Jay Vleeschhouwer is Managing Director, Software Research at Griffin Securities
Autodesk (NASDAQ:ADSK) is just one stock favored by Jay Vleeschhouwer, Managing Director of Software Research at Griffin Securities.
Mr. Vleeschhouwer has over 40 years of research analyst experience in the technology sector, including software, computer hardware and imaging technology.
He formerly was senior analyst at Merrill Lynch, Josephthal Lyon & Ross, Bear Stearns, and Cantor Fitzgerald.
He was ranked by Refinitiv Starmine Analyst Awards (U.S.) #1 in “top stock pickers.”
Mr. Vleeschhouwer received a B.A. degree in economics and political science from UCLA and an MBA degree from the University of California, Berkeley.
“I cover what is referred to as engineering and enterprise software.
In enterprise software, that would include Adobe (NASDAQ:ADBE) and Microsoft (NASDAQ:MSFT).
And under engineering software, which at times has also been referred to as technical software or industrial software, that would include a variety of companies whose products and services are used to design and engineer any number of industrial products, electronics and durable goods.
And the customer base for the companies that I cover, which I’ll name in a moment, would be in the automotive market, aerospace, any number of industrial markets, and as well the electronics and semiconductor markets.
The companies that I follow include Autodesk (NASDAQ:ADSK), Ansys (NASDAQ:ANSS), Dassault Systemes (OTCMKTS:DASTY), PTC (NASDAQ:PTC) — formerly known as Parametric, Altair (NASDAQ:ALTR) and Bentley Systems (NASDAQ:BSY). And I should also mention Cadence Design (NASDAQ:CDNS) and Synopsys (NASDAQ:SNPS).
And over time, a number of the companies we have followed have been acquired…
The companies that I follow are generally funded from their customers’ R&D and engineering budgets.
And those, by and large, remained quite stable. In fact, in some cases, as we’ve seen in the semiconductor industry, they have increased substantially in the last number of years.”
Autodesk (NASDAQ:ADSK) is most clearly affected by the current rapid expansion of US production plants.
“On the first topic you mentioned, which is onshoring, one example of how that would affect our companies is the design and construction of the manufacturing facilities themselves.
Some of the companies that we follow provide software that is used, in fact, in architecture and engineering and construction activities — known as AEC for short.
The leading company that would come to mind for that would be Autodesk (NASDAQ:ADSK).
To the extent that there is commercial construction activity of that kind, new factories, new battery factories or anything of that kind to support the onshoring activity, some of our companies would stand to benefit from that construction activity.
Later on, once the factories are up and running, again, our companies don’t get paid for how many widgets are produced in those factories.
But the products that would ultimately be made in those factories have to be designed and engineered, of course. And that then brings us back to the companies that we follow.
I think another very topical example of that would be what’s going on with the construction of new semiconductor fabrication facilities by, for example, Intel (NASDAQ:INTC) and TSMC (NYSE:TSM).
Sooner or later, those fabs will be up and running and the semiconductor companies want to utilize those as much as possible.
And that in turn will depend in part on the chips that are designed — and which need to be produced — through those facilities.
In many ways, the design and engineering of not only production facilities, but the products that flow through those facilities can be considered a kind of arms race.
And our companies provide the tools for the competition and product strategy requirements of their customers.
And inasmuch as our companies are in a relatively concentrated industry, that is to say there’s a small number of leading companies that comprise the industry rather than a large number of small companies, we have a fairly concentrated set of companies that then, again, is a very healthy situation, I think, in terms of growth, pricing power, operating margins and cash flow.”
Autodesk (NASDAQ:ADSK) is not the only stock this award winning analyst is pursuing
“In many ways, the companies that we follow — not all, but many — either are developing their own AI for their own purposes, for their own commercial applications.
Microsoft and Adobe certainly stand out in that respect.
A number of other companies have also begun to embed AI capabilities to enhance the productivity of their own products.
And at the same time, a number of our company’s products that they make available to their customers, in turn, enable AI.
So, for example, I mentioned earlier that we follow a number of companies in what’s known as electronic design automation — or EDA for short — Cadence and Synopsys being the two largest companies in that area.
And in addition to embedding AI features in their own software, their software is used by their customers to design AI chips, like NVIDIA (NASDAQ:NVDA), for example.
And then those new chips, in turn, enable more AI.
It becomes this cyclical process, where the software from our companies enables their customers among the semiconductor companies to design better and faster chips generally, but also AI-specific chips.
We see this from Microsoft, for example. In turn, those dedicated processors enable the consumption of more AI functionality and applications. And so, this builds upon itself.”
This recursive investment scenario benefits Autodesk (NASDAQ:ADSK) as well as NVIDIA (NASDAQ:NVDA).
“So, absolutely, our companies are going to be both enabling AI by their customers and offering it commercially within their own software…
Software, by nature, is a high margin business.
There are virtually no production costs associated with software.
There is, of course, the cost of development and the cost of sales and marketing.
But the gross margin on software is typically going to be very, very high.
The way you get operating margin improvement, obviously, is to leverage your R&D spending, your sales spending through faster revenue growth, expanding your markets, and so forth.
Those are all kinds of generic considerations.
But also, you want to think about their end-markets.
When you think about what’s going on in the automotive industry and the new developments there, new kinds of vehicles, new kinds of battery technology, all of that is going to be a tailwind for our companies.”
To get the full 3,289 word interview with the #1 Starmine Analyst Award winner Jay Vleeschhouwer, read it exclusively in the Wall Street Transcript.
Jay Vleeschhouwer, Managing Director – Software Research, Griffin Securities
e-mail: info@griffinsecurities.com
Thomas H. Forester, Chief Investment Officer, Forester Capital Management
Travelers (NYSE:TRV) is a top portfolio pick from this experienced professional value investor.
Thomas H. Forester, CFA, is the Chief Investment Officer of Forester Capital Management, Ltd. Previously, he managed over $1.4 billion for Scudder Investments, investing in value stocks at the firm’s Dreman Value Advisors.
Prior to that, Mr. Forester managed assets at Peregrine Capital Management and Thomas White International.
He received a B.A. in economics from the University of Colorado and an MBA from the Kellogg School of Management at Northwestern University.
This highly experienced portfolio manager picks Travelers (NYSE:TRV) as a safe bet for today’s market.
“One of the companies that we own is Travelers (NYSE:TRV).
And again, this is another long-term holding. Travelers (NYSE:TRV) is a property/casualty company, largely selling to businesses and institutions.
They’ve done a very good job of being able to choose the customers that they have — to watch the rates that they charge these customers.
They’re looking at profitability, so they’re not going to just take on anybody. They want to find that good mix of acceptable risk and good premium.
So there’s a recipe to that, and each insurance company has their own recipe.
Travelers (NYSE:TRV) has been very good at watching the profitability of the policies that they retain. And it’s more of an art than it is a science, but they’ve done a very good job of managing that.
Their investment portfolio is conservative, and their loss ratios are good.
So it’s a solid insurance company that has grown steadily along.
It hasn’t seen the ups and downs that the banking industry has had.
We like that.
It’s done well over the years, and we think it’s a stock that’s going to stay in our portfolio for quite some time.”
Chief Investment Officer Thomas H. Forester cautions investors on tech names.
“We do have some tech names, though we’re underweight tech.
Oracle (NYSE:ORCL) is one name that we still like.
And we like the software names.
We recently sold Microsoft (NASDAQ:MSFT), and that was a valuation issue — that it’s just gotten just too expensive.
We originally bought Microsoft at like $12 way back in 2009 or something like that when everyone said it was dead. So we made quite a bit on that.
Oracle is a software company.
It makes the kind of software that runs companies’ businesses.
It’s a subscription model, so you’ve got recurring revenues.
Their issue has been one of growth.
But they’ve been able to either raise prices or find new customers and continue to have some growth. And it’s all recurring, so it’s pretty steady.
And we think that even in a recession their business will not get hit nearly as much as, say, the hardware makers.
And you’re seeing companies right now, whether it’s Micron (NASDAQ:MU) or even HP (NYSE:HPE), a lot of these companies, when you hit a recession, when things start going down, they actually start losing money.
We don’t think a company like Oracle will see that sort of thing.
They’re not as operationally leveraged as a manufacturer would be, like a Hewlett Packard or a Micron that makes DRAM.
You can see these companies that are cyclical, when you do hit a recession, you end up seeing them go from making a couple bucks a share to losing a couple bucks a share.
And if something like that were to continue for a few years, you start wondering about the viability of a company like that.
As value managers, we don’t want to be in that kind of a situation.
We like the fact that Oracle has recurring revenues, recurring customers.
So a company like that is something that’s conservative and fits into our portfolio and the types of things that we look at.”
While Travelers (NYSE:TRV) is a current buy for this highly experienced Chief Investment Officer, he warns investors about today’s market.
“Be cautious right now.
Find something that has solid earnings, a solid balance sheet, something that if they need to weather a storm, they can.
That’s not going to work every day, every week, but we think over the longer run that that will work tremendously well.
We’re concerned about the economy here.
Who knows where the economy is going to go.
But if you look at the money supply, M2 — M2 growth has been negative the last, I don’t know, 11 months, something like that.
Generally, that means that you’re heading for a recession or in one.
We’re going to put out a piece next week — we do a quarterly piece — and one thing I was looking at was, whether it’s truck loads and rail loads, the growth there has gotten negative as well.
And that’s just not something you generally see in a healthy economy.
If you look at the leading indicators, those have been predicting a recession for a while now.
So we’ll see if we actually get one.
But we think this is a time to be cautious.
We’ll see where things play out.
But if you look at the Federal Reserve, for example, the Fed has been pumping money into the economy since 2009.
And every time that they try to pull back from it, they can’t do it; they can’t finish the program.
So they’ve printed $8 trillion, $9 trillion.
And every time they try to take that off, it lasts a few months. Then the market goes down a little bit and they have to jump back in.
We think that the Fed is in a difficult place right now because you have inflation.
So, in general, they’re supposed to be fighting that. People get very upset about runaway inflation, so the Fed needs to protect against that.
At the same time, it’s concerned about the stock market and the banking system.
And so, the banking system says, flood everything with money. But inflation says, “Oh, you better stop flooding everything with money.”
So they’re in a little bit of a predicament.
We think the tea leaves are concerning us about going into a recession right now. And we’ll just see over the next six months to a year.
We’ll see how things look at the end of the year.
But there are a lot of concerns out there. So we would suggest people be cautious at this time.
Obviously, our approach that has downside protection to it, we think, fits in quite well in these sorts of markets. And we also think this could be going on for quite some time, but we’ll see…
However, we also think — and look forward to — when there finally is capitulation in the market and when things get cheap and values go down like they did in 2008 that our hedging will stop, and we look forward to going long the market at that point and maybe even leveraged long.
So we look forward to those days.
We just don’t think the valuations are there right now, and that’s why our hedges are on and that’s why we think that hedging is going to play a big part over the next few years.”
Get the complete portfolio picks from Chief Investment Officer Thomas H. Forester by reading the entire interview, only in the Wall Street Transcript.
Bryant VanCronkhite, CFA, CPA, managing director and senior portfolio manager, Allspring Global Investments
AerCap (NYSE:AER) and MasTec (NYSE:MTZ) are two of the top portfolio picks from Allspring Global Investments, the former Wells Fargo Asset Management.
The airplane leasing company and the clean energy industrial products company exemplify the “balance sheet” investing philosophy of the Allspring Global Invesments team.
Bryant VanCronkhite, CFA, CPA, is a managing director and senior portfolio manager for the Special Global Equity team at Allspring Global Investments.
Earlier, he was a mutual fund accountant for Strong Capital Management.
In this 3,608 word interview, exclusively with the Wall Street Transcript, Mr. VanCronkhite explains the unique investment decision making from the his team at Allspring Global Investments that lead to the AerCap (NYSE:AER) investment.
“Allspring Global Investments is the former Wells Fargo Asset Management.
About 18 months ago, the business was sold and we became an independent asset management firm offering an array of investment solutions with a mission to elevate investing to be worth more.
We have approximately $465 billion in assets under management spread among fixed income, money market, equity, stable value and multi-asset investment products.
We have about 1,300 employees including over 480 investment professionals. We have more than 20 offices across the globe…
The Special Global Equity team runs five strategies. The special mid cap value fund is our largest strategy, at just under $14 billion of assets under management.
The team has other strategies including a U.S. small cap value, U.S. mid cap value, U.S. large cap value, a global small cap and international small cap, all run by the same team with the same investment process in mind…
The investment philosophy was designed by Jim Tringas and myself, who are the team co-leaders. We built this philosophy with the idea that we have a very clear set of goals.
One, we want to deliver excess return versus our benchmarks and our peers.
Two, we want to have a very low risk profile while doing that.
And three, we want to be very consistent in order to make the path of outcomes less volatile for our clients.
In order to accomplish these goals, we felt it important that we first recognize that markets are relatively efficient. And if we’re going to achieve the goals including excess return, we have to identify a way where the market is inefficient and exploit that to ultimately create the value through stock selection.
One of the most important ways that we do that is by recognizing that the majority of investors spend their time analyzing the income statement, thinking about a historical perspective, revenues, margins and earnings, and extrapolate it forward to create a view of the future.
The market is very efficient at pricing historical events. The market can be very inefficient at times appreciating how a company can use a balance sheet to change the slope of the income statement in the future. And so, what we’re exploiting is the market’s unwillingness to properly price in the optionality of a company using their balance sheet in productive ways to create future value.”
One of our top holdings in the industrial sector is a company called AerCap (NYSE:AER). AerCap is the largest airplane leasing business in the world. Airplane leasing is done through passenger jets, but also planes for cargo. Anyone who is flying airplanes can either own the plane or lease the plane and AerCap is the largest player.
The competitive advantage here is really data and scale. Back in 2021, AerCap (NYSE:AER) completed the acquisition of GE Capital’s (NYSE:GE) air leasing business. Combined, the two businesses made AerCap the number one player.
It took place at a time when the market was very fearful. GE was going through a breakup of their assets. We were on the back end of a pandemic. And people were worried about air travel going back to its historical levels.
As a result, AerCap was able to buy those planes from GE, and that business from GE, at what we believe to be a very material discount to its fair value.
And so over time, as AerCap (NYSE:AER) goes through the normal course of business, replacing planes and selling them off at premiums, those sales should drive higher earnings and higher cash flow than currently priced in the market.
More importantly, on a run rate basis, being the largest player in the space, they have tremendous buying power, giving them access to new planes during a time when airplane production is remarkably low.
There isn’t enough supply to meet the demand for new planes.
Beyond that, their dataset of being the largest player allows them to have incredible insights on pricing. The key then is that it will help drive earnings and cash flow growth above what the market is expecting today.
And finally, this company is going to produce a significant amount of free cash flow over the next several years.
And as that free cash flow becomes available for use by flowing into the balance sheet, we think one of the key uses of that capital will be to buy back the shares from GE that GE received in the purchase of its business.
And as that happens, assuming the stock is still trading where it is today, which is well below book value, that should be highly accretive to the book value per share of AerCap and also likely generate meaningful increases in the earnings per share and free cash flow per share of business.”
Another example of the Allspring Global Investments style is MasTec (NYSE:MTZ).
“There is a company called MasTec (NYSE:MTZ). MasTec (NYSE:MTZ) helps build the infrastructure that drives the economy forward.
The Mas family founded this business.
Jose Mas, the CEO, has demonstrated incredible insights in how he uses capital to drive future value creation for investors. He uses acquisitions to push MasTec (NYSE:MTZ) in the crosshairs of where future growth is.
More recently, they spent capital buying companies in the clean energy space. They can become a key player in the installation of both solar and wind infrastructure equipment.
Beyond that, they’re a big player in the pipeline space for oil and gas — and increasingly for hydrogen.
They spend a fair amount of time installing wireless infrastructure for communications, including 5G exposure. And they also do a lot of transmission work as we build the grid and need to improve the grid’s stability.
Recent acquisitions came with projects that were poorly priced and thus have hurt margins in the near term.
But as we look forward, and when we start to price the value of the recent acquisitions into these more attractive spaces, we see margin expanding as poor projects work themselves through and as they gain market share.
The market still treats this company as a very cyclical stock.
We see demand being relatively visible given the important areas they are working in and the direct exposure to the key drivers of success for the U.S. economy over the next three, five and 10 years.”
Get the complete picture on the two top picks AerCap (NYSE:AER) and MasTec (NYSE:MTZ) as well as many others by reading the entire 3,608 word interview with the Allspring Global Investments portfolio manager, only in the Wall Street Transcript.
Extra Space Storage Inc. (NYSE:EXR) and National Storage Affiliates Trust (NYSE:NSA) are two companies that have created billions in shareholder value from storing the endless personal goods of Americans.
Two interviews, exclusive to the Wall Street Transcript, detail the process through which these storage entrepreneurs have built their businessess.
Joseph D. Margolis, Chief Executive Officer, Extra Space Storage (NYSE:EXR)
Joseph D. Margolis has served as the Chief Executive Officer of Extra Space Storage (NYSE:EXR) since January 1, 2017.
Previously, he served as the company’s Executive Vice President and Chief Investment Officer from July 2015 until December 31, 2016, and as a member of its board of directors from February 2005 until July 2015.
From 2011 until July 2015, Mr. Margolis also was Senior Managing Director and Partner at Penzance Properties, a vertically integrated owner, operator and developer of office and other properties in the Washington, D.C. metro area.
Previously, Mr. Margolis was a co-founding partner of Arsenal Real Estate Funds, a private real estate investment management firm, from 2004 through 2011; held senior positions from 1992 to 2004 at Prudential Real Estate Investors in portfolio management, capital markets and as General Counsel; worked for The Prudential Insurance Company of America as in-house real estate counsel from 1988 through 1992; was a real estate associate at the law firm of Nutter, McClennen & Fish from 1986 through 1988.
Mr. Margolis is a graduate of Harvard College and Columbia University School of Law.
His 2,916 word interview details how he built Extra Space Storage (NYSE:EXR).
“We were founded in 1977 by Ken Woolley, and storage was not a common or accepted product type at the time.
Between 1977 and 1998 he really put in his “10,000 hours,” if you’re familiar with that reference from Malcolm Gladwell, and he built stores, financed them, leased them, kept them clean, and sold them because he had to keep selling the last store to get the capital to build the next one.
By 1998 he was, I would say, an expert in the business, but he wanted to get off the treadmill of having to keep selling the last one to raise money to do the next one.
He realized to grow the company large, he needed two things: He needed capital and expertise.
Extra Space had 12 stores at the time.
So for capital, he did a venture with Prudential Real Estate Investors, and I think that was the first institutional money into self-storage.
For expertise, he partnered with a guy named Spencer Kirk, who had built a tech company in his garage out of college and grew it and took it public and took it international and sold it, so he had that experience of taking a dream to a big company.
And what’s interesting about that is bringing Spencer on really gave us our focus on technology, which has served us well over the years; it’s been part of our DNA.
As has partnerships, and the partnership with Prudential really started us down that road.
So, with the capital and expertise, Ken was able to grow the company large enough that, by 2004, it went public.
He did a major acquisition in 2005 of a company called Storage USA, which was four times larger than Extra Space Storage (NYSE:EXR) at the time, and that accelerated our growth.
In 2008, we started a third-party management business, which is now the largest and fastest growing in the country.
In 2016, we were added to the S&P 500.
End of 2020/beginning of 2021, we got investment-grade bond ratings from Moody’s and S&P.
We’ve grown from 12 stores in 1998 to 2,400 stores today, and we have the highest 10-year return of any storage REIT, and, frankly, any REIT over the past 10 years.
So it’s been a great ride and a great growth story…
We have, as I said, 2,400 stores, which is about 175 million square feet, or 1.6 million storage units.
We’re in 41 states and very broadly diversified, about 1,000 different cities. We’re about 60% in what we would consider primary markets, 30% secondary, 10% tertiary, and that’s a very purposeful portfolio design based on our research of how markets perform over different economic cycles.
What’s great about our portfolio, and storage in general, is that each individual investment is very small, it’s very bite sized, so we’re very granular.
We have 1.3 million tenants.
We’re in almost 1,000 cities.
No MSA contributes more than 13% of our same-store revenue.”
Extra Space Storage Inc. (NYSE:EXR) is just one example of a successful storage space story.
David Cramer, President and CEO of National Storage Affiliates Trust (NYSE:NSA)
David Cramer was appointed President and Chief Executive Officer of National Storage Affiliates Trust (NYSE:NSA) in April 2023.
Before assuming his current role, Mr. Cramer served as National Storage Affiliates Trust (NYSE:NSA)’s President and Chief Operating Officer since July 2022, and Executive Vice President and Chief Operating Officer from April 2020 to July 2022.
In addition, he has served as Chairman of NSA’s Best Practices Committee since its inception.
Mr. Cramer has more than 24 years of experience in the self-storage industry beginning in 1998, when he joined SecurCare Self Storage, the predecessor company to National Storage Affiliates Trust (NYSE:NSA).
At SecurCare he served as Director of Operations from 1998 to 2005, COO from 2005 to 2013, and President and CEO from 2013 to 2020.
Prior to joining SecurCare, he worked for Target (NYSE:TGT) for 12 years where he held several operational and managerial positions.
Mr. Cramer currently serves as a board member for the Storage Business Owners Alliance Tenant Insurance program.
In this 3,948 word interview, David Cramer develops the investment case for National Storage Affiliates Trust (NYSE:NSA) and demonstrates his ability to build a successful storage business.
“If you think about the private world, when you’re dealing with investment groups, there’s always some type of timeline when they want their money back, and so you’re recapitalizing or you’re selling properties or you’re doing something that doesn’t really fulfill the long-term growth goal that you’re trying to achieve.
We spent a lot of time building great operational teams, we were limited to the available industry platforms and we really wanted to continue with the business.
So we were having a lot of brainstorming sessions around, what is it we can develop, and what is it we can build that will give us this long-term sustainability with our portfolio and give us the growth and the tools we needed?
As we were having those conversations, we realized there were probably other people in the self-storage world that had the same problems we had, and so we got to thinking, is there a way to put together a group of operators who could get on common ground and bring their portfolios into a larger group and look to take our company public?
These other operators we’re talking about were in the same boat we were, where you don’t want to sell out, you love the business, you want to stay in the business.
Self-storage has been great to us.
And so we spent time thinking about a vehicle that would allow us to access the public markets and get a group of people to come together and build a better mousetrap. There had been nothing like this.
So, it was a long road of planning and organizing and asking ourselves how we could put this together, and Arlen really started the ball rolling, along with Tammy Fischer who came along early in this part of the NSA journey, and really built a great vehicle to allow us to bring regional operators together — people who had been in the industry a long time, had great histories, had great portfolios, had great teams, and really wanted to do more than what they were doing at the time, and we were able to form NSA.
We were just in New York for the 10-year anniversary of our formation in 2013, so that’s exciting, and we’ve had great success since we IPO’d in 2015.
We started with three founding Participating Regional Operators, or PROs as we call them. We’ve grown to a total of 12 PROs and brands through the years.
And National Storage Affiliates Trust (NYSE:NSA) has just had tremendous success post-IPO overall, in operational performance and platform improvements and the way this team has gotten together and had great best practices and really executed an external growth plan through adding new PROs and acquiring properties.”
The success of National Storage Affiliates Trust (NYSE:NSA) and Extra Space Storage Inc. (NYSE:EXR) demonstrate the ability of American entrepreneurs to develop, build, finance and scale interesting real estate niche businesses in the United States.
Be sure to read the complete interviews with these CEOs and CEOs from other real estate businesses, only in the Wall Street Transcript.
Jeffrey S. Edison, CEO, Phillips Edison & Company (NASDAQ:PECO)
Jeffrey S. Edison co-founded Phillips Edison & Company (NASDAQ:PECO) and has served as a Principal since 1995.
He currently serves as Chairman and Chief Executive Officer. From 1991 to 1995 he was employed by NationsBank’s South Charles Realty Corporation, serving as a Senior Vice President from 1993 until 1995 and as a Vice President from 1991 until 1993.
Mr. Edison was employed by Morgan Stanley Realty Incorporated from 1987 until 1990, and The Taubman Company from 1984 until 1987.
He serves on the Board of Trustees for the International Council of Shopping Centers (ICSC) and is also a board member of the Utah Chapter of The Nature Conservancy.
Mr. Edison received his bachelor’s degree in mathematics and economics from Colgate University in 1982, and a master’s degree in business administration from Harvard Business School in 1984.
His exclusive 2,512 word interview with the Wall Street Transcript reveals the strategic focus and discipline behind Phillips Edison & Company (NASDAQ:PECO).
“…We have approximately 300 shopping centers, and today we’re Kroger’s largest landlord and Publix’s second-largest landlord.
As you’d expect, our top 10 tenants — we refer to them as our neighbors — are grocers, and that is how we feel like we are in a very different niche than other players in retail real estate.
The average size of our centers is 115,000 square feet, so it’s typically made up of a grocery store of approximately 60,000 square feet, and the balance is smaller stores.
Those smaller stores are all focused on necessity-based goods and services with more than 70% of our rents coming from those retailers, which we think is a differentiator from other parts of the retail business…
What we’ve done over time, using the data that we have, is identified 5,800 shopping centers that have the number one or two grocer, are approximately 115,000 square feet, are necessity-based — and that’s what our acquisition target is.
That’s a really big market. If you think about that as about $30 million per property, you’re talking about an $18 billion market. In order to meet our goals, we only have to buy a very small piece of that pie.
So, we’ve identified a big market, but it represents a very specific niche within the overall retail business.”
Operating results are resilient in the face of economic uncertainty according to the Phillips Edison & Company, Inc. (NASDAQ:PECO) CEO:
“…We’re in about as good of an operating environment as we’ve ever been in.
We’re at the highest level of occupancy in our shopping centers that we’ve been in in the history of the company.
We’ve got market-leading leasing spreads, both on new leases and renewals, and we have a renewal rate that is the highest among our peers.
So we’re at a place where the operating side is really strong, which, obviously, is a really nice place to be.
We believe that there are some things happening that have given us the ability to be at this kind of operating level.
It starts with some tailwinds that are helping us, and that’s the suburbanization and movement out of the cities and into the suburbs, which brings more people out to our properties.
Working from home, people are closer to our properties more of the day than they have been historically.
There’s a buying local pattern that really supports our kind of shopping center, because 25% of our small stores are local, so we’re able to bring that local flair to the shopping centers near your home, and that has been a positive.
That’s all stuff that’s driven demand and driven retailers to want to be in our centers, and then there has just been very little new construction over the last 15 years in the shopping center business.
And so, when you combine those two — really good demand with very limited supply —that’s what has allowed us to have the kind of operating results that we’ve had.”
Floris van Dijkum, REIT equity analyst, Compass Point
Floris van Dijkum joined Compass Point Research and Trading, LLC in June 2019, bringing 30+ years of real estate investment, research and banking experience.
In his 4,407 word interview, Mr. van Dijkum reveals a real estate investment experience curve that completely justifies his decisions.
Prior to joining Compass Point, he started the REIT research effort at Boenning & Scattergood.
Before that, he started the global REIT investment platform at BlackRock (NYSE:BLK), where he served as COO and was responsible for a quarter of the U.S. portfolio.
Prior to BlackRock, Mr. van Dijkum worked in Europe where he served as Chief Investment Officer for Speymill Property in London, head of real estate banking at NIBC in the Netherlands, partner at Forum Partners, head of Lehman Brothers European real estate banking in London, and Senior European Real Estate Research Analyst at Morgan Stanley (NYSE:MS) in London.
Shopping center mall REITs such as Phillips Edison & Company, Inc. (NASDAQ:PECO) is one of the sweet spots for Compass Point.
“…We tend to be quality snobs when it comes to real estate and balance sheets.
The three specific REIT segments that we cover are the mall, shopping center, and hotel sectors, with 22 REIT names.
We tend to be differentiated, I believe, in our research approach. We’re more property specific, as each company owns real estate assets.
People forget that real estate actually is relatively simple.
Real estate is ultimately about supply and demand.
If you look at the mall sector, for example, we’re out of consensus in recommending A-rated mall owners.
We currently like the mall sector because of negative supply growth and rising tenant demand.
There were approximately 1,200 malls in the U.S. and we estimate 800 will ultimately survive.
The demise of the lower-quality malls tends to be slow due to the longer lease terms for larger tenants.
Ownership is highly concentrated as the top 350 malls are 80% owned by the four listed companies: Simon Property (NYSE:SPG), Macerich (NYSE:MAC), Brookfield (NYSE:BN) and Westfield, part of Unibail-Rodamco-Westfield (OTCMKTS:UNBLF).
Many people still believe that all malls are dead, but they are referring to the lower 400 malls that are largely irrelevant to the public companies.
Think about what the malls went through starting essentially in 2015, with the “retail Armageddon.”
When the cost of capital was near zero and retailers chased sales, as opposed to profits, investors worried e-commerce was going to put all physical retail stores out of business.
Malls got disproportionately impacted as there were too many lower-quality malls in the U.S.
Bearish investors cited that retail per capita in the U.S. is twice levels in Europe. Mall space is just a fraction of total retail space, as the vast majority of retail is open air.
Due to the discretionary nature and concentrated ownership by the public companies, mall stocks got punished as investors fretted about tenant demand.
Obviously during COVID, because malls were deemed non-essential by the government, mall tenants and owners got hit much harder than the open-air shopping center space which were deemed largely essential.
During the “retail Armageddon” and COVID, the retail and mall sectors experienced bifurcation between the good and the bad — this is where our property quality differentiation helped.
Post COVID, retailers realized they made their highest margins selling in the store and refocused their business to expanding their footprint in the locations where they achieved their highest sales density, the A-rated malls.
We were focused on better-quality malls and shopping center owners, particularly those with stronger balance sheets.
We’ve always had a very strong preference for the higher-quality assets, and those mall owners that survived are in fact thriving now due to the strong tenant demand growth and negative supply growth.
Mall owners experienced an approximate 30% NOI drop during COVID.
We expect that Simon, which is the largest mall owner in the world, and Tanger (NYSE:SKT), which is the pure-play outlet owner, will both reach 2019 levels of NOI by the end of 2023.
For open-air shopping center owners, NOI dropped as well because select tenants weren’t paying and restaurants were closed, but the decline wasn’t as severe as in the mall space.
Every shopping center REIT that we cover, and we cover 12 of them, had recovered to 2019 levels of NOI in 2022.
The sector was helped by grocery-anchored centers that proved resilient as consumers continued to buy their groceries.
Grocery-anchored shopping centers were deemed essential, so they were never shut.
Likewise, drugstores, banks, and quick service restaurants continued to operate during COVID. So that made it a lot easier for those tenants and those segments to survive.
Today, shopping center REITs are continuing to grow NOI as additional tenants take occupancy of their leased space and owners have above-average signed not open — SNO — pipelines.”
This confirmation by the Phillips Edison & Company (NASDAQ:PECO) is echoed by Alexander D. Goldfarb, a Managing Director and Senior Research Analyst at Piper Sandler (NYSE:PIPR).
Alexander D. Goldfarb, Managing Director, Senior Research Analyst, Piper Sandler.
Mr. Goldfarb’s 3,888 word interview also reveals a bias to the shopping center thesis.
Previously, he was a Managing Director and the Senior REIT Analyst in the research department of Sandler O’Neill + Partners, L.P.
Mr. Goldfarb joined the firm in 2009 following two years as a Director and Senior REIT Analyst at UBS.
The Piper Sandler REIT analyst also confirms the Phillips Edison & Company (NASDAQ:PECO) thesis.
“My point is, all of these businesses want space, and if you’re Starbucks you want any end cap you can get, because you want drive-thrus.
Drive-thrus are incredibly valuable right now.
It’s like when you have a birthday cake, everyone wants a corner.
In a shopping center, everyone wants an end cap, but there are only so many end caps to go around.
So what are the landlords doing? The landlords get creative and say, how can we create more drive-thrus? Is there space to build out in the parking lot? Can we reconfigure some of the buildings to allow for more drive-thrus?
The point is, those are more in demand.
What I’ve just described is a scenario where landlords are not short for demand, and they’re not long excess inventory of space, and that’s a wonderful position to be in.”
Get the complete interviews on all of these REIT specialists including the full Phillips Edison & Company (NASDAQ:PECO) interview with founder and CEO Jeffrey S. Edison, only in the Wall Street Transcript.
Jeffrey S. Edison, Chairman & CEO
Phillips Edison & Company, Inc.
11501 Northlake Drive, Cincinnati, OH 45249
(513) 554-1110
Eyepoint Pharmaceuticals (NASDAQ:EYPT), GeoVax Labs (NASDAQ:GOVX), Telesis Bio (NASDAQ:TBIO), Organovo Holdings (NASDAQ:ONVO), TRACON Pharmaceuticals (NASDAQ:TCON), and Abivax: exclusive interviews with the CEOs of these six biotech companies uncovers six different business strategies for investors to contemplate.
Nancy Lurker, Chief Executive Officer of Eyepoint Pharmaceuticals Inc. (NASDAQ:EYPT)
In this exclusive 2,965 word interview, this biotech CEO from Eyepoint Pharmaceuticals Inc. (NASDAQ:EYPT) emphasizes that the target market is worth billions.
Nancy Lurker has been the Chief Executive Officer of Eyepoint Pharmaceuticals Inc. since September 2016.
From 2008 to 2015, Ms. Lurker served as President and Chief Executive Officer and a director of PDI, Inc., a Nasdaq-listed health care commercialization company now named Interpace Diagnostics Group.
“EyePoint is an ophthalmology company focused on back-of-the-eye diseases; we call it retinal eye diseases. And most importantly, we have two Phase II studies ongoing right now in very high unmet need, very, very large areas.
Wet AMD is the first one and we’re on track right now to announce those results in December.
…Once you start treatment — and probably the average age at diagnosis oftentimes is in your 60s, you have to keep going into the doctor’s office every one, two or three months.
And it’s a real problem because patients just can’t do that forever. As a result, there’s an enormous treatment burden, plus these visits cost a lot in addition to the amount of time it takes.
Even so, Eylea is a $10 billion drug and Lucentis is a $5 billion drug.
There are also some biosimilars on the market recently launched that are also now available but they cost about 20% less then Eylea and Lucentis.
But the big problem is that none of them can get patients out longer than three, maximum four months, and that’s even for just a small segment of patients.
So our drug with our proven drug delivery technology, called DURASERT, can potentially get a majority of patients out to once-every-six-month dosing.
It’s a very, very tiny little bioerodible insert which combines our DURASERT drug delivery technology with an active ingredient ANTI-VEGF called vorolanib.
The tiny bioerodible insert is an injection into the back of the eye, otherwise known as an intravitreal injection which while no fun to have done, is certainly better than getting your eye injected every month or every other month.
And with this tiny bioerodible insert, our goal is to be able to get a majority of patients out to every six months before they need another injection of our tiny bioerodible insert.”
David A. Dodd, Chairman, President & CEO, GeoVax Labs (NASDAQ:GOVX)
In this 2,779 word exclusive interview, the CEO of GeoVox declares that the latest recapitalization of his publicly traded biotech company will be the best with a cure for advanced head and neck cancer.
David A. Dodd is Chairman, President & CEO of GeoVax Labs (NASDAQ:GOVX). He was named to the GeoVax board of directors in March 2010, was elected Chairman in January 2011, and in September 2018, Mr. Dodd was also appointed CEO of GeoVax.
“In 2020, the company successfully recapitalized and uplisted on Nasdaq at the end of September 2020.
This was followed by further capital development, in support of targeted strategic transactions which occurred in 2021, catapulting the company from preclinical status into having two programs in Phase II clinical development.
This includes a gene therapy, known as Gedeptin, initially being developed as therapy for patients with advanced head and neck cancers.
The initial portion of the Gedeptin Phase II trial is being funded by the FDA’s orphan drugs clinical trials program with the product, previously having received orphan drug status.
The other transaction brought to GeoVax a next-generation SARS-CoV-2/Covid-19 vaccine, GEO-CM04S1, currently in two Phase II clinical trials.
This vaccine is being developed to address patient populations for whom the current authorized COVID-19 vaccines appear to be inadequate, especially those patients with compromised immune systems as a result of either existing medical conditions such as various blood cancers or other conditions that deplete their immune systems from appropriately responding to the current authorized Covid-19 vaccines.
Whereas the current authorized vaccines primarily induce a strong antibody immune response, our vaccine is structured to induce both strong antibody and strong cellular immune responses. ”
Keith Murphy, Founder and Executive Chairman, Organovo Holdings (NASDAQ:ONVO)
An exclusive 4,517 word interview with CEO Keith Murphy explains the cutting edge clinical trial design for his biotech company.
Keith Murphy is Founder and Executive Chairman of Organovo Holdings (NASDAQ:ONVO), as well as the CEO and Chairman of Viscient Bio, Inc. He is also a serial entrepreneur and investor in biotech.
He co-invented the NovoGen MMX bioprinter platform and grew Organovo through early investments and pharma corporate partnerships.
“One good example would be because we’re using cells from individual patients, we can actually look at, let’s say, 100 different patients’ donated cells and understand what percentage of those patients a drug will work in, and if it doesn’t work in a set, identify that set.
Then, moving forward, you can say, well, I can design a better clinical trial because I know how to predict which patients this drug should work in.
When you think about the success rates of clinical trials, often you’re going to get a 30% response rate in a clinical trial. That means a 70% failure rate.
As long as placebo is 14% or 15%, you’re going to see a difference.
But what if you could see a 70% response rate?
You can take that group that normally doesn’t respond, reduce the numbers of that group, and reduce the whole trial size as a result.
Take yourself from designing a trial with either 3,000 patients so you could get 80% power, to 1,000 patients with 80% power, or from 1,000 patients with 80% power up to 1,000 patients, which you still need for safety, but with 95% power.
So there’s just a real opportunity to improve clinical trial design here.”
Todd R. Nelson, Ph.D., President and Chief Executive Officer, Telesis Bio (NASDAQ:TBIO)
An exclusive 2,385 word interview with this biotech CEO reveals a major partnership as a strategic linchpin.
Todd R. Nelson, Ph.D., has served as the President and Chief Executive Officer and a member of the board of directors of Telesis Bio (NASDAQ:TBIO) since July 2018.
Prior to joining the company, Dr. Nelson served as the Chief Executive Officer of several life science companies through expansive phases of financial and commercial growth.
“We signed an agreement with Pfizer in the fourth quarter of 2021 and announced our first successful milestone being complete during the fourth quarter of 2022.
The agreement with Pfizer is around a new and novel way that our company has developed to make DNA.
It’s called enzymatic DNA synthesis or EDS for short, and our particular brand for that is called SOLA.
It’s an innovative, new way to make DNA that allows customers to make it at benchtop without having to order from suppliers or wait to perform experiments.
The reason Pfizer wanted to partner with us is that this technology is the best available for building long genes very rapidly with very high fidelity.
If a gene is a sentence, one would want to make your sentences with as few typos as possible, which is one of the core strengths of the technology.
They’ll be using it for flu vaccines or COVID vaccines where the ability to rapidly iterate on the DNA template can lead to a more robust vaccine down the way.
Just anecdotally, flu vaccines, as an example, are 40%, 50%, 60% efficacious. But with mRNA vaccines, such as the one that Pfizer’s working on, that efficacy can go up significantly.”
Charles P. Theuer, M.D., President, Chief Executive Officer, TRACON Pharmaceuticals (NASDAQ:TCON)
This exclusive 2,940 word interview reveals a strategy based on a rare drug being developed for a severe disease.
Charles P. Theuer, M.D., has served as the President, Chief Executive Officer and a member of board of directors of TRACON Pharmaceuticals (NASDAQ:TCON) since July 2006.
From 2004 to 2006, Dr. Theuer was the Chief Medical Officer and Vice President of Clinical Development at TargeGen, Inc., a biotechnology company, where he led the development of small molecule kinase inhibitors in oncology, ophthalmology and cardiovascular disease.
“I’m the CEO and president at TRACON Pharmaceuticals.
TRACON is a late-stage developmental therapeutics company focused on oncology. And our lead program is a subcutaneous checkpoint inhibitor.
So this is a drug that works by a similar mechanism of action as drugs you’ve heard about that are marketed by, for instance, Merck, namely KEYTRUDA, and Bristol-Myers, namely OPDIVO.
We’re using a checkpoint inhibitor in a rare tumor called sarcoma that has a very high unmet medical need.
And we’re dosing it in a pivotal study, meaning a study that’s designed to provide the efficacy and safety data for a potential accelerated approval of the drug within the next two years.
We at TRACON have a unique business model as well.
We have a focus on developmental excellence in the sense that we run our own trials with our own team.
And by so doing and insourcing that activity, we run trials at much lower cost according to much faster timelines and also at higher quality than companies that typically will outsource their trials to a third party, namely what’s called a contract research organization.
That’s our unique business model that says develop therapeutics at lower cost and then faster than most other companies.
Our pipeline is also broad.
We have three other clinical-stage assets as well.”
Prof. Hartmut J. Ehrlich, M.D., Chief Executive Officer, Abivax
This 1,906 word interview focuses in on how an EU based biotech makes it into the lucrative US market.
Prof. Hartmut J. Ehrlich, M.D., is Chief Executive Officer of Abivax. Prof. Ehrlich is a physician with 30 years of experience in academia and in the biopharmaceutical industry, 20 of which were in product development at Baxter and Sandoz (now Novartis).
Didier Blondel is EVP, Chief Financial Officer and Board Secretary of Abivax. Mr. Blondel was Chief Financial Officer at Sanofi Pasteur MSD, a Lyon-based joint venture between Sanofi and Merck, and European leader in human vaccines, since 2012.
“Abivax was founded in late 2013 by Truffle Capital, a Parisian-based investment fund.
The management, together with the founders, set the objective right from the beginning to do an IPO at Euronext Paris within 18 months of the founding, which we actually accomplished in June 2015.
Today, Abivax is a late-stage biotech company with around 50 collaborators based at its headquarters in Paris and its research facilities in Montpellier, in France.
Our lead drug candidate, obefazimod, has generated promising results in Phase IIa and Phase IIb clinical trials for the treatment of ulcerative colitis, a chronic inflammatory bowel disease, and in a Phase IIa clinical trial in rheumatoid arthritis, another chronic inflammatory condition.
At present, the company is focusing on conducting its ongoing global Phase III clinical program with obefazimod for the treatment of ulcerative colitis.
This program consists of two induction trials followed by a single subsequent maintenance trial to confirm the long-term safety and efficacy of obefazimod in this indication.”
Get the full interviews as well as expert biotech stock evaluations by top biotech equity analysts only in the Wall Street Transcript.
Hartaj Singh, Managing Director and Senior Analyst, Biotechnology at Oppenheimer & Co. recommends Astria Therapeutics (NASDAQ:ATXS), Biomea (NASDAQ:BMEA) and Sarepta (NASDAQ:SRPT)
Hartaj Singh is Managing Director and Senior Analyst, Biotechnology at Oppenheimer & Co. Inc.
Earlier, Mr. Singh was Managing Director and Senior Biotechnology Analyst at BTIG Securities.
He began his sellside career at Lehman Brothers and subsequently moved to the buy side covering biotechnology at Visium Asset Management and Tecumseh Partners.
Mr. Singh has a B.A. in biology from Case Western Reserve University and also did graduate work in computational neurobiology. He received an MBA from Duke University’s Fuqua School of Business.
“Just over the last six, 12 months, Astria Therapeutics (NASDAQ:ATXS), a company where we’ve known the management team for six-plus years, had one product in Duchenne muscular dystrophy that did not work.
They turned around and brought in another development candidate in HAE — hereditary angioedema. And they just had really good Phase I/II data in late last year, where their stock really jumped on that data.
And this is a long-acting antibody.
Usually, drugs for HAE are given about once every one to two weeks.
This drug could be given once every three months and maybe even once every six months and really bring down HAE attacks. And the initial data looks very favorable. So this could fundamentally change the way patients are treated in that disease and give them their lives back — to be able to live like normal human beings or close to it.
And even though it’s very early data Phase I/II PKPD data, the stock really reacted well and has held up even after the company raised money from investors — ATXS has been an investment banking client for OPCO.
Another company, Biomea (NASDAQ:BMEA), which recently has had some good data — BMEA has also been an investment banking client for OPCO — this is a company that we started covering because I’ve personally known the management team for over 12 years.
They’re scientists and drug developers from Pharmacyclics, which was bought by AbbVie (NYSE:ABBV). And they are really interested in bringing molecules that make a fundamental difference in patients’ lives to the market.
BMEA has a small molecule approach where originally, a couple of years ago, they were viewed as a cancer company.
Then, all of a sudden, that same molecule has shown promise in diabetes.
The promise of this molecule in diabetes — that is, the theoretical, scientific promise — has been around for a couple of decades. Management has been able to execute on this promise.
They should have initial data on diabetes, essentially, in March. We just had the CEO on our conference call, and he was looking forward to the data, even though the trial is blinded.
And this is a drug that could change the paradigm for some patients with diabetes.
These are two small-cap names with great science, execution-focused management teams and either had a clinical catalyst or are on the verge of a material clinical catalyst.
The stocks definitely seem to be working.”
The third of the Astria Therapeutics (NASDAQ:ATXS), Biomea (NASDAQ:BMEA) and Sarepta (NASDAQ:SRPT) recommendations is a small cap biotech recommendation is actually promoted by a recent accounting rules change.
“About a year and a half year ago, the SEC put a rule into play that anytime there was licensing acquisition, broadly speaking, instead of the company capitalizing it onto their balance sheet as what’s called IPR&D — intellectual property research and development — they have to now run it through their adjusted non-GAAP P&L.
So what that meant is, if a company is buying or licensing a product, they’ve got to run it through a P&L, which means it hits earnings.
So that’s actually put a dampener on M&A, in our view.
For example, if larger-cap companies were thinking about buying a smaller company and we knew it would lead to a decrease in earnings of about 10% to 15% this year and next, would we be happy with that?
Probably not.
And a lot of larger-cap management teams are compensated on earnings growth.
So the M&A targets we’ve seen recently from large-cap companies are mostly two types: One is companies whose revenues outstrip earnings, so that they are not a drag on earnings to the larger company’s earnings.
Number two, you look at a company buying a smaller company that has revenues or is close to being breakeven in earnings.
So for example, when you look at Seattle Genetics (NASDAQ:SGEN). Pfizer (NYSE:PFE) is set to acquire Seattle Genetics, covered by my colleague Jay Olson.
And Pfizer probably said to itself, “We think we can take that product and really increase sales.” And the reason Pfizer likes SGEN is because that company is actually already generating sales and has negative earnings.
But Pfizer could generate enough sales to make SGEN’s products breakeven very, very easily.
So those are the kind of M&A targets we’re looking at. And if you think about it that way, for us, a clear one by that metric is Sarepta (NASDAQ:SRPT).
Roche (OTCMKTS:RHHBY) already has a big investment there.
And if SRPT’s gene therapy gets approved in the next few months, there’s probably a better than 50-50 chance that a company like Roche steps up and buys.”
The Oppenheimer & Co. expert analyst reminds investors that biotech remains an investment opportunity.
“Remember, the NBI Index is a $1 trillion market cap even after the recent downturn, last couple years, roughly.
These are close to 300 companies in the NBI index, and $1 trillion in market cap.
And so, I remind investors that an Apple is more than $1 trillion, a Google is more than $1 trillion, Microsoft is $1 to $2 trillion in market cap, each. And here you have approximately 300 companies that are $1 trillion roughly.
So 10 years from now, what do you think is the greater probability to go from one to $10 trillion?
One company at $1 trillion right now or 300-plus companies at $1 trillion, who are conducting fantastic science — and maybe not curing, but really dampening human diseases and even animal diseases.
Look at what Merck (NYSE:MRK) is doing with their animal division.
And increasing the quality of life and making humans live longer.
That’s a pretty great bet to take.
So I would just advise investors to pay more attention to biotech.
I think biotech is going to be the true generator of alpha this decade.”
Get the complete interview with Hartaj Singh detailing his Astria Therapeutics (NASDAQ:ATXS), Biomea (NASDAQ:BMEA) and Sarepta (NASDAQ:SRPT) recommendations and many others besides, in this most recent Biotech sector report from the Wall Street Transcript.
Biotech stock equity analysts see a mixed bag with a few highlights for 2023. This sort of pessimism is often a sign of a biotech stock sector bottom and investors could begin to build their biotech stock buy list now.
David Nierengarten, Ph.D., Managing Director and Head of Healthcare Equity Research, Wedbush Securities.
David Nierengarten, Ph.D., is Managing Director and Head of Healthcare Equity Research at Wedbush Securities and is a bioteck stock expert.
He mainly covers development-stage therapeutic companies. He began his career on the financial side of biotechnology at a venture capital firm that focused on early-stage therapeutic and medical device companies.
Additionally, prior to joining Wedbush, he worked in a clinical-stage, venture-backed biotechnology company, in business development and clinical trial operations.
He received his bachelor’s degree in biochemistry from the University of Wisconsin-Madison and his Ph.D. in molecular and cell biology from the University of California-Berkeley.
His biotech picks are embedded in a 2,903 word interview recently conducted at the Wall Street Transcript.
“In terms of the regulatory and other environment, what we’re watching is a continued, we think, shift back to maybe more normal, shall we say, for the FDA in terms of approval behavior and questions and CRLs for manufacturing defects and things like that that existed before the pandemic.
So people might say it’s more restrictive, but I think it’s a return to where we were for, frankly, most of the last decade, from 2011, 2012 to 2020.
And one last thing of note is, I think there’s a diminishing possibility that things like the Inflation Reduction Act will be modified or revoked in terms of the drug pricing.
And in fact, of course, the president is insisting on adding more drugs to the list in his next budget proposal, and I think that is playing out as I expected, which is the initial proposal that they would have price controls for only a few drugs, the biggest-selling drugs was, frankly, a lie.
The plan was to open it up there and to expand it to as many drugs as they felt like to try to balance the books for Medicare.
So that’s a net negative for the industry and will continue to be an overhang until or unless that changes because the push is definitely for lower prices on drugs and expanding it to encompass more of the industry.”
One of the more esoteric supply chain issues for the biotech industry is a a monkey shortage which has affected pre-clinical testing.
“The latest one is there’s a shortage of non-human primates for preclinical testing.
And no one would have guessed there’d be a monkey shortage, but there’s currently a monkey shortage, and hopefully that will work itself out over the next few months.”
M&A activity may be a harbinger of a biotech bottom.
“…You’ll be hearing about reverse mergers a lot more.
A reverse merger is when a private company essentially takes over a public company and acquires that public company’s cash balance and public listing.
So it’s a different way to go public.
And so, that’s been utilized in the past. It’s been utilized for a long time as a technique for private companies to go public different from an IPO.
There will be more of that happening over the next year or two because there are plenty of companies that have cash balances but not a lot of clinical programs.
They feel they’ve been unable to raise money and they’re essentially shell companies. And so, we will be seeing a lot more of these reverse mergers in the next year, year and a half, at least.
So that’s how Disc became public.
In terms of acquisitions of biotech companies, biopharma in particular, we’ve seen a bit of a tick up.
There were some out of the gate at the New Year. Of course, the biggest acquisition was last year, at the end of the year, when Amgen (NASDAQ:AMGN) bought Horizon Therapeutics (NASDAQ:HZNP).
But since the beginning of the year, there have been a few companies buying. And surprisingly a couple private companies getting bought by public companies.
So we’re seeing a little bit more of that because valuations are resetting on the private company side.
And then on the public company side, we saw Ipsen (OTCMKTS:IPSEY) buy Albireo, which is a decent-size acquisition.
And Sun Pharma (NSE:SUNPHARMA) bought Concert Pharmaceuticals, which is also a little unusual because not too many people saw Sun Pharma as an acquirer of companies.
Then, these private companies getting bought — like InstaDeep by BioNTech (NASDAQ:BNTX) and such.
So those have been some of the recent acquisitions.”
Matt Phipps, Ph.D., biotechnology analyst, William Blair & Co, L.L.C.
Matt Phipps, Ph.D., a biotech stock expert analyst, joined William Blair & Co, L.L.C. in November 2014, after working as a postdoctoral research fellow at Texas Scottish Rite Hospital for Children.
In the 2019 StarMine Analyst Awards from Refinitiv, Dr. Phipps was ranked the No. 1 earnings estimator in biotechnology and No. 3 across all industries.
Dr. Phipps earned a Ph.D. in cellular and molecular physiology from the University of Alabama at Birmingham and a B.S. in physics in medicine from the University of Notre Dame.
Biotech stock picks for 2023 are highlighted in his 3,858 word interview, exclusively in the Wall Street Transcript.
“…We first added two companies that were involved in what we call the bispecifics, and this is really in the immune-oncology space, but specifically looking at a type of antibody, or how they design an antibody to try to activate the immune system.
And so those companies were Genmab (NASDAQ:GMAB) and Janux (NASDAQ:JANX), and they’re very different in terms of stage of development and all that.
Genmab is clearly a leader in developing bispecifics, and just antibodies, more broadly.
They should be getting approval very soon for a bispecific to treat different types of lymphoma, and so have had success there.
The stock has rewarded them for that, but we are cautious on where consensus estimates sit at currently.
Janux, on the other hand, is earlier stage, but at the next-generation approach for these immune-oncology drugs that we call bispecifics.
And they recently got into clinics with their first two programs, and so will start to get data by the end of this year.
And we do see more upside potential, but of course there is still clinical risk for their next-generation approach.”
Biotech stock recommendations are often hedged with caveats but not this one:
“…Our top pick for this year is a company called Chinook Therapeutics (NASDAQ:KDNY).
We think they’re really well positioned and going to be a leader in a newer disease space — I say newer in the sense of therapies getting approved, not that the disease itself is new.
It’s called IgA nephropathy, and it’s IgAN for short.
It’s a rare but not ultra-rare kidney disease.
It affects younger people in their 20s and 30s, and it’s where you develop an autoimmune condition against your kidney.
And so, historically, patients had to be given steroids, corticosteroids, and the like.
And those are not well tolerated, have a lot of side effects that especially younger patients don’t want.
And so now we’re seeing a wave of innovation for bringing in new medicines that don’t carry the side effects of steroids and actually are probably much more effective at the same time.
So we’ve had two already receive FDA approval from competitors, but we think Chinook will have their first Phase III readout later this year, towards the end of this year.
And then also, they have a second program that’s complementary or additive to their first that’s entering Phase III trials.
So a combination of those two assets that makes them very well positioned in this space…
Their valuation is around $1.5 billion, maybe $1.3 billion. So it is a small-cap, but it’s not a tiny-cap. ”
This former Marine Colonel and Wall Street Journal “Best on the Street” analyst picks his 2023 biotech winners in a 2,145 word interview in the Wall Street Transcript.
Steve Brozak, Managing Partner and President, WBB Securities,
Steve Brozak is the Managing Partner and President of WBB Securities, LLC.
In 2013, Dr. Brozak was selected as a top analyst in the pharmaceuticals sector by the StarMine/Financial Times Industry Analyst Awards.
He also was named to The Wall Street Journal’s “Best on the Street” list in the category of medical equipment and supplies.
Earlier, this biotech stock expert worked in finance at Alex. Brown & Sons, Cowen & Company, Dean Witter and Salomon Brothers.
Dr. Brozak has written for Nature, The British Medical Journal and Brain Stimulation.
He is also a contributor to Forbes and ABC News.
He received a B.A. degree and an MBA from Columbia University and a Doctorate in Medical Humanities — DMH — from Drew University.
He served in the United States Marine Corps, retiring as a lieutenant colonel.
The ex-marine officer minces no words in his 2,145 word exclusive Wall Street Transcript interview regarding biotech and drug company stocks.
“Big Pharma is responding to rising costs by divestiture. Some pharmaceutical companies are now breaking apart so they can, “Get a leaner business model in a much more difficult environment.”
In other words, shed the losers and retain the winners. It is a response for CEOs or CFOs who can no longer announce sequential double-digit earnings increases based only on price increases rather than additional value.”
His bioteck stock pick is the owner of an anti-fungal treatment in desperate demand today.
“I believe Cidara Therapeutics (NASDAQ:CDTX) and its CEO, Jeff Stein, represent a prime example of the managerial resilience needed to succeed in biotech today.
Cidara developed a critically needed antifungal treatment from research to product candidate in a very short time.
The product, rezafungin, received an overwhelmingly positive vote from an FDA advisory panel and should receive positive approval from the FDA shortly.
But product approval does not always translate to product profitability.
Cidara took steps to maximize short-term revenue as soon as approval is granted by negotiating licensing agreements with companies like Melinta Therapeutics, which will market rezafungin in the U.S., and Mundipharma, which will sell rezafungin in all markets outside the U.S. and Japan.
These agreements are expected to provide Cidara with many years of resourcing for other programs like an influenza therapeutic platform, partnered with Janssen (NYSE:JNJ).
All of this, so they can resource and advance a next-generation immuno-oncology therapeutic platform.
These are examples of how biotechs will survive — by understanding their technology and understanding how to get revenue, even before a product is approved, with little additional investment or managerial time required.”
Get more top biotech stock picks from these award winning equity analysts and more, only in the Wall Street Transcript.
Richard Safran, Managing Director, Analyst, Seaport Research Partners
Titanium is the ultimate winner in the current expansion of the US economy according to these interviews with expert equity analysts.
One of the biggest titanium fans is Richard Safran, Managing Director and analyst at Seaport Research Partners.
He is an aerospace and defense equity research analyst and former aerospace engineer and program manager.
He started his professional career working at Northrop Grumman on the B-2 program, then on to business development and strategic planning, and later program management.
Richard was previously the aerospace and defense analyst at Goldman Sachs.
He graduated from the University of Buffalo and received an MBA from Columbia University.
In his 3,397 word interview, exclusively in the Wall Street Transcript, Mr. Safran details how the industrial and aerospace sector works for investors in the United States.
“…Aerospace and defense is really two distinct sectors masquerading as one.
So they move to a bit of a different drumbeat.
The small- or mid-cap guys tend to be suppliers to one or more of the major OEMs. Allegheny Technologies (NYSE:ATI), for example, provides metal that goes into both engines and airframes for both aerospace and defense.
Same for Hexcel (NYSE:HXL), they provide carbon fiber composites that go into aircraft and engines.
On the aerospace side, what’s happening with most aerospace suppliers right now is they are tied to Boeing (NYSE:BA) and Airbus’ (OTCMKTS:EADSY) backlog and they pretty much follow what happens with the companies.
In other words, if you’re more heavily dependent on the wide body, that’s only starting to recover because of Boeing’s issues on the B787. More dependent or more exposure to the narrow body, you’re doing a bit better because at Boeing at least, the MAX had an earlier recovery than the 787 did…
OEM and prime contractors like Boeing and Lockheed are at the top of the value chain.
Tier 1 suppliers are those that supply engines, like General Electric (NYSE:GE) or Pratt & Whitney, part of Raytheon (NYSE:RTX), engines, avionics, or major structural assemblies like Spirit AeroSystems.
Tier 2 and 3 are component and subsystem suppliers, like Curtiss-Wright (NYSE:CW) and others, and they supply to the OEMs. And then, Tier 4 are base metal alloy and materials suppliers…
I think that the more interesting story right now is on some of the metal suppliers.
For example, the big thing right now has been the de-risking from Russia, which has shown itself to not be a very good business partner.
Boeing was getting about 30% of this titanium from, I think, VSMPO-AVISMA Corporation in Russia.
I think Airbus was getting even more, probably close to 40% of its titanium from Russia.
I think it has been abundantly clear for some time that things can’t continue the way they have been because aerospace and defense need good, reliable — and the key here is — long-term suppliers.
Russia has not turned out to be a very good one.
And so, a lot of that market share now, for example, in titanium is falling upon companies like Precision Castparts, which is part of Berkshire (NYSE:BRK.A), Allegheny Technologies ATI, and maybe some other smaller firms and companies like, for example, Toho Titanium (OTCMKTS:TTNNF) and things like that.
Right now share gains are important, and for example in the base metal suppliers, I like the stock ATI, because I think they stand to benefit inordinately from this de-risking from Russia and the sourcing of titanium, the alternate sourcing of titanium.”
Nick Heymann is co-group head of global industrial infrastructure at William Blair
And the demand for metals such as titanium will only increase as US based manufacturing sky rockets, according to Nick Heymann, co-group head of global industrial infrastructure at William Blair.
Previously, he was managing director of global industrial infrastructure equity research at Sterne Agee.
This expert analyst was an Institutional Investor All-American nine times and was ranked as the No. 2 stock-picker in electrical equipment by the Financial Times/StarMine.
In his 5,762 word interview, exclusively in the Wall Street Transcript, he sees enormous opportunities in the US economy and for investors in that economy.
“In the last 12 months, through the end of December, actual U.S. manufacturing construction on a trailing 12-month basis up 190% versus the prior 12-month period.
And it probably will continue to rise to somewhere near 250% to 300% for new starts for production facilities, not announcements.
So these huge amounts that were announced last year and are continuing at a feverish pace this year are going to continue to drive higher manufacturing construction well into 2024, and maybe even 2025 or 2026.
So again, most of our diversified industrial companies make the guts of what goes into factories and their automated production lines, as well as the equipment used to construct, insulate and paint them.
And of course now, we have ubiquitous automation in most factories which is being augmented by the tight labor market.
The investment in automation today versus a factory put up in 2003 or 2004 is probably on the order of 15 to 20 times larger.
So, it’s a very exciting time, an unparalleled time to be involved in investing in the industrial sector, which is why the market is reweighting the industrial portion of the overall market.
Higher rates normally would be a depressant for industrial capital spending.
It has tempered spending on the consumer durables sector for cars as higher-priced car loans and home mortgages are dampening demand, especially for tangible products that go into the home.
But outside of that segment of the industrial space, there is robust demand for oil and gas, mining, semiconductors and the pharma sectors.
By re-shoring our strategically important pharmaceutical industry, it’s creating an immense amount of demand for process control on automation and laboratory separation investments.”
So not only titanium but the entire range of industrial production and development in the United States will be in demand, from the painting new factories to the final finished products rolling out the doors and onto our internal transportation grid, all due to the implementation of the Infrastructure Investment and Jobs Act, the Chips-Plus and the IRA legislation.
Get the complete picture on these US industrial companies by reading the entire 5,762 word interview with Nick Heymann and the entire 3,397 word interview with Richard Safran, exclusively in the Wall Street Transcript.
Christopher P. O’Keefe, CFA, Managing Director, Logan Capital Management, Inc.
JPMorgan (NYSE:JPM), Microsoft (NASDAQ:MSFT) and Truist Financial Corporation (NYSE:TFC) are only three of the stocks discussed in detail in interviews with these highly experienced and successful portfolio managers.
Christopher P. O’Keefe, CFA, is a Managing Director of Logan Capital Management, Inc. and the Lead Portfolio Manager of both the Dividend Performers Strategy and the Dividend Performers Balanced Strategy.
Prior to joining the firm, he managed these strategies at Manulife Asset Management, where he was also the Lead Portfolio Manager.
Earlier, Mr. O’Keefe was an equity Portfolio Manager and Director of Research at Compu-Val Investments, and before that he held analyst positions at CoreStates Investment Advisers and First Pennsylvania Bank.
“Also, within banks, we own JPMorgan (NYSE:JPM), it certainly has been a good long-term dividend growth stock with very good management, a strong balance sheet, the kind of durability within financials that you want to have for long periods of time.”
Peter Santoro, CFA, Chief Investment Officer, Invesco U.S. Dividend and Core Equities
Peter Santoro, CFA, is Chief Investment Officer for Invesco U.S. Dividend and Core Equities and a Senior Portfolio Manager for the U.S. Dividend products at Invesco.
He serves as the lead manager for Invesco’s U.S. Dividend strategies.
Mr. Santoro joined Invesco in 2021.
Prior to joining the firm, he was a Senior Portfolio Manager at Columbia Threadneedle Investments on multiple equity strategies.
“One other stock I can highlight is software and technology products maker Microsoft (NASDAQ:MSFT). We hadn’t owned Microsoft for a long time in this fund, but we found Microsoft to get much more attractive as the tech selloff happened last year.
Quite simply, we believe Microsoft has a great diversified portfolio of products at the forefront of emerging critical technology needs.
In addition to benefitting from a number of long-term secular growth tailwinds, Microsoft has an extremely strong balance sheet, healthy projected free cash flows, and a management team that remains committed to strong capital discipline and returns to shareholders.”
Fred Cummings, President and Founder of Elizabeth Park Capital Management.
Fred Cummings is the President and Founder of Elizabeth Park Capital Management.
He serves as Portfolio Manager for the privately held, alternative asset management firm focused on long/short equity, event-driven, and customized investment opportunities in the banking sector.
The firm supports community bank technology investment through a partnership with Strandview Capital and the Btech Consortium Fund.
The firm is the investment manager for the Mission Driven Bank Fund
Truist Financial Corporation (NYSE:TFC) is a bank holding company formed in December 2019 as the result of the merger of BB&T and SunTrust Banks.
“The Mission Driven Bank Fund was an idea encouraged by the FDIC.
Microsoft (NASDAQ:MSFT) and Truist (NYSE:TFC) got together to anchor the fund, issued a competitive RFP, and we were fortunate to be awarded as the investment adviser last quarter.
Our co-manager, Calvert Impact, is a blue-chip impact investor.
And currently, we’re in the process of finalizing the fund documents and marketing materials.
So we expect to initiate fundraising activities hopefully sometime in the first quarter.
Our target first close is $350 million and the fund could be as large as $1 billion.
The anchor and lead investors have great support toward the mission and have committed $135 million.
We will partner with Calvert Impact and Strategic Value Bank Partners, creating a world-class team.
Calvert has long-standing roots over many decades in impact investing and they’ve also been active in the MDI and CDFI space.
Strategic Value Bank Partners has expertise in working with CDFIs, investing in private banks, and they also bring operational expertise. We bring bank-specific private and public equity investing with a highly experienced and deep investment team.
We will invest in community development financial institutions and minority depository institutions.
Many of these institutions are smaller in size and historically have not had access to capital. The fund will be a means to give these institutions broader access to capital to help them grow their businesses.”
Although JPMorgan (NYSE:JPM), Microsoft (NASDAQ:MSFT) and Truist Financial Corporation (NYSE:TFC) would seem to be a buy based on current market turmoil, another very experienced portfolio manager, urged caution in his prescient 3,315 word interview from January of this year.
Doug Ramsey, CFA, Chief Investment Officer, The Leuthold Group
Doug Ramsey, CFA, is the Chief Investment Officer of The Leuthold Group and Co-Portfolio Manager of the Leuthold Core Investment Fund and the Leuthold Global Fund.
He also maintains the firm’s proprietary Major Trend Index.
He is also the lead writer for The Leuthold Group’s institutional research publications.
He also has been interviewed on CNBC, Bloomberg TV, and by Barron’s. Earlier, he was Chief Investment Officer at Treis Capital.
“The Major Trend Index began to turn more cautious in late 2021, and formally sank into bear territory on January 21, 2022.
That was just a few weeks after the bull market high in the S&P 500 on January 3, 2022, and the MTI has remained bearish ever since.
The categories weighing on the MTI this year have been, one, the cyclical work, and within our cyclical work, anything related to monetary or liquidity conditions.
Second, the technical underpinnings have been poor.
A simple but useful mental model of the liquidity available for the stock market is the spread between money supply growth and nominal GDP.
We’ve seen an abrupt slowdown in M2 growth in 2022.
The latest report on M2 through the month of November showed it was flat versus 12 months ago. And it looks to me like when we get the final numbers for December of 2022, that we’ll have the first contraction in M2 on an annual basis in the modern history of those numbers, which goes back to 1959.
So, the monetary slowdown is one thing.
But in the face of that slowdown, the economy — despite consensus expectations of a U.S. recession in 2023 — the issue is that on a nominal basis, the economy is still too hot.
It looks to me like in the fourth quarter — and of course quarterly GDP estimates can be volatile — but it looks like we’ll have 2% to 3% real growth in the fourth quarter, plus 6 percentage points or 7 percentage points of inflation.
That means the nominal economy on a year-over-year basis is still growing almost double digits.
It’s probably 8% to 10% year over year in the fourth quarter, compared with money supply growth of zero.
There’s not enough money supply to fund this nominal expansion in the economy, and this is very often when stock market accidents happen — when we have this dearth of liquidity relative to the rate of economic growth.”
Get the complete picture of whether to invest in JPMorgan (NYSE:JPM), Microsoft (NASDAQ:MSFT) and Truist Financial Corporation (NYSE:TFC) and many other stocks by reading all of these interviews in full, only in the Wall Street Transcript.
