a lifetime opportunity? Tesla and Meta are the ones talked about but both are moonshots – wouldn’t that make for a good special edition for you to put out. What about Crowdstrike (CRWD) in cybersecurity? Any others?
The new Radar Report for 3.9.23 is posted.