Seth Goldstein, Morningstar Research Equity Analyst
Seth Goldstein, CFA, is an Equity Strategist, AM Resources, for Morningstar Research Services.
He covers agriculture, chemicals, lithium, ingredients, and electric vehicle companies on the resources team.
Mr. Goldstein is also the chair of Morningstar’s electric vehicle committee and is a member of Morningstar’s Economic Moat committee.
Before joining Morningstar in 2016, Mr. Goldstein was a senior financial analyst for Oasis Financial, and a financial analyst for Berkshire Hathaway Energy, and a field operations supervisor for the U.S. Census Bureau.
Prior to assuming the equity analyst role in 2017, Mr. Goldstein was an associate equity analyst covering the basic materials sector.
His previous financial analyst roles largely focused on mergers and acquisitions valuation.
Mr. Goldstein holds a bachelor’s degree in journalism from Ohio University’s Scripps School of Journalism. He also holds a Master of Business Administration, with a concentration in finance, from the University of Iowa’s Tippie College of Business. He also holds the Chartered Financial Analyst designation.
Seth Goldstein is a big believer in the value of Lithium mines.
“Lithium stocks are all significantly undervalued.
Albemarle (NYSE:ALB) is one of my top stock picks.
Albemarle is a dividend aristocrat and is in the S&P 500.
Albemarle has three of the lowest cost lithium resources already in production and should be well positioned to benefit from a lithium price rebound, as their lithium operations are still profitable, even at the lower prices of today.
Then if we look at agriculture, I like Corteva (NYSE:CTVA) and FMC Corp. (NYSE:FMC) as two of my top picks.
Corteva is probably the highest quality company in agriculture that I cover.
Their seeds business is number two to Bayer (OTCMKTS:BAYRY), and they are continuing to roll out their own proprietary genetically modified soybean seed, which is the first true challenger to Bayer (OTCMKTS:BAYRY) and Bayer-acquired Monsanto.
That sets Corteva as a formidable number two in the genetically modified seed market.
Corteva also has a very strong biological business. They’re the world leader in biologicals and are growing that business, benefiting from increased demand, as we discussed. They’re developing a very nice complementary crop chemicals business as well.
Similarly, FMC is a crop chemicals pure play.
They’re investing heavily in biologicals, but also developing products that have new modes of action to help farmers fight difficult to kill weeds, insects, and fungi.
We think those will be increasingly needed in the coming years.
That should lead their strong pipeline to generate revenue growth and profit growth that’s above industry rates.
Finally, I’d highlight Nutrien (NYSE:NTR) as another top agriculture pick.
They are, most notably, one of the largest potash producers in the world. Fertilizer prices hit record highs in 2022, when the Russia-Ukraine conflict started.
We think they’re at cyclical lows right now, especially potash.
And we think Nutrien, which has some of the lowest cost potash mines in the world, that creates the cost advantage.
They will benefit from higher potash prices in the years to come.”
Stephen Croskrey, CEO, Danimer Scientific, NYSE:DNMR
Stephen E. Croskrey has served as chief executive officer of Danimer Scientific, Inc. (NYSE:DNMR) and as a member of its board of directors since February 2016.
Mr. Croskrey is a business leader with over 30 years of experience in overseeing the strategic direction and operations of companies that manufacture and market a variety of products such as industrial lubricants, fibers, and law-enforcement gear.
From 1999 to 2005, Mr. Croskrey served as the president and chief executive officer of Armor Holdings Products, LLC, a major manufacturer of military, law enforcement, and personnel safety equipment.
Mr. Croskrey has also held senior executive positions at Allied Signal and Mobil Oil.
Mr. Croskrey received an MBA degree from the Kellogg School of Management at Northwestern University.
He also received a bachelor of science degree in Engineering from the United States Military Academy at West Point where he was also commissioned as an officer in the U.S. Army and served as a company commander, attaining the rank of captain during his six years of active duty.
Stephen Croskrey is delivering a new form of biodegradable plastic to the US food industry.
“We believe the Holy Grail of plastic to be PHA, which is polyhydroxyalkanoate.
PHA occurs in nature and the best way to explain it is what happens with trees.
The tree captures carbon from the sun and the atmosphere.
If a leaf falls from the tree, it dies.
There’s carbon in that leaf. The leaf will degrade and go away.
The process is due to a bacteria that changes the structure of the carbon in the leaf enzymatically to another form of carbon called PHA.
And then the bacteria basically eats the PHA.
It uses the PHA for its own metabolic processes, and so it’s nature’s natural recycling method of carbon.
The bacteria then releases carbon dioxide back into the atmosphere and water, and the leaf itself is gone.
We have replicated that process in an industrial facility through fermentation.
We feed vegetable oil to bacteria to kind of fatten them up.
Then we extract the PHA, because the bacteria store PHA in the cell wall just like humans would store fat.
We extract that PHA and that is the plastic resin.
You see how it will naturally degrade in the environment if it leaks into nature.
What we’re really solving for is plastic waste that escapes into nature.
There’s no other material on the market that can do that other than cellulose, usually in the form of paper.
But most paper in the world today is coated with plastic.
People don’t realize that.
PHA is a tremendous product when you’re concerned about plastic pollution.”
The specific end use cases are developing rapidly.
“Our business isn’t really driven specifically by consumer demand.
It’s really driven by the brand owners reacting to either consumer pressure or industry group pressure or legislative pressure and/or in some cases just wanting to do the right thing.
You know, when we landed Starbucks (NASD:SBUX), they never wanted to do a press release, and that was exactly what they told us: “We’re just doing the right thing, we don’t want to make a big deal of it.”
And so, if you think about what we sell, you know, the consumer isn’t going into a grocery store or a restaurant and trying to buy snack food packaging or a straw.
They want to buy a Pepsi or they want to buy Doritos, and so you don’t really market the materials to the consumer at this stage anyway.
You know, you’re right about the kind of uneducated viewpoint that bamboo is better than plastic and this is plastic, so there’s an education process.
But these big brands have sophisticated R&D teams and they understand polymers and they get what the consumer might not get.
I will tell you that the QSRs get plenty of feedback about paper straws.
Nobody likes paper straws.
I don’t really have to explain that.
When they trial our straw or when they roll it out, they get great feedback from their restaurant managers and up through the chain.
Everybody’s really excited about our version of a straw versus paper.
The fact that it goes away is really all they care about.
The consumer is not coming into the restaurant, pitching a fit because they got a plastic straw.
Especially in a drive-thru situation, they’re happy to have a straw that works.”
Get more detail on all of these stocks, and many others, exclusively in the new Construction, Chemicals and Waste Management Report.
Amanda Brock, CEO and President, Aris Water Solutions (ARIS)
Amanda Brock is the Chief Executive Officer and President of Aris Water Solutions, Inc., a leading produced water infrastructure and recycling company primarily focused on the Permian Basin which went public in October 2021.
Ms. Brock has been with Aris and its predecessor Solaris Water Midstream since 2017. She has spent her career focused on the global oil and gas, power, and water sectors.
Ms. Brock is originally from Mbabane, Swaziland, and grew up in Zimbabwe.
She completed her bachelor’s undergraduate degree at the University of Natal in South Africa and earned her Juris Doctor from Louisiana State University, where she was a member of the Law Review.
She is dedicated to responsible conservation and passionate about elephants, water and energy security.
“As we have built out our system and proven our capabilities, the industry has increasingly outsourced their produced water operations to us.
We are playing a major role in the sustainability efforts of the oil and gas industry.
We are now recycling at record levels, recently recycling over 500,000 barrels of water in a single day.
All these advancements help the industry achieve their sustainability targets by reducing their dependence on groundwater, as well as minimizing trucking — and the related carbon footprint — by moving their water to pipelines.”
This CEO contributes to the oil and gas industry by providing environmentally friendly water solutions at an economical justifiable price.
I think the trend in the industry right now is to be very disciplined in how you manage your capital program, and as a consequence, prioritizing your return to shareholders either through dividends or through buybacks.
We’ve seen a consistent message of capital discipline delivered by investors to our upstream customers and they’ve balanced their capital allocation strategies accordingly.
For us, it means steady investments by our customers throughout commodity price cycles with inventory lives that last multiple decades.
I think energy companies continue to focus on operating in a more sustainable manner.
You see it with the efforts on methane emissions and flaring and, on the water side, Chevron and ConocoPhillips have been very public with how we’ve helped them achieve over 85% recycled produced water blends for their completion water needs.
Andy Marsh, CEO, Plug Power (PLUG)
Andy Marsh joined Plug Power Inc. (NASDAQ:PLUG) as President and CEO in April 2008.
PLUG is a publicly traded independent world leader in providing hydrogen for fuel cell purposes.
“We built the first global liquid hydrogen plant using electrolyzers in Georgia, which produces 15 tons per day of hydrogen, which is equivalent to about 30,000 gallons of gasoline a day.
This serves about 25% of our customers’ needs.
While traditionally we were buying hydrogen from third-party players, companies like Lindy and Air Lakey, today we are able to produce approximately 30-35% of our hydrogen needs.
With our new hydrogen plant coming online in St. Gabriel’s, Louisiana in the fourth quarter, we’ll be able to reach almost 50% of our customers’ needs.”
This owned and operated source of Hydrogen will enable PLUG to pump up the volume significantly.
“PLUG makes our own electrolyzers.
The key component in electrolyzer plants are stacks, and we make our own based on a proprietary design that the Department of Energy — DOE — has stated that is the most efficient and best performing in the world.
We manufacture stacks in Rochester, New York, and do system integration of our electrolyzers all over the world.
Generally, I disagree with those who contend that stack electrolyzers are quite expensive.
When you really look at building a hydrogen plant, there are two ways that you could do it.
One is using traditional SMR technology, the other using electrolyzer technology.
The electrolyzer for a plant represents probably about 20%-25% of the system cost.
And today, electrolyzers are probably about 30%-40% higher than SMRs.
But as we scale up, I would expect by early 2028 that the cost of electrolyzers will be on par with SMRs.
On top of that, when you look at a total value, especially when you put tax credits into consideration, the cost to generate hydrogen will be very competitive.”
Stuart Rose, CEO, Rex American Resources (REX)
Stuart A. Rose was appointed Executive Chairman of the Board and Head of Corporate Development for REX American Resources Corp. in 2015. Mr. Rose had served as Chairman of the Board and Chief Executive Officer since the company’s incorporation in 1984 as a holding company.
REX has pivoted from retail television sales to the ethanol supply chain.
“I’ve been with the company since 1980.
We started out as a television, appliance and audio store basically, similar to, say, a Circuit City, but we served smaller markets.
That went along pretty well for about 25 years or so. Along the way, we invested in an energy project that was way more lucrative than the TV business was. And in the TV business, smaller towns were starting to slow up a little bit because of the Internet, warehouse clubs, Amazon, etc.
We made the decision to go full bore into alternative energy and that’s how we ended up in the ethanol business.
We’ve been in the ethanol business about 17 years now. And I’m still involved as the Executive Chairman, very much involved in the company, but Zafar Rizvi is the CEO and he primarily runs the ethanol business.”
Mr. Rose is pragmatic about the capital markets but has big plans for government sponsored carbon capture initiatives.
“We’re still not loved by the investment community.
But it’s interesting, I think the oil companies at one time did not really like the ethanol companies and competed with us in a very heavy-handed way and really didn’t like us.
Today, I think they’re much more our allies and the bigger competition is the electric car…We have possibilities of becoming a major player in carbon capture for other people.
That would be where I hope to have the growth in the next few years, along with, of course, expanding our One Earth ethanol plant.”
Get all the details in the complete interviews of these 3 CEOs as well as many others in the new and exclusive Wall Street Transcript Alternative Energy and Utilities Report.
Lori Keith, Director of Research at Parnassus Investments, LLC and Portfolio Manager of the Parnassus Mid Cap strategy
Artificial Intelligence is the powerful wave that will wash through the world’s leading economies in this next decade. These three portfolio managers pick the stocks they think will benefit most.
Lori Keith is the Director of Research at Parnassus Investments, LLC and Portfolio Manager of the Parnassus Mid Cap strategy.
She is responsible for portfolio management of the firm’s Mid Cap strategy and oversees sector research activities for the firm.
Ms. Keith joined Parnassus Investments in 2005 after serving as a Parnassus research intern.
Prior to joining Parnassus, she was Vice President of investment banking at Deloitte & Touche Corporate Finance LLC and a Senior Associate in Robertson Stephens & Company’s investment banking division.
Before that, she worked in the management consulting practice at Ernst & Young.
Ms. Keith received her bachelor’s degree in economics from the University of California, Los Angeles, and her MBA from Harvard Business School.
In her interview with the Wall Street Transcript, Ms. Keith develops her thesis for stock picks that will benefit from the Artificial Intelligence investment wave.
“…Our semiconductor holdings have benefited this year, as there’s been significant investment behind a lot of the AI applications, the large language models and semiconductor chips, and also as that has been heavily invested in by the hyperscale players, the system players, spending significant amounts of money to build out their own capabilities.
One particular type of company that we own within that space that’s directly benefited is the semiconductor equipment companies.
That would include names like KLA Corporation (NASDAQ:KLAC) and Lam Research Corporation (NASDAQ:LRCX).
Both of those provide essentially mission-critical equipment that’s needed to design, develop and manufacture this increasingly complex chip technology.
I’d say KLA has a little bit more of a niche in what’s called advanced inspection process control and yield management.
Specifically, they help the chip manufacturers, also known as fabs, to identify the defects in those highly complex chips before they go into production.
So this technology is extremely mission critical.
They have a very wide moat in the sense that they are one of the few players in the world that has the advanced technology that allows fabs to identify those defects and optimize production for manufacturers.
And they are ultimately benefiting as more and more semiconductor fabrication facilities are built.
As you may have seen, the CHIPS Act is funding new sites for semiconductor manufacturing in places like Arizona, Ohio and upstate New York.
Similarly, Europe has significant fiscal stimulus to fund new chip development activity and diversify that outside of Taiwan, where most is today.
Obviously, that continues to drive significant demand for additional equipment purchases from KLA.
Lam Research, another leading company in the semiconductor equipment space, is more focused on memory chips in terms of their specialty, but is also very much benefiting from robust demand for their specialized equipment, used increasingly for higher bandwidth memory chips to power large language models and AI applications.”
Jonathan Cofsky, CFA, Portfolio Manager on the Global Technology and Innovation Team at Janus Henderson Investors
Jonathan Cofsky, CFA, is a Portfolio Manager on the Global Technology and Innovation Team at Janus Henderson Investors, a position he has held since 2022.
He was previously an assistant portfolio manager.
Additionally, he is a Research Analyst and co-leads the firm’s Technology Sector Research Team.
Prior to joining Janus in 2014, Mr. Cofsky was at Sanford C. Bernstein for eight years, most recently as a vice president on the Institutional Investor IT hardware team.
While there, he also was a senior research associate on teams covering software, semiconductors, data networking equipment, aerospace, and defense.
Mr. Cofsky received a bachelor’s degree in economics from Dartmouth College. His top Artficial Intelligence stock picks also include ASML Holding.
“…The important thing is we’re really looking for innovation and that happens globally.
So, some of the best tech businesses over time, like an ASML (NASDAQ:ASML) or TSMC (NYSE:TSM), are not located in the U.S., and we want the ability for our fund holders to find the best technology companies wherever we can…a lot of the innovation starting with semiconductors, but also in software and internet is within the U.S, but you also have really innovative companies all around the world…
So, companies like ASML, which is in the Netherlands, Lam (NASDAQ:LRCX), KLA (NASDAQ:KLAC), Applied Materials (NASDAQ:AMAT) within the U.S., and there are other companies within Japan and Korea, and then TSMC, which is essentially where all the leading-edge chips that go into GPUs or smartphones are made.
And then on the software side, you have Cadence (NASDAQ:CDNS) and Synopsys (NASDAQ:SNPS), which are the two companies that have EDA — electronic design automation — software that allows you to build increasingly complex chips over time.”
Mr. Cofsky hones in on his top pick:
“I think ASML is a great example.
They essentially have natural monopoly in leading edge lithography.
So that’s how you use light to create chips.
And what they’ve done with things like extreme ultraviolet technology — EUV — machines is really taking the laws of physics to their extreme, and it allows you to make increasingly small chips.
And so that’s one example of a really special company. And no one else has been able to replicate what they do.”
Gus C. Zinn, CFA, Managing Director and Senior Portfolio Manager for the Ivy Science and Technology Team
Gus C. Zinn, CFA, is a Managing Director and Senior Portfolio Manager for Macquarie Asset Management’s Ivy Science and Technology Team, where he is responsible for making day-to-day investment decisions for the team’s strategy.
Mr. Zinn joined Ivy Investments in 1998 (Ivy Investments was acquired by Macquarie in 2021) and has served as Portfolio Manager for Ivy Investments since 2006.
He had served as Assistant Portfolio Manager for funds managed by Ivy Investments since July 2003, in addition to his duties as a Research Analyst.
Mr. Zinn earned a bachelor of science and a master of science in finance from the University of Wisconsin-Madison.
He holds the Chartered Financial Analyst designation.
“The AI deployment right now is really focused on sort of the plumbing and building out that infrastructure.
So obviously, Nvidia (NASDAQ:NVDA) is a large holding and that’s done particularly well.
We think Facebook or Meta (NASDAQ:META) is benefiting significantly through their advertising platform and implementing AI.
So, the AI trend is not just about the buildout.
We have a lot of companies that are benefiting from the buildout.
That’s in the semiconductor space, primarily Nvidia, Broadcom (NASDAQ:AVGO), TSMC (NYSE:TSM), semiconductor capital equipment.
The equipment to make these chips is important; we have large positions in Lam Research (NASDAQ:LRCX) and ASML (NASDAQ:ASML).
Micron (NASDAQ:MU) is another one that has done particularly well lately, as the memory content of these AI servers is significantly higher than a regular server.
We’re really levered to that buildout currently.
And I’d say that’s probably where, if you want to say overweight or whatever, is in that buildout of the plumbing.
There’s another kind of group of companies that are benefiting by implementing AI into their companies.
Meta stands out on that front, like I mentioned, and we’re looking for more of those currently, but we see the AI deployment in three phases.
One is the plumbing.
Two is the putting AI features in existing products like the Copilot for Microsoft (NASDAQ:MSFT) and the Microsoft Office Copilots.
We’ll see how those do over time.
Every company is obviously racing to put AI into their existing products.
And then I think there’s going to be a real exciting stage around new companies that come out that are built from the ground up to take advantage of AI.
Probably, those aren’t really public yet, but we’re expecting to see a huge wave of new companies come to market.
And I’m excited to find those opportunities.”
Artficial Intelligence is the next big stock pickers paradise. Get the complete interviews from these three professional portfolio managers and more, exclusively at the Wall Street Transcript.
Carrie Eglinton Manner, President and CEO, Orasure Technologies (NASDAQ:OSUR)
Carrie Eglinton Manner was named President and Chief Executive Officer of OraSure Technologies in June 2022 and brings more than 25 years of health care leadership and transformation expertise to the company.
Prior to joining OraSure, Ms. Eglinton Manner was Senior Vice President, Advanced & General Diagnostics Clinical Solutions, at Quest Diagnostics (NYSE: DGX).
In that role, she was responsible for bringing innovative diagnostic solutions to market in the areas of women’s health, neurology, oncology, cardiovascular, metabolic, endocrinology, infectious disease, and immunology testing services, as well as drug monitoring and toxicology.
She also led Quest’s pharmaceutical services, AmeriPath/Dermpath, and international businesses, as well as their molecular genetics team in pioneering next-generation sequencing innovation.
Prior to Quest Diagnostics, Ms. Eglinton Manner served for 20 years in a variety of leadership roles at GE Healthcare (NASDAQ: GEHC), a division of General Electric (GE).
A champion for inclusion and diversity, Ms. Eglinton Manner was co-chair for Quest’s African American Employee Business Network and GE’s Women’s Network.
Ms. Eglinton Manner received a B.S. degree in mechanical engineering from University of Notre Dame.
Ms. Manner is consolidating the manufacturing and testing sites for Orasure:
” The diagnostics business is based in the U.S., and it is where we are consolidating manufacturing.
We have a headquarters in the Lehigh Valley in Bethlehem, Pennsylvania, and that is both headquarters and our U.S. center of excellence — I should say global center of excellence in manufacturing.
Then, we’re the parent company of DNA Genotek, which is headquartered in Ottawa, Canada, which is that sample management solutions business that is about device collection and chemistry innovation, that allows collection remotely so that people can, like I said, collect samples and send them in.
So part Pennsylvania, part Ottawa, Canada…
Novosanis is about urine collection and the ability to do first-void volumetric urine collection, which is novel and fits within the scheme of how we want to collect samples remotely.
With Novosanis based in Belgium, what we decided was to consolidate that into our center of excellence in Ottawa, Canada.
So we had moved manufacturing of that into Canada last year, and it was really just a matter of time in terms of driving cost efficiency, process efficiency, and sample collection best practices across the business to then close out Belgium, which we’ve announced we will do by the end of this year.”
The COVID 19 global pandemic accelerated Orasure’s development of a world class automated testing platform.
“Building automation capabilities to address the pandemic need was a huge priority during COVID-19 and we built a state-of-the-art manufacturing facility in Bethlehem, Pennsylvania, that we opened in 2022.
It uses very advanced automation technologies and systems which have helped us improve quality and reduce the expense of scrap cost.
It’s helped us enable efficiencies across product lines more broadly because our COVID-19 test shares a platform, for example, with our HIV test.
And so, yes, we’ve used serving the pandemic in order to both create that automation and then translate it back into our portfolio to improve quality and consistency, reliability, while taking out the cost.
Both the site consolidation cost, because it’s allowed us to bring more of that manufacturing into our single facility in the U.S., and just the cost of having processes that were previously manual, which can now be done at high volume.
And it’s also allowing us to insource from Canadian manufacturers.
With our sample management solutions business in Ottawa, we were using third parties for manufacturing those devices.
What we’ve built in Pennsylvania is allowing us to bring that third-party contract manufacturing in-house, and leverage our resources there as well.
When we think about the best practice opportunities, it’s both taking cost out and leveraging capabilities we’ve built to more of our product line.”
Home testing is very relevant for sexually transmitted diseases that patients are reluctant to share with their physicians. Orasure innovation addresses this clinically relevant population.
“Our HIV oral fluid self-test is a hallmark test for us.
It’s the first FDA-cleared oral fluid self-test.
A program like the U.S. CDC’s Together TakeMeHome aims to address underserved populations in the U.S. and help them become aware of their HIV status, which is especially important and actionable since HIV is now preventable with PrEP and addressable with antiretroviral therapy.
The first year of that Together TakeMeHome program had tremendous results and examples where people who had been at risk for HIV now know their status, and now have a pathway to both prevent and/or treat infection, depending on the need.
So I think it’s more opportunities like that which COVID helped bring light to, for public and private partnership…
One of the other exciting partnerships that we shared was to distribute Diagnostics Direct’s test, which is the first FDA-cleared, CLIA-waived syphilis test.
Syphilis is a significant emerging-growth public health issue that happens to be right in that same opportunity to help serve underserved populations.
Many of those with HIV and HCV risk are at risk for syphilis infections.
Being able to partner with Diagnostics Direct to distribute their unique test — we’ve already launched it, we have first orders, we’ve shared that publicly and serve our customers in the U.S. with it — I think it’s just a great example of partnership.”
This innovation from Orasure is also feeding into the lucrative veterinary market.
“We are absolutely adding non-human segments, including animal health, and while those are small volumes today, they represent future growth opportunities.
They build on our scale, our discovery work that we can enable our customers to do in animal health.
Our line of products is in sample management solutions, our DNA Genotek line, which include all-in-one non-invasive kits for the collection, stabilization, and transportation of animal samples for diverse applications, including genetic analysis and microbiome analysis.
Regarding what types of animals, it’s all — barn, field, the clinic or home — we enable animal health through our devices and chemistries, which are uniquely simple, all-in-one, high-quality, and ensure that samples can be tested long after they were collected.
It’s just building onto our strength that we already have in human health.
We have good momentum, and animal health is small volume today, but lots of opportunity.”
To get the full 3,020 word interview with Carrie Eglinton Manner, President and Chief Executive Officer of OraSure Technologies, read it exclusively in the Wall Street Transcript.
Fair Isaac Corporation (NYSE:FICO) CEO Will Lansing
William Lansing is the Chief Executive Officer of Fair Isaac Corporation (NYSE:FICO).
Before joining FICO, Mr. Lansing served as CEO and president of InfoSpace, and also as CEO and President of ValueVision Media.
He was a partner at General Atlantic Partners, a global private equity firm.
Prior to his work at General Atlantic, Mr. Lansing was CEO of NBC Internet, an internet media company and as CEO of Fingerhut, a direct marketing company.
He has also held leadership positions at General Electric, Prodigy and McKinsey & Company.
Mr. Lansing has been on the board of directors of FICO since February 2006.
He also is on the global board of advisors for Operation Hope and the board of directors of SafeGraph.
He received a B.A. degree from Wesleyan University and a J.D. degree from Georgetown University.
He develops his thesis for continuing his company’s excellent stock market returns in this exclusive one on one interview with the Wall Street Transcript.
“[Fair Isaac Corporation (NYSE:FICO) was] founded in the 1950s by a mathematician and an engineer in California, who had this idea that you could apply analytics to data and make good decisions by doing that, make more precise decisions, more predictive decisions.
And so, they started this firm to do that.
And we were really kind of an analytics consulting firm for many years.
We quickly gravitated to financial services because the decisions there are high stakes decisions, they are money decisions, mortgages and auto loans, credit cards. And so, people were prepared to pay more for precision around those kinds of decisions.
So that’s where we focused.
We would build these scorecards for banks, individually — proprietary scorecards for the banks, where they could evaluate the creditworthiness of prospects based on a bunch of different factors. And so, we did this for decades.
There are really two sides of our business.
There’s a software side and the scores side.
So, I’ll take you down the scores track, and then we’ll talk about the software side.
In the 1980s, we partnered with one of the large credit bureaus, Equifax, and launched an industry-wide score.
This was a score available to any bank that was interested, and they could get the data from Equifax and the score from us, and that would inform their views about whether or not to lend money to a prospect.
Then we did the same thing with Experian and TransUnion, two other big credit bureaus, and we became the industry standard.
What happened was lenders really liked it.
They standardized on it because it was a very low-cost way to score a big population, and it met all the regulatory guidelines.
It’s objective, scientific, fair, unbiased, colorblind, gender neutral, and it had a lot of qualities from an analytic standpoint that tied with what the regulators were looking for. So that went pretty well.
And then what happened was the regulators said, this is a pretty good tool for us to understand how much risk the banks have.
So they started to ask for the FICO Score of various portfolios, and then when the banks would securitize their loans, they would sometimes sell their loans to investors downstream.
When they securitize the loans, the investors ask, what’s the creditworthiness of the loan that I’m buying?
And again, the FICO Score was a good objective metric for evaluating that.
The investors started to demand the FICO Score.
And so, we had interest from the lenders, from the regulators, and from the investors, and that combination of all those constituencies kind of established FICO as the industry standard in credit evaluation.
And then finally, we decided to get the consumer involved and we give FICO Scores for free to consumers.
Now, hundreds of millions of consumers get their FICO Score for free, either from their bank or directly from FICO.
So there’s a lot of demand for the FICO Score now and a lot of awareness about it. So that’s the scores side.
And now to the software side.
Back in the 1970s, the management of the company had this idea that they could get beyond just being an analytics consulting firm if they built software.
So, let’s take the intellectual property and build it into software, and then we can get higher margins and greater returns.
So they did that and we built software, again specifically for banks in originations, collections and recovery, credit line management, and fraud detection.
All the major issues that banks wrestle with the risk cycle, the credit risk cycle.
We had software that would solve those problems. And so, we became the industry standard for banks and for bank software.
And then about 12 years ago, we got focused on a path towards building a platform that a bank could use to interact with all of its consumer customers, and we call that FICO Platform, and it’s a decisioning platform.
It lets a bank — it could be a retailer, it could be anyone who has a consumer for a customer, but let’s just use banks, for example, because that’s where most of our business is today — it lets the bank take any data from any source and bring it into the decisioning engine in the platform and then apply the right analytics to answer some question.
The question could be, what do we offer this customer the next time they show up in a branch, or when they call into the call center, or if we’re making an outbound call, what should we offer them?
Or a text, or an email or whatever — whatever that interaction with the consumer is, our software helps the bank to optimize that.
And we’re best-in-class in that.
We have the world’s leading decisioning platform and it’s been adopted by almost half of the top 300 financial institutions globally, and we’re growing very rapidly, over 30% year over year, so it’s pretty popular.”
Fair Isaac Corporation (NYSE:FICO) CEO Will Lansing embraces the development of AI throughout the technology supply chain.
“AI is totally wrapped up with analytics.
I mean, machine learning, artificial intelligence, neural nets, it’s all part and parcel of the same kind of analytics challenge, which is: How do you apply analytics to make decisions, to predict things?
And we’ve been at the forefront of that for over 60 years.
In fact, we first got started with AI right around 1992 with our neural nets and machine learning for our fraud detection software.
And we have many patents in the area of AI and it absolutely is an important thing for our business and informs where we’re going.
We’re not big on hype, but we are big on solving problems for our customers.
And so, obviously, AI is a part of the analytics portfolio that we bring to our customers…
In the area of AI, we’re focused on making sure that we have what we call explainable AI and ethical AI.
We want to make sure that it’s not just a black box, but when you use it, you have to understand: What are the parameters?
What is the AI using to make its decisions?
How is it trained?
And we have some technology, some patented technology, for managing that…
We believe that the consumer should be empowered to make a lot of these decisions about where their data goes.
And so, for example, in the scores business, we’ve launched a score called UltraFICO.
What that does is, it lets consumers decide which of their information should be used for making a credit determination, and they can invite a lender to please look at my checking account.
Look how pristine my behavior is.
Look, I never overdraw.
Look, there’s my income showing up on a regular basis.
I’m a good credit risk. I’m responsible.
So our UltraFICO score is designed to put the consumer in the driver’s seat.”
To get more insight into the AI technology powering Fair Isaac Corporation (NYSE:FICO), read the entire 3,284 interview with Will Lansing, CEO, exclusively in the Wall Street Transcript.
Arbe Robotics Ltd. (NASDAQ:ARBE) CEO and co-founder Kobi Marenko
Kobi Marenko is Chief Executive Officer, Co-Founder and Director of Arbe Robotics Ltd. (NASDAQ:ARBE). An entrepreneur with over 20 years of experience in leading technology and media startups from seed stage to acquisition.
Mr. Marenko was the Founder and President of Taptica, a mobile DSP listed on the London Stock Exchange and acquired by Tremor International, and Founder and CEO of Logia, a mobile content platform acquired by Mandalay Digital.
Mr. Marenko holds a B.A. in Philosophy from the Tel Aviv University.
Arbe Robotics Ltd. (NASDAQ:ARBE) is at the cutting edge of enabling self driving vehicles.
“With this vision, we founded Arbe. I was the first investor in the company; we raised some seed money and built a prototype of a high-definition radar.
We decided to focus on the automotive industry, recognizing that delivery drones are still a long way from becoming mainstream and a viable business venture.
And although we originally planned to buy off-the-shelf RF chips and build our algorithms on existing processors like Nvidia, we quickly concluded that these RF chips didn’t have enough transmitting and receiving channels to solve the driver assist and autonomous driving challenge.
Further, processor chips on the market were not optimized for high channel count radar processing.
Instead, we decided to develop a dedicated processor and high channel count transmitting and receiving chips to provide the foundation for our proprietary algorithms.
With that decision we went from being a software company to being a semiconductor company that develops chips.
And not just chips, three chips — transmitter, receiver and processor — and the reference design for radar systems, all within the strict standards of the automotive industry.
At the time, there was no chip in the industry that met the rigorous qualifications demanded by automotive, both in terms of the qualification process and the level of faults allowable in order to proceed to production.
This was the ultramarathon that we began.
We raised upwards of $70 million overall as a private company.
Then, in October 2021, we merged into a SPAC and started trading under the symbol ARBE, raising another $100 million.
Last year, we raised a follow-on investment of $23 million, for a total of close to $200 million.
We are now in the final stages of bringing those three chips to full automotive production.
We currently have four Tier 1 customers: Magna, the largest North American Tier 1; HiRain, one of the largest Chinese ADAS Tier 1; Weifu, another significant Tier 1 in China; and Sensrad, a non-automotive radar house in Sweden that is designing radar solutions solely on the Arbe Chipset.
By the end of 2024, our Chinese Tier 1s will start serial production of next-gen radar systems based on our chipsets, and will launch a car in China with our product in 2025.
We are in the final stages of selection with around 10 leading European, U.S. and Japanese car companies to implement their hands-free driving software stack that will come to the market during late 2026/2027.”
The hardware/software stack from Arbe Robotics Ltd. (NASDAQ:ARBE) is almost unique.
“For the first quarter, I would say that the main highlight is the fact that a majority of the leading OEMs issued RFQs that validate Arbe’s approach.
Most are stating that high-definition radar based on a high channel count — exactly like what we are developing — is the only way to deliver safe hands-free driving.
In March, the Director of Radar and Radar Perception for Mercedes-Benz recognized the indispensability of a high-channel-count radar and said it loud and clear in a public conference:
The performance demands for ADAS radars necessitate an array of no fewer than 32×32 channels.
It is important to note that only two companies meet this requirement today — Arbe with a 48×48 channel array, and Mobileye with a 32×48 array.”
Arbe Robotics Ltd. (NASDAQ:ARBE) is at an interesting stage in its investment development.
“I think this year represents the first year that we are really in a position, in terms of the technology and the maturity of the product, to win contracts. We expect to start seeing those contracts come, and our basic expectation for this year is to win a few contracts with the leading OEMs.
From here, I believe that the main goal is to start shipping chips to customers in early 2025, and to reach breakeven and profitability in 2026. I believe that by the end of the decade we can be the leading player in next-generation radar.”
Get the complete interview with the CEO and co-founder of this innovative and productive semiconductor company, exclusively from the Wall Street Transcript.
POET Technologies Inc. (NASDAQ:POET) Chairman and CEO Surech Venkatesan
Dr. Suresh Venkatesan is the Chairman and CEO of POET Technologies.
He joined POET from GlobalFoundries, where he served most recently as Senior Vice President, Technology Development.
Prior to that, he led GlobalFoundries’ development and ramp of the 28nm node, was instrumental in the technology transfer and qualification of 14nm, and was responsible for the qualification and ramp up of multiple mainstream value-added technology nodes.
An industry veteran with over 22 years of experience in semiconductor technology development, Dr. Venkatesan has also held various leadership positions with Freescale Semiconductor.
He holds over 25 U.S. patents and has co-authored over 50 technical papers.
He holds a Bachelor of Technology degree in electrical engineering from the Indian Institute of Technology and Master of Science and Ph.D. degrees in electrical engineering from Purdue University.
“What POET does is make these optical transceiver products that enable this light-based communication to occur.
We’re not the first to make optical transceivers. Optical transceivers have been around for a long time, I’d say about 30 years.
But what we’re doing is transforming the way optical transceivers are manufactured.
The world of photonics hasn’t had significant innovations in manufacturing over its period of time, and what POET is trying to do is pioneer a concept that we call the semiconductorization of photonics.
We want photonics manufacturing to look like semiconductor manufacturing, which everybody is familiar with.
What we have developed is this Optical Interposer platform that enables photonics manufacturing to mimic semiconductor manufacturing, thereby bringing economies of scale, lower cost, lower form factor, and more tightly packed components to that world of photonics.
It’s been about five years for us to do the development, but it’s now increasingly clear that these kinds of manufacturing transformations in photonics are going to be essential to meet the needs of the AI segment that is growing like crazy.
The speed demands are intense, and conventional manufacturing techniques don’t come close to meeting this requirement or demand.
POET is one of very few companies that has developed a scalable manufacturing solution to address these growing needs.”
POET Technologies (NASDAQ:POET) is looking to crack the AI market through its top of the line speeds.
“I think the key highlight, from a product availability perspective, is that for the first time we’re now at the leading edge of technology in our company’s progression.
We’ve marched ourselves up from the 100 gigabits per second, and we were one of very few companies in March to demonstrate that our platform was capable of 1.6 terabit per second communication links.
That was a very important development for us that now allows us to get more premium eyes on our product, and we expect to be able to capitalize on that.
I think the big highlight over the past quarter or quarter and a half is driving the collaboration agreements that allow us to get to deploy cutting-edge products in the AI segment, showcasing the capability of our technology to be able to not just meet today’s demands, but to largely meet the demands for the next three to five years.
For our customers, they make an investment in our platform, but it’s an investment that takes them through multiple nodes of technology and multiple nodes of bandwidth increases, if you will, in these AI clusters.
So, that was really the big development for us. It was something that we’ve been wanting and working on for the past couple of years.
We’ve had some delays in our development, but I think we finally broke through, and we were able to showcase that over the past quarter, which was a very important milestone.”
Get the complete roadmap according to the CEO and Chairman of POET Technologies (NASDAQ:POET) in this 2,812 word interview, exclusively in the Wall Street Transcript.
Hans C. Mosesmann, Managing Director, Rosenblatt Securities
Nvidia (NASDAQ:NVDA) and Marvell (NASDAQ:MRVL) are buys and short Intel (NASDAQ:INTC) is the trade of the year according to Hans C. Mosesmann, Managing Director of Rosenblatt Securities Inc.
Prior to joining Rosenblatt Securities, where Mr. Mosesmann is a long-standing analyst, he was an electrical engineer who spent a decade working at the chipmakers Texas Instruments (NASDAQ:TXN) and Advanced Micro Devices before moving to Wall Street in 1996.
Mr. Mosesmann spent a decade at Raymond James & Associates, Inc. (NYSE: RJF) covering the semiconductor industry.
Prior to that, he worked as an equity analyst for several boutiques, including Needham & Company, LLC, Volpe Brown Whelan & Co. and Soundview Securities, as well as Prudential Securities.
Mr. Mosesmann holds a Bachelor of Science in electrical engineering from the University of Florida and an MBA in finance from Loyola University of Maryland.
His current recommended trade is long Nvidia (NASDAQ:NVDA) and Marvell (NASDAQ:MRVL) and short Intel (NASDAQ:INTC)
“Our favorite ideas, and they have been for some time, are Nvidia (NASDAQ:NVDA) and Marvell (NASDAQ:MRVL). We’ve been an extreme bear, if you will, on Intel, very focused on some of the structural problems that they have that the Street is just starting to internalize.”
The long term semiconductor equity analyst is a big Nvidia (NASDAQ:NVDA) bull:
“Nvidia, without a doubt, is at another level, and I think the valuation supports that. You can’t even consider them anymore as a semiconductor company. They’re something else. They’re bigger than that. They’re so powerful that it may be that nobody will ever be able to compete with them.
In order to compete with them, you probably need the entire industry to kind of coalesce and say, OK, we’re going to see if we can stop this. Because going with Nvidia, you really are marrying into a somewhat proprietary kind of platform and structure, and a lot of people don’t like that.
What you might end up seeing is something like we saw over the past 15 years or so with the smartphone market, where you’ve got a proprietary, very powerful and very strong technology roadmap with iPhone, and then you have an Android kind of open platform supported by the rest of the industry.
You have coexistence with those kinds of dynamics that look like they can play out here over time with the Nvidias of the world, as they do battle and collaborate with the Amazons (NASDAQ:AMZN) and Metas (NASDAQ:META) and Googles (NASDAQ:GOOG) of the world.
We’re big fans of how you look at AI — which is very, very early — as it migrates from the cloud, from training of modalities.
Nobody makes money training, you make money producing or going to an inference type of mode, and that’s going to happen more and more at the edge.
Not in the cloud, but between that smartphone or that PC that’s in your office or at home and the cloud.
So everything in between is going to have an AI presence. That includes industrial markets, IoT base stations, and so on.”
Get the complete picture of the AI semiconductor stock boom by reading the entire 2,337 interview, exclusively in the Wall Street Transcript.
PDS Biotechnology is a mid- to late-stage clinical development company working in the area of cancer immunotherapy, with a current focus on HPV-associated cancers.
Dr. Frank Bedu-Addo
Dr. Frank Bedu-Addo has served as president and CEO of PDS Biotechnology (NASDAQ:PDSB) since its inception in 2005. Dr. Bedu-Addo is a veteran biotech executive with experience successfully starting and growing biotechnology organizations.
As Vice President of Drug Development at KBI BioPharma, he oversaw all business and drug development operations. Before KBI, he successfully started and managed Cardinal Health’s East Coast biotechnology drug development operations. Prior, Dr. Bedu-Addo was an Associate Director at Akzo-Nobel, Senior Scientist at Elan (The Liposome Co.), and Principal Scientist at Schering-Plough.
He obtained his M.S. degree in chemical engineering and a Ph.D. in pharmaceutics from the University of Pittsburgh.
Dr. Bedu-Addo says that the cancer therapy they are developing attacks tumors from within.
“One of the ways that cancer thrives in the body is essentially by hiding from the immune system or building defense mechanisms against the immune system. That’s how the cancer continues to thrive and grow in bodies.
What we’re doing is training our immune system and reactivating it to specifically recognize and attack cancer. That’s what we mean by cancer immunotherapy. We have progressed over the last several years.
PDS Biotechnology became a publicly traded company approximately five years ago via a reverse merger with a company called Edge Therapeutics. Since we’ve had that merger and gone public, we’ve gone from having no Phase II human clinical trials to where we are today, where we are running approximately eight Phase II clinical trials, have completed one and are close to completing a second and then moving into the final stages of clinical development.
We have several collaborations. One is with the National Cancer Institute … Others include MD Anderson Cancer Center and the Mayo Clinic. At the National Cancer Institute, we’ve just completed one trial which was looking at all types of HPV-associated cancer.
So, you may know that head and neck cancer, for example, is growing quite significantly. Previously, head and neck cancer incidences were associated primarily with tobacco and alcohol use, and these are now on a steep decline.
However, HPV-associated head and neck cancers are on a steep incline in terms of those incidences increasing dramatically. Cervical cancer is also an HPV-driven cancer, as is anal cancer, vaginal and vulva cancers.”
Thus far, clinical trials have demonstrated encouraging results.
“The National Cancer Institute evaluated our technologies and our products in these cancers together in a clinical trial, demonstrating interesting results in patients who had previously failed initial treatment with chemotherapy and radiation.
Traditionally, those patients will be treated with a checkpoint inhibitor, like Keytruda and Opdivo. With these products, about 50% of these patients will live one year and beyond. At three years, the results drop to a 20% to 25% survival rate.
The trial with our products demonstrated a 75% survival rate at three years. Our proprietary drug combination appears to dramatically promote the survival of these patients.
What was also very interesting is that the NCI took the patients who had also failed traditional approaches with drugs like Keytruda and Opdivo, who traditionally would have about a three to four months survival after failing on all these available therapies.
In those patients, the NCI trial demonstrated that treatment with our triple combination of our IL-12 fused antibody drug conjugate PDS01ADC, Versamune HPV (formerly PDS0101) and an investigational immune checkpoint inhibitor extended survival from about three to four months to about 20 months.
These findings have been very important for PDS Biotechnology to understand how our technologies could potentially help these patients with advanced cancer.
The NCI is also conducting studies in advanced prostate cancer. The initial data from one of those trials was presented at a cytokines conference last year in November, which demonstrated good tolerability of that combination.
They’re combining our IL-12 fused antibody drug conjugate PDS01ADC with chemotherapy, which showed good survival in these patients. That trial is continuing. There’s another trial ongoing in Kaposi sarcoma, which is associated with HIV infection, looking at patients who failed standard therapies and treating them with PDS01ADC.”
Another trial, done in conjunction with MD Anderson Cancer Center, is focused on cervical cancer.
“Today, the standard of care for cervical cancer has been chemoradiotherapy, which has a high rate of recurrence. Even though chemoradiotherapy may work initially in high-risk patients, within six months to a year, patients with large, bulky tumors have a high rate of recurrence.
The team at MD Anderson has found using chemoradiotherapy in combination with Versamune HPV has led to a significantly reduced rate of recurrence to date in their study. At one year, there were no recurrences of the cancer and 100% of the patients responded to treatment.
It was a small population, initially eight patients. And they showed that seven out of the eight had complete elimination of the cancer and no recurrence during that one-year period of evaluation.
We are looking forward to giving updates on these trials as we go through the remainder of the year and in 2025.”
Dr. Bedu-Addo adds that the company’s platform technologies can be applied beyond HPV-associated cancers.
“HPV-associated cancers are really the proof of concept with these technology platforms.
We are now also branching out into the MUC1-related cancers, colon cancer, colorectal, breast, and ovarian cancers. Some ongoing studies at the National Cancer Institute are also looking at prostate cancer and liver cancer.
We are 100% focused today on getting the HPV cancer product to FDA approval, but due to our collaborations, we also have our partners working beyond HPV-associated cancer. So we can quickly bring all those pieces together and expand into a broad range of solid tumors.”
Learn more about the potential benefits of PDS Biotechnology Corp.’s approach to cancer immunotherapy in our exclusive interview.
Andrew Baum, M.D., Citi Research
Citi Research Health Care Analyst Andrew Baum, M.D., maintains a “buy” recommendation on GLP-1 drugmakers Novo Nordisk (NYSE:NVO) and Eli Lilly (NYSE:LLY) despite their lofty valuations.
Dr. Baum is the Global Head of Healthcare Research for Citi Research. Before joining Citi in 2011, he covered European Pharmaceuticals at Morgan Stanley for 14 years. Previous to that he was a U.K. Pharmaceuticals and Biotechnology analyst at Salomon Brothers.
Dr. Baum holds an M.A. degree in Physiological Sciences and an M.D. degree from Oxford University. He is a member of the American Heart Association, American Society of Oncology and the DIA. He is also a Fellow of the Royal Society of Medicine.
He says:
“The momentum remains very much with the two names, which are obesity plays and which have growth rates which have escaped the orbit of the rest of the pharma sector. And so, they are benchmarked more against tech stocks than they are against their pharma peers.
And the investor base reflects that as well. It’s heavily populated by generalists for those names, but less so for the other pharma names, much less so.
So, the two standout names for last year were the two incretin manufacturers, which address the diabetes, but particularly obesity, market, with phenomenal share price appreciation. And that pattern has extended into 2024. And the willingness of investors to continue to envisage ever greater peak sales of these forecasts is unabated.
So this is why you have stocks trading up to 40x times multiples compared to the rest of the sector, because of the expectation of growth and just the sheer size of the obese patient population, which, as you know, is somewhere between one and two, or one in three in the United States.”
Dr. Baum cites the effectiveness and safety record as factors behind the drugs’ rapid adoption.
“Well, these are without doubt the most effective and safest drugs for addressing obesity. And the magnitude of weight loss is 18% plus. And we are just at the beginning of the evolution of these drugs; not to become any more potent, but to be easier to dose, less frequent dosing required.
As well as in the future we may well have an adjunctive therapy which will increase the lean muscle mass at the same time as reducing body fat.
So when you think about the enormity of the public health issues which are attributed to obesity and just the magnitude of how many patients just simply struggle to control their weight — losing weight is one thing, but maintaining the weight once you’ve lost is another.
If you know anyone who’s ever been on a diet, these drugs are a sort of miracle cure. And this has been the case for the best part of 18 months. Media platforms are full of stories of individuals who have gone through miraculous weight loss.
What is as important, if not more important, is that these drugs have a history of being used extensively in diabetics, particularly the Novo Nordisk (NYSE:NVO) drug, for the last 13 years. So, unusually, we have a very long and very large database to provide reassurance on safety.
And given some of the historic obesity drugs of many years ago, where there was a combination of amphetamines called the Fen-Phen diet, very, very effective drugs, but they caused cardiac toxicities. Here, we don’t have this concern because it’s been in millions of patients over a prolonged period. So that’s the first thing that’s different about these drugs.
The second thing, which is as important, is that as well as causing very significant weight reduction and weight maintenance, there has been a stream of positive outcome data for these drugs showing there’s a 20% reduction in the risk of having a heart attack if you’ve already had an event previously, a reduction in the rate of chronic kidney disease. We’re also anticipating similar reductions in diseases such as sleep apnea.
So not only you are getting the cosmetic benefit of patients achieving a goal they’ve sometimes striven for years, but you’re getting very, very significant health benefits.”
Dr. Baum notes that the market has already priced in the potentially wide-ranging impacts of the drug class.
“And the question is, how big is that market ultimately going to be? And today, probably these stocks are pricing in $160 billion in peak sales for diabetes and obesity combined, with the bulk of that being obesity. But it could be double that or more. And the question is, why is that not going to happen? And this really is going to determine the future share price trajectory.
But obviously, when you’re trading on that type of multiple and when the stocks are already discounting a forecast for peak sales which is a multiple of anything in history, obviously you have to be very thoughtful about potential risk to those revenues.
So the two incumbents and market leaders are Novo and Eli Lilly (NYSE:LLY). And if you look at the share price, that’s all you need to know in terms of how effectively the market’s priced it in. And both of them are actively developing the next generation of weight loss and weight maintenance drugs, and in some cases muscle-building drugs in order to continue the lead they have, compared to the competition.
Of course, when you have a market of that size, everyone wants in. And so, there is no shortage of competitors to those companies that currently do not yet have an approved agents, but who are pushing drugs as fast as they can through the clinic, either because they potentially can be dosed less often — so that would be a drug like Amgen (NASDAQ:AMGN); they have a drug that can be dosed once a month, maybe once every two months, maybe less frequently than that, as opposed to once every week. So that’s their play.
And then you have other companies who are developing therapies on the basis of more effective, so greater, faster weight loss. And then you have other companies who are prosecuting the muscle build.
But there are other dimensions to go down, because there’s a whole pack of competition from both pharma and biotech to try and get a slice of this very substantial market opportunity.
We have ‘buys’ on both Lilly and Novo. The valuation makes you somewhat hesitant, but because we’re sort of at the beginning of a cycle, we think there’s risk in stepping away too early. So both those two names with the obesity drugs are very much on our “buy” list. But they’re not at the top.”
Outside of the weight loss arena, Dr. Baum continues to like Merck.
“The name that we added to our most preferred major at the beginning of 2024 is Merck (NYSE:MRK), which is a name that we liked last year. They had a stream of earnings beats on the quarters, they’ve done some great business development, but yet the stock underperformed; it was fairly unremarkable.
And I think a key reason for that is Lilly and Novo have been sucking in all the capital that was going into pharma names, meaning that great stories like Merck just weren’t getting the share price that they truly warranted, given the data and the financials they were delivering.
So, since that time, Merck has received attention from investors and has had a very nice period of share price appreciation. And I think it’s set to continue. It’s not a play on the incretins, the drugs that address obesity and diabetes. Instead, it’s a call on their ability to manage their way through what is going to be the single biggest patent expiration of a single pharmaceutical product, which is Keytruda.
And the market’s been fearful that this drug, which will have peak sales of $35 billion or so, will prove very difficult for Merck to sustain revenues. And then to even accelerate out of that, because of the enormity and the profitability of that drug.
But Merck has been very creative and dynamic in their business development and portfolio management. That makes us confident at least they’re going to be able to manage their way through.”
Read more of Dr. Baum’s views on the large cap pharma sector, exclusively in The Wall Street Transcript.
