- Ray Blanco: One of the most promising stock sectors of 2023?
- “The answer is simpler than you think”
- The market is unfazed by the power struggle in D.C.
- How Russia put a “de facto floor under gold”
- Doubling down on Tesla (Cathie, Cathie, Cathie)
- Readers on “aggressive” — or is it “abusive”? — marketing… And more!
What’s one of the most promising sectors of the stock market in 2023?
The answer lies partly in the market action of late 2022.
Thursday, Dec. 22, 2022, was a miserable day for the market as a whole. But Paradigm Press Group’s science-and-wealth specialist Ray Blanco noticed something interesting: “I saw plenty of relative strength in the SPDR S&P Biotech ETF (NYSE: XBI).
“Around noon, XBI was able to reverse off its losses and climb to just around breakeven.
“While that doesn’t sound very impressive, compared with the rest of the market it was one of the only sectors that didn’t completely bite the dust… Just take a look at this heatmap of the market that day:
And that’s not just a one-day thing: “Biotech stocks finally put a stop to the bleeding near the end of 2022 to swing back fully into bull market territory,” says Ray.
Biotech bottomed last June. The broad stock market also bottomed in June… but sank even lower in October.
Biotech bucked the trend — intriguing indeed.
“You might be wondering,” Ray acknowledges, “how some of the market’s riskiest stocks are getting ready to soar during this punishing bear market.
“But the answer is simpler than you think,” Ray avers.
“For starters, Biotech stocks were in a free fall for much of 2022, providing huge discounts on some of the most innovative names in the field. And those discounts attracted large drugmakers who started rapidly buying them up to fuel their patent pipelines.
“Consulting firm ZS Associates notes the top-10 drugmakers have more than 46% of their revenues at risk between 2022 and 2030. Since new and effective drugs are the lifeblood of the biotech market, these larger companies need smaller innovators to profit.
“So Big Pharma spent big to set itself up for success over the next decade. The feeding frenzy for takeover targets sent the value of the entire sector soaring. Last year alone, $126 billion in biotech takeovers were announced.”
(Hold that thought about takeovers. We’ll come back to it…)
“Now, I’m expecting things to really go up this year. We should see the tempo of FDA approvals swing upward, with potential blockbusters up for approvals that could send the companies involved to the moon.
“So not only is the biotech boom built on a solid foundation… The rally is built to last well into 2023.”
How to seize the moment? We don’t give away a lot of picks in The 5 — that’s reserved for our paid publications — but Ray encouraged us to make an exception today for Arrowhead Pharmaceuticals Inc. (ARWR).
[If you caught Ray’s write-up about ARWR last week during the Paradigm Press Holiday Wealth Series, you’re already in the know and you can skip ahead to today’s market notes. Otherwise, read on…]
“Arrowhead specializes in a particular form of gene therapy — one that doesn’t permanently change a person’s DNA.
“DNA is found in the nucleus of our cells. It’s essentially our body’s ‘blueprint,’ containing all the information that makes you, well, you. The blueprint also contains the instructions for creating all the proteins your body needs to live.
“But those proteins are built in other structures of our cells known as ribosomes. It’s like the nucleus of our cells is the head office of a manufacturing business, and the ribosomes are the factory.
“The blueprints and instructions need to get from one place to the other. That’s the job of messenger RNA, or mRNA for short.
“So if you want a cell to produce a protein that isn’t part of a person’s genetic code — or if you want to stop cells from producing harmful proteins — the RNA is a good place to start.
“The science of interfering with mRNAs is known as RNA interference, or RNAi for short,” Ray goes on.
“It can be highly specific — designed to only interact and knock down the activity of a desired gene.”
For Arrowhead, the RNAi drug that’s closest to approval is designed to treat hypertriglyceridemia — an excess of triglycerides often associated with heart disease.
“A protein called apolipoprotein C-III (apoC-III) is responsible for triglyceride transport in the blood,” Ray explains. “When it is present in high levels, it is linked to inflammation, high triglycerides, atherosclerosis and metabolic syndrome. Humans that produce low apoC-III have lower levels of triglycerides and fewer cases of cardiovascular disease.
“Arrowhead believes curbing the production of apoC-III can help patients who are having trouble regulating their triglycerides. The drug has proven safe and effective in a small sample of people who are genetically predisposed to have too much apoC-III in their blood.”
Phase 3 trials are underway now. And right behind this drug in the pipeline is a treatment for liver disease caused by a genetic disorder.
“Getting just one drug successfully through trials,” says Ray, “will prove the company’s worth.” But — getting back to the takeover theme — with such an attractive pipeline of products, ARWR might well be bought out by Big Pharma before that. So now’s the time to pounce while the beaten-down share price is just starting to stage a comeback.
And stay with The 5 throughout the year for more intriguing biotech opportunities from Ray.
On this second trading day of 2023, nearly every asset class is on the rally tracks.
The major U.S. stock indexes are solidly in the green — the Dow up three-quarters of a percent at 33,380… the S&P 500 up more than 1% at 3,870… and the Nasdaq also up more than 1%, cresting 10,500.
➢ Fun fact: The stock market ended 2022 down over 19%. Per figures from Bianco Research, that’s the eighth worst year since 1793. Across the seven previous instances of even worse performance, the market jumped an average 10.9% the following year. As always, past performance is no guarantee of future results.
Bonds are also rallying, pushing yields lower. The yield on a 10-year Treasury note is down to 3.71%, the lowest since before Christmas. And gold has pushed past $1,850, although for the moment silver has sunk below $24.
In other words, so far, Mr. Market seems unfazed by the power struggle in Washington. Maybe he realizes how inconsequential it is…
Crude, however, has sunk over 4% to $73.67. In the absence of any obvious catalyst, the mainstream is chalking up the drop to “demand concerns stemming from the state of the global economy and rising COVID cases in China.” (As if that’s something new?)
To be sure, the big U.S. economic number of the day is recessionary: The ISM Manufacturing Index rings in below 50 for a second straight month, registering 48.4 for December. The all-important new orders component of the index is even weaker at 45.2.
The Russian government just put “a de facto floor under the price of gold,” says Paradigm’s macro maven Jim Rickards.
On the heels of Zach Scheidt’s forecast here yesterday of $3,000 gold during 2023… Jim directs our attention to a compelling announcement from the Russian finance ministry.
Up until now, the government’s investment fund could sink up to 30% of its reserves into Chinese yuan and 20% into gold. Going forward, those ceilings rise to 60% yuan and 40% gold.
Key point: “Russia will have to buy 100-plus metric tonnes of gold per year to achieve and maintain the target ratio of 40% gold,” says Jim.
“That’s about 2.5% of global output at a time when physical gold is already in short supply. A price floor is highly desirable from an investor’s perspective. It creates what we call an asymmetric trade where the price can go up and is unlikely to go down much because of Russian opportunistic buying.
“It’s a good deal for Russia — and a good deal for gold investors as well.”
Heh… Cathie Wood of Ark Investing fame is doubling down on Tesla.
After we hit “send” on yesterday’s edition, TSLA ended the day down 12%.
But at the same time… “Funds backed by Wood’s firm Ark Investment Management LLC bought more than 176,000 shares of the automaker in the first U.S. trading session of this year,” Bloomberg reports.
In her flagship ARKK fund, TSLA is now the third-biggest holding — eclipsed only by the medical diagnostics firm Exact Sciences and by Zoom.
We have nothing to add, other than what an anonymous submitter pointed out at the Fark website: “Cathie Wood’s ETF lost 67% last year, so maybe Tesla only losing 65% makes it look like a winner to her.”
“Your marketing isn’t merely aggressive. It’s abusive. It’s called spam,” a reader writes after we republished the latest version of “who we are and what we’re all about” during the holidays.
“Indeed, your Paradigm Press-related email campaigns are so overwhelmingly ‘aggressive,’ you have destroyed my ability simply to keep up with my personal and business interests via email.
“Because of the overwhelming number of emails from the senders who promote Nomi Prins’ and Jim Rickards’ and James Altucher’s ‘services,’ I have missed a large portion of emails family members and personal business associates have sent me over the past six months to a year.
“Indeed, the volume of promotional emails I receive from Paradigm Press-related senders has destroyed my ability to follow the email missives from the Paradigm Press advisers (particularly Jim Rickards) for whose counsel I have actually paid! You destroy the value of your services.”
The 5: Maybe you’re a newer reader, but you forgot the part about “I dare you to publish this!”
Seriously, though, let’s go point by point.
First, it may feel like spam to you, but rest assured there are very strict laws governing the distribution of spam… and if we were to run afoul of them, we’d be out of business quicker than you can say “overwhelmingly aggressive.”
Second, much as we love Nomi Prins, she’s been with a different publisher for more than a year now. So we can’t shoulder all of the blame for the volume of emails you’re getting.
As far as missing business and personal emails, might I suggest you do what I’ve done for over 20 years? I have an email account for strictly personal correspondence, and a separate account for anything I order online. (If you’d like to take this step and change your email address with us, our customer care team will be happy to help.)
“Thank you, Dave, for publishing this explanation,” another reader writes. “Yes, the marketing is aggressive.
“As a person who has never engaged in the financial markets, beyond buying into the employer’s 403(b), I find the marketing intimidating as well as aggressive. I am learning to pick and choose what I read and am learning how to spot the duplicates. (It’s very clever the way you slightly repackage the same offer over and over. Well done!)
“My only pet peeve is the inescapable videos. Once in, I cannot leave unless I listen to the entire monologue/interview or choose to quit. I can pause and come back later, but if anything ‘happens’ to my computer or tablet while I am away, my only option is to start all over again.
“I suppose this is a clever new marketing plan to ‘capture’ the audience/consumer but it doesn’t work for me. I prefer a timescale across the bottom of the screen so I can either watch the whole thing, if I have time right then, or I can make a note of where I stopped and come back later. What I cannot do is sit in front of a screen for 45 minutes, or more.
“Beyond that rather trivial concern, I am cautiously optimistic about my decision to jump onboard at a small entry level. I will continue to try to navigate through all the mail I get daily and ‘teach’ my email system to divert the important (i.e., purchased) products into a separate mailbox and focus on those. Thank you for listening.”
The 5: You sound like a newer customer, and indeed that’s what our records confirm. And you responded to an upsell in very short order. So thank you for placing your trust with us.
Yes, we freely acknowledge a certain captive-audience nature to the promotions.
The “video sales letter” has been around for more than a decade now. Over that time, publishers have dabbled with scrubber bars and pause buttons and other tools to see whether they would improve engagement… and almost always, the answer is no. Sorry, but the metrics suggest we get a better return on investment when we don’t make those tools available.
In any event, you sound like a savvy customer — which is the kind we like the most, because those are the ones most likely to stick around for the long haul. So welcome to the fold — and thanks for the honest feedback!
Best regards,
Dave Gonigam
The 5 Min. Forecast
