- After six months of sideways churn, a sector breaking out now
- Meaningful progress against prostate cancer… and it’s not too late to invest
- The urge to merge: Why merger-and-acquisition activity is its highest in years
- The New York Times notices one front in the War on Small Business
- Why banks won’t mellow out about pot… crazy coastal real estate (and inland)… in search of hard currency… and more!
“The biotech breakout has arrived — and it can make you a bundle over the next few months,” says Greg Guenthner of our trading desk.
“No one’s thinking about backing up the truck right now. That’s why this is the perfect time to strike.”
Let’s back up a bit: Biotech was on a tear throughout 2013 — the sector as a whole up 60%. We said it was due for a rest.
During the first eight weeks of 2014, it jumped another 30%. The rest finally came in March and April. But as the year wore on, Greg spotted a comeback that began in June. From that point, the sector jumped 17%. Then it swooned along with the rest of the stock market.
Now the back-and-forth, up-and-down is over.
“Biotech shares have shot up a staggering 12% since Oct. 15,” says Greg. “That’s an insane move in such a short time.
“And they’ve got all kinds of room to run. In fact, with many important names hitting new highs right now, biotech could be the best performing sector on the market for the rest of 2014.”
Sure, you could buy an ETF like the iShares Biotech (IBB) for a few weeks’ trade. But if it’s the really big money you’re looking for, a little patience has the potential to pay off in what our tech maven Stephen Petranek calls “ultra-wealth”…
“The older you get, the more likely you are to have prostate cancer,” Stephen said in this space last February. “It cannot be overstated that this is a disease of aging.”
Yes, bad genes are a factor. But the biggest factor by all is sheer age. Stephen’s father was diagnosed in his early ’70s. “It turns out that any man that age in the United States has a 1 in 8 chance of going to his doctor and getting that bad report.”
No, it’s not a death sentence. But all the same, it’s the second-leading killer of men among all cancers — behind lung cancer.
Prostate cancer treatments are a $12 billion-a-year market. Back in February, Stephen identified a player in the sector whose drug was becoming a powerful competitor behind Zytiga, one of the 100 top-selling drugs in the country. Shares have jumped a solid 24% since then.
But there’s still ample upside: Last month, the FDA approved expanded use of the drug.
It is now available to patients whose cancer has spread — but who’ve never received chemotherapy. “This news is only the beginning of what we’ll see from this company,” says Stephen, “if my read is correct.
“Theoretically, the drug should be prescribed only for patients with prostate cancer that has metastasized. But if I were diagnosed with prostate cancer tomorrow, I’d ask my physician to prescribe it BEFORE it spread. And that’s where I’m thinking the future applications of this drug will prove to be.
“Eventually, this drug could be used in men at the first sign of rising PSA counts.”
But the drug’s potential market is far bigger… because the treatment also shows promise combating breast cancer.
“Researchers are beginning to agree that breast cancer and prostate cancer are extraordinarily similar diseases,” Stephen explains, “that may respond to the same drugs.”
Phase 2 trials of the drug are now underway in breast cancer patients. Wall Street is already starting to notice — with one analyst saying it has the potential to become a “first in class” breast cancer treatment.
“You can make the case,” says Stephen, “that this company could see its revenues from the drug double and then double again and double again. This stock has a huge potential.”
With biotech taking off right now, you have the ideal entry point if you weren’t one of Stephen’s readers when he first recommended it.
Second chances like this don’t come along often. And the window of opportunity is closing: Stephen’s presentation on this company — and four others that could change the world in equally dramatic fashion — is coming offline tonight at midnight. The likelihood of a third chance presenting itself is remote… so now’s the time to act.
Stocks are in rally mode on a Tuesday morning. The Dow and the S&P are both up, and the Nasdaq and small-cap Russell 2000 are up bigger.
Among the day’s economic numbers, there’s one standout — durable goods orders down 1.3% in September. Whoops, the “expert consensus” among dozens of economists polled by Bloomberg was a 0.9% increase.
OK, so the number is notoriously noisy because it includes everything from jet aircraft to washing machines — any item designed to last three years or longer. But within the number is a disturbing detail. Business orders for capital goods excluding aircraft and armaments fell 1.7%, the biggest drop in eight months.
It might be a one-month blip, but we can’t help but wonder if Reuters is engaging in wishful thinking when its lead to the story says, “the surprise decline was likely to be temporary, as business sentiment has been upbeat in recent months.”
Just sayin’…
“So far this year, companies around the world have spent $3.3 trillion on mergers and acquisitions, also known as M&A,” says our Jonas Elmerraji.
“That’s up more than 62% from this time in 2013, which was itself another big boost from the year before.”
Why all the growth? “Simple,” says Jonas. “Companies are buying each other right now because they have to — there just aren’t many better options to find growth in this environment. You see, large U.S. firms have a big problem on their hands. In fact, it’s a $1.53 trillion problem.
“That number is the amount of cash that companies in the S&P 500 currently hold on their balance sheets. It’s a record. Put simply, companies have never had so much cash on hand. As I write, more than 20% of the S&P 500’s current price tag is paid for by cash in the bank.”
Too much cash makes executives and board members antsy, Jonas explains: “If a company has a pile of cash sitting on its balance sheet, it had better have a darned good reason for holding onto it. If cash is just going to sit there, then investors want that money paid out” in the form of dividends or share buybacks.
Apple, sitting on the biggest corporate cash hoard in the world, is opting to do just that. “The firm plans on returning nearly all of its current cash to shareholders over the next couple of years.”
“That announcement got management teams from other big, cash-rich technology companies sweating,” Jonas goes on.
“They love having big cash cushions on their balance sheet, but they realize that they need to justify those cash piles to investors. And since M&A can offer instant growth, it’s an easy choice. Actually, it’s more or less the only choice.
“And given the fact that tech stocks, and small caps in particular, have been correcting for the past couple of months, the sector that’s been the most targeted for acquisitions in the last few years is also suddenly starting to look like the biggest bargain.”
Yes, Jonas has some candidates in mind. More tomorrow…
From the believe-it-when-you-see-it file, the IRS is promising to stop harassing small-business owners who handle lots of cash.
A year ago, we told you how the feds seized the checking account of a grocery store in the Detroit suburb of Fraser, owned by the Dehko family.
As you might be aware, federal law requires banks to report all cash transactions over $10,000. It is illegal to “structure” cash deposits to get around this requirement.
Unfortunately, the Dehkos were regularly making cash deposits of less than $10,000… for the basic reason that many small-business insurance policies don’t cover cash losses from a robbery or fire for more than $10,000.
The IRS seized the account — more than $35,000 — even though the same agency audited their accounts in 2010 and 2012 and found nothing wrong.
Within a few weeks, the feds dropped the case.
Recently, The New York Times discovered this phenomenon was actually, you know, a good story. Sunday, it was on the front page with the headline, “Law Lets IRS Seize Accounts on Suspicion, No Crime Required.”
A reporter found a few more good case studies — a restaurant owner in Iowa, a candy and cigarette distributor on Long Island — and some statistical evidence that sheds light: The good folks from the Institute for Justice pored over IRS “structuring” data. The agency made 114 seizures in 2005. By 2012, the number had exploded to 639. Only one in five ended up prosecuted as a criminal case.
And the paper got the IRS to react even before publication: “On Thursday, in response to questions from The New York Times, the IRS announced that it would curtail the practice, focusing instead on cases where the money is believed to have been acquired illegally or seizure is deemed justified by ‘exceptional circumstances.'”
Whatever that means…
At least restaurants and grocery stores can still have bank accounts. That’s more than you can say for marijuana businesses.
Pot is now legal to one extent or another in 23 states. But it’s still a Schedule I controlled substance under federal law.
“Banks that help the marijuana industry could be found guilty of ‘aiding and abetting’ marijuana manufacturing or ‘conspiring’ to dispense marijuana,” writes University of Alabama law professor Julie Andersen Hill at The Conversation. “It is also a crime to launder money — to engage in transactions knowing that the money came from marijuana.”
Even if pot is decriminalized at the federal level, Hill says regulators like the FDIC might still block banks from accepting pot businesses as customers, absent a change to the banking laws.
“At the same time, congressional action may not be enough,” Hill writes, referring to the feds’ Operation Chokepoint we’ve written about this year: “Recently, the Department of Justice and FDIC have come under fire for policies that choke off banking access to legal but ‘high-risk’ customers like payday lenders, gun and ammunition retailers and the adult entertainment industry.”
Sigh…
“In really desirable towns and higher-end neighborhoods of more or less coastal California, that is pretty typical,” a reader writes of the ramshackle dump in Palo Alto that fetched $1.8 million, described in this space yesterday.
“I have seen very serviceable homes bought for $2 million and torn down to build new ones (even without an ocean view). Good schools, good neighborhood, decent weather, crappy politics, whatever.”
“Is there any currency in the world today that is backed by a hard asset (such as gold)? Or is every country in the world dependent on a house of paper cards?”
The 5: All paper. Switzerland was the final holdout, and they threw in the towel around the turn of the 21st century. Even the Swiss gold referendum coming up a month from now — a potentially earth-shaking event if approved — doesn’t go so far as to restore a gold-backed franc.
“I thoroughly enjoy reading The 5 every day. And when I disagree with something written, well, I simply disagree with it!
“Can’t understand the angry responses of some readers, but it sure makes for some humorous reading.”
The 5: That sounds way too sensible…
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Final reminder: Access to Stephen Petranek’s presentation on five companies that can change the world and make you ultra-wealthy comes offline tonight at midnight. Move now and you’ll secure a substantial discount off the full subscription price.