This is a short week, with my last update just a few days ago, but our Explorer portfolio is doing well. In the last few days, Sea (SE), NovoCure (NVCR) and Alibaba (BABA) are each up 10 points and ElectraMeccanica (SOLO) has increased 20%. As the clouds lift with the flurry of positive vaccine announcements and election uncertainty gone, markets will go into December with more confidence but with lingering doubts about the strength of the economy. Our new recommendation is a leader in critical cancer diagnostics highlighting the benefits of a sharp focus on one market.
Cabot Global Stocks Explorer 724
A Short Thanksgiving Week
This is probably going to be an unusual Thanksgiving for many of you as we head into the last month of a turbulent year. While the overall market is up only a bit over 10%, there have been pockets that have delivered much, much higher returns. These include the big tech and data stocks, financial payments and other digital plays, and clean energy areas such as electric vehicles.
The hard part is figuring out whether these trends will continue into 2021 or new asset classes such as international or emerging markets will take the lead. Both appeared to be moving in early 2020 until the pandemic intervened.
This is definitely a momentum market buoyed by easy liquidity, low cost trading, low interest rates, and the willingness of investors to pay high multiples of earnings that may or may not be delivered. And the spark that has kept this bull market moving ahead is technology. Not making technology products, but rather software and technology platforms that deliver amazing growth and high profit margins while requiring very little capital. The biggest risk going into 2021 is probably the real economy and the real possibility of political paralysis in Washington. We may be headed into an era when what happens in Washington will be more important to stock prices than what happens on Wall Street.
Now, let’s turn to our new idea.
New Explorer Recommendation
NeoGenomics, Inc (NEO)
NeoGenomics operates a network of cancer-focused testing laboratories in the United States, as well as laboratories in Switzerland and Singapore. The company is the world’s leading oncology testing company for doctors, pathologists and hospitals serving more than a half a million patients each year. Cancer is primarily a disease of old age, so our increasing longevity is driving cancer incidence. The number and complexity of new treatments are also driving sales, especially since follow-up testing is a key driver increasing survival rates.
And the expanding oncology drug pipelines will increase the demand for future testing as well. With more than 10,000 baby boomers turning 65 every day, growth will surely accelerate. NeoGenomics’s strength is that it is entirely focused on cancer testing rather than trying to diversify into related business segments. As Chief Strategy Officer Bill Bonello says, “If there is an oncology test to be done, we do it.”
Here is a list of the some of the company’s services:
- Expert bone marrow and surgical pathology consults
- Hematologic testing that “maps” the genetic material in human cells
- 10-color flow cytometry
- Histology supported by an extensive IHC antibody library
- 150 molecular oncology tests comprising the most comprehensive combination of tumor profiles and targeted biomarker tests in the industry
Precision testing is now a critical component in controlling and treating cancer. NeoGenomics’s laboratory network system gives it the ability to examine and extract data from a blood-based cancer or solid tumor by as many means as are necessary to reveal biomarkers that expose the disease’s vulnerability to different therapies.
NeoGenomics now has the capacity to accurately and quickly perform more than 10,000 tests per day. And the company has scaled up coronavirus testing, and now serves as a leading COVID-19 reference lab for oncologists and laboratories.
According to the National Cancer Institute, more than 1.7 million new cases of cancer are diagnosed in America alone each year. The good news is the overall death rate from cancer is decreasing, with more than 15.5 million cancer survivors in the U.S. And that number is expected to rise to 20.3 million by 2026.
NeoGenomics is playing a critical role in this battle and is the only publicly traded oncology diagnostics lab play trading in America. The company also has ample opportunities to grow overseas such as the China lab opening in 2021 through a joint venture with a Chinese company. In addition, the company recently announced plans to collaborate with QIAGEN N.V., a Netherlands-based holding company, in the area of advanced breast cancer.
In April, test volumes were down 30% compared to the year-ago period but by June, test volumes were back in line with the prior-year period. The stock has been in a strong uptrend and revenue should accelerate in 2021 as pent up demand drives catch-up testing. This is an aggressive play with a leading company in a critical, high growth market.
BUY A HALF POSITION
|Stock||Price Bought||Date Bought||Price 11/24/20||Profit||Rating|
|Afterpay (APT.AX)||78||9/17/20||98||26%||Buy a Half|
|Alibaba (BABA)||102||1/27/17||270||165%||Hold a Half|
|Cloudflare, Inc. (NET)||24||4/30/20||66||176%||Hold a Half|
|ElectraMeccanica (SOLO)||2.84||10/29/20||10.20||259%||Buy a Half|
|Logiq (LGIQ)||7.12||10/15/20||7.63||7%||Buy a Half|
|MP Materials (MP)||14||11/12/20||19||37%||Buy a Half|
|NovoCure, Ltd. (NVCR)||68||7/23/20||134||97%||Buy|
|Sea Limited (SE)||15||2/8/19||183||1131%||Hold a Half|
|Taiwan Semiconductor (TSM)||81||8/6/20||98||21%||Buy a Half|
|Vipshop Holdings (VIPS)||16||10/1/20||25||57%||Buy a Half|
|Virgin Galactic (SPCE)||7.34||12/5/19||25||239%||Buy|
Portfolio cash position: 20%
About two weeks ago, the company reported that underlying sales increased 115% to $4.1 billion on a year over year basis. Active customers globally increased 98% to 11.2 million and active merchants increased by 70%. If you have not already done so, I suggest you purchase shares on the Australian stock exchange which offers by far the best liquidity. BUY A HALF
Alibaba reported a massive $75 billion haul in gross sales from its one-week Single’s Day shopping event. About $5 billion of this revenue was attributed to sales of American products and services. For some perspective, the sales number for the first Single’s Day event in 2009 was $7.5 billion. The impact of Chinese regulators delaying the very much-anticipated IPO for Ant Group, in which Baba has a 30% equity stake, has to be the key issue here. BABA remains a legacy hold and a key core holding for investors looking for a quality stake in the emerging Chinese consumer. Long-term investors should consider adding some shares. HOLD A HALF
Cloudfare shares have more than doubled since early September but have recently been treading water. Cloudfare recently reported third quarter results, and revenue growth accelerated at a year over year clip of 54%. Large customers delivered a 75% conversion rate from free to paying customers and the company delivered a record-level addition of about 100 new large enterprise customers. I will keep NET a hold at these levels. HOLD A HALF
SOLO shares have been on quite a run since being added to the Explorer portfolio. The company has been quietly laying the groundwork to bring to the U.S. west coast and then Europe and Asia a single-seat, three-wheel electric car (dubbed Solo) as the company plans to open six new retail locations across the western U.S. within the next month. This is speculative idea that will attract some serious media attention into 2021 and has a chance to scale up in America and beyond. SOLO remains a buy, although I would be more aggressive on any pullbacks. BUY A HALF
This company is a New York-based leading global provider of e-commerce, mobile-commerce, and fintech business enablement solutions for three big markets: Southeast Asia, Europe, and the United States. LogiQ’s stock is trading at under three times 2020-projected revenue. This is an aggressive idea and I suggest you buy shares if you have not already done so. BUY A HALF
*Fortress Value Acquisition Corporation (FVAC) is now trading as MP Materials (MP)
MP Materials (MP)
MP Materials owns and operates one of the world’s largest integrated rare earth mining and processing facilities in Mountain Pass, California. It is the only major rare earths resource in the Western Hemisphere. Its primary rare earth products are key ingredients in permanent magnets which power the traction motors of EVs, robotics, wind turbines, drones, and many other high-growth, advanced motion technologies. The stock is on an uptrend as the merger is progressing and also due to rare earths becoming more and more of a strategic priority and national security issue as it becomes clearer that the U.S.-China rivalry will continue no matter which party runs Washington.
This is a speculative idea with a strong management team and represents a play on climate change tech and, in particular, clean energy such as wind power and electric vehicles. BUY A HALF
NovoCure recently reported revenue growth of 44% in the third quarter with the number of active patients increasing 22% year over year. Shares have more than doubled over the last six months. NovoCure is a global oncology company working to extend survival in some of the most aggressive forms of cancer through the development and commercialization of its innovative therapy, Tumor Treating Fields. I encourage you to take advantage of the stocks dip to buy shares if you have not already done so. BUY A FULL
Sea Limited (SE)
Sea recently reported third-quarter financial results. This Singapore-based company’s revenue doubled to $1.2 billion for the quarter and it boosted annual forecasts for two key businesses. But the stock pulled back a bit as quarter-on-quarter growth in e-commerce gross merchandise value dropped to 16%, from 29% in the second quarter. Though the stock is up more than 300% so far in 2020, aggressive investors can add to their position at these levels but I will keep Sea as a hold and encourage holders to take some profits if they have not already done so. HOLD A HALF
Taiwan Semiconductor (TSM)
Taiwan Semiconductor shares are approaching 100 on significant volume, always a good sign. This company is a dominant global semiconductor chip fabricator with tremendous economies of scale in a capital-intensive industry. China recently announced major investments in its semiconductor industry, although the country is several generations behind Taiwan Semiconductor, which dominates global chip fabrication with a market share of 56%. The company delivered an impressive return on equity of 31% in its most recent quarter. I maintain a buy rating on the stock. BUY A HALF
Virgin Galactic (SPCE)
The company’s shares have benefitted from the renewed attention to the commercial space sector with Elon Musk’s SpaceX launching its first operational crewed mission to the International Space Station. As the only pure play space tourism stock in the public markets, this remains your best way to play for exposure to this megatrend. If the next two missions run smoothly, Virgin Galactic plans to send founder Richard Branson up in the first quarter of 2021. Aggressive investors should be buying at these levels ahead of 2021 developments. BUY A FULL
Vipshop Holdings (VIPS)
Vipshop recently reported that orders in the third quarter increased 35% year over year, total net revenue increased 18.2%, and net income surged 42.1%. You might think of the company as a Chinese online version of T.J. Maxx, Ross, and Marshall’s all rolled into one. I suggest you buy this stock if you have not already done so in anticipation of learning what I believe will be favorable results from China’s Singles’ Day shopping’s impact on its upcoming fourth-quarter financial results. BUY A HALF POSITION
The next Cabot Global Stocks Explorer issue will be published on December 10, 2020.
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