Dear New World Investor:

Rents were high a year ago, so the S&P 500 fell 68 points on Tuesday after the Consumer Price Index for January was announced. If that doesn’t make any sense to you, this is how Wall Street shakes out the weak hands so they can buy cheap stock. Headline inflation dropped from December’s +3.4% to +3.1%, but – horrors! – economists expected +2.9%. Core inflation rose 3.9%, matching December and above the +3.7% expected.

The Bureau of Labor Statistics said: “The index for shelter continued to rise in January, increasing 0.6% [that’s year-over-year – it was +7.6%! month-over-month] and contributing over two thirds of the monthly all items increase.” As you know, the index for shelter lags reality so badly it reflects rents and house prices 12 to 18 months ago. Yeah, from July 2022 to January 2023, housing costs were shooting up. I know at least two people who don’t care – me and Chairman Powell.

In addition to the out-of-date shelter index, Goldman Sachs added: “The CPI largely reflected start-of-year price increases for labor-reliant categories such as medical services, car insurance and repair, and daycare, and we assume inflation in these categories returns to the previous trend on net in February and March.”

Click for larger graphic h/t @GregDaco

And as Austan Goolsbee, the President of the Chicago Fed said: “Our 2% target is on PCE not CPI…It is totally clear that inflation is coming down.”

New Recommendation: Antibodies

Development-stage companies are public venture capital investments, which means the losers will fail early, the big payoff winners will come later, and you need to hold a diversified list of them rather than go all-in on one or two. My weekly repeated comments under “Biotech MegaShift: The $20-For-$1 Stocks” tried to get that across, and it is on me if that wasn’t clear. My best newsletter mentor thinks these kinds of companies are not appropriate for a retail newsletter because the typical subscriber doesn’t diversify and/or won’t wait the necessary five to ten years for the big payoff.

Maybe so, but I think I have a brighter, more sophisticated subscriber base than the Stansberrys of the world. I’m not going to recommend any more biotechs with only a single drug or in need of funding to develop their drugs, but I have found another compelling development-stage company.

Antibodies have emerged as a significant class of drugs, playing a crucial role in various therapeutic applications. Antibodies (aka immunoglobulins) are proteins produced by the immune system to identify and neutralize foreign substances like bacteria and viruses. As drugs, antibodies can be designed to target specific molecules, such as proteins involved in diseases like cancer or autoimmune disorders. Monoclonal antibodies (mAbs) are a common type used in therapy, created by cloning a single type of antibody to produce large quantities.

The antibody therapeutics market is over $400 billion. Antibodies as drugs have gained immense importance due to their specificity and versatility. They offer targeted treatment options with fewer side effects compared to traditional therapies. Their ability to modulate the immune system and selectively bind to disease-related targets makes them valuable in treating a wide range of conditions, from cancer to inflammatory diseases.

Several antibody drugs have received regulatory approval and are widely used in clinical practice. Examples include:
Trastuzumab (Herceptin): Used in breast cancer targeting HER2-positive tumors.
Rituximab (Rituxan): Employed in non-Hodgkin’s lymphoma and rheumatoid arthritis.
Adalimumab (Humira): A TNF inhibitor used for autoimmune diseases like rheumatoid arthritis.

Many major pharmaceutical companies are actively involved in discovering and developing antibody-based therapies. They include:
Roche/Genentech: Renowned for their expertise in cancer therapeutics, Roche has a robust pipeline of antibody drugs.
Johnson & Johnson: Through its subsidiary Janssen, the company is engaged in developing antibodies for cancer and autoimmune diseases.
AstraZeneca: Known for its strong presence in respiratory and cardiovascular medicine, AstraZeneca is investing in antibody-based therapies for diverse indications.

Numerous biotechnology companies are working on antibody drug discovery. Some key players include:
Regeneron Pharmaceuticals: Recognized for its expertise in monoclonal antibody technologies.
Amgen: Antibodies for cancer and inflammatory diseases.
Seattle Genetics: Specializing in antibody-drug conjugates for cancer therapy.

Antibodies as drugs represent a transformative approach to therapeutics, offering targeted and potent treatment options across various medical conditions. With ongoing advances in biotech and pharmaceutical research, I expect to see continued growth and diversification in the development of antibody-based drugs. I wanted to find a company at the center of this technology, preferably funding the development their own drugs through development contracts with bigger companies. Found it!

BUY AbCellera Biologics

AbCellera Biologics (ABCL) is a 12-year-old, $1.5 billion market cap Vancouver company backed by Peter Thiel that built a single, focused, full-stack engine for antibody drug discovery and development, from concept to clinic. They’ve invested over $500 million in developing the platform. It discovers antibodies from natural immune responses that are pre-enriched for antibodies. They have many discovery programs that are either completed, in progress, or under contract with partners, including a research collaboration and license agreement with Eli Lilly and a research collaboration with Confo Therapeutics. AbbVie, Regeneron, Novartis, and Incyte are all customers. They now have had 110 partner-initiated discovery program starts, resulting in 10 molecules in the clinic. They even create new companies in partnerships with venture capitalists.

In addition, they have had 12 internal program starts with two drugs of their own in preclinical studies, headed for human trials in 2025.

Click for larger graphic

They finished the September quarter with over $800 million in cash and another $220 million from non-dilutive government funding, so they can afford to go forward. This is a big effort; they have about 600 employees in three countries.

Click for larger graphic

AbCelllera has about $7 million in quarterly revenues from development contracts, but still burns about $12 million a quarter. Both of those numbers vary quite a lot, but they had $813.0 million in cash at the end of September, so no worries.

The stock is down 95% from its 2021 high and sells for less than 2x cash. AbCellera will report December quarter results after the close on February 20. Revenues won’t matter and I don’t expect them to be profitable for the next few years. Don’t buy this stock if you don’t have a VC mindset! What will be important is program progress and a liquidity update. Buy ABCL under $6 for a multiyear hold to $30 or more. (PS: Peter Thiel = PayPal > Facebook > Palantir > AbCellera)

Click for larger graphic

Market Outlook

83% of US companies are beating estimates, the highest level in two years and well above the upper end of the pre-pandemic range. The S&P 500 added 0.6% since last Thursday, clearing 5,000 to a new all-time high today. At 20.3x, the S&P 500’s forward Price/Earnings ratio has risen above 20x for the first time in two years. The Index is up 5.4% year-to-date. The S&P hasn’t fallen by more than 2% in a day since 2022. Since January 2023, the magnitude of daily rallies has been greater than selloffs, averaging +67 basis points (bps, or 0.67%) on up days versus -60bps on down days. As my friend Kieth Fitz-Gerald pointed out, since 1927, the markets have spent 83% of the time at or within 10% of all-time highs.

The Nasdaq Composite gained 0.7% and set a new 52-week high. It is up 6.0% for the year. The SPDR S&P Biotech Exchange-Traded Fund (XBI) climbed 4.5% as the sector finally caught a bid. It is up 3.3% year-to-date. The small-cap Russell 2000 jumped 4.1% and finally is up 1.7% in 2024.

BofA’s Bull & Bear Indicator moved up from 6.1 to 6.8 “driven primarily by strong inflows to risky Emerging Market assets.” There’s room to go higher, but we’re running out of new buyers.

Click for larger graphic h/t @dailychartbook

The fractal dimension is very extended and for the first time in many years I am looking at put protection against a broad market decline.

Top 5

Changes this week: Replaced GBTC with IBIT

Near-Term – chronological order
SCYX – ScyNexis – Data releases and resolution of the manufacturing problem
TGTX TG Therapeutics – Rapid recovery from overdone pullback
EQT EQT –natural gas price rebound
USL United States 12 Month Oil Fund, LP – crude should rise quickly
FCX Freeport McMoRan – copper shortage

Long-Term – alphabetical order
EQT EQT – largest US natural gas company
IBIT iShares Bitcoin Trust – Bitcoin is headed for $100,000
META Meta – a (the?) leader in the metaverse
RKLB Rocket Lab – #2 to SpaceX in space
SCYX ScyNexis –First new antifungal in 20 years
VLD Velo3D – Return manufacturing to the US

Economy

The Atlanta Fed’s GDPNow model reduced its March quarter real GDP forecast from +3.4% to +2.9% due to reduced estimates for both personal consumption expenditures growth and gross private domestic investment growth. They still are substantially above the consensus expectations.

Click for larger graphic

For the first time since April 2022, BofA’s Fund Managers Survey investors are not predicting a recession (top). Global growth optimism is also at its highest since February 2022 (bottom).

Click for larger graphic h/t @dailychartbook

But tax refunds are down a whopping 57%, which is sure to hit spending by low income households.

Click for larger graphic h/t @zerohedge

Also, every time US government tax receipts declined, the US was in a recession. When they were this low, the US was reeling after the dot.com and credit bubbles.

Click for larger graphic

Coming Events
All times below are ET, and most presentations and slides are archived on the companies’ websites so you can listen to them.

Friday, February 16
SAND – Sandstorm – 11:30am – Earnings conference call

Monday, February 19
Markets Closed – Presidents Day

Tuesday, February 20
ENVX – Enovix – 5:00pm – Earnings conference call
ABCL – AbCellera Biologics – 5:00pm – Earnings conference call

Wednesday, February 21
RKLB – Rocket Lab – Unspec – Citi Global Industrial Tech and Mobility Conference
CDE – Coeur Mining – After the close – Earnings release; call tomorrow

Thursday, February 22
AG – First Majestic – Unspec – Earnings conference call
CDE – Coeur Mining – 11:00am – Earnings conference call

Big Tech: The 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 – $183.86) bought up to 32 AI startups last year, more than any other tech giant, according to Statista. In overall AI startup acquisitions, Google trails Apple with 21, Meta with 18, and Microsoft lags with 17. Apple mostly acquires early-stage startups, a proactive strategy to identify and invest in emerging AI trends and technologies before they reach mainstream adoption.

I expect Apple to showcase their generative AI technology being worked on in the labs of Apple Park for developers and consumers at the annual World Wide Developers Conference in June. That will be followed by AI features on iPhone 16 in September. The next iOS will incorporate generative artificial intelligence features in a significant way while the iPhone 16 is likely to have a large number of AI computing cores as part of its processors.

Dan Ives of Wedbush, an analyst I’ve respected for many years, said recent checks into the supply chain suggest that Apple is seeing a “clear stabilization of demand” in China. He wrote: “ While the China demise narrative has been the black cloud over the Apple story, we are expecting iPhones to show year over year growth during the Lunar New Year in China as some promotions and a stepped up marketing campaign by Apple has been very successful in mainland China.”

He expects the iPhone to have incremental growth this year because it is “catalyzing an upgrade cycle that will exceed Street expectations.” He is looking for 225 million to 230 million iPhones shipped this year.

This morning, KeyBanc Capital Markets said that despite concerns about China, Apple’s iPhone 15 is performing about as expected or even slightly better-than-expected in the US. They wrote: “Our carrier checks indicate sell-through for the iPhone 15 decreased [month-over-month] in January, while tracking in line with to slightly better than store expectations and consistent with normal seasonal trends, partially offset by pent-up demand for iPhone Pro/Max. Demand for the Pro series remained relatively resilient, while sell-through for the base lineups saw a seasonal decline.”

They added that supply of the iPhone 15 line is normal, while a few stores surveyed had “very lean” inventory levels of the iPhone 15 Pro Max. Overall, inventory levels at U.S. carriers have increased slightly but they are below the levels seen last year with the iPhone 14 and below roughly two days of inventory, the firm added. AAPL is a Buy under $150 for new iPhone rollouts and augmented/virtual reality products.

Corning (GLW – $32.03) has faced growth headwinds in its optical communications segment as their telecom customers used excess inventory to deploy their networks rather than buy more fiber. However, optical fiber demand is expected to normalize as Internet providers expand and upgrade their 5G networks. And while I wouldn’t call Corning “a Hidden AI Opportunity,” they do have a growth opportunity through the buildout of AI networks requiring hyperscale technology. Management thinks they are 30% below trendline, leaving room for a big increase in revenues and profit margins without additional selling, general and administrative costs.

Click for larger graphic

As CEO Wendell Weeks said in the recent earnings call: “We’re also seeing encouraging signs in hyperscale. Overall orders grew in the fourth quarter and we’re seeing the earliest edge of Al related network builds in our order books. Returning to trend adds more than 40% to our revenue run rate for Optical Communications and we are laser focused on doing just that.

“Beyond that, we expect the strong underlying growth trend to continue far into the future and our sales to grow faster than the market through More Corning innovations. Optical fiber remains the ascendant technology with growing applications in wireless, cloud computing including Al and broadband efforts to connect the unconnected.”

Meanwhile, we get a 3.5% yield while we wait. Or more. Corning has a track record of 13 consecutive years of dividend growth, including the last five years at an annual rate of 9.2%. GLW is a Buy under $33 for the 5G cellular buildout, followed by the smartphone upgrade to use 5G services. My target is $60 in 2025 .

Gilead Sciences (GILD – $73.37) will acquire CymaBay Therapeutics (CBAY) for $32.50 a share in cash, a 27% premium, for a total equity value of $4.3 billion. Management said that after FDA approval of Seladelpar. the acquisition will be neutral to earnings in 2026 and “significantly accretive” thereafter. It should add $500 million to $1 billion in annual revenue.

The FDA just accepted the New Drug Application for Seladelpar for the treatment of Primary Biliary Cholangitis, an autoimmune disease of the liver, and gave it a Priority Review with a PDUFA date of August 14. In addition to their rapidly growing oncology business, Gilead has a liver portfolio and is growing an inflammation franchise. GILD is a Long-Term Buy under $80 for a first target of $120.

Meta Platforms (META – $484.03) hit a new 52-week high today. The company did one of the greatest things for the AI Community last year when they released their free LLaMa large language model, according to someone who should know: Nvidia CEO Jensen Huang. META is a Buy under $345 for a $400 target in 2024.

SoftBank (SFTBY – $28.54) is rising with ARM Holdings (ARM). They sold their position in BigCommerce Holdings (BIGC) and established an investment in Soundhound AI (SOUN) with around 1.1 million shares in the December quarter, according to their latest 13F filing. SFTBY is a Buy under $25 for a first target of $50 in the next two years.

Small Tech

Enovix (ENVX – $11.70) reports December results next Tuesday after the close. Analysts are expecting $3.37 million in revenue and a loss of 27¢ per share. That would give them an 86¢ loss for 2023, and the company could positively surprise the Street by forecasting a smaller loss in 2024.

Even if The Wall Street Journal is right about The Six Months That Short-Circuited the Electric-Vehicle Revolution, it won’t hurt Enovix. They are only going to enter the EV battery market with a partner who will fund the effort. Enovix is focused on the very high volume wearables and smartphone markets. ENVX is a Buy up to $20 for a 4-year hold to $100+ as their BrakeFlow lithium-ion battery takes market share.
Primary Risk: A new competitor invents a better battery.

Fastly (FSLY – $16.34) reported December quarter revenue up 15.5% from last year to a record $137.7 million, just under the $139.97 million estimate. Pro forma earnings of one cent a share beat expectations for a loss of two cents. Their 12-month net retention rate was 113%. Their total customer count was 3,243 in the quarter, up 141 from the September quarter. 578 of them were enterprise customers, up 31 from the third quarter. The average enterprise customer spend grew 3% quarter-over-quarter to $880,000 and enterprise customers accounted for 92% of total revenue. Fastly’s gross profit margin expanded from 53.6% in 2022 to 56.0% in 2023, including 59.2% in the December quarter.

But the stock was clocked for 30.6% today because the new CEO guided for March quarter revenue of $131 million to $135 million, slightly below the consensus for $136.36 million, with a pro forma loss of five to nine cents a share, substantially below the consensus of a three-cent loss.

For the whole year they guided for total revenue of $580 million to $590 million, about on the consensus for $587.06 million. But they guided for a pro forma bottom line of breakeven to a six-cent loss, while the consensus was expecting breakeven. The CEO said: “,,,we are being conservative…We, of course, have a desire to overachieve on that guide, but we know that there is macro risk, just like all of you do.”

So on an annual basis they could meet Wall Street’s expectations, but the soft March quarter guidance scared almost everyone. Not BofA, which reiterated their Buy rating and said: “Key metrics trended in the right direction for Fastly, despite the traffic hiccup in Q4. Customer acquisition trends are continuing to improve with total customer count up 6% year over year versus up 2% the quarter prior.” Morgan Stanley even increased its price target on FSLY from $19 to $20.

On the conference call (INVESTOR SUPPLEMENT HERE and TRANSCRIPT HERE), management said December quarter revenue came in at the lower end of their guidance range due to weaker than anticipated international traffic, offset by seasonally strong live streaming and gaming activity. They expect the gross margin to be over 60% in 2024.

The CEO said: “We established our annual guidance of 16% growth to incorporate macro uncertainties that are of course targeting to outperform that guidance with continued financial rigor, strong innovation velocity, strategically lowering the friction of our go-to-market efforts, and streamlining both our employee experience and our customer experience.”

Most quarters, Fastly sets a new traffic milestone. This quarter, for the first time, the Fastly platform handled more than 100 terabits per second on November 8th. Organizations around the world invest incredible amounts of time and resources to build best-in-class digital experiences, only to see the value of them lost by having to compromise between performance, safety, and personalization. The solution to this has to be built on the edge, and it has to leverage all of the benefits that a best-in-class edge cloud platform brings. Fastly delivers that platform.

They ended the quarter with $329 million in cash after repurchasing $130.9 million in principal amount of their convertible notes for $113.6 million in cash, or approximately 87¢ on the dollar. FSLY is a Buy up to $20 for a 2- to 5-year hold to $80+ as Compute@Edge drives customer acquisition and revenue growth.
Primary Risk:Content and applications delivery networks are a competitive area.

Rocket Lab USA (RKLB – $4.89) presented at the TD Cowen Aerospace & Defense Conference (AUDIO HERE). It was a good discussion about the dynamics of the business and how Rocket Lab fits in. This is going to be a BIG company – don’t miss it!

The next launch window opens Monday, February 19, in New Zealand to deploy the Active Debris Removal satellite for Astroscale Japan. The mission is the first phase of an orbital debris removal program. During this phase, the 150-kilogram ADRAS-J satellite is designed to test technologies and operations for approaching and monitoring debris objects, also known as space junk, and delivering data that will assist in removing it, to ensure the sustainable use of space for future generations.

After launching on Electron, ADRAS-J will approach an aged, derelict rocket stage in orbit to observe it closely, understand how it behaves, and determine potential methods for its assisted deorbiting in the future. The rocket stage it will be observing is the Japanese H-2A upper stage left in low Earth orbit after the launch of the GOSAT Earth observation satellite in 2009. ADRAS-J will fly around the stage, 11 meters long and four meters in diameter, inspecting it with cameras. After deployment from Electron, ADRAS-J’s full mission will take between three and six months to complete.

Citi picked up coverage again on Rocket Lab with a Buy rating and a $6 target based on 3.6x 2026 revenues. They believe the new US government contract shows that customer adoption of the company’s products is beginning to accelerate. After the recent $300+ million convertible offering, they think the company is likely to now have sufficient liquidity to execute on its current backlog, to develop new products, and to engage in bolt-on M&A. They wrote: “We estimate this puts pro-forma 3Q23 liquidity at over $600M, a level that we believe is sufficient for the company to execute on its strategy and to become self-funding over time… A recent $515 million award by the Space Development Agency is a solid endorsement of the company’s products and technical prowess, and it follows a commercial award on a Globalstar program. In our view, these two programs together suggest customer adoption for the company’s satellite products is accelerating, and the recent improvement in liquidity is likely to allow for more seamless execution on this backlog as the company expands capacity and working capital.”

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.

Biotech MegaShift: 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 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.

Compass Pathways (CMPS – $10.62) did a fireside chat at the Oppenheimer 34th Annual Healthcare Life Sciences Conference (WEBINAR HERE). Management gave a good review of the choices they made to get into the current Phase 3 trials, but they couldn’t comment on how the trial is going. This is a very careful management team headed for almost certain approval of COMP360. The first Phase 3 trial reads out this summer and the second next summer. The market is huge, with plenty of room for several drugs:

Click for larger graphic

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 3
   Probable time of first FDA approval: 2025
   Probable time of next financing: Late 2025

Inovio (INO – $7.44) also did a fireside chat at the Oppenheimer 34th Annual Healthcare Life Sciences Conference (AUDIO HERE and TRANSCRIPT HERE). CEO Jacqueline Shea focused on INO-3107, their program for recurrent respiratory papillomatosis that the FDA will review for approval without a Phase 3 trial. It has Breakthrough Designation and the Accelerated Approval pathway. (I think that’s about all you need to know to forecast approval.) Inovio does have to do a brief confirmatory trial, but they can complete that and file the Biologics Licensing Application before the end of the year. They may be able to do a rolling submission, and they will request a six-month Priority Review.

RRP surgeries can cause damage to the vocal cords. It’s a rare disease, but it’s not that rare. There are about 14,000 estimated active cases in the US, about 1.8 per 100,000 new cases a year. So in the adult population, that’s just under 5,000 new cases a year. In the Phase 1/2 trial, 80% of the participants had a reduction in surgery, with about 28% of patients having no surgeries whatsoever after day zero, even including the nine-week initial dosing regimen.

In addition to their diverse pipeline we already know about, they have a transformational dMAb technology to encode monoclonal cells within their DNA plasmids. That enables the body to produce monoclonal cells through in vivo protein production. It basically uses the human manufacturing system as an antibody manufacturing system to create immunity They also have a next generation vaccine technology called DNA launch nanoparticle vaccines that is just entering to the clinic. INO is a Buy under $14 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: 2025
   Probable time of next financing: 2025

Invitae (NVTA – $0.02) filed for Chapter 11 bankruptcy protection. I believe the current stockholders will own part of the company that emerges from bankruptcy, but we’ll see. Until then, NVTA is a Hold.
Primary Risk: Current shareholders don’t own any of the restructured company.
   Clinical stage of lead product: NM
   Probable time of first FDA approval: NM
   Probable time of next financing: Mid-2024.

Medicenna (MDNAF – $0.78) reported a December quarter loss of $5 million or seven Canadian cents a share (SLIDES HERE). They used C$3.9 million in the quarter and ended the year with C$21.8 million in cash. The MDNA11 Response Rate increased to 23%, continuing to show very good single-agent activity in the ABILITY-1 trial of high-dose Phase-2 eligible patients that failed checkpoint inhibitor therapies, while maintaining an acceptable safety profile. Tumor shrinkage also was observed in all high-dose Phase-2 eligible patients with stable disease (SD). In addition to a new partial response (PR), the clinical benefit rate (PR plus SD for over 24 weeks) increased to 46% and the tumor control rate (PR plus all SD) increased to 69%.

During the quarter, they dosed the first patient in the Phase 1 combination escalation portion of the ABILITY Study evaluating MDNA11 with Keytruda. We will get additional monotherapy data updates and preliminary combination escalation and expansion data throughout this year.

Click for larger graphic

They ended the quarter with C$21.8 million in cash, enough to carry them through multiple data readouts and into the June 2025 quarter. The stock jumped 24.5% today. Buy MDNAF under $3 for a first target of $20, then maybe $40.
Primary Risk: Their drugs fail in the clinic.
   Clinical stage of lead product: Entering Phase 3
   Probable time of first FDA approval: 2024
   Probable time of next financing: March 2024

Inflation MegaShift

Gold ($2,016.30) fell below $2,000 for the first time in 2024 after Tuesday’s CPI report, even though high inflation actually is bullish for gold. But markets assumed a May Fed interest rate cut is off the table, therefore the dollar will strengthen, and therefore gold must go down. Gold has been tied to the inverted 10-year Treasury note.

Click for larger graphic h/t @TheMarketEar

The fractal dimension isn’t indicating a trend in either direction.

Miners & Related

Coeur Mining (CDE – $2.73) reports their December quarter after the close next Wednesday with a conference call Thursday morning. The two analysts publishing revenue estimates are expecting $245.4 million and $251.0 million for an average of $248.2 million. There are five analysts predicting a breakeven quarter on average, with a range from a two-cent loss to a one-cent profit. I think their mine-by-mine update, which should be positive, will determine where the stock goes. CDE is a Buy under $5 for a $20 target as gold goes higher.
Primary Risk: Prices of precious metals fall due to US dollar strength.

First Majestic (AG – $4.52) reports next Thursday. The single analyst forecasting revenues is expecting $126 million, down 15% from last year. Five analysts have a consensus estimate of a two-cent loss, with a wide range from minus seven cents to plus nine cents. 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.

Sandstorm (SAND – $4.08) announced record 2023 results but won’t hold their conference call until tomorrow morning. December quarter revenues grew 15.7% from last year to $44.5 million. They earned eight cents a share, obliterating the one-cent consensus estimate. SAND is a Buy under $10 for a $25 target.
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 – $51,906.67) reached $50,000 for the first time since 2021, so my March 15, 2018, buy recommendation at $8,254.70 is looking even better. I still think we have a shot at a run to $100,000 by the April halving, far above the $69,000 all-time high in November 2021. There probably will be a dip back to the $50,000 area in the years following that, but a run to $1,000,000 by the 2028 halving still is the goal.

There was $631 million of net inflows to the spot bitcoin ETFs on Tuesday. That is 14x more demand than the 900 coins the network produced in the same day. (That drops to 450 coins a day after the April halving.) Spot ETFs have attracted more than $9 billion of investor inflows so far, including 21 of the last 22 trading days. I don’t think people understand the magnitude of what is happening right now.

Click for larger graphic h/t Bloomberg

The next wave of spot ETF inflows will be driven by widespread adoption by registered investment advisors and institutional investors as the funds take the big, complicated step of moving on to broker-dealers’ platforms. It will be huge. Vanguard said they will not be offering the ETFs for trade on their platforms. How long do you think it will be before they change their mind? I’m guessing less than six months and the morons wonderful people miss the April halving.

Click for larger graphic

BTC-USD, ETH-USD, GBTC, and ETHE are Strong Buys.
Primary Risk: Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.

iShares Bitcoin Trust (IBIT- $29.52) management fee is only 0.12% until the Exchange-Traded Fund reaches its 12-month anniversary on January 11, 2025, or hits $5 billion in assets. This grace period might not last much longer, as IBIT’s net assets just topped $3.9 billion. Still, even the full 0.25% management fee is on the low side for the first group of spot bitcoin ETFs. With iShares Bitcoin Trust, we get a very experienced, sizable ETF management company with $3.5 trillion of ETF assets under management for relatively little. IBIT is a Buy for the 2024 and 2028 halvings.
Primary Risk:Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.

Ethereum (ETH-USD on Yahoo – $2,852.37) moved up 15% in less than nine days to clear $2,700 for the first time since May 222 as traders look for a replay of the bitcoin spot ETF drama for the second-largest cryptocurrency. ETH-USD is a Buy.
Primary Risk: Bitcoin extensions outperform Ethereum.

Grayscale Ethereum Trust (ETHE- $23.76) has a 50/50 chance of getting SEC approval to convert to an exchange-traded fund by the SEC’s May deadline. It has to happen eventually. As Barron’s wrote: The Grayscale Ethereum Trust Might Be the Next Big Crypto Opportunity. ETHE is a Buy under net asset value.
Primary Risk:Ethereum falls due to over-regulation or is surpassed by another cryptocurrency.

Commodities

Oil – $78.10

Big 4 Storage saw a 12 million barrel build this week as the large crude build outpaced the product draws. I expect another big build next week because refinery throughput still is depressed at 80.6%, a five-year low. It will be important for product draws to offset the incoming crude builds if prices are to keep going up.

Click for larger graphic h/t @HFI_Research

ANZ Research said crude oil prices are expected to rise this year as a broadly negative market sentiment should see OPEC extend its current production cuts into the June quarter. They see Brent crude at $85 a barrel short term and above $90 by year-end. Today’s stories show how hard it is to invest in oil:

Click for larger graphic

The July 2026 Crude Oil Futures (CLN26.NYM – $67.65) are a Buy under $70 for a $200+ target. Only buy futures for all cash; do not use margin.

The United States 12 Month Oil Fund, LP (USL – $37.43) is a Buy under $40 for a $100+ target.

Vermilion Energy (VET – $10.80) moved up as crude gained, but still is under my buy limit. This is an excellent way to get exposure to the piece of oil. VET is a buy under $11 for a target price of $24 or more.
Primary Risk:Oil prices fall.

EQT (EQT – $34.49) reported December quarter revenues fell 41.4% from last year to $2.04 billion due to low natural gas prices, but that was much better than the $1.61 billion Wall Street expected. Pro forma earnings of 48¢ per share only beat the consensus by a penny.

They produced 564 billion cubic feet equivalent (Bcfe), toward the high-end of their guidance, driven by continued operational efficiency gains and strong well performance. Capital expenditures of $539 million were near the low-end of guidance.

On the conference call (SLIDES HERE and TRANSCRIPT HERE), management said they generated nearly $880 million of free cash flow in 2023, retired north of $1.1 billion of debt, and raised the base dividend by 5%. CEO Toby Rice said: “This financial performance is a clear demonstration of our advantaged position at the low end of the North American natural gas cost curve and highlights that EQT is poised to thrive regardless of where we are in the commodity cycle.”

For 2024, they guided for production of 2,200 to 2,300 Bcfe, up from 2,016 Bcfe in 2023. which includes some flexibility to curtail volumes should natural gas prices remain weak. This activity level juxtaposed against their large production base underscores the high capital efficiency and quality of their assets. EQT is generating the most gross-operated production per rig of any natural gas operator in the United States by a wide margin.

Click for larger graphic

Toby said EQT will generate cumulative free cash flow of almost $9 billion over the next five years at a natural gas strip that averages approximately $3.40 per million BTU over the period. This gas price is roughly equivalent to the fully loaded corporate marginal cost of supply in the US required to simply breakeven from a free cash flow perspective, let alone to generate returns for shareholders. Said another way, higher cost natural gas producers will at best generate no shareholder value at the current strip over the next five years, while EQT is set to generate more than 40% of its enterprise value and free cash flow over the same timeframe. This is a really well-run company.

The CFO said: “We will continue to prioritize debt pay-down until we achieve our $3.5 billion gross debt target. Our capital allocation philosophy is underpinned by an unwavering focus on establishing a fortress balance sheet, counter-cyclical and opportunistic share repurchases, and a steadily growing base dividend.”

They have more than 50% of their March quarter 2024 production volumes hedged with a weighted average floor price of $3.87 per million British thermal units (MMBtu), which has derisked a significant portion of their free cash flow outlook for the year. They have nearly 50% of their June quarter production hedged with a weighted average floor of $3.39 per MMBtu. And roughly 40% of their September quarter production covered at a weighted average floor price of $3.42 per MMBtu. They recently added some 2024 winter hedges, taking their December quarter hedge coverage up to more than 20% with a weighted average floor price of $3.47 per MMBtu.

A low cost structure is the only competitive advantage a company can have in a commodity-driven business, which is why it drives nearly all of EQT’s strategic decision-making. Natural gas prices fell for the eighth straight day today to $1.59, the lowest since July 2020. This is where it started bottoming in 2020, although the final low was $1.43. We’re likely to have an initial bullish reversal any day, although we may still be a few months away from a final low.

The Wall Street Journal reported that Iranian officials said two explosions struck natural-gas pipelines in the country early Wednesday, calling the blasts a terrorist attack, which comes amid heightened tensions in the Middle East over the Israel-Hamas war in Gaza. Maybe that will turn natty.

Click for larger graphic h/t @CyclesFan

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.

* * * * *

* * * * *

Your realizing I was wrong about Putin’s motivation Editor,

Michael Murphy CFA
Founding Editor
New World Investor

All Recommendations

Priced 2/15/24. 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.

Tech Dominators
  Apple Computer (AAPL – $183.86) – Buy under $150 for new iPhones
  Corning (GLW – $32.03) – Buy under $33, target price $60
  Gilead Sciences (GILD – $73.37) – Buy under $80, target price $120
  Meta (META – $484.03) – Buy under $345, target price $400
  SoftBank (SFTBY – $28.54) – Buy under $25, target price $50

Small Tech
  Enovix (ENVX – $11.70) – Buy under $20; 4-year hold to $100+
  First Trust NASDAQ Cybersecurity ETF (CIBR – $58.62) – Buy under $40; 3- to 5-year hold
  Fastly (FSLY – $16.34 – Buy under $20; 2- to 5-year hold to $80+
  PagerDuty (PD – $24.49) – Buy under $30; 2- to 5-year hold
  QuickLogic (QUIK – $12.97) – Buy under $10, target price $40
  Rocket Lab (RKLB – $4.89) – Buy under $13, target price $30+
  Velo3D (VLD – $0.31) – Buy under $6, target price $50

$20-for-$1 Biotech
  AbCellera Biologics (ABCL – $5.28) – Buy under $6, target $30+
  Akebia Biotherapeutics (AKBA – $1.47) – Buy under $2, target $20
  Aptose Biosciences (APTO – $2.02) – Buy under $10, ultimate target $300
  Compass Pathways (CMPS – $10.62) – Buy under $20, hold a long time for a 10x return
  Inovio (INO – $7.44) – Buy under $14, hold a long time
  Invitae (NVTA – $0.02) – Buy under $10, first target $50, then $100+
  Medicenna (MDNAF – $0.78) – Buy under $3, first target $20, then maybe $40
  ScyNexis (SCYX – $1.78) – Buy under $3, target price $20, then $50
  TG Therapeutics (TGTX – $14.40) – Buy under $12 for buyout at $30+

Inflation
  A Short-Sale or REO House – ($415,400) – Hold
  Bag of Junk Silver – ($22.98) – hold through silver bull market
  Sprott Gold Miners ETF (SGDM – $21.68) – Buy under $28, target price $50
  Sprott Junior Gold Miners ETF (SGDJ – $26.66) – Buy under $39, target price $100
  Sprott Physical Gold and Silver Trust (CEF – $18.42) – Buy under $18, target price $30
  Global X Silver Miners ETF (SIL – $24.03) – Buy under $30, target price $50
  Coeur Mining (CDE – $2.73) – Buy under $5, target price $20
  First Majestic Mining (AG – $4.52) – Buy under $11, next target price $23
  Paramount Gold Nevada (PZG – $0.36) – Buy under $1, first target price $10
  Sandstorm Gold (SAND – $4.08) – Buy under $10, target price $25
  Sprott Inc. (SII – $38.10) – Buy under $40, target price $70

Cryptocurrencies
  Bitcoin (BTC-USD – $51,906.67) – Buy
  iShares Bitcoin Trust (IBIT – $29.52) – Buy
  Ethereum (ETH-USD – $2,847.63) – Buy
  Grayscale Ethereum Trust (ETHE – $23.76) – Buy

Commodities
  Vermilion Energy (VET – $10.80) – Buy under $11; $24 target
  Crude Oil Futures – July 2026 (CLN26.NYM – $67.65 – Buy under $70; $200+ target
  United States 12 Month Oil Fund, LP (USL – $37.43) – Buy under $40; $100+ target
  EQT (EQT – $34.49) – Buy under $35; $70 first target
  Energy Fuels (UUUU – $6.71) – Buy under $8; $30 target
  Freeport McMoRan (FCX – $38.25) – Buy under $44; $65 target within two years

International & Other Recommendations
  EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ – $30.52) – Buy under $38 for a $66 target in 12 to 18 months
  KraneShares Bosera MSCI China A Share Fund (KBA – $20.22) – Buy under $40 for a three- to five-year hold
  Morgan Stanley China A-Shares Fund (CAF – $13.12) – Buy under $18 for a three- to five-year hold
  KraneShares CSI China Internet ETF (KWEB – $25.19) – Buy under $40 for a double over the next three years
  Acreage Holdings (ACRDF – $0.25) – Buy under $2 for the Canopy Growth merger
  Mongolia Growth Group (MNGGF – $1.12) – Buy under $1.30; long-term hold

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.

  Arch Therapeutics (ARTH – $3.00) – Hold for buyout

Publisher: GwynRose LLC, 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.

Copyright ©GwynRoseLLC 2024

New World Investor Mastermind Group

1. Post unto others as you would have them post unto you.
2. Keep it clean, like a 1950s family television show. Your alter ego can run free on Twitter.
3. NO PERSONAL ATTACKS! If you don’t like the stock, don’t trash the person. Everyone is responsible for their own due diligence and investments.
4. Don’t post here about politics or religion – you aren’t going to change anyone’s mind. Again, NO PERSONAL ATTACKS!
5. The investment implications of something going on in politics or religion is OK.
6. Of course, there’s never a reason to slur someone based on race, religion, gender, sexual orientation, or country of national origin.
7. Please, no snark!