The Weekly Blogue - April 19, 2021


Last Week in a Nutshell


Another week, another dollar. Green for the major indexes, with a slight uptick in volume as we head into another highly anticipated earnings season. Q1 earnings have the suits upbeat, with J.P. Morgan forecasting S&P 500 annual profits to grow at a 26% clip in 2021 and for the all-encompassing index to reach record earnings in 2022.




The stock market serves as the greatest forward-looking indicator, meaning that investors not only pay attention to this quarter’s results, but also future expectations. With that, one shouldn’t be all that surprised that the S&P 500 and the Dow Jones (DJIA) are both sitting at all-time highs.

However, I can’t help but address the fact that these indexes are reaching these highs on such little volume. If we look at the DJIA over the past three weeks, we see higher and higher highs, but the lack of volume has started to raise some concerns.

To break it down - during the first 15 weeks of 2021:

  • The DJIA has had 11 ‘up’ weeks

  • Of those 11 'up' weeks, only 3 were on above average volume

  • On the contrary, the 4 ‘down’ weeks in 2021 have all been associated with above average volume


To close off last week’s news...

We’ve been focusing in on the ‘high-flying’ stocks over the last couple Weekly Blogues. Last week we saw Tesla (TSLA) move up 9% on above average volume while my favorite stock, Pinterest (PINS), got crushed on above average volume.

PINS had a wild week, where on Wednesday they approached an all-time high, reaching an intraday high of 88.83 only to reverse course and close the day at 83.49. Then on Friday, Pinterest shareholders (i.e. me) were taken the woodshed, watching the stock fall 9.72% on 158% above average volume. This is an important lesson for all investors - even companies with incredible fundamentals and product innovation can fall severely in price on any given day on NO news.

Looking Ahead


Earnings season kicks into high gear. With the major indexes sitting at all-time highs, investors get to hear directly from corporate leaders who often have the best insight into the overall economy.

Last week, the major banks started off the Q1 season with a bang, delivering exceptional results across the board.

We have a total of 309 companies reporting earnings this week with the below companies headlining this remarkably busy week:


Continued strength in the consumer: KO, NFLX, SAM and AXP

Industrials: LMI & HON

Travel Demand: UAL, AAL and LUV


Stock of the Week ** I have a position in that security


Invitae Corporation (NYSE:NVTA)


The Genomics Revolution.

Mission

“Invitae’s mission is to bring comprehensive genetic information into mainstream medical practice to improve the quality of healthcare for billions of people.”

Furthermore…

“Our goal is to aggregate a majority of the world’s genetic information into a comprehensive network that enables sharing of data among network participants to improve healthcare and clinical outcomes.”

Overview

Invitae is a leader in the genomic testing and DNA processing space and has the ability to become an extremely powerful and successful company via its data driven network.

If you and/or anyone you know has done a 23andme or ancestry.com test to reveal what your/their true heritage/ethnicity are, then you know what genetic testing is. Learning about your ethnicity is cool but genetic/DNA testing’s true power is its ability to reveal genetic disorders in cardiology, neurology, pediatrics as well as assessing an individual’s inherent risk for hereditary cancers (i.e. breast, colon and pancreatic).

These are tests that can be done at birth and with high accuracy to assess one’s risk to certain diseases throughout their lifetime. These are diseases that one might be more prone to due to their family history (hereditary).

A Company Worth Rooting for

Being able to identify one’s risk to disease at such a young age and so early on will lead to 1) higher survivor rates 2) more specialized and personalized medical practice and treatments as well as 3) cheaper costs.

As an example, Pharmacy Times wrote an article touching on the importance and benefits of gene mutation research in preventing men from suffering from prostate cancer and malignancy in general.

As someone with a family member suffering from malignancy and knowing the tremendous pain and stress it can cause, having the ability to identify cancer risk before it even enters the picture and thus preventing malignancy is a MASSIVE breakthrough.

Acquisition of ArcherDX

Prior to June of 2020, NVTA was restricted to using a ‘centralized’ testing approach. Germline testing is done on cells that don’t have cancer and is done to identify those potential hereditary risks. The test samples are then sent to a ‘central’ laboratory for processing and diagnosis. Due to the fact that germline tests are done on non-cancer cells, it makes sense for the tests to be sent to a central lab (incur a time lag) for the highest quality analysis.

However, somatic testing differs from germline testing in that it is done on cells with cancer. This allows doctors to understand the cancer further, determine the stage it is in as well as which treatment/therapies available make most sense. Having the ability to have these tests done on site without a time lag would be a pivotal improvement.

Invitae addressed this need with their $1.4 billion acquisition of ArcherDx. Known for its high-quality on-premise somatic testing technologies, ArcherDX now provides Invitae the ability to perform decentralized (on-premise) somatic testing.

This makes Invitae the only company with high-quality centralized and decentralized testing capabilities.

Market Size

According to Global Market Insights, the genetic testing market generated more than $14.8 billion in 2020 and is set to eclipse $31.8 billion by 2027.

In 2020, testing on newborns and pre-birth accounted for 30% of the total genetic testing market.

According to Statista, in 2018, 35% of U.S. adults said they were not likely to use a commercially available genetic test to determine cancer risk. To add on, 29% of respondents said they were, “not very likely”. This shows that we are still in the very early innings of taking advantage of this incredible technology that could and should have a profound impact on the medical/health industry.

Fundamentals (Concerns)

Invitae is a very fascinating company who operates in a massive market, but it’s also a company who has some glaring issues with their financial statements. Revenue growth was declining prior to the pandemic-riddled 2020, earnings couldn’t be further from positive and debt is sky-high.

In 2019 and 2020, the company’s total debt balance was greater than total sales.


Not only that but annual earnings per share (EPS) came in at -4.47 in 2020 after reporting a -2.66 EPS figure in 2019.

Yes, the sky is the limit for Invitae but unless they can get their fundamentals and operating model in line, the NVTA stock will struggle to outperform down the line.

DISCLAIMER:

The information provided above is my own independent research and should not be seen as a recommendation. A fair amount of the stocks I have and will present are very volatile and can experience sharp downturns in price as you can see in several of the stocks I have given in prior weeks. One should perform their own research to determine if an investment is suitable for their portfolio and risk tolerance.


Weekly Crypto Recap


Historic IPO On Wednesday (4/14), Coinbase (COIN) publicly listed on the NASDAQ exchange. Coinbase is one the largest cryptocurrency exchanges in the world and has over 56 million active users. For comparison, Robinhood has 13 million accounts and Fidelity has 31.3 million accounts. Let that sink in – Coinbase (a cryptocurrency exchange platform) – has more users than Robinhood and Fidelity combined. Anyone who doesn’t think the crypto space is here is in denial. Ethereum The thing with crypto is that the best way to truly go about valuing them and understanding their insane price rises, is network effects and adoption. For example, Bitcoin’s price has been all about adoption and individuals holding Bitcoin as a store of value. As more people buy and hold Bitcoin, the price rises (due to more demand and restricted supply) which leads to more and more people taking the same route (network effects). With that, let’s take a look at Ethereum – the below chart taken from Electric Capital:


To summarize, the top developers in the world are taking their talents to the Ethereum blockchain. If that doesn’t scream adoption and high utility, then I don’t know what does.


Saturday Night


And lastly, on Saturday night, for anyone who is a crypto fanatic and checks the prices of their tokens on a regular basis, would have seen that Bitcoin and others fell dramatically (this is a light way to put it). Some are speculating that this crash was due to a huge power outage in China.


Disclaimer Appendix

The information contained in this newsletter and website should NOT be seen as investment advice or recommendations. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Tom Logue is not paid by any company to recommend any stocks or cryptocurrencies to readers and all research done is independent. Tom Logue does not guarantee that any of the companies listed in this newsletter or on the website will out-perform the stock market nor does Tom Logue guarantee the accuracy or completeness of the information contained herein. The information provided in the newsletter and the website should not be relied upon as the sole factor in determining whether to buy, sell or hold a stock. Past performance is not a guarantee of future performance. All investments involve risk, including the loss of all of the original capital invested. One should perform their own due diligence and understand the associated risks before making investments.

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