Should Pfizer Buy This Beaten-Down Immuno-Oncology Company?

This is the title of a blog I saw about a tiny drugmaker with a lot of  PD-1 candidates in its portfolio in the hottest cancer treatment frontier: immune-oncology (IO). You can read it here. The company I’m talking about is Agenus (AGEN).

 

While this is a very interesting discussion about the potential MA target, which I also think is quite a solid case, purely  relying on this to buy the stock is just like a gamble as there is no any certainty. There are simply so many early stage biotechs that are busy doing something relevant to IO. However, what further interesting me about AGEN is its technical strength after I reviewed its price chart. I was shocked to learn that AGEN used to be an over $300 stock and has got crashed all the way down to around $4 now. This a small biotech with a net cash of around $30 million and its price action looks strong to move up, supported a positive MACD. This suggests a lot of investors are also betting for it to further advance. If Pfizer or another company really takes it, I think this tiny company could give Pfizer or the acquirer an edge over its immuno-oncology competitors. This reminds me a similar situation for a biotech called Medrex. It had a lot of monoclonal antibodies in house, including the historical product, ipilimumab or Yervoy. This is the first ever marketed IO product developed by Bristol Myers Squibb, a truly historical breakthrough that really opens a new era in cancer therapy. But you cannot find Medrex  anymore. It licensed Yervoy to BMS for development and at the later stage of the development BMS must have smelled that they were holding a gem in hand. So they simply bought out Medrex! While there is surely no certainty but I think AGEN could be the next Medrex someday, if their rich portfolio of IO-related candidates can lead to one or more blockbusters.

Blood test for cancer may replace the biopsy

I talked about the liquid biopsy a while ago and I’m interested in aparticular stock TROV which Ibelieve is one of the leading players in this new trend.  Of course, as with any new breakthrough technologies, it won’t be a smooth road for them to fight for their existence. They always face significant doubts and disbelief about their validity. But I’m a strong believer that new technologies will eventually replace old ones, as long as they truly bring in new advantages. While I’m not talking at all about a total replacement of the physical biopsy any time soon, I do firmly believe the liquid biopsy has a very extinct advantage for it to become more and more of a routine test in the future. Now we get more evidence to support just that. Here is what was recently reported in Time:



What’s more, the team of researchers, which also included scientists from University of California San Diego, also compared the blood-based results with those from a physical sample of the tumor obtained from a traditional biopsy within six months of the blood test. Among these patients, there was 98% agreement over the genetic results of which mutations were present.

Those findings are the strongest yet confirming the utility of such blood-based tests for cancer. Such liquid biopsies carry an advantage over physical biopsies since tumors are notoriously heterogeneous; cells from one part of the tumor may be different from cells from another, and biopsies typically only take cells from one part. Tumors also change over time, but repeated biopsies are not practical for safety as well as economic reasons. Blood-based testing, however, could track tumors over time and provide a better picture of how the cancer is changing, and how treatments might also have to change if the tumor is becoming resistant to an existing therapy.


Be aware, investing in early stage companies for new technologies is always associated with high risk and volatility for such stocks could be extremely high. For those who laugh at last, they must have the vision to identify the trend, the courage to pursue it, and the tenacity to stay with it. I hope I’m one of them and so are you!

Will UK leave the EU?

I’m sure the majority, if not all of you are aware of the upcoming referendum in the UK in less than a week time to decide whether UK will stay or leave the EU union. No one knows for sure what will be the result of course but the polls have been increasingly in favor of exiting the EU with a double-digit-point lead over Brits who want to stay. There is no precedent on it and the potential damage done to the EU is deemed huge. One possible outcome of the Brexit is the end of the EU as other member countries may want to follow the same route to leave the EU. Inevitably this saga has created a lot of uncertainty leading to high volatility. In generally, the stock markets will go down, the US$ will go up along with gold and silver as well as government bonds. We likely will see this trend intensified as we go closer and closer to the due date, June 23. But somehow my gut feeling tells me Brexit won’t happen and the UK will remain in the EU. We are probably seeing another drama similar to what was happening to Greece about a year ago when the fate of Greece in the Eurozone was to be decided. I had the same feeling at that time that I just didn’t believe it would occur as I wrote in my blog. This time, apart from my gut feeling, there are two additional things going on that kind of in favor of my bet: For one, the large corporations in the UK are urging their UK employees to vote to stay. Don’t underestimate this as this involves quite a large portion of the voters in the UK and their efforts may also move the needle. The other thing is more interesting. While the polls are largely in favor of the Brexit, the real money is betting strongly that Britain will stay in the EU. You can see this via the odds at Ladbrokes. Ladbrokes is a UK-based world leader in online betting and gaming. You can virtually bet for any significant issues around the world. Don’t forget, this is the real money from people who are serious about their betting and oftentimes they are right, especially when it is getting closer to the day of the incident. If you ask me, my money is on the real money, not the polls.

So be aware of the possible consequences if you are long gold/silver, US$ and bonds and short stocks. We may see a large reversal if indeed the UK referendum decides that UK will stay in the EU. Be prepared for a sharp decline of gold, dollars and bonds, and jump of stocks. In a way, this is likely what will happen post the vote even if the Brexit wins, a kind of relief reversal that people buy/sell the news and sell/buy the result.

This mining stock jumped 30 times in price

I was shocked to see a high-flying stock of mine suddenly disappeared from my portfolio a couple of weeks ago. I double checked but it was still not there. I was almost picking up the phone to call the broker to find out what happened, I then decided to do some homework first by searching for the stock. The result showed that the stock (Claude Resources) was not listed anymore but instead this company was acquired by another one and I didn’t realize initially that I was now holding a new stock, SSRI (Silver Standards).  I was even more shocked to learn with a great joy that the price of this tiny “garbage stock” has increased by 30 times now from $0.35 per share to $11. While this is indeed a big surprise, I must say this is what I have been expecting to see from a bunch of such stocks I’m still holding. This is a very unique type of investment with super high risk but also potentially super high reward. I’m talking about investing in precious metal exploration companies.

 

Why is it so unique to invest in such companies? Well, these are typically the early stage mining companies that have no proven reserves yet of gold or silver in their mines. They are almost always heavily indebted and most of them will probably not survive eventually. So in a way, putting money into this kind of companies is very similar to venture capital investment that you are not aiming for any return from many of the companies, but you are hoping to hit just a few with a huge success and reward. Of course, you can try this strategy for all kinds of stocks but I’m particularly interested in the precious metal sector. If you are following my blogs, you certainly know that I’m a big believer for the gigantic bull trend for gold/silver. For me, this bull run has started around 2000 and has much more to go. After a track record of 13 consecutive years of gaining every year that no any other assets have been able to do, gold has gone into a rather long and painful correction in the past 4-5 years. But this by no means the end of the gold bull run. On the contrary, it is just giving it more necessary strength to mount a new leg high move. I firmly believe that gold has much more to go upwards, and potentially may become the official money again when all the fiat currencies, including the US$, collapse. You can call me crazy but I do think this is likely the destine for the US$, if the Fed and the US government continue to play fire with its ever increasing debt. After nearly a 50% correction for gold, it becomes increasingly possible that this correction is over and gold has started its next leg up. So dose silver! I have started to invest in gold/silver nearly 10 years ago and have put money in almost all kinds of forms, physical, paper, and mining stocks. A couple of years ago, I decided to also invest in some exploration mining stocks. I know a veteran precious metal investor who got over a million dollars return by investing just a few thousands for a mining company in the last bull run for gold (back in 1970s/80s). You cannot expect this kind of reward from more matured companies. So I bought a bunch of “garbage” precious metal mining stocks when they were generally around $1 or less. You can imagine it was quite a painful time period of the last couple of years when virtually all the mining stocks were struggling and virtually all of them got decimated one way or the other. But I’m continuing to hold them as long as they are still alive. Looks like my tenacity starts to pay off. Starting from Jan of this year, majority of my holdings of such stocks have gained substantially and most of them have turned to green by now. Claude Resources was one of the most shining metal stocks for me. Within a few months of this year, it had increased my holding over 3 times already. So I decided to cash out a third of it to ensure my profitability from it. Then the story described above hit me. Retrospectively and from the greedy part of me,  I guess I should have held the full position but somehow I totally missed the news when the acquisition was announced. Well I still have quite a few early stage mining stocks in my holdings. I think we will see more and more such M&As in this sector when gold/silver truly resumes its next bull run. I hope some of my current holdings will end up either growing to a successful mining giant or being acquired on the way up.

If you are also considering to buy such companies, just be aware that the key is not to try to find one or two and put all your money into it. It is very risky this way as no one can be sure upfront which one will eventually succeed. The best way to go is to buy a range of such stocks, say 10-15 and evenly distribute your money among them. Keep in mind, you should expect many, if not majority of them will fail but hope just a few will bring some windfall to you!

 

By the way, if you are interested, RRSI itself is a great silver company. I made some money from it a few years ago and I’m happy that I’m holding it now by accident via acquisition. SSRI is kind of mining company that controls a large areas of mineral  deposits that are  economically minable. If I’m right that gold and silver will go up much higher from here, SSRI will be doing great along the way. Actually SSRI was on my watch list to buy when gold/silver is corrected in the near future, which is what I believe will likely occur in the short term. Now I’m already holding SSRI which I have no intention to give up any time soon but I do use covered call options to try to protect it from a possible short term weakness.

Another great business on sale

Do you wear Polo shirts? Chances are that you do. Polo is one of the most recognized brands in the world and a lot of people love it. The manufacturer for the Polo brand is  Ralph Lauren Corporation (RL). RL designs, markets and sells luxury men's, women's and children's apparel, accessories, fragrances and home furnishings to customers worldwide, and has dozens of boutiques in the United States and other international locations in London, Milan, Tokyo, Paris and Moscow. This is a very successful fashion business with products loved by people all over the world. But it cannot be immune to the sluggish retail sales as for others lately.  Here is the headline news on Tuesday: Shares of Ralph Lauren Corporation (RL) are getting punished Tuesday, falling more than 10% to $25.35 after the fashion retailer announced that revenue will likely decline by low double digit percentage points this year on plans to close under-performing stores. But I think this was way overdone and offers a great opportunity who wants to own part of this great company. Fundamentally RL is cheap at a forward PE of 13 and EV/EBITDA at 7. It has paid out increasing dividends since 2003 with an annual compounding dividend growth rate over 10% since then. You don’t see a bad company that can consistently increase dividends for so long. But I’m more encouraged by its technical strength. It has a strong  support around $84. And its Tue price action has further demonstrated a text book style of a bottoming: it plunged to about $85 at opening but quickly recovered all the way back to above $90. This was a very strong price action in facing very bad news. Anyone who dared to buy it below $90 should be really happy as we are talking about over 5% immediate gain over just a few days. But I think it has more upside potential moving forward. Today is another demonstration why RL is quite bullish technically: when the overall market is under heavy selling with nearly a 20% jump of the volatility, not much downside move for RL today. I will hold RL as long as possible until I see a technical bearish sign showing up. For now, I only see a strong upward trend for it.

 

A crisis mode trade

By now I assume everyone in the market knows about the troubled company, Valeant (VRX). If you don’t, here is the brief summary in the Los Angel Time today: “Valeant's stock price surged for years, fueled by a strategy of gobbling up smaller companies and raising prices on niche drugs — bypassing the huge research and development investments typical of the drug industry. But the company's approach has drawn scrutiny from federal prosecutors, Congress and its own investors. Shares that traded above $260 around this time last year, fell below $25 in pre-market trading.” Yes, VRX is in a crisis mode, fighting for survival in the longer term. Today’s big miss in earnings has added further pain to it. With this kind of troubles involved, it is hard to believe anyone would be interested to hold this stock for long-term before it can truly demonstrate its survivability. Having said that, I think today’s poor earning event is actually making VRX a very good short-term trading candidate. Let me explain.



 You see, VRX is still a profitable company, generating incomes from selling drugs. Almost by all the valuation criteria, VRX is extremely cheap at the moment. While I’m not sure about its long term, I’m pretty sure VRX won’t simply fall apart in the next 2 weeks, which is the timeframe I’m talking about for the trade. Actually the recent price actions for VRX have pictured it a rather positive technical pattern, with a quite strong positive divergence for its momentum indicator, MACD. As I said many times, you should not follow the herd for trading as they are usually overacting to almost everything. Today’s price action for VRX further proves its technical strength that it has bottomed at least for now: It crashed to as low as $22.6 from $29 (over 20% plunge) but closed much higher, close to $25. This is typically a bottoming-type of action that the selling pressure has been exhausted.  Now with such bad news baked in and the bullish price action today, I really don’t think VRX will be below $25 by end of the next 2 weeks. So if you have the gut to sell VRX Jun 17 puts for $25, the chance is very high that you can simply walk away with the very inflated premium (about $1.3) as your 2 weeks income. This will translate to a 15-20% gain on the margin in less than 2 weeks.

But let me be very clear, there is zero interest for me to hold VRX for long term. This is only a very short term technical trade. Although I’m convinced this will be a profitable trade, there is certainly no guarantee. But even one gets put to buy VRX, it will only be losing money if VRX gets down to below $23 on Jun 17. With the very strong technical setup and overacting nature of the herds who are dumping the stock today, I really don’t think it will go down that far in 2 weeks!

The most hated presidential candidates may reward this company dearly

After Trump has secured his candidacy for the Republicans and Clinton is likely to win for the Democrats, they will be the most hated US president candidates in the history. I’m not interested in the politics at all but I cannot help but predict that these two will start a historical political drama not ever seen before in the US presidential election. It will be really an interesting saga to play out soon. You also have to understand, this election is not only to determine the US future for the next 4 years, but rather it will have a huge political impact for decades and generations. Why so? Well, believe or not the death of Supreme Court Justice Antonin Scalia on Feb 13, 2016 has effectively made the 2016 election the most important election of our lifetimes. The vacancy left by Scalia is  leaving the bench evenly split between liberals and conservatives in the Supreme Court. If you know anything about the US politics, you can easily understand that the Supreme Court virtually dictates the US political direction and as such this is monumental because Supreme Court justices, after all, have a lifetime appointment. That means the November election results could hand effective control of the Supreme Court to either liberals or conservatives for a generation – or longer. In addition to the Presidency, the 2016 election cycle will decide a staggering 12 governorships, 34 Senate seats, and all 435 U.S. House of Representatives seats. Therefore you can expect that the upcoming campaign and debates between Trump and Clinton will be extremely heated or red hot. This will lead to a huge uptake of the political adverstising. It is estimated that over $10 Billion will be spent for the election with roughly half for the broadcast TV and other half in the media including cable TV, digital, newspaper, radio etc.  So who will benefit from this humongous campaign money? You can bet that the traditional media heavy weights are among the big beneficiaries like CBS, FOX or Time Warner. But I think a much smaller media player, Gray TV Inc (GTN) will be the next huge winner in this battle. Don’t underestimate this rather small media company as it owns or operates 92 TV stations in 50 TV markets. As you can see its TV station map below, it covers the vast majority of the 50 US states with channels affiliated with a wide array of media giants, with FOX, ABC, CBS, and NBC.

At the current price of around $11, GTN is quite cheap:  at a forward PE of 14, it is much cheaper than its competitors (the industry average PE is about 22). However, the thing interests me most about GTN  is its technical setup: it seems to have come out of its bottom with an upward moving averages with a positive divergence in its momentum indicator. If it can only capture 10% of the projected over $10 billion ad spending in the coming election and its shares are simply moving towards its industry average PE, its share price will fly to the sky, potentially more than double from here.

Regardless which one is more hated between Trump and Clinton and which one finally wins, I think GTN will win a big time along with him or her! Of course, it is a speculative bet but I think it has a great risk reward ratio. Let’s try to earn some money while watching the historical drama with fun!!

 

A pension crisis you better to know about

Over 400,000 US worker across 37 states recently were shocked by the news that their pension benefit will be cut by a third. This is what is just happening for those participating in the Central States Pension Fund that manages $18 billion for over 400,000 people. It virtually fails and on the road to bankruptcy as it has to pay out over $3 dollars for each dollar contribution. In this kind of situation, I’m not sure even a 30% haircut for the pension benefit will save it. See more details here. Of course, CSPF is not the only fund that is failing. According to the Pension Rights Center, 58 multi-employer plans are in “critical and declining” status, meaning they might have to cut benefits to survive. Seven of these funds have warned that they could go broke within eight years. I think virtually all the pension funds managed by the state government as well as the federal social security system are facing similar crisis one way or the other. If you happen to be the ones that you are wishing to rely on the pension benefits from such sources for your retirement, you better think twice and start to do something. Think about this, U.S. pension funds are the single largest pool of money in the world… If they collapse, the global financial system will collapse. There are few things you need to consider to do to secure your retirement life:

• Buy some gold and silver as insurance. It is almost a certainty that precious metals will shoot up to the moon when a large scale crisis is unveiling. With what all the central governments around the world are doing to push interest rates to zero or negative, a global financial crisis greater than the 2008 disaster is likely brewing. Be prepared for it!
• Buy quality dividend stocks when they are on sale. In theory all the stocks may go down to zero during a crisis, you can safely bet that those companies that have reliable sources of income with a long track record of paying increasing dividends have gone through all kinds of crises over time and will be able to manage the coming challenges much better than others. If you can create a portfolio with many such great dividend stocks cross different business sectors, I’m pretty sure you will be doing much better than most of the mutual funds over time. Your retirement can be much better secured. I have been talking about such good stocks from time to time such as MSFT, APPL, TGT etc. Take the advantage when they get crashed due to some temporary problems and buy as much as you can.
• Buy municipal bonds that can save you a lot of tax down the road. Keep in mind that the local governments can always raise your tax to fund such bonds if they are short of money. Historically, the default rate for muni’s is less than 0.1%. The best way to buy muni’s is to buy closed end funds when they are at big discounts. I was pounding the table a couple of times to buy such funds like IIM when they were at a discount around -5 to -10% (see here and here). Sure enough, IIM has gone up all the way to close the gap from their NAV and now is trading hands at premium. It is not a good time to buy at the moment as it is too expensive. But those who bought it back then have enjoyed not only a big tax-free dividend yield (5-7%) but also a big capital gain (15-20%). Don’t miss it when I’m shouting again!!