Author: The INO.com Team

See Mentor in Action and Get 50% Off

Posted on by The INO.com Team

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Mentor can steer you through portfolio design based on your investing needs.

Continue reading "See Mentor in Action and Get 50% Off" →

September FOMC Meeting - How Might Gold Respond

Posted on by The INO.com Team

The Federal Reserve will conclude its September FOMC meeting and release a written statement at 2 PM EDT today. This will be followed by Chairman Powell’s press conference a half-hour later.

It is widely anticipated that the Federal Reserve will raise the “Fed funds rate” by 75 basis points. The CME’s FedWatch tool is forecasting that there is an 84% probability of a 75-basis point hike, and a 16% probability that the Fed will raise rates by a full percentage point.

In the unlikely event that the Federal Reserve raises its benchmark interest rate by 1%, it would most certainly pressure gold to lower pricing.

According to MarketWatch, “economists at the brokerage Nomura Securities … became the first on Wall Street to predict a full-percentage-point increase in the Fed’s benchmark short-term rate.”

Weekly Gold Futures Chart

However, if the Fed raises rates by 75 basis points as expected market participants could see some short-covering activity amid a relief rally. As of 5:05 PM EDT yesterday gold futures basis, the most active December contract is trading five dollars lower and is fixed at $1673.20.

The hard truth is that after four consecutive rate hikes beginning in March inflation remains extremely elevated and persistent. The latest data revealed that the CPI index had a slight decline from July’s 8.5% to 8.3% in August. While the headline CPI had a fractional decline the core CPI which strips out food and energy costs increased 0.6% more than double the prior month’s increase. This means that the core inflation rate climbed to 6.3% from 5.9% in August.

Because the August core inflation rate is three times the 2% target the Federal Reserve wants to achieve members of the Federal Reserve will continue the exceedingly hawkish tone expressed at the Jackson Hole economic symposium. Continue reading "September FOMC Meeting - How Might Gold Respond" →

3 Meme Stocks to Avoid

Posted on by The INO.com Team

Meme stocks witness unusual rallies solely based on retail investors’ interest in them. Retail investors gather on social media platforms such as Reddit, Stocktwits, Twitter, and Facebook and bet on fundamentally weak stocks to trigger a short squeeze. As the skyrocketing rallies in these stocks have little to do with the fundamentals of the companies, they fail to sustain the high price levels they reach.

The meme stock mania, born during the peak of the COVID-19 pandemic, has recently returned after a pause for a few months, as evident from unusual rallies of certain fundamentally weak stocks. Since the surge in meme stocks is usually disconnected from the companies’ fundamentals, investors should shun them amid an uncertain market outlook.

The Consumer Price Index (CPI) for August rose 8.3% year-over-year. And the rampant inflation enhances the chances of the Federal Reserve maintaining its hawkish stance, pushing an already weakening economy into a recession. Thus, the stock market is expected to remain under pressure in the foreseeable future. This is a good enough reason to avoid the risk associated with meme stocks.

Hence, fundamentally weak meme stocks Robinhood Markets, Inc. (HOOD), AMC Entertainment Holdings, Inc. (AMC), and Bed Bath & Beyond Inc. (BBBY) are likely best avoided now.

Robinhood Markets, Inc. (HOOD)

HOOD operates a financial services platform in the United States. The company’s platform enables users to invest in stocks, exchange-traded funds (ETFs), gold, options, and cryptocurrencies. In addition, it provides learning and education solutions, including Snacks for business news stories, News Feeds that give access to free premium news from different sites, and first trade recommendations.

In August, HOOD announced its second round of layoffs this year, slashing 23% of its headcount by letting go of 800 employees, with marketing, operations, and product management functions of the firm being the most impacted. The company blamed the worsening of the economy, including inflation and the crypto market crash, which had reduced customer trading activity and assets under custody.

Financial services companies are also struggling with a shrinking active user base and increasing regulatory pressure. The monthly active users (MAU) declined 1.9% million sequentially to 14 million for June 2022, as consumers navigate an environment marked by high-interest rates and surging inflation.

For the fiscal 2022 second quarter ended June 30, 2022, HOOD’s revenues decreased 43.7% year-over-year to $318 million. Its operating expenses increased 21.8% from the year-ago value to $610 million. The company’s adjusted EBITDA was negative $80 million, compared to $90 million in the prior-year period.

In addition, the company’s net loss and loss per share attributable to common stockholders amounted to $295 million and $0.34, respectively.

The consensus revenue estimate of $353.60 million for the fiscal year 2022 (ending December 2022) represents a 24.7% decline from the prior-year period. The company’s loss per share is expected to come in at $1.14 for the current year. Furthermore, the company has missed the consensus revenue estimates in each of the trailing four quarters.

HOOD’s shares have slumped 21.4% over the past six months and 44.4% year-to-date to close the trading session at $10.26. Continue reading "3 Meme Stocks to Avoid" →

AstraZeneca’s (AZN) Blockbuster Drug Pipeline

Posted on by The INO.com Team

Finding winners in the pharmaceutical sector is not an easy process. But it is potentially quite lucrative.

For the pharmaceutical companies themselves, the current environment for success is reminiscent of the Greek myth surrounding Sisyphus, whom the gods condemned to repeatedly roll a boulder up a hill—only to have it roll down again once he got it to the top—for all eternity.

Today’s pharmaceutical firms must use vast amounts of capital in search of a blockbuster drug, which can generate $1 billion or more in annual sales. But then, even when such a medicine is found, the benefits provided are fleeting: from the moment a drug makes it to market, the clock begins ticking on its patent exclusivity. Once this expires and generic copycats reach the market—typically within a decade or so—revenues for the original inevitably fall, and often quite rapidly.

Then, like Sisyphus, the companies climb the hill of developing blockbuster drugs again, investing anew in the whole risky and costly process of drug development.

If you are an investor in the sector, you want to focus on the companies that have drugs in their pipelines with blockbuster potential, as well as the funds necessary to propel them through several trial stages.

Since 2010, the global pharmaceutical sector has invested the equivalent of around one quarter of its revenues in drug development each year. The U.S. industry alone spent some $83 billion on R&D in 2019—when adjusted for inflation, that’s about 10 times what it spent in the 1980s!

So, which segments of the pharmaceutical industry (and which drug companies) are poised to come up with the next blockbuster drugs?

Precision Therapies

Recent advances in science are ushering in a new era of highly effective personalized medicines. So-called precision therapies are based on greater understanding of how diseases work on a molecular level. This translates to doctors being able to identify what treatments fit which patients, and why.

Precision therapies are tailored to fit specific groups of people. This means they will likely be highly effective. But can cutting-edge personalized medicines reach blockbuster drug status? The naysayers say the market size is too small…but they seem to forget that innovative drugs can command very high price tags.

Consider recent data from the drug price tracking service division of GoodRX (GDRX). It shows that, after 15 years on the market, the average drug with accelerated approval by the FDA underwent 15.4 price increases. Drugs subject to conventional approval saw 12.7 price increases in the same span of time.

Keeping an eye on the list of development-stage therapies expedited through the FDA’s approval processes can provide insight into which companies have potential blockbusters in the pipeline. Continue reading "AstraZeneca’s (AZN) Blockbuster Drug Pipeline" →

3 Stocks to Sell if You're Bearish on Crypto

Posted on by The INO.com Team

The largest cryptocurrency, Bitcoin, topped the $20,000 barrier on Friday on optimistic market sentiments about a possible drop in inflation numbers. The second largest crypto, Ether, also rose on Friday.

However, additional interest rate hikes will likely constrict the economy, which is expected to create pressure on the relatively riskier crypto market. Experts believe cryptocurrencies will continue a downtrend amid the volatile economic backdrop.

Moreover, digital currencies might face heightened regulations in the future. Gary Gensler, the current SEC chair, stated that the Commodity Futures Trading Commission (CFTC) needs greater authority to oversee and regulate crypto non-security tokens and related intermediaries.

Moreover, with the much-anticipated Ether merge expected to occur soon, the crypto market might experience more volatility. Hence, the blockchain stocks Block, Inc. (SQ), Coinbase Global, Inc. (COIN), and Riot Blockchain, Inc. (RIOT) might be best avoided now.

Block, Inc. (SQ)

SQ engages in the creation of tools that enable sellers to accept card payments and provides reporting and analytics and next-day settlement. The company also provides hardware products.

On July 13, SQ subsidiary Afterpay and beauty retailer Sephora announced their partnership to enable customers to pay for U.S. beauty brands and products in four installments. However, the gains from this partnership might be stretched over a long period of time.

For the fiscal second quarter that ended June 30, SQ’s total net revenue decreased 5.9% year-over-year to $4.40 billion. Adjusted net income decreased 56.8% from the prior-year quarter to $110.74 million. Adjusted net income per share declined 63.3% from the same period the prior year to $0.18.

The consensus revenue estimate of $17.60 billion for the fiscal year 2022 indicates a 0.3% year-over-year decrease.

The stock has declined 70% over the past year and 54% year-to-date to close its last trading stock at $74.29. Continue reading "3 Stocks to Sell if You're Bearish on Crypto" →