The biotech bear market from February 2021 through October 2023 created some dramatically underpriced stocks. There is free money lying on the sidewalk, just waiting for you to pick it up.
Dear Biotechies:
Your Friday Biotech Moonshots is reprinted from Thursday's New World Investor that includes 6 tech dominater Buy recommendations, 7 small techs, the 8 $20-for$1 biotechs below the paywall, 11 inflation hedges (mostly precious metals), 4 cryptocurrency positions, 6 commodities, and 2 other recommendations. We have an excellent Comments board on every weekly issue where you an ask me and other subscribers questions, recommend stocks you like, or whatever. For the full experience, for a limited time, as a Biotech Moonshots subscriber you can get a $100 discount on a $495 annual subscription (CLICK HERE - only $395) or a $300 discount on a $1,495 Lifetime Subscription (CLICK HERE - only $1,195) with no “annual maintenance fee” (or whatever they're calling it these days). Join us!
Bloomberg said the tailwind from surging immigration would boost March quarter GDP.
Oops. Real GDP only grew at 1.6%, short of all estimates including the Atlanta Fed's GDPNow +2.7%. Could it be that housing massive illegal immigration from South America, Asia, and the Middle East in luxury hotels isn't really good for the economy?
To be fair, the growth details were better than the headlines, although the inflation data was slightly hotter than I expected. The headline number was mainly driven by weakness in volatile components, especially net exports. Private domestic final purchases, the “core GDP” of consumption and fixed investment, grew a strong 3.1%.
h/t @ernietedeschi
Consumption was above expectations, business investment was below expectations, and overall private sector activity remains pretty strong. Part two of the Fed's dual mandate – full employment – is on track.
But part one, lower inflation, was not. This morning's March Personal Consumption Expenditures Index number confirmed yesterday's GDP report. Core PCE rose at an annual rate of 3.7% during the March quarter, faster than the 2.9% reported for last year's March quarter and the 2.0% in the December quarter, and above the consensus estimate for 3.4%.
h/t @jasonfurman
Bottom line: The real side of the economy remains healthy but the nominal side is too hot. Overall that is not a bad place to be, but also not a place where the Fed will need to cut rates anytime soon. Inflation remains sticky and paused – maybe reversed – its clear trend lower. The Fed will stay on hold at next Wednesday's meeting.
The futures market is still pricing a first rate cut in September, but the probability is down to 58%. I'm not quite ready to give up on my forecast of a mild recession starting this year, but it won't take much more to convince me that this is the first time in 56 years the leading indicators fell below -5% without being in a recession.
h/t @DiMartinoBooth
Stocks got a bid today in part because the buyback blackout ended. Goldman Sachs wrote: “On the authorization front, 2024 YTD authorizations stand at $317.4B vs $377.0B 2023 YTD authorizations. We expect to see authorizations this year finish higher, estimating 2024 authorizations to finish $1.15T (up ~16%).”
h/t @zerohedge
Market Outlook
Even after yesterday's intraday drop below 5,000, the S&P 500 added 0.7% since last Thursday. The Index is up 5.8% year-to-date. The Nasdaq Composite eked out a 0.1% gain and is up just 4.0% for the year. The SPDR S&P Biotech Exchange-Traded Fund (XBI) fell 1.5%. It is down 7.9% year-to-date as the biotech winter continues. The small-cap Russell 2000 gained 2.0% but still is down 2.3% in 2024.
The fractal dimension stopped the consolidation for the moment, but this probably is not a renewed uptrend. The fractals still are so low that they need many weeks of consolidation to build up the energy for another upleg. Don't be panicked out by drops like last week – markets can consolidate by periodic price reversals, sometimes sharp, or the passage of time. Or, most likely in this case, both.
Bitcoin has steadied after the halving. Barring a quick dump to clean out the weak hands, I expect a steady run to $100,000 over the next six to twelve months.
Biotech Focus
Nautilus Biotechnology (@NautilusBio) wrote a don't-miss blog post on “Genomics versus proteomics - two complementary perspectives on life.” They say genomics and proteomics both peer into living organisms at the subcellular level. While the genome has 20,500 estimated human genes that reveal cellular blueprints, the proteome has six million estimated proteoforms per cell type and captures what's actually happening in cells now.
Combining the two gives an unprecedented view of the inner workings of life, from the blueprint that encodes the architecture of our bodies to the molecules to carry out the functional processes underpinning life as we know it.
Nautilus wrote: “Within an individual organism, the genome is generally the same across all the cells. Some exceptions might arise thanks to naturally occurring mutations or esoteric biological processes like immune cell development, but in general, the genres the genes in an eyeball are the same the genes in a pinky toe. The proteome, on the other hand, is another matter: Dynamic differences in protein composition are the reason an eyeball cell functions differently from a toe."
Nautilus has a next-generation proteomics platform designed to identify and quantify over 95% of the proteins in a biological sample. “There are some instances where a gene's effects are well-understood, and genomic approaches are well-suited to answering questions. For instance, a certain mutation may cause a disease, or could confer resistance to disease, in which case genetic testing would be an appropriate approach. Anytime researchers are looking for the root of a biological process, it can make sense to trace it all the way back to the genes.
But they go on to say that genes aren't always expressed the same way. They determine what proteins cells can possibly make, yes. But the proteins themselves are doing the heavy lifting. Having a comprehensive genome sequence for an organism does not reveal the full story of what's happening in a cell or sample of interest right now. When studying the mechanisms of ongoing cellular processes, it is far more useful to also look at the proteome to see (1) what proteins are present; (2) in what abundance; and, (3), how they're interacting with one another to carry out cellular functions.
This is a very important concept for biotech R&D because proteomic analysis, rather than genomic analysis, can be a more direct route to successful drug development. Also, knowing what proteins are over- or under-represented in a disease can help researchers identify biomarkers for diagnosis.
Coming Events for Free Subscribers
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Wednesday, May 1
Fed Meeting - 2:00pm press release; 2:30pm press conference
Friday, May 3
April payrolls – 8:30am - +210,000 expected; March was +303,000
Biotech Moonshots Portfolio Update
This was another tough week for biotech but the Moonshots portfolio only fell 0.2%. There's enough clinical and other data coming to drive our performance much higher in 2024. Let's dig in...
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RIP Calvin Keyes
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