Dear New World Investor:
The final Atlanta Fed’s GDPNow model estimate for December quarter real Gross Domestic Product (GDP) was +2.4%, stronger than the Blue Chip economists’ consensus for +1.5%. The first government announcement this morning was an even stronger +3.3%. September quarter GDP was revised down to +4.9%, and I expect December to be revised down a little in the second and third estimates coming in February and March. But it was a good quarter, no doubt.
Click for larger graphic
But the market is forward-looking, so what’s next? According to S&P Global’s flash US composite PMI, which includes both the services and manufacturing sectors, activity rose to 52.3 in January, up from 50.9 in December and better than the 51.0 that had been expected by economists.
S&P headlined: “Output growth fastest for seven months at start of 2024, prices charged rise at slowest rate since May 2020 .” They said business confidence reached a 20-month high while prices charged, a measure of inflation, rose at its slowest pace since May 2020. The manufacturing index saw the largest increase with a reading of 50.3 up from 47.9, the month prior. The services index hit 52.9 in January, up from 51.4 in December.
As I said in Saturday’s Flash Alert, the returns following an all-time high (ATH) in the stock market usually are above average. The all-12-month returns average 8.5% with a 73% batting average, The 12-month returns after an ATH average 13.8% with an 89% batting average. Yes, the first month after an ATH can be rocky as those who are scared of heights bail out, but after that the statistics are pretty compelling.
Of course, there will be ups and downs during the uptrend. This chart shows the best and worst case historical outcomes during the 24 months following a new all-time high.
Click for larger graphic h/t @TimmerFidelity
Most of the time the upside momentum keeps the drawdowns modest (which results in a favorable upside/downside ratio), but there have been cases where subsequent drawdowns were in the double-digits. The new ATH in March 1972 happened nine months before the start of a 48% bear market. The new ATH in July 1980 happened right as the economy was about to enter Dip #2 of its double-dip recession. The prize for worst whipsaw was the new ATH in July 2007, right before the Global Financial Crisis caused a 57% decline. But most of the time, new ATHs confirm the uptrend, which brings upside momentum with it.
As usual, retail investors are going the wrong way. Equity funds saw outflows of $6.81 billion last week after a $9.5 billion outflow the week before.
Click for larger graphic h/t @dailychartbook
Is The Recession Canceled?
Even though Wall Street doesn’t believe it yet, a recession is coming. The mother of all recession charts shows Federal tax receipts collapsing:
Click for larger graphic h/t @Stimpyz1
Another recession indicator that has a near-perfect track record over the last 75 years is the ISM Manufacturing New Orders Index. It is a sub-component of the well-known ISM Manufacturing Index (aka the Purchasing Managers’ Index, or PMI). It was 47.1 in December, the16th consecutive month of a reading below 50 – contraction territory.
Click for larger graphic h/t Sean Williams
Since 1949, there have been a dozen instances where the ISM Manufacturing New Orders Index has fallen below a reading of 43.5. Only one of these instances, which occurred early in 1952, did not lead to a recession. Every other instance over the past 72 years where the ISM Manufacturing New Orders Index has dipped below 43.5 has been followed by a recession. During the last 16 months, this Index has dipped below 43.5 twice.
In addition, the November Fed Beige Book showed two-thirds of the 12 Federal Reserve districts are either contracting or stagnating. That’s more downbeat than any previous Beige Book on the cusp of past recessions.
And the Conference Board Leading Economic Index has declined 7.8% since the three-month/10-year Treasury curve inverted 13 months ago. This 7.8% decline is worse than the average 5.4% decline by the 13thmonth after an inversion. The worst performance by Month 13 was the 1974 recession, where the LEI was down 9.2%.
Click for larger graphic h/t @EPBResearch
Although a recession will cause more stock market volatility as Wall Street tries to scare people out of holding stocks, I still recommend being fully invested. “Fully invested” for some traders may mean holding some dry powder to pick up bargains in the periodic downturns, while for others it means being on margin. For me, it just means 100% invested.
I still think the recession will be mild and short, even though I don’t think the Fed will be in any hurry to cut interest rates. But I do recognize that downturns can spiral out of control – as does Chairman Powell – so I’ll be watching for signs it’s getting worse than I expect.
Market Outlook
The S&P 500 added another 3.3% since last Thursday with five straight record closes, including the first pair of consecutive record closes since December 2021. After a pair of consecutive records, since 1950 the Index has historically averaged a gain of 3.9% in the following six months. The median gain has been 5.1%. The S&P is up 2.6% year-to-date.
The quarterly path of S&P 500 earnings growth for 2024 will support further gains:
Click for larger graphic h/t @themarketear
The Nasdaq Composite gained 3.0% and is up 3.3% for the year. The SPDR S&P Biotech Exchange-Traded Fund (XBI) climbed 1.7% but is down 0.9% year-to-date as the biotech rally stalls.
The small-cap Russell 2000 added 2.6% but is down 2.6% in 2024. Even though the Russel Index is down, there’s a wide spread of individual performance. Some sectors like biotech are weak but we’re seeing the most small-caps making new highs in years.
Click for larger graphic h/t @allstarcharts
Risk aversion is back among the pros, and the recent spike in the National Association of Active Investment Managers Exposure Index quickly returned to normal territory in response to the All-Time Highs. The pain trade still is to the upside.
Click for larger graphic h/t @AndreasSteno
The fractal dimension says the end of this upturn is in sight – maybe next week. Remember that consolidations can be by price – a quick, scary plunge would do it – or time, as in going more or less sideways for a couple of months.
Top 5
Changes this week: None
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
GBTC Grayscale Bitcoin Trust – Bitcoin is headed for $100,000
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
SCYX ScyNexis –First new antifungal in 20 years
VLD Velo3D – Return manufacturing to the US
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, January 26
Consumer Personal Consumption Index – 8:30am – Event
Tuesday, January 30
GLW – Corning – 8:30am – Earnings conference call
Wednesday, January 31
Fed Meeting – 2:00pm press release; 2:30pm conference
Thursday, February 1
META – Meta Platforms – 4:30pm – Earnings conference call
AAPL- Apple – 5:00pm – Earnings conference call
Friday, February 2
January payrolls – 8:30am – +178,000 expected; December was +216,000
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 – $194.17) nabbed a record 15 Academy Award nominations, including 10 for Martin Scorsese’s Killers of the Flower Moon. Napoleon got the other three.
They report earnings next Thursday after the close. Analysts expect $118.03 billion in sales with $2.10 earnings per share. Apple could easily miss on both the top and bottom lines because Chinese sales have been weak. The consensus expects March quarter guidance for $96.19 billion in sales and $1.58 a share, both of which seem reasonable.
If they miss the December numbers, the stock will get hit on the open and that’s when you should buy it – before they reveal on Friday how well the Vision Pro is selling with over a million apps available. Speaking of which:
AAPL is a Buy under $150 for new iPhone rollouts and augmented/virtual reality products.
Corning (GLW – $30.82) reports next Tuesday before the open. Analysts expect sales to fall 10.5% from last year to $3.35 billion with earnings per share down 17% to 39¢. That sounds like a low bar, but it’s probably right on because all of Corning’s consumer markets are still soft.
Analysts expect guidance for a smaller 5.4% revenue decline in the March period to $3.1 billion with 38¢ EPS. Management is doing a great job of keeping costs down and managing the balance sheet. When their markets turn up, profit margins and the stock will soar, and we get paid a 3.7% yield while we wait. It’s an excellent choice for the safe end of your barbell portfolio.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 – $80.23) slipped after they said their Phase 3 trial of Trodelvy versus docetaxel in patients with metastatic or advanced non-small cell lung cancer (NSCLC) that had progressed on or after platinum-based chemotherapy and checkpoint inhibitor therapy did not meet its primary endpoint of overall survival in previously treated metastatic NSCLC.
There was a numerical improvement in overall survival favoring Trodelvy, including in patients with both squamous and non-squamous histology. A more than three-month difference in median overall survival favoring Trodelvy was observed in a sub-group of patients who were non-responsive to their last prior anti-PD-(L)1 therapy – over 60% of the trial population. Although this analysis was pre-specified in the protocol, meaning they are not data-mining, it was not alpha-controlled for formal statistical testing. Gilead intends to explore potential pathways to further understand the role Trodelvy may have in these patients given the high unmet medical need, and they will discuss results from this trial with regulators.
The folks selling the stock must have been (1) computer bots that sell any negative headline; (2) MOMO day traders who short or buy puts on anything going down; (3) morons who think a company with dozens of clinical trials in process won’t have an occasional failure; (4) morons who think a Big Pharma company won’t find a path to FDA approval if they want to. Take advantage of all of these worthies and Buy GILD under $80 for a first target of $120. And enjoy the 3.77% yield while you wait.
Meta Platforms (META – $393.18) also reports next Thursday after the close. The consensus expects Team Zuck to grow revenues 21.5% from last year to $39.08 billion and report $4.93 per share. Guidance should be for $33.75 billion and $3.58.
Brokerage firm Citi said Meta could see a boost in December quarter revenue because the ad load on its popular Reels product is continuing to expand. They wrote: “Our Reels ad load tracking suggests ad loads expanded to 19.1% in 4Q, +20bps Q/Q, and with Reels likely becoming revenue accretive in the fourth quarter, we believe monetization efficiency through newer ad products and advertiser adoption is ramping. Instagram Reels ad load is tracking at 19.3% month-to-date in January and the ad is now on the fourth Reel, on average. Additionally, 95% of Reels sessions had seven or more ads in the fourth quarter, good for a 14% or more ad load.”
They raised their target price from $425 to $440. META is a Buy under $345 for a $400 target in 2024.
Small Tech
PagerDuty (PD – $23.93) jumped earlier this month amid speculation that private equity firms are circling the company. But yesterday it slipped after it was downgraded by Morgan Stanley from Overweight to Equal-Weight on concerns over revenue growth, They said: “While PagerDuty is delivering on its profitability with margins expected to be up over 1,000 basis points in fiscal year 2024, top-line has been weaker than what we expected.”
They expect December quarter revenue growth around 9%, down from 20% over the past two years. They wrote: “While we had anticipated a slowdown in revenue growth, we did not fully appreciate the magnitude of the deceleration and the forces at play that have been driving the slowdown.” They said those forces include an increase in sales cycles, a declining customer base, layoffs across the tech industry, and more intense competition than expected.
The problem with this is that the consensus already is expecting 9.3% revenue growth to $110.4 million when PagerDuty reports, and everybody already knows about the sales cycles, customer base, layoffs, and competition. This looks like some big Morgan Stanley client wants to buy stock before a private equity deal is announced. PD is a Buy up to $30 for a 2- to 5-year hold as their digital operations management Software-As-A-Service gains market share.
Primary Risk: Digital operations management is a competitive area.
QuickLogic (QUIK – $15.28) presented at the Needham Growth Conference (WEBINAR HERE and SLIDES HERE). It was the standard presentation, except they are now “Riding the Renaissance of Programmable Logic.”
Click for larger graphic
They are coat-tailing the AI revolution:
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One of the biggest reasons I like QuickLogic is they have very high operating leverage as they carefully control their operating expenses:
Click for larger graphic
Which leads to pro forma profitability in the September quarter and for the full year.
Click for larger graphic
QUIK is a Buy up to $10 for my $40 target as their earnings repeatedly surprise Wall Street.
Primary Risk: Customers’ product introductions and associated royalties are unpredictable.
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.
Aptose Biosciences (APTO – $1.90) filed a prospectus amendment to sell 2.9 million units (stock plus a warrant) and 2.9 million prefunded warrants that should net them about $9.75 million.
They said: “We expect to revise our current development as follows. Assuming the net proceeds from this offering and our existing cash, cash equivalents and short-term investments, a net proceeds from the concurrent private placement offering, a committed equity facility, and ATM we plan to, (i) complete our ongoing APTIVATE clinical trial studying TUS and TUS/VEN, (ii) pause enrollment in the LUX G3 study and (iii) evaluate other costs reductions in general and administrative expenses.”
They have a path to approval of tuspetinib with venetoclax (TUS/VEN) without doing a Phase 3 trial, and they need to grab it. APTO is a Buy under $2.50 for a $300 target in a buyout.
Primary Risk: Either drug fails in clinical trials.
Clinical stage of lead product: Phase 2
Probable time of first FDA approval: 2025
Probable time of next financing: Late 2025
Inovio (INO – $6.79) did a reverse split of one share for every 12 you own, effective this morning. I hate reverse splits but companies are afraid to be knocked off Nasdaq, so they keep doing them. Medicenna was dual-listed on the Toronto Stock Exchange, so they told Nasdaq to shove it and the stock doubled from its low.
Inovio updated their Investor Presentation.
Click for larger graphic
They have a big pipeline with some strong partners;
Click for larger graphic
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 – $0.38) completed the previously-announced sale of certain reproductive health assets, which include carrier screening and non-invasive prenatal screening, to Natera (NTRA). The value of the transaction is up to $52.5 million, including cash, milestone payments and litigation credits. Invitae expects operating expense cash savings of approximately $44 million a year from the sale. That’s what Wall Street wants to see. 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: Mid-2024.
Inflation MegaShift
Gold ($2,019.80) seems pretty happy to sit just over $2,000 and consolidate. The fractal dimension definitely gave a false trend signal – we are still in a consolidation of the late 2022-early 2023 upturn.
Miners & Related
Coeur Mining (CDE – $2.77) presented at the TD Securities Global Mining Conference (SLIDES HERE). There were a couple of new slides:
Click for larger graphic
Their extensive drilling program has been very productive:
Click for larger graphic
In 2024 they will ramp-up Rochester mine production, control their inflationary cost pressures, and continue their drilling program. 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.
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 – $39.909.88) fell below $40,000 as the outflows from the Grayscale Bitcoin Trust ETF (GBTC) exceeded the inflows to the other newly-approved exchange-traded funds. I think this is temporary as markets adjust to the new dynamics.
Bitcoin seasonality is the best in February, with an 89% chance of upside, and an average gain of 11.2% The second best month is October, with an 80% chance of upside, and an average gain of 20.3% January’s generally not a great month, with only a 40% chance of upside
Click for larger graphic h/t @Mayhem4Markets
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.
Grayscale Bitcoin Trust ETF (GBTC- $35.44) says their 1.5% management fee is justified by “the size, the liquidity, and the track record” of the company. The market: No.
Click for larger graphic h/t @jameslavish
I expect them to slash the management fee soon, but I’m about to recommend an alternative to swap into if the capital gains tax won’t block you. GBTC is a Buy under net asset value.
Primary Risk:Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.
Commodities
Oil – $77.21
Oil rose to its highest level since November as the Red Sea attacks continue. Tankers are diverting around the Cape of Good Hope, adding to fuel costs and delivery delays.
Click for larger graphic h/t @OilCfd
Thanks to the cold blast last week, US oil inventories fell 21.4 million barrels. Cushing storage fell 2.0 million barrels and is starting to drain very fast again, raising the “bottom of the tank” problem. Commercial crude storage is headed for new lows:
Click for larger graphic h/t @HFI_Research
Seasonally, we normally see US crude storage build in the first quarter. This happened as usual last year, and we spent the rest of the year trying to eliminate that surplus. With Q1:2024 likely to finish at a deficit and possibly below 2022 levels, it’s likely that US crude exports will fall, increasing global prices.
As @HFI_Research wrote: “As oil continues to climb the wall of worries, the consensus remains far too bearish. We think the combination of US shale and OPEC+ production disappointing to the downside will further improve Q1 balances. In addition, with US crude storage falling to start the year and increasing its deficit versus 2023 by mid-February, the market will start to pay attention. Fundamentally speaking, the oil market is moving in the right direction, so all that’s left is for the results to become obvious, and sentiment to change.”
The July 2026 Crude Oil Futures (CLN26.NYM – $66.97) 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 – $37.39) is a Buy under $40 for a $100+ target.
EQT (EQT – $36.06) should see some strength after the Energy Information Administration reports the latest natural gas storage, According to @NatGasWeather, survey averages suggest a draw of 326-328 billion cubic feet, aided by freeze-offs at the weak heads. It was much colder than normal over most of the US besides the East Coast and Southwest.
Click for larger graphic h/t @NatGasWeather
Interestingly, Marcellus Shale gas production has stopped increasing despite more producing wells.
Click for larger graphic h/t @aeberman12
On the international front, Qatar is delaying LNG cargoes to South Europe due to the Red Sea crisis. They are one of the world’s biggest liquefied natural gas exporters. At the same time, Russian gas giant Novatek said it had been forced to suspend some operations at its huge Baltic Sea fuel export terminal on Sunday due to a fire started by what Ukrainian media said was a drone attack. 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.
Freeport McMoRan (FCX – $39.44) reported December quarter revenues up 2.6% from last year to $5.91 billion, a skootch above the $5.88 billion consensus estimate. Pro forma earnings per share of 27¢ beat the 23¢ estimate.
In the quarter they produced 1.1 billion pounds of copper, 573,000 ounces of gold, and 20 million pounds of molybdenum. They sold all 1.1 billion pounds of copper, 549,000 ounces of gold and 22 million pounds of molybdenum.
For the full year, they increased copper production 6% to 4.2 billion pounds, increased gold production 10% to 2.0 million ounces, and produced 82 million pounds of molybdenum. They sold 4.1 billion pounds of copper, 1.7 million ounces of gold, and 81 million pounds of molybdenum.
On the conference call (SLIDES HERE and TRANSCRIPT HERE), they guided for March quarter sales of 1.0 billion pounds of copper, 575,000 ounces of gold, and 20 million pounds of molybdenum. For the full year, they expect to sell 4.1 billion pounds of copper (the same as 2023), 2.0 million ounces of gold (also the same), and 85 million pounds of molybdenum (+4.9%).
Based on the low inventories at the major exchanges, I thought copper would be in short supply beginning last fall, but a lot of hidden stockpiles came to market. The shortage thesis is delayed but not wrong – it’s coming early this year. As Freeport’s CEO said on the call: “There were supply shortfalls throughout the industry for some significant mines for political issues in some countries, community issues, and then operating issues. As a result of all that, inventories of copper around the world are at historically low levels and the inventory levels are really inconsistent with the current copper price…I’ll just say when the macro outlook improves, watch out for the copper price.
“Looking ahead, the world’s going to need significantly more copper in the future for a variety of factors. The world’s just becoming increasingly electrified and that’s what copper is used for. And it’s at a time when the industry is simply not investing to grow production that the outlook indicates will be required for economic, operational, and resource nationalism, a series of factors, but the facts are there’s an outlook for strong demand and supply challenges.”
Goldman Sachs on the copper shortage: “…tightest state since 2021, as the market has suffered a supply shock over the past quarter from a series of mine supply downgrades, reducing expected growth this year by 60% from expectations in mid-2023.”
Goldman’s latest assessment sees the copper market likely to experiencing a deficit of 428,000 tons this year, compared with its earlier forecast for a deficit of 182,000 tons.
Click for larger graphic h/t @robert_ivanhoe (Founder of Ivanhoe Mines)
Freeport is projecting steady growth in production:
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…and prices:
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…and has a lot of leverage to the higher prices coming:
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The stock fell after the report due to their conservative production forecasts, making FCX a Strong Buy under $44 for a $65 target within two years.
Primary Risk: Copper prices fall.
International & Other Recommendations
It is important to hold some non-US assets, especially in China. The Hang Seng is back near the lows of 2022. With tens of millions of young men without enough women to date and marry, and one out of five unemployed, the Chinese government is fixated on boosting the economy via stimulus.
Click for larger graphic
They are considering a $278 billion stock market rescue package before the Lunar New Year. But if they want to grow their economy out of the real estate bust, the government has to take their foot off the neck of the technology companies.
EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ – $29.90) is a Buy under $38 for a $66 target in 12 to 18 months.
KraneShares Bosera MSCI China A Share Fund (KBA – $19.91) is a Buy under $40 for a three- to five-year hold.
Morgan Stanley China A-Share Closed-End Fund (CAF – $12.48) is a Buy under $18 for a three- to five-year hold.
KraneShares CSI China Internet Exchange-Traded Fund (KWEB – $24.72) is a Buy under $40 for a double over the next three years.
Primary Risk of all four of these: China falls into a recession.
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The Good Mourning Show
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Your trying to get the truth on Ukraine Editor,
Michael Murphy CFA
Founding Editor
New World Investor
All Recommendations
Priced 1/25/24. 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 – $194.17) – Buy under $150 for new iPhones
Corning (GLW – $30.82) – Buy under $33, target price $60
Gilead Sciences (GILD – $80.23) – Buy under $80, target price $120
Meta (META – $393.18) – Buy under $345, target price $400
SoftBank (SFTBY – $22.47) – Buy under $25, target price $50
Small Tech
Enovix (ENVX – $9.96) – Buy under $20; 4-year hold to $100+
First Trust NASDAQ Cybersecurity ETF (CIBR – $56.28) – Buy under $40; 3- to 5-year hold
Fastly (FSLY – $20.68) – Buy under $20; 2- to 5-year hold to $80+
PagerDuty (PD – $23.93) – Buy under $30; 2- to 5-year hold
QuickLogic (QUIK – $15.28) – Buy under $10, target price $40
Rocket Lab (RKLB – $4.92) – Buy under $13, target price $30+
Velo3D (VLD – $0.26) – Buy under $6, target price $50
$20-for-$1 Biotech
Akebia Biotherapeutics (AKBA – $1.50) – Buy under $2, target $20
Aptose Biosciences (APTO – $1.90) – Buy under $10, ultimate target $300
Compass Pathways (CMPS – $9.96) – Buy under $20, hold a long time for a 10x return
Inovio (INO – $6.79) – Buy under $14, hold a long time
Invitae (NVTA – $0.38) – Buy under $10, first target $50, then $100+
Medicenna (MDNAF – $0.34) – Buy under $3, first target $20, then maybe $40
ScyNexis (SCYX – $1.81) – Buy under $3, target price $20, then $50
TG Therapeutics (TGTX – $15.98) – Buy under $12 for buyout at $30+
Inflation
A Short-Sale or REO House – ($415,400) – Hold
Bag of Junk Silver – ($23.02) – hold through silver bull market
Sprott Gold Miners ETF (SGDM – $22.84) – Buy under $28, target price $50
Sprott Junior Gold Miners ETF (SGDJ – $27.35) – Buy under $39, target price $100
Sprott Physical Gold and Silver Trust (CEF – $18.57) – Buy under $18, target price $30
Global X Silver Miners ETF (SIL – $25.48) – Buy under $30, target price $50
Coeur Mining (CDE – $2.77) – Buy under $5, target price $20
First Majestic Mining (AG – $4.87) – Buy under $11, next target price $23
Paramount Gold Nevada (PZG – $0.36) – Buy under $1, first target price $10
Sandstorm Gold (SAND – $4.72) – Buy under $10, target price $25
Sprott Inc. (SII – $36.02) – Buy under $40, target price $70
Cryptocurrencies
Bitcoin (BTC-USD – $39.909.88) – Buy
Grayscale Bitcoin Trust (GBTC – $35.44) – Buy
Ethereum (ETH-USD – $2,221.58) – Buy
Grayscale Ethereum Trust (ETHE – $18.06) – Buy
Commodities
Crude Oil Futures – July 2026 (CLN26.NYM – $66.97 – Buy under $70; $200+ target
United States 12 Month Oil Fund, LP (USL – $37.39) – Buy under $40; $100+ target
EQT (EQT – $36.06) – Buy under $35; $70 first target
Energy Fuels (UUUU – $7.34) – Buy under $8; $30 target
Freeport McMoRan (FCX – $39.44) – Buy under $44; $65 target within two years
International & Other Recommendations
EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ – $29.90) – Buy under $38 for a $66 target in 12 to 18 months
KraneShares Bosera MSCI China A Share Fund (KBA – $19.91) – Buy under $40 for a three- to five-year hold
Morgan Stanley China A-Shares Fund (CAF – $12.48) – Buy under $18 for a three- to five-year hold
KraneShares CSI China Internet ETF (KWEB – $24.72) – Buy under $40 for a double over the next three years
Acreage Holdings (ACRDF – $0.23) – Buy under $2 for the Canopy Growth merger
Mongolia Growth Group (MNGGF – $1.16) – 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 – $4.09) – Hold for buyout
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MM–please address Brent and my questions about VLD. Thanks.
Repost from the bottom of the last board–
MM–on VLD, please contribute your analysis of their margins, as Brent and I have discussed. The IR guy said that revenues would have to be $25-30 million a quarter to breakeven. With 40% reduced expenses of $16 million, that assumes 40-50% margin. From their balance sheet, and your knowledge of manufacturing in this field, is that plausible? Brent thinks the GM (gross margin?) is only 11.9% from balance sheet data. If that is true, they would need about $125 million in quarterly sales to net $16 million in profits to break even. What is your assessment?
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taos_red
January 25, 2024 8:42 am
VLD announces strategic priorities for 2024:
https://finance.yahoo.com/news/velo3d-announces-key-strategic-priorities-103000767.html
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JGMD
Reply to taos_red
January 25, 2024 11:47 pm
I think this is the turning point. The stock did OK today, although I thought it would zoom after this news.
Reply
What are your thoughts on VLD and NVTA doing Reverse Splits? Below a $1!
Although reverse splits are a negative factor, for VLD it would mean better visibility on a major market like the NYSE. For VLD to avoid bankruptcy later this year, they need sales, sales, sales, which would be aided by more visibility. Yesterday’s PR of $15 million in sales from mid Dec to the present is a good start. If sales continue at a better pace, they may avoid BK and the stock may be over $1 in a few quarters, avoiding the reverse split.
I asked MM to analyze margins of VLD.
From tomorrow’s issue:
On the third quarter conference call, management guided for December quarter revenues in a very wide range from $15 million to $27 million, with a gross profit margin – the selling price of a Sapphire 3D printer minus the cost of production – of 5% to 17%. With the reasonable assumption that the gross margin is 5% at $15 million in revenues and 17% at $27 million in revenues, we can calculate their incremental gross margin. At $15 million they make $750,000 gross margin, while at $27 million they are projecting $4.59 million. On the additional $27-$15 = $12 million in revenues, they make an additional $3.84 million. That’s a 32% incremental gross margin ($3.84 million divided by $12 million).
If we then make the very conservative assumption that the 32% doesn’t get better with even higher quarterly revenues, in order to cover the projected reduced General & Administrative expenses of $16 million they would need $63 million in quarterly revenues. So the IR guy is wrong. The right number probably is around $50 million.
The company is projecting free cash flow breakeven in the second half of this year, which is a stretch goal I think they can hit, Cathie Woods just reported owning 13,354,810 shares or 5.59% of the company. Angellist Advisors, a venture capital fund in Seattle, reported owning 22,724,407 shares or 8.8%.
Thanks for your analysis. So the IR guy is wrong. $50 or 63 million is a lot more than the $30 million he said would be needed per quarter to breakeven. Unless the incremental gross margins are actually about 50%, which we have no way of knowing. With much higher revenues, economies of scale would increase the gross margin. But now they are building to order individually, so I doubt economies of scale kick in. Trouble is, even in their heyday of great sales a few years ago, I don’t recall they ever approached $50 million in quarterly sales.
I think VLD is a buy only up to 30 cents. The recent nice rally from 26 to 33 cents is starting to fizzle. If sales pick up, they won’t breakeven this year, but maybe 2025.
Cathie Woods holds 55 stocks in her 3D Printing ETF. VLD is only her 33rd largest holding comprising a .46% weight in the ETF, or less than one half of one percent. Sector ETF/fund managers managing large sums of money own virtually the whole universe of stocks having some relation to their sector. VLD is little more than an after thought for Cathie.
She owns nearly 6% of the company and probably can’t buy any more. All fund managers have liquidity guidelines.
A major contributor to the downward price pressure on both NVTA & VLD is dilution, which makes it very difficult to get the share price back over $1 making a reverse split almost inevitable, especially for NVTA.
I don’t think MM has adjusted his price targets to reflect either of these two dilution situations.
The VLD dilution is a small %. The reason for the 97-98% drop since the $10 buy reco is deteriorating business in a niche field, bad customer support, etc. MM hasn’t answered our questions or analyzed the business, merely repeating company promotions. The persistent $6 buy price shows he is not seriously following this company. I’ll be happy with a $2 sale in a takeover, etc.
What happens when Powell and company gets all the rosy news about the great economic news? In addition to your forecast of a recession coming. Wall Street is now wound up so tight about the FED cutting interest rates, just a hint from Powell that isn’t going to happen any time soon or he just goes for another pause, will send the markets in a tizzy. IMO . Also last week the stock market in India crashed some 1000 points. China is in a world of hurt. Their economy is sliding backwards, their real estate world has serious issues, young people can’t find a job, and now they are less of a threat to Taiwan because their military has serious internal problems. Not to mention that they are no longer the go to place for cheap labor. That title now goes to India. Which has seen a great influx of big companies (yes US) to their shores. Can you list some great picks in India’s markets?
Years ago, I held the India Fund and did OK. Maybe again today?
Thanks JGMD.
India is a hard country to do business in due to the bureaucracy.
Regarding APTO, the recently filed prospectus indicated common shares outstanding will be going from 7,942,363 to 12,483,629, which is over 50% dilution for any current shareholder. And this capital raise will only buy them an additional 10 months of significantly pared back operations.
“Based on our planned use of the net proceeds from this offering and the concurrent private placement offering and our existing cash, cash equivalents and short-term investments, committed equity facility, and ATM, we estimate that such funds will be sufficient to enable us to fund our operating expenses and capital expenditure requirements for at least the next 10 months from the date of this prospectus.”
According to APTO’s 12/26/23 corporate presentation APTO was to start their TUS/VEN/HMA triplet trial around Q2 but that now appears off the table as it’s not mentioned as a use of funds in the prospectus. The TUS/VEN registrational trial was to start late this year but that is just about when the funds from this capital raise run out so they’ll have no money to fund that trial. They are now in dilution hell with little hope of getting TUS through even a doublet registrational trial. This is the price of Bill Rice moving slowly. While the TUS results are good enough to interest big pharma, none will pay much to take this over at a pre-registrational phase stage. We’ll see what Bill Rice has to say on the Q4 conference call…
MM’s rarely adjusts price targets to reflect the significant dilution from capital raises, which is an issue with many of his bio-wreck stock picks.
Carol J on YMB has posted for a long time that APTO has too many financial problems to get anywhere. At the time, MM dismissed her. He merely has been a cheerleader without acknowledging the financial situation. Carol J has been shown to be correct.
CarolJ frequently posts flat-out lies.
Hilarious. Murphy posts some random person with 6000 followers on Twitter about the Ukraine situation and titles it “trying to get the truth on Ukraine.”
Mike, I think you can do better. Twitter or X whatever you call it is a pile of garbage now.
I try to read anybody who actually goes to Ukraine. She’s the latest. It sounds like you have a better source? Please share.
Well I’m certain the conditions are shitty in Ukraine but I could invent a name on Twitter and say the conditions are all roses and champagne and folks like you could link it .. completely unvetted.
We both know that Twitter has become a steaming pile of crap under Musk.
I have to disagree. Musk has done a great job fact checking both left and right leaning post on X. It is one of the more honest new sources you will find today. Both CNN and FOX News are garbage, CNN is infatuated with Trump as is Fox infatuated with Biden.
X does absolutely zero fact checking now. Click on the “For You” tab and you will see the most insane shit ever.
I doubt X makes it through the year. If they were public, I would short the shit out of it.
If she has actually spent time there recently you can probably assume her opinions are correct regarding the general mood of the population. She probably has no clue regarding the military situation and the losses on both sides. Those are closely guarded secrets by both the Russian and Ukrainian general staffs and most information disclosed BY BOTH SIDES is pure propaganda.
When the war started in February 2022, I said here that arming and using the Ukraine as a proxy, a battering ram, against Russia was a very risky policy doomed to failure. Economic sanctions against Russia were not going to work and the war was risking to seal a military alliance between Russia and China that would constitute an insurmountable threat to the US and the West.
After 2 years of hard fighting, Russia now possesses the biggest and best trained army in the world with a military industrial complex producing all manners of armaments, very large numbers of tanks (which we do not make anymore) artillery ammunition, missiles of all kinds and new generations of drones and EW systems. They are actually using Hypersonic missiles (which the US does NOT have yet) in the theatre, some of which (Kinzhals) were successfully used to destroy Patriot batteries we gave the Ukraine. The newly raised reservist and volunteer formations are rotated on the frontline for the necessary exposure to modern warfare, an important step as this new type of warfare dominated by mines, artillery, stand-off weaponry and drones is not currently taught in any military Academy and is forcing both Russians and Ukrainians to ditch their manuals.
Progress is slow and whoever is on the offensive risks substantial losses. Accumulation of large forces of tanks and IFVs is immediately detected by C4ISR and drones and concentrations are then attacked by missiles, drones and long range artillery. Airspace is thick with Air Defense so use of airforce and helicopters is limited.
In this new type of 21st Century warfare, Russia is slowly prevailing and now putting pressure along the entire 1000km frontline looking to causing the Ukrainians to break somewhere. To be sure Russians have losses, particularly from Ukrainian FPV drones; however, the UAF is low on artillery ammunition and reserves/replacements so their situation is starting to be critical, particularly in Adveevka, in front of Bahkmut, Siversk and Kupiansk.
Have not changed my mind, failure of the Biden Administration/Neocons Project Ukraine will be a huge foreign policy disaster for the US, Afghanistan 10x.
To blame this on Biden is just plain silly. Every president since Reagan has taken marching orders from the military industrial complex ( Northrop Grumman, General Dynamics, Lockheed Martin, Boeing, ect). War is America’s number one export and they are damn good at it. If there is conflict in the world, you can bet the old USA will be wetting their beak.
BTW, are tanks really needed when the skies are full of drones controlled by some kid in Langley?
El Capitan Nemo “After 2 years of hard fighting, Russia now possesses the biggest and best trained army in the world”
really interesting point of vew.
El Capitan Nemo “Have not changed my mind, failure of the Biden Administration/Neocons Project Ukraine will be a huge foreign policy disaster for the US, Afghanistan 10x.”
so you actually believe that what is happening in Ukraine is a Project of our government. thats a little over the top – think about it thats a big piece of work.
Russia does not have the biggest and best trained army in the world. The USA has spent a trillion a year for 24 years. Come on man, let’s get real.
Michael read it again i was quoting someone else. note the use of ” marks on both and I intended to be sarcastic in my comments.
reminds me of some of the covid and maga comments.
plane old crazy talk.
Ru has a paper army nothing more. and are in fact the aggressors and in violation of Lisbon Protocol.
According to https://en.wikipedia.org/wiki/List_of_countries_by_number_of_military_and_paramilitary_personnel
Russia has 1,154,000 Active Military, 2,000,000 Reserve military, and 554,000 Paramilitary for a total of 3,708,000.
The USA has 1,328,000 Active Military, 744,950 Reserve military, and 0 Paramilitary for a total of 2,072,950. Larger Active military, smaller total.
Severe and intentional US provocations began with moving NATO and its missiles ever closer to Russia.
clear you stand with Ru, there excepting volunteers.
It appears you were correct ECN.
I wonder if Russia wins this war with Ukraine, What will stop it from slowly taking over all the countries as before?
Russia will also have a monopoly on gain export from Ukraine.
News flash, Iran backed militants attacked Jordan ,
with a drone, killing 3 US soldiers and wounding 25 more. Prior to that the Houthis struck a ship with a full load of naphtha. The ship and cargo was valued at $100 million. It caught on fire and they struggled to put it out. Now the ship is needing repairs and will be taken out of service. Naphtha is used in the refining process so this shipping vessel lost will be reflected in the fuel supply chain. Just another wrinkle in the ongoing fossil fuel world. It will be interesting now to see what the US does now with this strike on Jordan?
MM, what are your thoughts on this deal that AKBA made with Blackrock?
Akebia Secures $55 Million Term Loan FinancingJanuary 30, 2024 at 8:00 AM EST
Strengthens Balance Sheet Ahead of Potential Vadadustat Approval on March 27, 2024
CAMBRIDGE, Mass., Jan. 30, 2024 /PRNewswire/ — Akebia Therapeutics®, Inc. (Nasdaq: AKBA), a biopharmaceutical company with the purpose to better the lives of people impacted by kidney disease, today announced it has closed a loan facility with funds and accounts managed by BlackRock. The loan provides Akebia with up to $55.0 million of borrowing capacity available in three tranches.
At the closing, Akebia drew the first tranche of $37.0 million and used the proceeds to pay down $35.0 million of principal outstanding from a loan agreement with Pharmakon Advisors, LP (Pharmakon), the investment manager of the BioPharma Credit funds, plus interest and fees. The new agreement substantially extends the interest-only period in the event of vadadustat approval by the U.S. Food and Drug Administration (FDA) without requiring any principal repayment until December 31, 2025, with an option for Akebia to extend until December 31, 2026.
Two additional tranches comprising a total of $18.0 million are available to be drawn down at Akebia’s option through December 31, 2024, contingent in part on FDA approval of vadadustat. Details of the loan agreement are provided in a Current Report on Form 8-K filed on January 30, 2024.
“Now within two months of a major milestone, the potential U.S. approval of vadadustat, we are pleased to have further strengthened our balance sheet with the immediate addition of a $37.0 million loan facility on very competitive terms with an excellent partner in BlackRock,” said John P. Butler, Chief Executive Officer of Akebia. “The loan from BlackRock-managed funds and accounts enables our team to use capital more strategically as we prepare to launch a potential new medication for patients on dialysis with anemia. We also deeply appreciate Pharmakon, a tremendous partner for more than four years. The ongoing support from Pharmakon has contributed meaningfully to our ability to fund operations as we worked through the regulatory process for vadadustat globally. We are now delighted to embark on this new journey with this investment from BlackRock.”
It’s a standard high-cost term loan. According to the 8-K the interest rate is the one-month Secured Overnight Financing Rate (“SOFR”) (subject to a floor of 4.25% per annum) plus a margin of 6.75% per annum (subject to an overall cap of 15.00% per annum on the all-in interest rate). They have to get vadadustat approval by June 30. Looks OK to me.
MM or anyone else. Does NVTA have any chance of getting over a $1.00 without a Reverse Split?
It’s all about there earnings Doyle,with 23 percent of the float being shorted,if the earnings are above the estimates then there is a great possibility of the stock popping,if not who knows,have a nice day,at least there hasn’t been any selling from the major holders so that’s a plus so one should assume
Analysts are expecting a 28-cent loss for the December quarter and guidance for a 25-cent loss for March. Invitae has beaten the earnings estimate for the last four quarters.
Earnings History 12/30/2022 3/30/2023 6/29/2023 9/29/2023
EPS Est .-0.53 -0.39 -0.37 -0.32
EPS Actual -0.34 -0.37 -0.30 -0.10
Difference +0.19 +0.02 +0.07 +0.22
Surprise % 35.80% 5.10% 18.90% 68.80%
But for this company nvta mm,the recent earnings beats haven’t meant much of anything as you can tell with the share price,something magical needs to happen,I haven’t seen anywhere on the earnings date,have you
The share price for nvta..40 cents is sickening for what has happened here,MM
You’re correct that if earnings were the metric driving NVTA’s share price then the stock price would have been trending up rather than down the past 6 months or so (MM’s numbers came from Yahoo Finance, under the Analysis heading link).
The primary NVTA share price drivers appear to be negative to low growth sales (depending on whether one looks at all revenue or just the revenue for ongoing operations), huge cash burn & a very ugly Balance Sheet. In combination, these add up to essentially an ongoing concern issue. While NVTA has made a few recent announcements regarding cost reduction moves there was no mention of the associated revenue impacts of those actions. Regarding cash, they began 2023 with $557M and likely ended the year below $200M which means the market will become increasingly focused in 2024 on what actions NVTA will take to raise additional cash.
I don’t see any meaningful change in the stock price prior to the Q4 earnings call when investors will get the latest guidance regarding sales, cash/cash flow, and the need for additional financing.
NVTA’s share price non-compliance notice was dated 9/20/23 so they only have until 3/20/24 to regain compliance, which I don’t see happening. However, they may ask for a 180 day extension, although I don’t think that extension will help them because as the year goes on the headwinds from a dwindling cash position will be increasingly hard to overcome.
Plus,the other issue killing nvta is how high the Short interest is,they are driving it lower for a reason?it’s a fu..cking joke,the joke is on all of us here,for who believed
.
We will see it at 4.00 because the reverse split is coming
I think it’s more a situation that many investors familiar with NVTA recognize the rather dire financial quagmire the company has gotten itself into and don’t see how they can materially improve their situation without first inflicting additional share price pain.
NVTA is likely to need to raise a significant amount of additional capital, which is more dilution and a lower stock price. There is also doubt they’ve taken sufficient measures to reduce costs to the point that’s needed to get cash burn close to zero, which is tough to do without also negatively impacting revenue.
As a result, many think the most likely near-term stock direction continues to be down and are placing their bets accordingly.
MM, Do you think they’ll ask for the 180 day extension? If so, they would bring them to mid September.(if I’m correct) Is that going to be enough time to get the price over $1?
Yes and yes.
No date announced yet. Last year wa February 28.
Chris, on ACXP, the past 2 days of plunge is ominous. I got filled yesterday with more shares at $3.50. The latest PR said that all 5 out of 5 patients getting Ibeza had no recurrence of CDI after 3 months. The negative is that only 5 patients out of 16 agreed to monitoring for 3 months. They will definitely proceed to phase 3, but where is the partner to fund this? ACXP has only $7 million in cash. Going it alone for phase 3 would take forever. Luci claimed he knows the name of the partner who he has spoken to already. Is he to be believed?
ACXP has wen’t down for 5 days. I wonder if something has changed.A private company in England has a drug called MGB-BP-3 that is a promising treatment for CDI. It seems very similar to acurx drug.There starting phase 3. This could be the reason for the slide.
Don’t why i put a hyphen on went. I believe Luci Don’t think he’s a liar but maybe a little over zealous.
Thanks for your input. What’s the name of the private company with the competitive drug? Worst case for ACXP–the market for better CDI treatment is large with plenty of room for both drugs.
Chris?
Name of Company is MGB Biopharma. I just don’t understand the price drop. It was trading over 5 2 weeks ago. Sentiment has changed dramatically. Insider ownership is 17 percent. Luci has over a million shares, so he has skin in the game.I realize it’s spec so it can go viral to the up and down side. Just trying to make since of it. Would love to here Chris’s take.
I searched MGB-BP-3 and found a few PR’s and scholarly articles on the drug. The latest story was 1/30/24, coinciding with the start of the plunge in ACXP stock. Discussions are with the FDA on MGB’s design of phase 3 for 900 patients. Sales are projected to start 2028. That means phase 3 will take a few years, just as with ACXP. Who will be on the market first?
The MGB drug is selective for gram positive bacteria like C diff, like ACXP’s Ibexa. MGB interacts with the DNA of a diverse population of bacteria, but doesn’t kill the gram negatives. MGB’s effectiveness is based on rapid killing. They don’t mention the effect on the microbiome, whereas Ibexa’s advantage is no effect or even an improvement in the microbiome after treatment. I suspect Ibexa is a better drug because of this, but of course we won’t know until both companies do phase 3.
I don’t know how MGB will fund its phase 3, and that is my similar concern about ACXP. Will Luci get a partner to fund ACXP’s phase 3? There was a 9:30 PM TV newscast tonight with Luci, which probably is ending as I write this.
Chris?
Thank you for responding It does sound very similar to ACXP. It was the only thing I could come up with the reason for the price drop.Would big pharma buy if they had to share with another company? If it keeps going ACXP will be in the 2’s next week.
SCYX is getting some love today. While the Nasdaq was down 345.88 points, SCYX was up to $2.06. I bought 2645 shares on 1/23 @ 1.90. Today I was up $647.64. Just my opinion.
I don’t know where the positive earnings of SCYX are coming from. For VVC, the only approved indication so far, GSK gets the lion’s share of revenue. Only until the manufacturing problem is corrected will SCYX make any progress. MM estimates it will be by June 30.
MM, analysis of their revenue and very attractive P/E? Thanks.
MM Apple beat the numbers but still crashed after hours Is it time to buy the stock?
No. Only down 3%.
A stock is overvalued when it falls after good news. A stock is undervalued when it rises after neutral or negative news.
MM Apple beat the numbers Do we buy the stock its down after hours?
New World Investor for 2.1.24 is posted. New email delivery rules from Google and others go into effect today. If you didn’t get the usual email saying this issue is posted, that’s why. I’ve wasted hours working to comply with their constantly changing rules, despite never in the history of NWI sending a single spam message. I thank you for your understanding and I will get this fixed.
Got the email today 2.2.24 at 5:15PM EST….so a day late so many of the prices are out of whack…especially META! 🙂 A Good Out of Whack Up 20% or so…