Radar Report – 5.18.23

Michael Murphy
Uncategorized
2023-05-19
19
May 23

Dear New World Investor:

Many years ago, I learned that one good way to make money in the market is to understand the consensus view and then figure out where it is most likely to be wrong. Not that the consensus is always wrong – it’s usually right but fully priced into the market.

So I was interested in a recent Reuters poll of 116 economists that said a couple of interesting things. First, they said the risk of a US default over the debt ceiling was higher compared to prior stand-offs. That surprised me. The risk of a default in prior stand-offs was 0.0%, and the risk of a default in this one also is 0.0%. The shameful noh play we have to watch over and over is manufactured political drama. Wall Street uses it to shake out some rubes and get a little cheap stock to sell when the debt ceiling is miraculously raised at the last minute, thus funding their kids’ summer camp.

But the other finding was more interesting. Over 60% or 75 of the economists expect the Fed to hold the Fed funds interest rate steady this year despite the expected recession. I think they’re right. But the futures markets are pricing in at least a 50 basis point (0.5 percentage point) cut by the end of 2023.

Fourteen expected the funds rate to be even higher than 5.00%-5.25% at some point this year. Three of them also had a cut penciled in to take it back to the current level. Thirty predicted no hike and at least a 25 basis point cut. I think they’ll be disappointed, although being wrong by 25 basis points probably doesn’t matter much.

I think we’re in for two to four quarters of slightly positive or slightly negative GDP – the shallow recession that frustrates both bears and bulls. It’s not a time for extreme positions. Here’s an outlier waiting to revert with velocity – the combined net short position in 2-year, 5-year, and 10-year treasuries is a record 2.39 million contracts, or $239 billion. As they cover, bond prices go up, yields fall, and stocks rise.

Click for larger graphic h/t @themarketear

If I’m right that the Fed pauses at the June 14 meeting, how did markets historically trade during Fed pauses? As monetary policy uncertainty is reduced, the S&P 500 tends to rally in the first three months after the pause. After that, are we in 2001 or 2007?

Click for larger graphic h/t @MacroAlf

As we know, both institutional money managers and individuals have been negative and underinvested all year. They are worried about the economy and, lately, the health of the US banking system So who is buying stocks? They’re not buying themselves. The answer is: Quant Funds. Quant, or systematic, funds use algorithms to automatically detect trends and ride momentum across different markets. These algorithmically driven hedge funds have been buying stocks at one of the fastest rates in a decade, according to bank trading desks. Quant funds have been piling into US stock markets in response to falling volatility.

These funds move fast and unemotionally. They’re don’t parse through earnings reports or take a view on the stickiness of inflation. They are focused on price trends and momentum. There are several types of systematic strategies, including “volatility control” funds, commodity trading adviser funds, and “risk parity” funds. Their approaches vary, but all three rely on realized versus expected market volatility as critical drivers of where they allocate assets. Nomura estimates that volatility control funds alone have added about $72 billion to US stocks in the past three months. That was a greater flow than in 80% of the three-month periods over the past 10 years.

Deutsche Bank showed overall equities positioning across systematic funds is at its highest level since December 2021, while stock market exposure among active managers is close to a one-year low. The big swings in markets throughout 2022 encouraged systematic funds to reduce their exposure or even bet on further declines, exacerbating last year’s S&P 500’s 19% downturn. But volatility has fallen dramatically this year as fears about US interest rate rises and the health of the global economy have eased. The VIX Fear & Greed Index, which reflects expected stock market swings over the next month, has closed below its long-term average 57 times so far this year, compared with just 23 times in the whole of 2022.

Low exposure to stocks has meant 2/3 of actively managed mutual funds failed to beat their benchmark in the first quarter as portfolio managers were caught off guard by the rally, according to Bank of America. They know they need to catch up.

Market Outlook

The S&P 500 added 1.6% since last Thursday to a new 2023 high as the “pain trade” still is up. The Index is up 9.3% year-to-date. The Nasdaq Composite gained 2.9% as Big Tech continued to lead. It is up 21.2% for the year. The small-cap Russell 2000 climbed 2.3% and is back in the black, up 1.3% in 2023.

The fractal dimension paused on its way to signaling a strong new uptrend. It’s possible it will revert into consolidation mode. But the better bet is is grinds down to and through 55 after the next Fed meeting on June 14.

Top 5

Changes this week: None

Near-Term – chronological order
EQT EQT –natural gas price rebound
OIL iPath Pure Beta Crude Oil Exchange-Traded Note – crude should rise quickly
BLPH Phase 3 results mid-2023
VLD Velo3D – Rapid revenue growth; low market cap

Long-Term – alphabetical order
EQT EQT – largest US natural gas company
NVTA Invitae – the winner-take-most of genetic testing
META Meta – a (the?) leader in the metaverse
RKLB Rocket Lab – #2 to SpaceX in space
VLD Velo3D – Return manufacturing to the US
GBTC Grayscale Bitcoin Trust – Bitcoin is headed for $100,000

Economy

That Reuters poll of 116 economists showed that after March quarter real GDP growth of 1.1%, growth will slow to 0.6% in the June quarter and then contract 0.2% in September and 0.3% in the December period. The Atlanta Fed’s GDPNow model ticked up to +2.9% for the June quarter due to strength in housing starts.

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, May 19
Fed Chairman Powell speech – 11:00am

Tuesday, May 23
GLW – Corning – 9:30am – JPMorgan Global Technology, Media, and Communications Conference
ENVX – Enovix – 10:10am – JPMorgan Global Technology, Media, and Communications Conference
APTO – Aptose – 12:00pm – Annual & Special Shareholders meeting

Wednesday, May 24
Short Interest – After the close

Thursday, May 25
March quarter GDP – 8:30am – Second estimate

Friday, May 26
Personal Consumption Expenditures Index – 8:30am

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 – $175.05) is “well prepared” for the announcement of its mixed reality headset, according to top analyst Ming-Chi Kuo. He wrote that Apple is “highly likely” to announce the headset at the Worldwide Developer Conference starting on June 5.

In a perceptive Twitter post, @SullyOmarr suggested that Apple is the best positioned company in Artificial Intelligence with the potential to shift the entire AI landscape, even though they don’t have a Large Language Model (LLM) offering yet.

Open AI’s GPT3.5 uses 750 gigabytes of video random access memory (VRAM) and eight Nvidia A100 graphic processing units (GPUs) per user interface. GPT4 probably requires at least 80 A100s per user interface. Each A100 is about $10,000.

But a highly optimized and tuned LLM that runs on your iPhone, MacBook, or Mac would need no Internet connection, have no network lag, and be free to run. Apple has two billion active devices worldwide that they could potentially ship an AI assistant to.

Apple probably has a software team dedicated to building an LLM optimized for their devices. Their other problem is hardware. Current locally running LLMs take 30 to 60 seconds to craft a response where ChatGPT does it in three seconds. But the new M2 MacBook with 64 gigabytes is lightening fast even before Apple tweaks it for AI applications. Siri is about to get a MASSIVE upgrade.

And while iOS 17 isn’t even announced yet, today Apple previewed an accessibility feature that allows users at risk of losing their ability to speak to create a voice that sounds like them in 15 minutes. It integrates with FaceTime, phone calls, the metaverse, etc. AAPL is a Buy under $150 for new iPhone rollouts and augmented/virtual reality products.

Gilead Sciences (GILD – $78.21) Chief Medical Officer presented at the RBC Global Healthcare Conference (VIDEO HERE) and (TRANSCRIPT HERE). He said 2024 is going to be a big year for Trodelvy Phase 2 and 3 trial results in many tumor types as they expand the label into earlier treatment for already-approved tumor types and add new types, like lung cancer.

This was a very comprehensive review of their entire product line. He said: “And I’m really excited about the portfolio we’ve built. I think there’s a lot of potential there, and we should start seeing some of those play out. I’m not — I’ll never say that they are going to work. We know how this business goes. But boy, some of the early data we’re seeing and some of the targets we’ve got, I’m really excited about it. I think we’re going to be able to be talking about Phase III trials for those next time I’m here, maybe not next time, maybe in a couple of years.”

Gilead is going to be a Big Pharma powerhouse and we are in early. GILD is a Long-Term Buy under $80 for a first target of $120.

Meta Platforms (META – $246.85) VP & Head of Infrastructure published a blog post: Reimagining Our Infrastructure for the AI Age. He said Meta’s artificial intelligence compute needs will grow dramatically over the next decade as they break new ground in AI research, ship more cutting-edge AI applications and experiences across the family of apps, and build their long-term vision of the metaverse.

Their next generation of their infrastructure backbone — specifically built for AI – includes a first generation custom silicon chip for running AI models, a new AI-optimized data center design, and the second phase of their 16,000 GPU supercomputer for AI research. They just hired a 10-person Norwegian team that had been working on building artificial intelligence networking technology at British chip unicorn Graphcore, an erstwhile Nvidia competitor.

Speaking at the 2023 Sohn Investment Conference for charity, no less than OpenAI CEO Sam Altman said that he thinks Meta Platforms could be a “surprising” new real player in artificial intelligence. Ya’ think? So does this SeekingAlpha author. META is a Buy under $150 for a $400 target in 2024.

The SoftBank (SFTBY – $18.83) earnings call transcript (HERE) had an interesting insight I missed on the call. Management said the Vision Funds hold some late-stage portfolio companies that are ready for an Initial Public Offering with an approximate current valuation of $37 billion. That is a lot of future cash flow to pay down some debt (not the 77% that is fixed-rate), raise the dividend, and buy back stock. SFTBY is a Buy under $25 for a first target of $50 in the next two years.

Small Tech

Enovix (ENVX – $12.08) presents next Tuesday morning at the big J.P. Morgan Global Technology, Media and Communications Conference. They may update us on when a firm order is likely. ENVX is a Buy up to $13 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.

QuickLogic (QUIK – $5.82) reported a mostly in-line March quarter. Revenues were up 0.7% from last year to $4.13 million, just short of the $4.39 million estimate. The pro forma loss of four cents a share was better than the six-cent loss estimate.

On the conference call (TRANSCRIPT HERE), management said they’ve increased their sales funnel to $125 million. “Conversion of opportunities in our sales funnel should start to accelerate in the third and fourth quarters, providing upside to our sales growth estimate of 30%. This continued growth would put us on track to report positive non-GAAP operating income in both the third and fourth quarters and for the full year.”

QUIK is a Buy up to $10 for my $40 target as their sensor hub is widely adopted in smartphones, tablets and wearables.
Primary Risk: New sensor hub competitor emerges.

Rocket Lab USA (RKLB – $4.65) is targeting May 22 for the second TROPICS launch for NASA. This one goes from New Zealand. 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.

After your biotech gets its drug approved, you have a 10% to 15% probability of it getting acquired if it hasn’t been scooped up already.

Click for larger graphic

Aptose Biosciences (APTO – $0.48) presented at the RBC Global Healthcare Conference (AUDIO HERE). It was the standard review with no new information on how the trials are enrolling, but that’s coming soon at the European Hematology Association presentations June 8 – 15. APTO is a Buy under $2.50 for a $30 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: Mid- to late-2023

Arch Therapeutics (ARTH – $3.00) said their March quarter 10-Q filing could be up to five days late, which means by June 7. ARTH is a Hold for a buyout.
Primary Risk: AC5 fails to sell or the internal trial fails.
   Clinical stage of lead product: External approved. Internal trial 2023
   Probable time of first FDA approval: External done. Internal 2024
   Probable time of next financing: March or June 2023 quarter

Bellerophon Therapeutics (BLPH – $9.46) reported a March quarter profit of $2.8 million or 27¢ per share, thanks to the $5.6 million licensing agreement with Baylor Biosciences.

The CEO said: “We are pleased with the progress we have made to date in 2023, highlighted by the completion of the blinded treatment phase of our ongoing pivotal Phase 3 REBUILD trial [in fibrotic interstitial lung disease]. We expect to report top-line results from the study in the middle of this year, a critical milestone for the Company. Importantly, following the recent license agreement with Baylor Bioscience and having successfully completed a $5 million equity financing, we are well-capitalized through this critical milestone.”

INOpulse will be the first therapy to treat a broad fILD population, including patients at low-, intermediate- and high-risk pulmonary hypertension.

They finished the quarter with $15,2 million in cash. Buy BLPH under $5 for a $30 first target and $100 someday.
Primary Risk: The Phase 2b PH-ILD trial fails or the FDA turns down the INOpulse.
   Clinical stage of lead product: Phase 2 transitioning to Phase 3 in the March quarter
   Probable time of first FDA approval: 2024
   Probable time of next financing: September 2023 quarter

Inovio (INO – $0.65) presented at the RBC Global Healthcare Conference (TRANSCRIPT HERE) and held their annual meeting (WEBINAR HERE). They clearly are prioritizing their most advanced drugs: INO-3107 for recurrent respiratory papillomatosis and VGX-3100 for a number of different HPV-related pre-cancers across cervical dysplasia, anal dysplasia, and vulvar dysplasia. VGX-3100 can be approved in 2024 and INO-3107 in 2025. INO is a Buy under $7 for a very long-term hold.
Primary Risk: Their drugs fail in the clinic.
   Clinical stage of lead product: Phase 3
   Probable time of first FDA approval: 2023
   Probable time of next financing: Mid-2024

Invitae (NVTA – $1.14) lost a patent case in a Federal court in Delaware that found in favor of Natera (NTRA). Invitae has been ordered to pay $19.35 million to Natera, but they are going to appeal. As I said on the Comments, I expect an out-of-court settlement in the $10 million area.

The stock dropped after Piper Sandler maintained an Underperform rating but cut their price target to $1.50 from $1.75. Raymond James downgraded it from Market Perform to Underperform “…on the grounds of what we view as a challenging path to rectifying a bleak balance sheet situation.”

I get it that there is work to be done, but the new management is slashing the cash burn and restarting top-line growth. Wall Street is too negative. 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: Not needed

ScyNexis (SCYX – $2.87) closed their license agreement with Glaxo SmithKline for Brexafemme, banking $90 million up front and up to $502 million in milestone payments, plus tiered royalties on sales. GSK gets exclusive rights to ibrexafungerp while ScyNexis retains rights to all other assets in its proprietary class of enfumafungin-derived antifungal compounds (“fungerps”), currently in preclinical development. Buy SCYX under $2.50 for a first target price of $20 after ibrexafungerp is approved for hospital use and a buyout at $50.
Primary Risk: Ibrexafungerp fails to sell.
   Clinical stage of lead product: Approved
   Probable time of next FDA approval: 2023/2024
   Probable time of next financing: Never

Inflation MegaShift

Gold ($1,960.20) fell back under $2,000 this week and while it’s possible the fractal dimension head-faked us and is headed back up, the more likely case is the uptrend is just taking a breather and still has room to run. The pressure seemed to be from a rebound in the dollar and Treasury yields, plus profit-taking from the run over $2,000.

Miners & Related

Coeur Mining (CDE – $3.20) presented at the BofA Global Metals, Mining & Steel Conference (SLIDES HERE). It was a high-level backgrounder.


Click for larger graphic

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.

Sandstorm Gold (SAND – $5.22) has so many assets coming into production that their annual gold production is expected to average 110,000 ounces a year for the next 15 years.


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This will lead to record cash flow, even with gold as low as $1,800 an ounce:

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If gold averages $2,200 an ounce, cash flows go up dramatically.

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And they will be debt-free by 2026 or 2027.

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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 – $26,717.35) broke under $28,000 on similar fears that hit gold. It’s very volatile around a very strong multiyear uptrend. Don’t get shaken out. There are halving events coming in 2024, 2028, 2034, and 2036. You want to be in for as many of those as possible.

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 (GBTC- $14.42) closed at a 40.5% discount to the $24.24 value of bitcoin behind each share. Free money. An opinion on their lawsuit against the SEC should come by summer. GBTC is a Buy under net asset value.
Primary Risk: Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.

Commodities

Oil – $72.00

Oil gained only about $1 this week as weaker China and US economic data offset a very positive International Energy Agency demand forecast. The IEA raised its forecast for global oil demand this year by 200,000 barrels per day to a record 102 million bpd. It said China’s recovery after the lifting of COVID-19 curbs has surpassed expectations, with their demand reaching a record 16 million bpd in March. The IEA predicted demand would outpace supply by 2 million bpd in the second half of the year, with China making up 60% of oil demand growth in 2023.

US oil demand continues to trend in the right direction:

Click for larger graphic h/t @HFI_Research

AAA expects the Memorial Day holiday weekend traffic to be the third-highest for auto travel since 2000 and the highest at US airports since 2005. According to Reuters, US refineries aim to run at up to 94% of a total 17.9 million barrels per day processing capacity this quarter, driven in part by expectations of strong seasonal travel demand. Strong demand means higher product prices, with gasoline leading the way.

Click for larger graphic h/t @HFI_Research

Kuppy wrote: “In April, we were drawing roughly 2+ million barrels a day with an expected expansion to roughly 4 million barrels a day as OPEC+ cuts began in May. The question was, why was oil trading so sloppy? The Strategic Petroleum Reserve was selling a few hundred thousand a day, but that wasn’t enough to move the needle.

“A lot of oil traders frantically asked each other – what the hell are we missing? We looked under every rock, and we found a few wrinkles, but not enough to smash the price. Effectively, the only bear thesis was “recession, bro.” Then we started looking at the speculator positioning.

“Over a 3 week period, specs flooded the market with ~10 million barrels a day of paper supply. It was one of the most rapid net position liquidations ever, with a massive buildup of spec shorts. Suddenly, we had our answer. The market was overwhelmed by the supply of paper barrels.”

According to a Reuters story on Monday, hedge funds and other money managers sold the equivalent of 17 million barrels in the six most important futures and options contracts over the seven days ending on May 9. Funds had sold a total of 249 million barrels in the three weeks since April 18, halving their previous holdings.

Kuppy continued: “Maybe the recession bros get it right, but if it doesn’t come soon, they’re going to be in a world of trouble. Spec length is unusually low (6th percentile) and into one of the most telegraphed deficits in history. Meanwhile, production is rolling over at $70/barrel and will miss.

“For every spec short, a commercial goes long. Would you rather drill wells with $80+ breakevens (using actual Estimated Ultimate Recoveries instead of Ponzi math) or buy oil at $70 or less on the strip? I’ve been early here, but look at what we waded through in terms of balances. China shut, Russia purged inventory, SPRs dumped, winter was warm, Iran liquidated the floating cache, and now specs sold a quarter billion barrels of paper. Meanwhile, oil mostly took it like a champ.” – h/t Kuppy

It looks like the SPR drain is over, at least until right before the 2024 election:

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The Biden Administration appears to have forgotten Oil Rule #1 – Don’t Fight The Saudis.

Click for larger graphic h/t @HFI_Research

Next week, Texas auctioneer Kruse Asset Management will put two unused, top-of-the-line drilling rigs under the hammer. “There’s no reason for them to be so cheap, but there’s just no demand,” said CEO Dan Kruse, who has been selling oilfield equipment for 40 years. An oversupply of equipment is a sign that drilling in US shale energy regions is leveling off, as producers respond to lower prices and pressure from Wall Street to direct spare cash to shareholders.

The only way I can explain the slow pace of buying in crude is China’s oil demand is recovering, but they must have had a massive product storage surplus prior to reopening. Either that or crude is headed for the moon. Got OIL?

Click for larger graphic h/t @HFI_Research

The July 2026 Crude Oil Futures (CLN26.NYM – $64.13) are a Buy under $65 for a $200+ target. Only buy futures for all cash; do not use margin.

The iPath Pure Beta Crude Oil Exchange-Traded Note (OIL – $27.91) is a Buy under $36 for an $80+ target.

EQT (EQT – $36.84) rose a bit as natural gas climbed above its 10-day and 50-day moving averages.

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EQT is a buy under $35 for a first target of $70 and a long-term hold for much higher prices.
Primary Risk:Natural gas prices fall.

Energy Fuels (UUUU – $6.04) reported March quarter revenues up 567.0% (not a misprint) from last year to $19.61 million, just ahead of the $19.53 million estimate. GAAP earnings hit 72¢ per share, clobbering the 53¢ estimate. On the conference call (SLIDES HERE and TRANSCRIPT HERE), management said they sold 300,000 pounds of uranium at a gross margin of 58%, 79,344 pounds of vanadium at a gross margin of 37%, and the Alta Mesa property for a capital gain of $116.45 million. They have a broad product line:

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This will be a transformative year:

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At the end of the quarter, Energy Fuels had $43.83 million of cash, $60.44 million of marketable securities, $38.00 million of inventory at cost, and no debt. At current commodity prices, the product inventory has a value of $52.53 million. UUUU is a buy under $8 for a $30 target.
Primary Risk: Uranium prices fall.

Freeport McMoRan (FCX – $35.68) presented at the BofA Global Metals, Mining & Steel Conference (TRANSCRIPT HERE) just as copper prices hit over five-month lows on worries about China’s economy. Bizarre. Marginal fluctuations in demand are unimportant because we’re out of supply. As Jeff Currie, the head of commodities research at Goldman Sachs, said: “This is a molecule crisis. We’re out of everything, I don’t care if it’s oil, gas, coal, copper, aluminum, you name it, we’re out of it,”

At the BofA conference, CEO Richard Adkerson said: “You go back a couple of years ago and people were predicting major surpluses this year. And they’re not occurring. There’s new production coming on. After that new production comes on, the pipeline is pretty bare, though. It’s really bare.

“And this is an industry that you can’t turn a spigot on and get new production quickly. We have very substantial reserves and resources and we know how long it would take us to get them engineered, permitted, structured to go forward.

“So we continue to believe that the market is going to be challenged to meet the growing demands for copper. Everywhere you go, people are now talking about artificial intelligence and electrification. Last year, or before last, we were all talking about climate change investments. However you look at the world today, it’s becoming more electric. Two-thirds of copper or more goes into electricity.”

Freeport has the second-largest copper mine in the world and their net cash costs were negative in the March quarter, -15¢​​ per pound, and are projected to be negative for the year. The byproducts more than cover their mining costs. We can buy the second largest copper mine in the world with a negative cash cost. It’s a great asset to build a company around. FCX is a 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. Ray Dalio wrote a thought-provoking post: What I Think Is Going On with China-US Relations. I don’t think we are really close to war with China, nor do I think they’re about to surpass or somehow overcome the US. I do think they are (still) a huge, developing country that we need to – and will – find ways to work with.

EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ – $29.44) is a Buy under $38 for a $66 target in 12 to 18 months.

KraneShares Bosera MSCI China A Share Fund (KBA – $24.33) is a Buy under $40 for a three- to five-year hold.

Morgan Stanley China A-Share Closed-End Fund (CAF – $13.42) Buy under $18 for a three- to five-year hold.

KraneShares CSI China Internet Exchange-Traded Fund (KWEB – $28.64) is a Buy under $40 for a double over the next three years.
Primary Risk of all 4 of these: China falls into a recession.

* * * * *

RIP Sam Zell

* * * * *

Two Hours and Worth It

* * * * *

Your not worried about the debt ceiling Editor,

Michael Murphy CFA
Founding Editor
New World Investor

All Recommendations

Check out the complete Portfolio page HERE.

Buys
These are the stocks everyone needs to own because transformative events are happening over the next year or two, and I expect to hold them long-term.

Tech Dominators
  Apple Computer (AAPL – $175.05 ) – Buy under $150 for new iPhones
  Corning (GLW – $31.29) – Buy under $33, target price $60
  Gilead Sciences (GILD – $78.21) – Buy under $80, target price $120
  Meta (META – $246.85) – Buy under $250, target price $400
  SoftBank (SFTBY – $18.83) – Buy under $25, target price $50

Other Tech
  Enovix (ENVX – $12.08) – Buy under $13; 4-year hold to $100+
  First Trust NASDAQ Cybersecurity ETF (CIBR – $41.62) – Buy under $40; 3- to 5-year hold
  Fastly (FSLY – $13.24) – Buy under $20; 2- to 5-year hold to $80+
  PagerDuty (PD – $29.39) – Buy under $30; 2- to 5-year hold
  QuickLogic (QUIK – $5.82) – Buy under $10, target price $40
  Rocket Lab (RKLB – $4.65) – Buy under $13, target price $30+
  Velo3D (VLD – $1.75) – Buy under $6, target price $50

$20-for-$1
  Aptose Biosciences (APTO – $0.48) – Buy under $2.50, ultimate target $30
  Bellerophon Therapeutics (BLPH – $9.46) – Buy under $5, first target $30, then $100
  Compass Pathways (CMPS – $8.42) – Buy under $20, hold a long time for a 10x return
  Inovio (INO – $0.65) – Buy under $7, hold a long time
  Invitae (NVTA – $1.14) – Buy under $10, first target $50, then $100+
  Medicenna (MDNA – $0.60) – Buy under $3, first target $20, then maybe $40
  ScyNexis (SCYX – $2.87) – Buy under $2.50, target price $20, then $50

Inflation
  A Short-Sale or REO House – ($447,000) – Hold
  Bag of Junk Silver – ($23.66) – hold through silver bull market
  Sprott Gold Miners ETF (SGDM – $27.72) – Buy under $28, target price $50
  Sprott Junior Gold Miners ETF (SGDJ – $30.92) – Buy under $39, target price $100
  Sprott Physical Gold and Silver Trust (CEF – $18.55) – Buy under $18, target price $30
  Global X Silver Miners ETF (SIL – $27.89) – Buy under $30, target price $50
  Coeur Mining (CDE – $3.20) – Buy under $5, target price $20
  First Majestic Mining (AG – $6.16) – Buy under $11, next target price $23
  Paramount Gold Nevada (PZG – $0.30) – Buy under $1, first target price $10
  Sandstorm Gold (SAND – $5.22) – Buy under $10, target price $25
  Sprott Inc. (SII – $34.07) – Buy under $40, target price $70

Cryptocurrencies
  Bitcoin (BTC-USD – $26,717.35) – Buy
  Grayscale Bitcoin Trust (GBTC – $14.42) – Buy
  Ethereum (ETH-USD – $1,803.06) – Buy
  Grayscale Ethereum Trust (ETHE – $8.37) – Buy

Commodities
  Crude Oil Futures – July 2026 (CLN26.NYM – $64.13) – Buy under $65; $200+ target
  iPath Pure Beta Crude Oil Exchange-Traded Note (OIL – $27.91) – Buy under $36; $80+ target
  EQT (EQT – $36.84) – Buy under $35; $70 first target
  Energy Fuels (UUUU – $6.04) – Buy under $8; $30 target
  Freeport McMoRan (FCX – $35.68) – Buy under $44; $65 target within two years

International & Other Recommendations
  EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ – $29.44) – Buy under $38 for a $66 target in 12 to 18 months
  KraneShares Bosera MSCI China A Share Fund (KBA – $24.33) – Buy under $40 for a three- to five-year hold
  Morgan Stanley China A-Shares Fund (CAF – $13.42) – Buy under $18 for a three- to five-year hold
  KraneShares CSI China Internet ETF (KWEB – $26.84) – Buy under $40 for a double over the next three years
  Acreage Holdings (ACRDF – $0.49) – Buy under $2 for the Canopy Growth merger
  Mongolia Growth Group (MNGGF – $0.88) – 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.
  Akebia Biotherapeutics (AKBA – $1.09) – Hold for FDA decision
  Arch Therapeutics (ARTH – $3.00) – Hold for buyout
  Graphite Bio (GRPH – $2.86) – Hold until they update their strategy
  TG Therapeutics (TGTX – $30.64) – Hold for buyout at $25+

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.

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the debt ceiling ‘crisis’. 0h pLEase ! so much BS from the babbling professional politicians. They have the spine of an octopus, .0.0% is soooooo right. We’ve had 59 of these since 1963, and never a fail to cave to spend more of our money. Look at the VIX to see if Mr. Market cares about Yellen yelling

Oil is selling for $72.00 a barrel. But have you seen any relief at the pump? Hell NO. It’s still $4.69 here. That should tell you volumes about the future of of gas and oil. IMO

Yeah it’s called price gouging.

It’s supply and demand dynamics. If you choke off the supply of anything and the demand stays the same or increases the price always goes up. The average Joe can’t afford a $60, $70, or $80 thousand dollar EV. (With inflation eating up his pay check for higher prices on housing, food and living expenses). So he has NO other options except to pay more for gas because he still has to get to work, to the grocery store, go on vacations etc. And oil companies have no incentives now to drill speculative holes in the ground, spend billions of their capital and years of work for an unclear future in an industry that is being targeted for extinction by none other than the prez.

Your right wing misinformation news site conned you into quoting fake $60-80k prices a brand new electric car. And you don’t bother checking before spreading the lies.

Here’s the MSRP price of the cheaper electric cars available in the USA, assuming you do NOT qualify for any tax incentives.
Nissan Leaf $28,040
Chevy Bolt EUV $27,800
Chevy Bolt EV $26,500
Hyundai Kona Electric $33,550
VW ID.4 $38,995
Kia Niro EV $39,550

Note that $28 to $40k is HALF of your false claim they cost the average Jane $60-$80,000. Subtract up to $10k incentives if you live in certain states, then add in local car dealer price gouging.Then subtract the savings of $1.40 equivalent instead of current average US $3.65 per gallon of gas, which was a dollar more a year ago due due to inflation or disinflation. No oil changes and tuneup cost either, since electric cars don’t need that. On the other hand, the average Republican billionaire can buy a ConGreaseMan to keep the Trump billionaire tax cuts extended, costing the average Joe and Jane only $35 trillion.

Hey John, maybe if gas costs so much in your area, you should consider buying an electric car?

The misinformation on EVs is amazing. You can get a Tesla Model 3 for $39,500 and get a $7500 tax credit. 31k is bargain for the best EV out there.

In 2 years I’ve saved about 2 grand in gas savings and I just did the 2 year maintenance yesterday. I had to replace the cabin filter that cost about 12 bucks.

I wonder if Elon is platforming meatball Ronny as a way to market to the misinformed right. Could he be that crafty?

Trump and DeInsanetis wrestlemania on Twitter might bring back the crowds, and thereby the advertising $$??

Not with that cluster-f performance last night. Didn’t they stress test the servers??

A $30,000 car with a $2500. down payment for 60 months @8,5 percent is $824.20 a month for 60 months. A $20,000 car @5 percent is $377 a month. They DON’T have it. People are using credit cards to pay for necessities because they have debt up their ass in addition to the higher housing, higher food and energy costs. Ford is losing money in its EV division. Living proof that people can’t afford new cars . Electric or otherwise. So they either can’t afford them or they don’t want them.

Michael, you store BTC in a cold wallet, correct? Im looking for a full node BTC wallet, any recommendation? Someone said Bitcoin Core was a good one, whats your opinion?

I use Ledger.

Im a neophyte on this topic, is Ledger a physical hardware wallet you purchase and attach to your computer or is it a virtual wallet?

It’s a physical device that you attach to your computer and accessed by ledger software that you download. There are tons of ledger youtubes out there to show you how to set it up.

I found it pretty simple and it’s impossible to hack.

Does it have the same functionality as hot wallets like Coinbase, Are you able to send and recieve crypto from it to other wallets?

Yep. There is easy to use software that you can send and receive wallet to wallet. I’m finding the best way to but BTC is using Coinbase One where you don’t pay commissions. You can then send that BTC offline to Ledger.

The main point is Ledger is YOURS!. Coinbase own the keys so they own the BTC. Look at FTX and Blockfi.

That being said, Coinbase is a good company IMO and you could just cold wallet on their platform. I got burned with Blockfi so I might be a bit paranoid 🙂

Check out some YouTube vids, it’s less intimidating than it seems.

BLPH 🙁

MM, I see that Ted Wang sold 560K shares yesterday. I realize it’s only part of his position, but if we are expecting news soon, why would he sell now?

Where do you see that?

See attached.

Screen Shot 2023-05-19 at 11.25.31 AM.png

Thanks. Clearly not a good sign.

BLPH
Lean over the porcelain throne when you say that.

Yup, started buying at $8 all the way up to $11

Well I’ve owned it since Jan ’18 so this wonderful revival has brought my loss down to 78.6% (I didn’t have either the cash or the confidence to avg down), but I wasn’t referring to the stock’s recent performance but its pronunciation as a single syllable. (I copied the smiley which appeared when I posted but vanished when I refreshed.) Congratulations on your gain.

No gain. My average price is $9.68

NVTA President Kenneth Knight sold around 45k shares on-market at roughly $1.20/share…MM this doesn’t give me a warm fuzzy about their turnaround any time soon

Is the amount of debt the U.S. has really that important? I contend the Debt/GDP ratio is what really matters. While it should be lower than it currently is, it has fallen in both full years of the Biden presidency. Continued decline of the Debt/GDP ratio should be the goal of these debt limit negotiations.

Kevin McCarthy is so concerned about growing US government debt, that he will not support extending those recent Trump tax cuts for the ultra wealthy donors. You may have forgotten since it was announced on April 1. 😉 Saves $35 trillion.
https://www.budget.senate.gov/chairman/newsroom/press/extending-trump-tax-cuts-would-add-35-trillion-to-the-deficit-according-to-cbo

$35 trillion is a huge sum. Did you mean 3.5 trillion?

Yes $3.5 trillion what the CBO and the Senate Budget Committee article states, but the dot is not in the URL or the April Fools comment… 😉

McCarthy is focused on the smallest budget items that won’t make a dent in the national debt. We need to cut the military in HALF or more.

I’m sure they will come up with some last minute deal but it would be hilarious to see the SS checks stop in June. THAT would really unify the country!

And … down she goes. 9!% loss for me.

88% for me, and once again I didn’t have the cash or conviction to acquire a lower lot to let me cash in on yest’s jump.

10-Q – 05/23/2023 – Arch Therapeutics, Inc. (equisolve.net)
Arch filed the 10-Q; first quarter sales were $16,654. The loss of
$902,477 (.71 per share) was helped by a $1,158,197 gain on extinguishment of derivative liability.
Also, cash on hand @ 12/31/22 of $746,940 drops to $29,495 at 3/31/23.

TGTX – I understand that there was a non-verified rumour yesterday of a buyout at $50. I assume that someone was trying to book profits or get out of a large block. I’m curious if there’s anything to the rumour. I’m an Explosive Options member and have seen a lot of trades around this stock, not a lot recently, but over the past couple months.

Even the current stock price around 27 assumes several more quarters of growth in sales. No big Pharma will make an offer that Mike Weiss will accept until another year goes by.

Y’all may want to have a look at CLCO, It’s similar to another of my favorites, NAT, in that it owns a fleet of ships transporting fuel, a very good business these days and paying a very sweet dividend. Where NAT ships oil, CLCO ships LNG (liquified natural gas). Both businesses have done very well since the Russian oil and gas embargo. CLCO announced earnings yesterday and blew it out of the park. It has a PE of 4.3 and announced a quarterly dividend of 41 cents. At this rate, $1.64 in dividends for this $13.50 stock is a 12.3% yield.

On a more speculative note, SLNO will be announcing Phase 3 results for Prader Willi Syndrome in the next few weeks. If positive, I expect a 5 bagger.

PLTR is on some kind of tear. AMD is the poor man’s NVDA. AI will drive both of these companies to the trillion dollar club.

MM: Thoughts on the proposed merger of Desktop Metal [DM] and Stratasys [SSYS], and the unsolicited tender by Nano Dimension [NNDM] for (some) SSYS shares? Implications for VLD? How vulnerable might VLD be to a buyout offer in the $8-12$ range? Thanks in advance.

Question for you m.m do you feel it’s strange that nvta has not come with anything positive since they said they would appeal the ruling,unbelievable that they really don’t give a crap about the share price or shareholders,guess they want it to hit a dollar,maybe a buyout for about 2.50,any serious thoughts alot of us would like to know,tx

Nevermind in the radar report from 2 18 21,,shares wet 47.52 you stated nvta as being unstoppable in the next 5 years at that point everyone would know about them,24 months later trading at 1.09 it seems like no one cares to know about them,tried to get in touch with company today to know prevail?can you provide a number for investor relations tx,

SMCI and NVDA are blowing the doors off the Wall Street outhouse!

Last edited 1 year ago by Brent