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Dear New World Investor:
None of our stocks reported earnings this week and there hasn’t been a lot of news, so I thought I’d have a discussion with you about the direction I’d like to take New World Investor. I still think we are entering a 15-year upcycle that will transform our country and the world, with many opportunities to invest and build wealth. I spent much of the holiday weekend thinking about how my investment career and skill set should match that opportunity.
First, let’s talk about biotech. I’ve been studying biotechnology for over 25 years and, until recently, I’ve always been pretty good at identifying companies with a drug that can get FDA approval. I like reading clinical trial results and thinking about trial design issues and the like. I focused on important programs that could change the way medicine is practiced. When those companies were out of favor with Wall Street and the stocks were cheap, the risk/reward looked very attractive and I recommended them.
What I’ve not been good at is selling them after they get approval, whether they just doubled or tripled, or really shot up, like Dendreon. So some years ago I thought if I applied my stock-picking skills to a group of early-stage biotechs and then changed my sell discipline, we could cash in on the ongoing biotech revolution.
But it’s been increasingly difficult to pick biotech stocks for three reasons. First, for some reason drugs that seemed very approvable after Phase 1 or 2 results have been failing in later trials. That might be because companies are targeting very narrow niches and rare diseases, thinking it will be easier to get approval.
Second, the FDA has become increasingly unpredictable and erratic, especially when a new drug threatens a Big Pharma drug. The revolving door problem of FDA reviewers leaving the Agency to take a cushy job at Big Pharma started decades ago, but it seems to have gotten way worse since 2000.
Third, the FDA just seems overwhelmed with their workload, and issuing a Complete Response Letter is a way to postpone a decision.
Here’s the biotech report card so far:
AGNPF Algernon Pharmaceuticals was recommended because they had an unusual way to inexpensively create value with a drug: Take an already-approved drug (therefore no safety issues), repurpose it, do a Phase 2 trial to demonstrate efficacy, and license it. All the data says ifenprodil will be effective against chronic cough.
But I didn’t give enough weight to two factors: they have almost no money, so even bootstrapping drug development is difficult, and the payoff isn’t big enough. Ifenprodil is not going to change the way medicine is practiced. I think it will work, but then they have to license it and the payoff probably wasn’t worth the risk inherent in any biotech, much less ones that had to run a clinical trial during the pandemic. Meanwhile, a reverse split looms (bad) offset by a Nasdaq uplisting (good). So it’s a reasonable hold. My Mistake: Recommending a drug too early that won’t have a dramatic effect.
AKBA Akebia Biotherapeutics was recommended when it was Keryx, before the merger. I thought Keryx’ Auryxia was a much better drug than calcium binders to reduce phosphate levels in dialysis patients with chronic kidney disease, and it is. But it’s taking much longer to gain significant market share than I expected.
When Akebia acquired Keryx I looked at vadadustat and realized it is a way better drug than Amgen’s Aranesp (darbepoetin). Its approval in Japan, which is even more focused on safety than our FDA, just convinced me to stay the course. I understand subscriber JGMD’s concern about the imbalance in the Phase 3 cardiovascular data between the drug and control groups, but I thought that would not cause the FDA to turn them down.
So I was surprised when they got the devastating Complete Response Letter at the end of March. We won’t know until the forthcoming meeting what the reason was, but I fear the real reason was that Akebia was trying to knock off Aranesp. There is an insidious revolving door between the FDA and the industry it regulates. It must be very tempting to do a solid for Amgen in the expectation of a cushy job offer in a year or two. My Mistake: Maybe misreading the safety data, maybe not paying enough attention to the threat to a Big Pharma. We’ll know more after the meeting.
ATRS Antares Pharma was recommended because they have a platform technology – autoinjectors – that can be applied to improve or prolong the life of numerous products. I thought they would just keep growing and growing as they layered in one product after another, and they have. The Pfizer product announcement coming later this year will be the newest and biggest success story, but we won’t enjoy it because Halozyme Therapeutics (HALO) bought Antares out on May 24.
My Mistakes: First, misjudging how long it would take them to get to critical mass; and, second, that management would sell out too soon.
APTO Aptose Biosciences had APTO-253, a drug that causes apoptosis (cell death) in any cancer cell, plus a CEO who is a great drug developer. I recommended it even before the Phase 1 trial was done, and in that trial it became obvious that the animal efficacy data didn’t translate to humans. OK, but the CEO made what appeared to be a great in-licensing deal of CG-806 and put it into a Phase 1 trial. So I stuck with the stock.
CG-806 did very well as they escalated doses but then ran into a similar problem – they can’t get enough drug to the patients. OK, but he then in-licensed another oncology drug that already is in human trials, HM43239, for the same indication as CG-806. So at this point they’ve given up on APTO-253 and are trying to partner it, they are reformulating CG-806 (see below), and they are focused on HM43239. The saving grace here is that the CEO knows when to pivot to keep the company alive. My Mistake: I focused on the goal – curing cancer – instead of the stats on the drug. I should have waited for Phase 1/2 results. Staying in APTO is a bet on Bill Rice. I still think that’s a good bet, but I’d rather bet on the developer and the drug.
ARTH Arch Therapeutics has been the biggest disappointment of my career. I realized very early this was a technology that would change the way medicine was practiced and that they could get FDA approval on a shoestring. They did, even though the FDA slowed them down (unnecessarily) for a year, their European manufacturer screwed up the EMA filing (another wasted year), and Norchi changed manufacturers (yet another year, and his fault).
They spent 2020 seeding Key Opinion Leaders with free AC5 to develop a buzz and elicit a takeover bid. That didn’t work, so after final marketing approval in March 2021 they’ve been trying to get some market traction inexpensively through the VA, where they don’t have a payer problem, but to no avail. So, as I wrote two weeks ago: “My guess is that CEO Terry Norchi is about to decide – or has already decided – that his gamble in leaving a million dollar a year job at Putnam to start Arch 10 years ago has failed. His equity position has been diluted by more than 50% and Arch finished the quarter with only $54,405 in cash and over $1.2 million in accounts payable. They probably are funding the company with At-The-Market stock sales. He should be able to get $1 to $2 a share for the 300 million shares of stock outstanding from either Johnson & Johnson or Baxter, whichever one wants to dominate the high-end wound care market. So I am with great sadness moving ARTH to a Hold for a buyout.” My Mistake: Thinking that if Norchi got approval for a much better mousetrap, the world would beat a path to his door. Nope. And there was no viable Plan B.
BIOC Biocept was recommended because they have the best liquid biopsy technology and now the only one that works on cerebrospinal fluid. But the company would have died if they hadn’t started testing for COVID-19 infections. That pivot was very well executed, and we’d still be in the stock except that they appointed a Chief Compliance Officer and then a few weeks later fired both the CEO and the CFO. I don’t know what happened, but I do know we don’t want to own the stock when the world finds out what happened, so I recommended sale. My Mistake: Thinking having the best technology in a very crowded space would make a difference. Their financial management was weak and almost killed the company.
BLPH Bellerophon Therapeutics I recommended because it was a spin-out from Ikaria that simply has to put Ikaria’s hospital-based nitric oxide treatment into a portable device that can get FDA approval. It has low fundamental risk with a potentially high reward. Payers and doctors would love to see hospitalized patients sent home. Mallinckrodt, which bought Ikaria, probably will buy Bellerophon, too. My Mistake: I think Bellerophon will be a winner, but I recommended it too early.
CWBR CohBar is another case of great, transformative technology that I recommended before there were Phase 1 results. Although the company persists in saying the CB4211 Phase 1 trial was a success, that is only partially true. Now they are trying to partner that drug and move another drug into Phase 1, with the stock way under $1 and a reverse split inevitable. I still think mitochondria DNA is a gigantic opportunity and their patent position is superb, but My Mistake – again – was recommending it too early, before there were strong clinical results.
CMPS Compass Pathways is pioneering psilocybin therapy for treatment-resistant depression. It’s a very big market and I think their approach of combing a drug with therapy/support will be successful. They are a driven management team. My Mistake, if there is one, is again recommending the stock too early. The first trial succeeded, yet we could have bought the stock cheaper after having the data than when I took the unnecessary risk of recommending it before the data. In part, this is due to the biotech bear market, but the truth is there usually are opportunities to buy biotech stocks at a discount even after a successful trial but before FDA approval.
GRPH Graphite Bio is a good example of that. I have no doubt their second-generation gene repair technology is far ahead of others and the sickle cell trial will succeed. But I could have waited until the results were imminent or even published to recommend the stock. It’s going to be a huge winner, but My Mistake was recommending it too early.
INO Inovio was not recommended for its vaccine. I recommended it before the pandemic because it has a powerful antiviral and vaccine technology platform with numerous successful clinical trials. When the stock took off in the vaccine enthusiasm, My Mistake was not recommending sale. As soon as Trump appointed a Moderna director to run Operation Warp Speed, I worried that he would find a way for Moderna to win and everyone else to lose. As he did. JNJ and Pfizer were too big to block, and Astra Zeneca imploded, but Novavax, Inovio, and many other small companies somehow never made it to the finish line.
So the MNRA “vaccines” that don’t prevent infection because they don’t elicit a long-lasting T-cell response (but don’t call them “drugs” because patients can’t sue for injury from a vaccine, but they can from a drug) are approved. But as the World Health Organization has figured out, INO-4800 can be given as a booster after any of the other “vaccines” and actually stops infections, without the ridiculously low temperature requirements.
NVTA Invitae is my favorite biotech recommendation right now. I understand subscriber JGMD’s position that doctors don’t use much genetic information today. But I see Invitae’s 60+ pharma partners developing precision drugs for particular genetic profiles, and believe we will see a tsunami of approvals over the next few years.
Wall Street, led by Ophir Gottlieb of Capital Market Laboratories, sold the stock because management’s strategy was rapid revenue growth to get market share while running losses that had to be funded by stock offerings. Now that management has decided to cut costs and focus on the bottom line, they still hate the stock. That’s a great opportunity. Honestly, I don’t see My Mistake here. I think Gottlieb was wrong about the prior strategy – the best way to become the Amazon of genetic testing is to have the most tests at the lowest price delivered in a way that helps the most doctors. The new strategy has a risk of Invitae ending up with one or two powerful competitors, but we’ll still make a bundle on the stock. I’ve been buying it from $14 all the way down.
MDNA Medicenna is another “Great Technology–Too Early” story. My Mistake: I should have waited until they found a partner for MDNA55, which looks like an excellent brain cancer drug. MDNA11 is a truly superior interleukin-2 drug and we will get clinical updates throughout this year.
SCYX ScyNexis was recommended because they have the first new antifungal in over 20 years and the only one that actually kills the fungus instead of just stopping it from getting worse. There are many use cases for the ibrexafungerp technology and over time ScyNexis can grow into a big company. As subscriber RGMD points out, Brexafemme sales are not strong (although they are growing). It will take the recurrent vulvovaginal candidiasis approval later this year followed by the hospital approvals in 2024 and thereafter to turn this into a big winner. My Mistake: Aside from recommending SCYX into a biotech bear market, I’m happy so far.
TGTX TG Therapeutics was recommended for their multiple sclerosis program, which was as successful as I expected and will get approval this year. The FDA just pushed their PDUFA date from September 28 to December 28 “to allow time to review a submission provided by the Company in response to an FDA information request, which the FDA deemed a major amendment. The submission comprised an integration and summary of certain clinical information that was previously provided to the FDA by the Company.”
CEO Michael Weiss said: “While we are disappointed with the extension of our PDUFA goal date for ublituximab, a delay of this duration is not unprecedented, with both of the currently marketed CD20s in MS experiencing a similar 3-month PDUFA extension prior to approval. As we were targeting a launch for late this year or early next, we do not believe this will impact our overall launch plans for ublituximab in RMS.”
I think we’re OK here. My Mistake was not selling the stock when it ran up after their cancer drug approvals, which I had little interest in. But I didn’t want to miss the MS drug impact and was afraid it wouldn’t come back down far enough to give us a graceful re-entry point. Wrong.
I’ve gone through this at length – thank you for your patience! – because I think I’m not going to recommend any more development-stage biotechs until they have lots of clinical trial results (like Inovio) and are selling for peanuts (like Inovio). I’m also going to sell any recommendation that meets those criteria after they get approval. We may even buy some back if they have a strong launch and get cheap again.
The other force driving this pivot is the current bear market in tech. I see lots of potentially great recommendations that are 80%+ off their highs. Peloton (PTON), no. But Palantir (PLTR)? Snap (SNAP)? Roku (ROKU)? It’s a target-rich environment we haven’t seen for a long time. I like buying good, big tech companies at temporarily depressed prices – Apple at $27.25, Corning at $28.89, Meta at $159.34. Perhaps it’s time for Intel (INTC) again. You should expect a lot more tech recommendations going forward.
I am interested in your comments on this change in direction.
Market Outlook
On May 23, JP Morgan Chase CEO Jamie Dimon said: “Credit looks really good, we’ve never seen it this good.”
Yesterday, Jamie Dimon said: “Brace for an economic hurricane. Everyone thinks the Fed can handle this. That hurricane is right out there coming our way.” Somebody had a bad week!
And the stock market tanked for a few hours, then roared right back today. It’s obvious to everyone – well, excluding the Fed – that the economy and inflation are slowing rapidly. The April increase in the Fed’s favorite measure of inflation, the personal consumption price index, was the smallest since November 2020. The year-over-year increase slowed to 6.3% in April from a 40-year high of 6.6% in March and was the first decline in a year and a half. The core rate that excludes food and energy was 4.9%.
The Fed staff now is projecting 4.3% in 2022, 2.5% in 2023, and 2.1% in 2024 “as supply-demand imbalances in the economy are reduced by slowing aggregate demand and an anticipated easing of supply constraints.”
Meanwhile, the revised March quarter real GDP showed a contraction of 1.5% compared with the expectation for a 1.3% decline and the advance reading of a 1.4% drop. When you consider the original estimate was for a 1% gain, the revision is even worse.
The Atlanta Fed’s June quarter GDP forecast fell to +1.3% on weakness in both real personal consumption expenditures growth and real gross private domestic investment. We aren’t looking at the “two down quarters = recession” scenario yet, but it’s getting uncomfortable.
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The bear market rally – or OMG is it a new bull market? – rolls on. The S&P 500 added 2.9% since last Thursday and now is down only 12.4% year-to-date. The Nasdaq Composite gained 4.9% but is down 21.3% for the year. The small-cap Russell 2000 booked a 3.2% gain and is down 15.5% in 2022.
Sentiment still is very negative. The BofA Bull and Bear Indicator hit 0.6, one of the lowest prints on record.
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The fractal dimension [4] downtrend has stopped for now and will quickly return to consolidation mode if the rally continues. As I wrote last week, a recovery to the 4195 area would just be a 38.2% retracement of the decline from the all-time high – we need to see more than that to believe the downturn is over, even if the lows are in.
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Top 5
Changes this week: Long-Term, replaced ARTH and CWBR with RKLB and VLD
Near-Term – chronological order
OIL iPath Pure Beta Crude Oil Exchange-Traded Note – crude should rise quickly
GBTC Grayscale Bitcoin Trust – Bitcoin is coming out of one of its periodic sharp drops
FB (META after 6/8) Meta – Bounce from overdone selloff
VLD Velo3D – Rapid revenue growth; low market cap
Long-Term – alphabetical order
GRPH Graphic Bio – second-generation genetic editing
NVTA Invitae – the winner-take-most of genetic testing
FB Meta – a leader in the metaverse
RKLB Rocket Lab – #2 to SpaceX in space
VLD Velo3D – Return manufacturing to the US
Virus Update
Worldometers [6] now shows 533,812,361 worldwide confirmed infections, of which 511,060,059 have run their course. Of those, 504,743,489 recovered and 6,316,570 died – matching last week’s new low case fatality rate of 1.2%
In the US [7], there have been 86,172,391 confirmed infections, of which 83,350,869 have run their course. Of those, 82,318,399 recovered and 1,032,470 died – the sixth week in a row at the all-time low case fatality rate of 1.2%.
The moving average case fatality rate [8], measuring recent outcomes, is back to the all-time low at 0.29%.
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Still a lot of people in the hospital, though.
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But daily deaths continue to fall and hit 203 yesterday.
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Coming Events
All times below are ET, and most of the presentations and slides are archived on the companies’ websites so you can listen to them.
Friday, June 3
May payrolls report – 8:30am – +325,000 expected. Market probably rallies on a shortfall (easier Fed) or falls on a beat (tougher Fed)
Monday, June 6
AAPL – Apple – 1:00pm – Worldwide Developer’s Conference
VLD – Velo3D – 1:40pm – William Blair Growth Stock Conference
INO – Inovio – 1:42pm – American Society of Clinical Oncology meeting
Tuesday, June 7
NVTA – Invitae – 9:40am – William Blair Growth Stock Conference
VLD – Velo3D – 1:15pm – Stifel Cross Sector Insight Conference
Wednesday, June 8
GILD – Gilead – 11:00am – Jefferies Healthcare Conference
INO – Inovio – 1:00pm – Jefferies Healthcare Conference
GRPH – Graphite Bio – 4:00pm – Jefferies Healthcare Conference
VLD – Velo3D – 4:00pm – Annual meeting
Thursday, June 9
GRPH – Graphite Bio – Through 6/12 – European Hematology Association
Short Interest – After the close
Friday, June 10
Consumer Price Index – 8:30am – +8.2% expected; core CPI +5.9% expected. Market probably rallies on lower numbers (easier Fed) or falls on higher (tougher Fed)
APTO – Aptose – 5:30pm – European Hematology Association presentations
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 12 speculative biotechs might be a good way to start.
The market capitalizations of these recommendations typically are very low. At the same time, Initial Public Offering valuations have moved very high. We are seeing $750 million to $900 million valuations for a good preclinical/Phase 1 IPO, and even $300 million to $500 million for mediocre Phase 1s. I don’t see how investors make 5x to 10x in a reasonable, three- to four-year period. How many biotechs have moved north of $10 billion within 5 years after pricing an IPO in the $700 million to $900 million range? Hardly any. 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 much better 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 – $1.01 [12]) held their Key Opinion Leader event this afternoon (ZOOM HERE [13]) as a preview of the European Hematology Association presentations coming on June 10. I was most interested in the new third generation (G3) formulation of lux, which has been administered to the first patients.
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The initial data looks good. A much smaller dose of G3, 50 milligrams, produces almost as much plasma concentration as 900 milligrams of the G1 formulation. Because lux is remarkably side-effect free, they should be able to substantially increase the G3 dose and produce much higher plasma concentration and beneficial effects than G1.
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Their next steps are to evaluate higher doses and multiple doses. Wall Street won’t like this cautious approach, but I’d rather get an approvable drug than see them try a Hail Mary pass and lose the company. APTO is a Buy under $4 for a $45 target in a buyout.
Primary Risk: Either drug fails in clinical trials.
Clinical stage of lead product: Phase 1a
Probable time of first FDA approval: 2025
Probable time of next financing: late 2022 or early 2023
Inovio (INO – $1.80 [16]) announced a successful Phase 1/2 trial of INO-5401 and INO-9012 in combination with the PD-1 inhibitor Libtayo (cemiplimab) in the treatment of newly diagnosed glioblastoma (brain cancer), including encouraging median overall survival data. The data will be presented at the big American Society of Clinical Oncology meeting on Monday. INO is a Buy under $21 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: 2022
Probable time of next financing: Not needed
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 – $151.21 [17]) is rumored to have asked suppliers to assemble about 220 million iPhones this year, flat with 2021 and lower than the ~240 million Wall Street expects. I view this as management being conservative so they don’t get stuck with too much inventory before the major update to the iPhone 14 expected in September. AAPL is a Buy under $150 for new iPhone rollouts and augmented/virtual reality products.
Meta Platforms (FB – $198.86 [18]) will change its symbol to META next Thursday, June 9. Chief Operating Officer Sheryl Sandberg is resigning after 14 years. I think that’s a neutral to good thing, although I really want to see someone very competent replace her. FB is a Buy under $320 for a $400 target in 2022 or 2023.
SoftBank (SFTBY – $20.77 [19]) had its credit outlook cut to “negative” from “stable” on Tuesday by ratings agency Moody’s Japan, which cited a decline in the value of its portfolio and estimated the tech investor’s leverage had risen. That did not sit well [20] with Masa, who wrote: Softbank “has neither provided any information to Moody’s nor has received any requests for information or inquiries from the company for more than two years since we withdrew our request for a rating on March 25, 2020. Moody’s opinion is therefore based on their subjective assumptions and hypotheses with no reasonable basis for support.” Zing! SFTBY is a Buy under $30 for a first target of $60 in the next two years.
Other Tech
PagerDuty (PD – $27.43 [21]) reported March quarter results after the close today and I’ll have a full report next week. It looked good at first glance. Revenues were up 34.3% from last year to $85.4 million, ahead of the $83.0 million consensus estimate. The pro forma loss of four cents a share was half of the eight-cent loss expected. The stock is up about $1 in after-hours trading. PD is a Buy up to $40 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.
Probable time of next financing: None needed
QuickLogic (QUIK – $7.38 [22]) got a new $3.0 million eFPGA contract, its largest ever. These carry very high profit margins and are an important driver of the company’s return to profitability. QUIK is a Buy up to $10 for my $60 target as their sensor hub is widely adopted in smartphones, tablets and wearables.
Primary Risk: New sensor hub competitor emerges.
Probable time of next financing: None needed
Rocket Lab USA (RKLB – $4.92 [23]) will launch the Capstone project to the moon sometime after June 13, marking the first time they’ve gone past low earth orbit projects. I added RKLB to the long-term Top 5.
RKLB is a Buy up to $13 for my $30+ target as low earth orbit satellites and space exploration grow.
Primary Risk: A new competitor emerges.
Probable time of next financing: None needed
Inflation MegaShift
Gold ($1,873.60 [24]) booked its third up week, following four sharply down weeks. This stealth rally just shows as more consolidation on the fractal chart, but that beats a downtrend. There’s still plenty of energy to get to new all-time highs.
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Miners & Related
First Majestic (AG – $9.09 [26]) hit 8.39 grams per tonne of gold over 29.7 meters in step-out drilling at the Jerritt Canyon mine. They also got a Forest Service permit to drill 42,976 acres near Jerritt Canyon, including 500 acres of new roads and up to 1,100 drill pads. They start drilling in July. AG is a Buy under $15 for a $23 next target price as production increases and the price of silver rises.
Primary Risk: Prices of precious metals fall due to US dollar strength.
Sandstorm Gold (SAND – $7.02 [27]) will benefit from mining giant Gold Field’s takeover of Yamana Gold because SAND has a large streaming contract on some of Yamana’s production. 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 [28], Block [29], or Robinhood [30].
Bitcoin (BTC-USD on Yahoo – $30,299.98 [31]) rose the most in two weeks, trading above $30,000 after China said it will ease its COVID-19 curbs.
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Some of the pressure on bitcoin comes from shortsellers targeting the $750 million ProShares Bitcoin Strategy Exchange-Traded Fund (BITO). Short interest as a percentage of shares outstanding is nearly 11%, close to the highest since the fund’s October 2021 inception. Also, the fund’s ratio of open interest in bearish put contracts to call contract open interest has soared since mid-April to all-time highs. This is hot money that will rush to cover when bitcoin starts its inevitable uptrend, adding to the buying pressure.
BTC-USD, ETH-USD, GBTC and ETHE are Strong Buys.
Primary Risk: Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.
International & Other Recommendations
It is important to hold some non-US assets, especially in China. Chinese stocks just had their longest winning run in a year as the virus curbs were eased. Xi Jinping’s war on Chinese tech stocks, which has to be one of the most moronic self-inflicted wounds of all time, should be history. This looks like an excellent time to move a small percentage of your portfolio out of the US.
The EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ – $31.99 [33]) is a Buy under $38 for a $66 target in 12 to 18 months.
Primary Risk: China falls into a recession.
The KraneShares Bosera MSCI China A Share Fund (KBA – $35.04 [34]) can be bought under $34 for a three- to five-year hold.
Primary Risk: China falls into a recession.
The Morgan Stanley China A-Share Closed-End Fund (CAF – $15.38 [35]) sells at a discount to net asset value and is a Buy under $24 for a three- to five-year hold.
Primary Risk: China falls into a recession.
The KraneShares CSI China Internet Exchange-Traded Fund (KWEB – $30.17 [36]) is a steal after Xi’s carnage. KWEB is a buy under $50 for a double over the next three years.
Primary Risk: China falls into a recession.
Acreage Holdings (ACRDF – $1.22 [37]) said the Memorial Day holiday was the Marijuana Weekend in New Jersey. And Rhode Island just became the 19th state to legalize adult-use, with retail sales set to launch December 1. ACRDF is a buy under $4.49 for a hold for the Canopy Growth merger and beyond.
Primary Risk: Canopy Growth does not acquire the company.
Oil – $117.52! (Better release oil from the Strategic Petroleum Reserve…oh, wait…)
Oil dipped briefly on rumors that OPEC was considering letting Russia off the hook for their production deal, which would allow OPEC members to step in and produce more oil. This sanction-free oil theoretically would help reduce supply problems for countries struggling to replace Russian oil.
The trouble with that theory is that while OPEC keeps raising output targets, their monthly compliance rate is terrible. Eight of the biggest OPEC-10 members under-produced their allowed quota in May, and we’re supposed to be spooked by a headline about a potential opening of the floodgates? Really?
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Underproduction means disappointing exports, which now are down for the year to date:
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The European Union plans to ban 90% of Russian crude by the end of 2022 – they are so screwed. In the US, the White House is now asking about restarting refineries closed over the last few years. Sorry, those are costly projects that need to see years of demand to pay off – not anti-fossil fuel actions. Maybe somebody should have thought about that before putting a petulant Scandinavian teenager in charge of global energy policy.
The July 2026 Crude Oil Futures (CLN26.NYM – $53.16 [40]) are a Buy the under $55 for a $200+ target.
The iPath Pure Beta Crude Oil Exchange-Traded Note (OIL – $37.55 [41]) is a Buy under $36 for an $80+ target.
* * * * *
RIP Ronnie Hawkins – “The Hawk”
* * * * *
Your keeping up with the Ukraine War [42] Editor,
Michael Murphy CFA
Founding Editor
New World Investor
All Recommendations
Check out the complete Portfolio page HERE [43].
Buys
These are the stocks everyone needs to own because transformative events are happening over the next year or two, and I expect to hold them long-term.
$20-for-$1
Aptose Biosciences (APTO – $1.01) – Buy under $4, ultimate target $45
Bellerophon Therapeutics (BLPH – $1.06) – Buy under $11, first target $30, then $300
Compass Pathways (CMPS – $8.85) – Buy under $36, hold a long time for a 10x return
Graphite Bio (GRPH – $2.28) – Buy under $26, hold a long time
Inovio (INO – $1.80) – Buy under $21, hold a long time
Invitae (NVTA – $3.56) – Buy under $50, first target $100, then $200+
Medicenna (MDNA – $0.93) – Buy under $4, first target $40, then maybe $80
ScyNexis (SCYX – $2.13) – Buy under $12, target price $27, then $85
Other Biotech
TG Therapeutics (TGTX – $4.10) – Buy under $7, target price $25+
Tech Dominators
Apple Computer (AAPL – $151.21) – Buy under $150 for new iPhones
Corning (GLW – $36.52) – Buy under $33, target price $60
Meta (FB – $198.86) – Buy under $320, target price $400
Gilead Sciences (GILD – $63.46) – Buy under $105, target price $130
SoftBank (SFTBY – $20.77) – Buy under $30, target price $60
Other Tech
First Trust NASDAQ Cybersecurity ETF (CIBR – $43.84) – Buy under $32; 3- to 5-year hold
Fastly (FSLY – $13.01) – Buy under $45; 2- to 5-year hold to $150+
PagerDuty (PD – $27.43) – Buy under $40; 2- to 5-year hold
QuickLogic (QUIK – $7.38) – Buy under $10, target price $60
Liberty Media Acquisition Corporation (LMACA – $9.92) – Buy under $10.50, target price $20 to $30
Rocket Lab (RKLB – $4.92) – Buy under $13, target price $30+
Velo3D (VLD – $2.38) – Buy under $11, target price $50
Inflation
A Short-Sale or REO House – $391,200 – Buy while fixed mortgage rates are low
Bag of Junk Silver – $22.36 – hold through silver bull market
Sprott Gold Miners ETF (SGDM – $29.22) – Buy under $25, target price $50
Sprott Junior Gold Miners ETF (SGDJ – $37.08) – Buy under $39, target price $100
Sprott Physical Gold and Silver Trust (CEF – $17.89) – Buy under $15, target price $30
Global X Silver Miners ETF (SIL – $32.49) – Buy under $30, target price $50
Coeur Mining (CDE – $4.26) – Buy under $10, target price $20
First Majestic Mining (AG – $9.09) – Buy under $15, next target price $23
Paramount Gold Nevada (PZG – $0.55) – Buy under $5, first target price $10
Sandstorm Gold (SAND – $7.02) – Buy under $10, target price $25
Sprott Inc. (SII – $39.90) – Buy under $30, target price $70
Cryptocurrencies
Bitcoin (BTC-USD – $30,299.98) – Buy
Grayscale Bitcoin Trust (GBTC – $19.95) – Buy
Ethereum (ETH-USD – $1,823.68) – Buy
Grayscale Ethereum Trust (ETHE – $12.05) – Buy
International & Other Recommendations
EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ – $31.99) – Buy under $38 for a $66 target in 12 to 18 months
KraneShares Bosera MSCI China A Share Fund (KBA – $35.04) – Buy under $34 for a three- to five-year hold
Morgan Stanley China A-Shares Fund (CAF – $15.38) – Buy under $24 for a three- to five-year hold
KraneShares CSI China Internet ETF (KWEB – $30.17) – Buy under $50 for a double over the next three years
Acreage Holdings (ACRDF – $1.22) – Buy under $4.49 for the Canopy Growth merger
Mongolia Growth Group (MNGGF – $1.35) – Buy under $1.25; long-term hold
Energy
Crude Oil Futures – July 2026 (CLN26.NYM – $53.16) – Buy under $55; $200+ target
iPath Pure Beta Crude Oil Exchange-Traded Note (OIL – $37.55) – Buy under $36; $80+ target
Energy Fuels (UUUU – $6.73) – Buy under $11; $30 target
Holds
These are holds but not sells – yet. They could get moved back to one of the buy categories if their prices drop or outlook improves, or they could become sell recommendations in the future.
Algernon Pharmaceuticals (AGNPF – $4.35) – Hold for chronic cough results
Akebia Biotherapeutics (AKBA – $0.36) – Hold for FDA meeting
Arch Therapeutics (ARTH – $0.05) – Hold for buyout
CohBar (CWBR – $0.20) – Hold for human trials of CB5138-3
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