Dear New World Investor:

Last Friday’s announcement that May payrolls increased by 339,000 jobs, far above the 190,000 estimate, marked the 14^th-straight month that job creation came in above what Wall Street economists had expected and the largest monthly increase since January. Wall Street was “shocked” and with the next Fed meeting only a couple of weeks away, the stock market crumbled, right? Wrong! The S&P 500 rose 61 points or 1.5% as investors suddenly decided good economic news really is good stock market news. And those of us who believe a pause is coming on June 14 are gaining adherents – the odds of another 25 basis point increase have fallen to 30%.

I’ve run this graphic since last November so many times you’re probably sick of it:

Click for larger graphic

The key I’ve emphasized today is that pauses almost always are followed by cuts due to already restrictive rates, falling inflation, and a recessionary economy. The Fed very rarely raises rates again after pausing when policy is already restrictive, because they almost always are behind the curve and Chairman Powell knows it.

The May ISM Services Index was 50.3, the lowest since May 2020, down from 51.9 in April and in a different direction than the 52.4 estimate. New orders dropped to 52.9 from 56.1 in April; prices paid were down to 56.2; business activity fell from 52.0 to 51.5; supplier deliveries were lower at 47.7, and employment now is in contraction.

Click for larger graphic h/t @LizAnnSonders

Inflation will keep falling in the coming months, while labor-cost pressures are being revised significantly lower. In spite of the payrolls report, the jobs market is weakening fast. Wage pressures are not nearly as high as they were thought to be. Last week’s release of employment data saw significant downward revisions to real hourly compensation and unit labor costs for the last quarter of 2022, as seen in the last two columns in the table below.

Click for larger graphic h/t @Bloomberg

Two of most forward-looking employment indicators are temporary help and average weekly hours worked. Employers are likely to cull temp workers and cut full-time employees’ hours before they move to firing people. Both indicators are falling quickly.

Click for larger graphic h/t @Bloomberg

Today’s weekly Jobless Claims report was +261,000 versus 232,000 last week and well above the 235,000 estimate. New claims hit their highest level since October 2021 (setting aside upward revisions).

Click for larger graphic h/t HedgeyeDJ

In an amazing revival of the “higher for longer” trade after the bank crisis, the futures market is forecasting a Fed funds rate over 5% at the end of this year. Not a chance. The pause that refreshes will end up being the prelude to a cut – and higher stock prices.

Click for larger graphic

Market Outlook

The S&P 500 added 1.7% since last Thursday and now is up more than 20% from its October 13 low – a “new bull market” according to Wall Street. The Index is up 11.8% year-to-date. The Nasdaq Composite gained 1.0% and is up 26.5% for the year, on pace for the best first half of a year since 1991.

Click for larger graphic h/t @carlquintanilla

Mega-cap tech has drawn comparisons to the dotcom stocks of the late 1990s. The key difference is the group today is very profitable. However, their market-cap relative to earnings weight has gotten extremely extended.

Click for larger graphic h/t @NDR_Research

And while FANMAGT has been getting all the attention, about one-third of Nasdaq stocks are still 50% or more below their 252-day (~52-week) highs.

Click for larger graphic h/t @NDR_Research

The small-cap Russell 2000 soared 6.4% and is up 6.8% in 2023. On an absolute basis, the Russell 2000 has not broken its 2022 lows and its 50-day and 200-day moving averages for the first time since March 8, the day before the Silicon Valley Bank news broke.

Click for larger graphic h/t @edclissold and @NDR_Research

One of the simplest reasons to be bullish in 2023 was how stocks usually did quite well when they were down the year before – up 15% on average and higher 80% of time. When they were down 20% (2022 just barely missed), they were up 27% on average the next year and never lower.

Click for larger graphic h/t @RyanDetrick

The fractal dimension finally signaled a new uptrend is underway. Unless it reverses quickly, there is enough stored-up consolidation energy (in the form of sideline cash) to drive the Index to a new record.

Top 5

Changes this week: Dropped BLPH due to trial failure

Near-Term – chronological order
EQT EQT –natural gas price rebound
OIL iPath Pure Beta Crude Oil Exchange-Traded Note – crude should rise quickly
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

The Atlanta Fed’s GDPNow model is predicting June quarter real GDP growth of 2.2%.

Click for larger graphic

I still think a short, shallow recession will start this year, but most people now are looking at 2024. Imagine if we spend the whole of 2023 talking about a recession that doesn’t happen.

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.

Saturday, June 10
APTO – Aptose Therapeutics – 12:00pm – Clinical trial update from the European Hematology Association

Monday, June 12
GILD – Gilead – 1:40pm – Goldman Sachs Global Healthcare Conference

Wednesday, June 14
RKLB – Rocket Lab – Unspec – Wells Fargo Industrials Conference

Thursday, June 15
ENVX – Enovix – 1:30pm – Annual meeting

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 – $180.57) held their Worldwide Developer’s Conference (WWDC) this week (HIGHLIGHTS HERE) and did not disappoint. The new M2 Ultra processor will allow developers to build AI models that are far larger than the memory of current GPUs. This may be the massive game changer for Private and Personal local AI.

Click for larger graphic

And they introduced the Vision Pro Augmented Reality and Virtual Reality headset “spatial computer” that doesn’t compete with Meta’s AR/VR Quest headset. With the Reality Pro priced at $3,499 versus Meta’s Quest Pro at $999 or forthcoming Quest 3 at $499 – well, no wonder they’re calling it a “spatial computer.” Read through the company’s press release and you won’t find a single trace of the word headset. Re-watch the roughly 40-minute Vision Pro portion of Apple’s Worldwide Developer Conference 2023 keynote, and you won’t hear anyone utter the term “headset.”

But they did quietly buy Mira, a Los Angeles-based AR startup that makes headsets for other companies and the U.S. military. And all the developers will be furiously updating old software and writing new apps to take advantage of the early-2024 launch.

If you go to https://www.apple.com/apple-vision-pro/ you will be brought to the Vision Pro page on the site. In the top right corner is a button that says “Notify Me.” Apple is collecting data on how popular the launch will be and the possible manufacturing needed to meet demand in the future.

We’re about to enter the hype cycle for September’s iPhone 15 introduction. Apple hit a new all-time high of $184.95 on Monday, and I expect to be over $200 by mid-September. Dan Ives of Wedbush just raised his 12-month target from $205 to $220. AAPL is a Buy under $150 for new iPhone rollouts and augmented/virtual reality products.

Gilead Sciences (GILD – $78.40) Chief Commercial Officer presented at the Jefferies Global Healthcare Conference (TRANSCRIPT HERE). She said less than three years ago they didn’t really have an oncology pipeline or franchise. Today they have several drugs targeting a broad array of cancers with a deep pipeline.

Yescarta, the CAR-T therapy made by the Kite unit of Gilead, prolonged the lives of patients with large B-cell lymphoma by 27% compared to standard treatment in a long-running clinical trial. Stat+ said that proving a meaningful survival benefit for patients with a type of blood cancer represents another milestone for CAR-T therapy, which involves extracting white blood cells from a patient and genetically modifying them to attack cancer. Yescarta is the first CAR-T to do it in a randomized study, which could help Gilead grow sales and extend its lead over competing cell therapies.

For nearly 30 years, chemotherapy and a stem cell transplant have been the standard treatments for people with large B-cell lymphoma that returns after initial, or first-line, treatment. But only about half of patients are eligible for this so-called second-line approach, and just 20% are cured.

Gilead’s vision is to replace chemotherapies in the frontline settings, not just in lung cancer, but broader. These are HUGE markets. GILD is a Long-Term Buy under $80 for a first target of $120.

Meta Platforms (META – $264.58) will benefit from the Vision Pro introduction next year. Most apps written for Apple will be ported to Meta, and many potential customers will want the AR/VR experience at 28% of the price. META is a Buy under $150 for a $400 target in 2024.

Small Tech

Enovix (ENVX – $14.14) signed distribution deals with a Japanese distribution and manufacturing services company, Elematec and a South Korean power management and IoT-focused distributor, Semicomtech, to support pan-Asian shipping, distribution and market expansion.

Their Chief Commercial Officer said: “These strategic distributor agreements enable us to expand quickly and leverage their experience and customer relationships in key markets. Elematec and Semicomtech will act as an extension of our team, so we can sell more of our next-generation batteries across Asia.”

Next Thursday’s annual meeting could include important production and potential order updates, with a possible EV joint venture. 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.

Fastly (FSLY – $16.89) presented at the William Blair Growth Stock Conference (TRANSCRIPT HERE). The CFO said: “If we sign a customer in the first year, the second year revenues might be 200% on average of what that first year was, going to 40% increases in the second year and third year. So, you see really good expansion within those customers as we deploy and they see our performance levels.”

Fastly specializes in moving processes from the central computer to he edge, where they can be more responsive to the user. Regarding AI, management said: “A lot of the big compute, heavy compute is going to be done kind of at the central cloud. But there are certain things you need to do at the edge so that you’re responsive there. And so, I think inferential calculations on AI will be done at the edge. I think they’ll be done as part of Compute [Fastly’s software]. So, I really see AI as being another application for Compute at the edge.”

FSLY is a Buy up to $20 for a 2- to 5-year hold to $80+ as Compute@Edge drives customer acquisition and revenue growth.
Primary Risk:Content and applications delivery networks are a competitive area.

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 – $5.67) did there 1-for-15 reverse split on Tuesday. They are doing a clinical update at non EDT on Saturday from the European Hematology Association. If they have good news to share, the reverse split might work. APTO is a Buy under $10 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: Mid- to late-2023

Bellerophon Therapeutics (BLPH – $0.77) announced a total disaster in their Phase 3 trial. It missed every important endpoint. As I wrote on the Comments, we know nitric oxide works well in the hospital and worked in the INOpulse in Phase 2, so this was a real shocker. The problem must be in the device’s delivery of nitric oxide, but then why did it work in Phase 2? They have about $15 million in cash but no path forward. Sell BLPH.
Primary Risk: The trial fails or the FDA turns down the INOpulse.
   Clinical stage of lead product: Dead
   Probable time of first FDA approval: NA
   Probable time of next financing: NA

Compass Pathways (CMPS – $8.06) CEO, CFO, and SVP: Patient Access & Medical Affairs presented this afternoon at the Jefferies Healthcare Conference (WEBINAR HERE).

They emphasized how closely they are working with the FDA and how much support they are getting from the Agency. They are collecting extra safety data because they expect an Advisory Committee meeting – undoubtedly told that by the FDA.

The community is very aware of the benefits of psilocybin for treatment-resistant depression and Compass is in the interesting position of tamping down expectations. They also are collecting Phase 3 data to answer payer questions on the durability of response and similar issues. They are expecting approval in March 2025.

The 20-patient PTSD trial will readout by the end of the year. The 60-patient anorexia trial is accruing but it’s hard to predict when we will see data. In general, depression patients want to get better. Anorexia patients don’t.

Compass is the first filer for US patents on psilocybin and just defeated a protest. CMPS is a Buy under $20 for a very long-term hold to a 10x.
Primary Risk: Their drugs fail in the clinic.
   Clinical stage of lead product: Phase 2
   Probable time of first FDA approval: 2025
   Probable time of next financing: Late 2023

Invitae (NVTA – $1.20) presented at the William Blair Growth Stock Conference (TRANSCRIPT HERE). Management said: “The macro drivers for growth in our space remain robust. And the opportunity for utilizing genetic information and genomic testing has substantial upside. So with recent advances in technology, clinical validation, guideline expansion, and reimbursement, the industry is poised to grow. And Invitae has been a leader and a catalyst in driving many of these advances.”

As Wall Street wanted, they’ve been slashing their cash burn:

Click for larger graphic

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

Inflation MegaShift

Gold ($1,980.50) is clinging to the $2,000 ±$50 area as investors wait for the Fed to pause while the Treasury sells billions of dollars worth of bonds to fund the deficits. The fractal dimension shows this is a real trend up with headroom to new all-time highs.

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 – $26,604.41) is holding relatively well as the altcoins and exchanges crumble under the SEC’s attack on Binance and Coinbase.

Click for larger graphic

As Mark Cuban wrote: “The SEC could have easily have gone to them and outlined an exact plan to get them to compliance. Then if Coinbase or whoever didn’t comply, they sue over whatever legal disagreements they have.

“Instead they do what they told one of my companies to do when we called, read these cases and get a lawyer to figure it out for you. That’s the fundamental problem of the SEC. They don’t want to help companies get to compliance, they want to challenge them to get to compliance.

“They are full of lawyers. Lawyers want to litigate. If you had business people, more like the SBA, there would be more compliance, fewer lawsuits and better investor education and protections.

“But if that happened, 2,000 SEC lawyers would be out of a job. This isn’t new. It’s been the same for decades. They promote the number of cases and wins they get as their metrics rather than the number of companies they helped get into compliance and the impact those companies had on GDP, jobs and investor returns.

“At that point the impact they have on protecting investors would be profound and stand out and most likely they would find the bad actors before they stole money because the connection to investors and real companies would be stronger and they would be willing to communicate about the bad actors. As it is, no one wants to talk to the SEC because no one trusts them for fear of being in the same situation as Coinbase finds itself. You get what you measure.”

Amen. 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- $13.85) should not be impacted by the SEC’s litigiousness, because they are likely to win their lawsuit against the agency. GBTC is a Buy under net asset value.
Primary Risk: Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.

Commodities

Oil – $70.90

Oil got as low as $69.03 today, $3.50 below yesterday’s close, as word spread that the Biden Administration will allow Iran to export a million barrels of oil a day if they agree to limit uranium enrichment to 60%. Iran already exports 1.4 million barrels a day of visible crude. Including the shadow fleets would add about 0.4 million barrels. So if the deal is “one million barrels,” the flash crash in oil is just dumb algorithms trading an illiquid market. If the deal is an additional one million barrels, that would put them at their maximum exportable level of 2.8 million barrels.

Saudi Arabia just said they would cut production by one million barrels starting in July, so they will see this as a big middle finger from Biden. Excluding the pandemic, Saudi production would be at a level unseen in more than a decade, and similar to the 2005-2008 period.

Click for larger graphic h/t @JavierBlas

As long as I am directionally accurate on the magnitude of the summer inventory draws, the oil price will take care of itself. Physical oil will be deeply under-supplied in five to six weeks as the May 1 OPEC+ cuts hit the Energy Information Administration data just as the Strategic Petroleum Reserve releases end. It’s easy to claim weak demand when inventories are flat, but this will be impossible in July/August/September. Biden will likely need to tap the SPR again by Fall as prices skyrocket. For now, the market needs to see it to believe it.

The July 2026 Crude Oil Futures (CLN26.NYM – $61.85) 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 – $28.42) is a Buy under $36 for an $80+ target.

EQT (EQT – $38.97) enters the S&P 500 at #487, so get ready for the mindless index funds to buy, buy, buy. 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 – $6.42) rallied after the U.S. Senate Environment and Public Works Committee voted to approve a sweeping bill that would fast-track the deployment of a new fleet of advanced nuclear reactors. UUUU is a buy under $8 for a $30 target. As the great Janis Joplin sang: “Get it while you can.”
Primary Risk: Uranium prices fall.

* * * * *

* * * * *

Your reading difficult books 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 – $180.57) – Buy under $150 for new iPhones
  Corning (GLW – $31.68) – Buy under $33, target price $60
  Gilead Sciences (GILD – $78.40) – Buy under $80, target price $120
  Meta (META – $264.58) – Buy under $250, target price $400
  SoftBank (SFTBY – $21.42) – Buy under $25, target price $50

Other Tech
  Enovix (ENVX – $14.14) – Buy under $13; 4-year hold to $100+
  First Trust NASDAQ Cybersecurity ETF (CIBR – $43.61) – Buy under $40; 3- to 5-year hold
  Fastly (FSLY – $16.89) – Buy under $20; 2- to 5-year hold to $80+
  PagerDuty (PD – $22.41) – Buy under $30; 2- to 5-year hold
  QuickLogic (QUIK – $7.18) – Buy under $10, target price $40
  Rocket Lab (RKLB – $5.28) – Buy under $13, target price $30+
  Velo3D (VLD – $1.82) – Buy under $6, target price $50

$20-for-$1
  Akebia Biotherapeutics (AKBA – $1.25) – Buy under $2, target $20
  Aptose Biosciences (APTO – $5.67) – Buy under $10, ultimate target $300
  Compass Pathways (CMPS – $8.06) – Buy under $20, hold a long time for a 10x return
  Inovio (INO – $0.55) – Buy under $7, hold a long time
  Invitae (NVTA – $1.20) – Buy under $10, first target $50, then $100+
  Medicenna (MDNA – $0.60) – Buy under $3, first target $20, then maybe $40
  ScyNexis (SCYX – $2.59) – Buy under $2.50, target price $20, then $50

Inflation
  A Short-Sale or REO House – ($447,000) – Hold
  Bag of Junk Silver – ($24.38) – hold through silver bull market
  Sprott Gold Miners ETF (SGDM – $27.13) – Buy under $28, target price $50
  Sprott Junior Gold Miners ETF (SGDJ – $30.50) – Buy under $39, target price $100
  Sprott Physical Gold and Silver Trust (CEF – $18.81) – Buy under $18, target price $30
  Global X Silver Miners ETF (SIL – $27.70) – Buy under $30, target price $50
  Coeur Mining (CDE – $3.21) – Buy under $5, target price $20
  First Majestic Mining (AG – $5.86) – Buy under $11, next target price $23
  Paramount Gold Nevada (PZG – $0.30) – Buy under $1, first target price $10
  Sandstorm Gold (SAND – $5.34) – Buy under $10, target price $25
  Sprott Inc. (SII – $33.58) – Buy under $40, target price $70

Cryptocurrencies
  Bitcoin (BTC-USD – $26,604.41) – Buy
  Grayscale Bitcoin Trust (GBTC – $13.85) – Buy
  Ethereum (ETH-USD – $1,843.799) – Buy
  Grayscale Ethereum Trust (ETHE – $8.04) – Buy

Commodities
  Crude Oil Futures – July 2026 (CLN26.NYM – $61.85) – Buy under $65; $200+ target
  iPath Pure Beta Crude Oil Exchange-Traded Note (OIL – $28.42) – Buy under $36; $80+ target
  EQT (EQT – $38.97) – Buy under $35; $70 first target
  Energy Fuels (UUUU – $6.42) – Buy under $8; $30 target
  Freeport McMoRan (FCX – $37.84) – Buy under $44; $65 target within two years

International & Other Recommendations
  EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ – $29.94) – Buy under $38 for a $66 target in 12 to 18 months
  KraneShares Bosera MSCI China A Share Fund (KBA – $23.26) – Buy under $40 for a three- to five-year hold
  Morgan Stanley China A-Shares Fund (CAF – $13.07) – Buy under $18 for a three- to five-year hold
  KraneShares CSI China Internet ETF (KWEB – $27.85) – Buy under $40 for a double over the next three years
  Acreage Holdings (ACRDF – $0.35) – Buy under $2 for the Canopy Growth merger
  Mongolia Growth Group (MNGGF – $0.87) – Buy under $1.30; long-term hold

Holds
These are holds but not sells – yet. They could get moved back to one of the buy categories if their prices drop or outlook improves, or they could become sell recommendations in the future.
  Arch Therapeutics (ARTH – $3.25) – Hold for buyout
  Graphite Bio (GRPH – $2.96) – Hold until they update their strategy
  TG Therapeutics (TGTX – $28.98) – Hold for buyout at $25+

Sell
  Bellerophon Therapeutics (BLPH – $0.77) – Sell

Publisher: GwynRose LLC, 5348 Vegas Drive, Suite 868, Las Vegas, NV 89108

New World Investor does not act as a personal investment adviser or advocate the purchase or sale of any security or investment for any specific individual. The recommendations and analysis presented to members are for the exclusive use of members. Members should be aware that investment markets have inherent risks and there can be no guarantee of future profits. Likewise, past performance does not assure future results. Recommendations are subject to change at any time. Nothing in this presentation should be considered personalized investment advice. No communication to you by Michael Murphy or any of our employees or contractors should be deemed as personalized investment advice.

Copyright ©GwynRoseLLC 2023

New World Investor Mastermind Group

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