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Playing it Safe

By Jim Pearce and Rob DeFrancesco and Joe Duarte on November 23, 2015

A common question asked last week was, why is the stock market going up when there is so much bad news overseas? With the threat of continuing terrorist activity in Europe, the implication was that everyone should be hiding their money under a mattress until order is restored. Actually, that’s what a lot of investors ARE doing, except in this case that mattress is the U.S. stock market. With the odds of a Fed rate hike next month nearing 100%, the bond market no longer looks attractive since bond prices drop when yields rise.

And traditional commodity hedges such as gold are also on the decline, with no clear sign of a bottom any time soon. So, that leaves U.S. equities as the best place to ride out the storm if you don’t mind a little extra volatility along the way. A quick look at the performance of our three portfolios last week demonstrates the desire for safety; our large-cap Investments Portfolio sported the highest average return at +2.49%, with the mid-cap Next Wave Portfolio coming in at +1.58% and the small-cap Medical Profits Portfolio bringing up the rear at 1.41%.

However, the stock market is hardly insulated from fear and greed, as Rob DeFrancesco’s update on two of our Next Wave Portfolio holdings indicates. Although money is not being pulled out of the stock market altogether, it is being moved around the stock market as investors concentrate equity in the companies they believe will deliver near-term results. That mindset may not bode well for riskier biotech stocks in the near-term, but that is also why some of them may offer attractive entry points from a long-term perspective. The current “risk-on” geopolitical situation is not conducive to a momentum mentality, which is why Dr. Duarte is selectively adding new trading opportunities to our Medical Profits Portfolio.

By Jim Pearce

 

Next Wave Portfolio Update—Nimble Storage & Zendesk

By Rob DeFrancesco

The small-cap tech stock sector is often treacherous over the short term. That point was driven home last Friday when shares of Nimble Storage (NMBL) dropped 46% at the open because of a fiscal third quarter revenue shortfall. While many emerging tech companies flub a quarter, most don’t see their stock prices cut in half as a result. Traders in this case overreacted to the downside, slashing Nimble’s enterprise valuation to just 1.5 times forward revenue.

I am moving Nimble Storage to ‘Hold’ in the Next Wave Portfolio. I need to see proof that the business has stabilized. Nimble over the next two or three quarters must show it’s capable of handling intensified pricing pressure from larger competitors and resolving the company-specific execution issues that were behind the October quarter’s 7% top-line miss compared to the consensus estimate.

In the meantime, the current low valuation increases the odds Nimble attracts an activist investor who would push for a sale of the company. Recent acquisitions of growth companies in the storage space have taken place at an average enterprise valuation of around 4 times revenue. If the Nimble management team isn’t up to the task of getting the company back on track, it could be forced to seek strategic alternatives.

Nimble has a market cap of $799 million, with no debt and cash/investments totaling nearly $210 million on the balance sheet. Even with sharply reduced expectations for fiscal 2017 (ending January), the company is capable of delivering nearly $400 million in revenue, representing growth of 24%. In the $40-billion storage market, there is still ample opportunity for Nimble to continue to carve out a niche and gain share based on its superior technology and reduced total cost of ownership.

In the October quarter, product revenue growth came in at 28%, a sharp deceleration from 42% growth in the previous quarter. The main headwind for Nimble: incumbent vendors appear more desperate than ever to hold onto their customers. The four largest legacy storage vendors (EMC, NetApp, H-P and Hitachi) were all behind the third quarter revenue miss at Nimble because they were able to win (and delay) a number of large deals using severe price discounts. The other big issue in the quarter was the fact that less than 60% of Nimble’s sales teams are at full maturity, meaning productivity levels are not where they need to be when it comes to battling the biggest storage players.

To get Nimble’s business back on track, sales teams are being directed to get more aggressive in terms of winning larger accounts over the competition (temporarily sacrificing some of Nimble’s relatively high gross margin in the process), while marketing dollars are being redirected at the somewhat less-competitive midsize enterprise segment in order to reinvigorate the deal pipeline.

It’s not that Nimble’s business in the latest quarter totally fell apart, as revenue still rose 36% year over year. International revenue advanced 49%, driven by growth of 54% in the EMEA region. The company added 617 new accounts, bringing its total customer base to more than 6,800—including 400+ global enterprises (78 of the Global 500 are in this mix) and 600+ cloud service providers. Deferred revenue advanced 74% to $105.4 million. For the December quarter, revenue guidance of $87 million to $89 million (below the consensus estimate of $99.2 million) represents growth of 29% year over year.

Things are going much better for another Next Wave Portfolio holding, Zendesk (ZEN), provider of a cloud-based customer service platform. Since the company at the beginning of this month reported strong third quarter results, the stock has gained as much as 23%. Revenue in the September quarter rose 64% to $55.7 million, above the consensus estimate of $52.2 million. Top-line growth accelerated 100 basis points sequentially.

The company, now with more than 64,000 customers (up 32% from the year-ago level), saw its dollar-based net expansion rate rise to 125% from 121% in the year-ago quarter, indicating increased traction across the installed base. Zendesk in the third quarter saw particularly strong growth in the EMEA region (28% of total revenue), which boasts more than 24,000 customers.

Zendesk had a breakout quarter with respect to its enterprise business, which is focused on larger, more lucrative accounts. Customers with 100 or more seats represented 31% of recurring revenue, up from 27% in the second quarter and 23% in the year-ago period. Zendesk won several large enterprise deals over larger competitors, and management on the earnings call said there’s still a “significant” enterprise pipeline going into the end of the year.

The company offered fourth quarter revenue guidance above the consensus and raised its 2015 outlook for the third time this year. The latest 2015 consensus revenue estimate of $206.4 million (just above the updated guidance midpoint of $206.1 million) indicates growth of 62.5%. For 2016, the consensus calls for top-line growth of 39%

Nimble Storage is moved to ‘Hold’ and Zendesk remains a ‘Buy’ in the Next Wave Portfolio.

 

Portfolio Update – Medical Profits
By J. Duarte MD

In this issue:

  • The Big Picture: Biotech Sector Could Deliver a Surprise End of Year Rally
  • In Depth: New EBIS Pick – Cerus Corp. (CERS) – A Long Shot Blood Safety Play
  • Trading Portfolio: Sell Stops Updated
  • EBIS Portfolio Update: New FDA Approval for Meridian Bioscience (VIVO)
  • News Update: Is Obamacare Really Dead?

The Big Picture: In Uncharted Waters

The biotech sector could deliver a very positive surprise to investors before 2015 is over.   In a holiday shortened week that started with a $160 billion dollar merger between Pfizer and Allergan, investors will have a lot to think about. And with the elephant in the room being the new challenges faced by Obamacare and the health insurers (see our news and analysis section) the rest of the year could shape up to be very interesting indeed.

SPX chart 2015 11 20 NBI biotech index 2015 11 20

 

 

 

 

 

 

 

 

 

 

The stock market, as measured by the S & P 500, bounced back on the week that ended November 20, 2015. A quick technical look suggests that the bounce in the S & P was lukewarm. Note the lowest two panels on the chart. First the MACD histogram (blue bars) is still below zero. That means that upward momentum has not completely returned to this index.   The second indicator in the lower panel, the Ease of Movement (EMV) oscillator broke below zero on the week that ended on November 13 and did not bounce back above zero. Also note that EMV has been trending lower since October. These are signs that investors are still not very confident after the previous week’s decline.

But here is what’s interesting. Biotech has a totally different technical picture. And although things are still a bit sketchy there are several signs that the potential for further gains in biotech are possible, given the technical action. The Nasdaq Biotech Index (NBI) may be in the process of reversing a negative lower high lower low pattern of trading. In fact, the Bollinger Bands (green lines above and below prices) are constricting, a sign that a big move is coming. Even more important is that the MACD histogram (blue bars) are back above the zero line just as the Ulcer Index (black line lowest panel) is hugging its recent lows. When you put this together, it’s clear that investors are giving biotech a second look and they seem to be building positions in the sector slowly. If NBI can close above its 200-day moving average convincingly, we could see higher prices in biotech for the rest of the year, barring something unfortunate happening. So here is what to do:

  1. Continue to pay close attention to the overall market as well as our new Trading Buy Recommendations and our new EBIS picks. Expect volatility to rise and consider raising cash as positions get stopped out, but don’t treat all your holdings as if they were the same. There is a chance that some may do better than others.
  2. Monitor the price of all current positions in your biotech portfolio.   View each stock separately. Check our weekly updates or any special alerts, and sell stop updates. This is especially applicable to our trading recommendations. If your stocks are holding their own, keep them in your portfolio and add to positions as they re-enter their buy ranges from lower prices as they recover.
  3. Pay attention to news items, especially as related to products, mergers, takeovers and geopolitical events. Always monitor your portfolio’s response to the market and to any news events, especially those in health care and only sell stocks that are showing significant weakness and fall below their sell stop.
  4. Consider using BIS to hedge your biotech portfolio during periods of weakness for the market and the biotech sector. BIS is a hugely volatile ETF and has a new entry point as of our November 9 update. See below for details. Our July 27th, 2015 update has an excellent tutorial on how you may go about doing using this ETF to hedge your portfolio. For further reading on portfolio protection techniques and risk management also consider a copy of Dr. Duarte’s “Trading Options for Dummies.”
  5. If you choose to buy new stocks, be cautious as the next few weeks could very volatile. A good method for building positions in a volatile market is to buy small lots of stock over a few weeks to months, depending on the overall trend. When this is coupled with a long term time horizon it’s much easier to weather the volatility.

Trading Recommendations

Our trading recommendations are still hanging on. The sell stops on open positions have been adjusted to reflect the closing prices of the week that ended on 11/20/15.  

Trading stocks are only recommended as trades based on technical analysis.   These are not stocks meant for long term holding periods.

  • Trading stocks are not EBIS type stocks. This means that they are more volatile and that any moves by these stocks, up or down, can be very fast and treacherous.
  • Follow the trading guidelines and recommendations issued with each stock in detail.
  • Trading guidelines are not applicable to our longer term holdings in the EBIS portfolio.

Trading Recommendation: Celldex Therapeutics (CLDX) Trading Buy Range $12-14. Sell stop at $13 (based on 11/20/15 closing price). Buy range entered – 11/20/15 closing price $16.19. For every dollar of price increase, raise the stop loss by $1. This is almost an EBIS stock. The company is working on a vaccine for aggressive brain cancers. It has plenty of money on its balance sheet but is high risk and has not been able to make money consistently. In this market, it may be worth exploring on a trading basis.

Trading Recommendation: Edwards Life Sciences (EW) – (Initially recommended 10/19/15- Bought 10-27-15 at $153) Trading Buy Range $153-156 – 11/20/15 closing price $157.68. Sell Stop at $147. For every dollar of price increase, raise the stop loss by $1.

Alert: Trading Recommendation Stopped Out: Alnylam Pharmaceuticals (ALNY) – Trading Buy triggered at $85 on 10/9/15. 11/6/15 closing price $102.57 – Stopped out at $100 on 11/16/15. Total Return 15%.

Alert: New Buy Recommendation: Cerus Corp. (CERS) – Buy Range $5-7. Recommended 11/16/15. 11/20/15 closing price $5.06.

Cerus Corp. – A Long Shot Blood Safety Play

Cerus Corp. is a tiny, $550 million market capitalization stock that is well stocked with cash, has an interesting pipeline and is in the difficult stage of development where it is pushing for market share in the United States while struggling with the negative effects of a strong dollar since its current customer base is overseas. However, the company has made progress getting its product into key areas of the Southern United States through deals with key blood product distribution not for profit entities.

Cerus developed the INTERCEPT system from virus and other disease causing organism detection in blood products. It currently has FDA approval for INTERCEPT systems for platelets and fresh frozen plasma, key blood components for clotting. It is working on the INTERCEPT system for red blood cells. The company notes that the “the INTERCEPT treatment is designed to inactivate established transfusion threats, such as Hepatitis B and C, HIV, West Nile Virus and bacteria, as well as emerging pathogens such as chikungunya, malaria and dengue.”

The current immigration and the frequency and potentially long lasting nature of the geopolitical situation makes Cerus an interesting long term, speculative buy for patient investors.   In times of trouble, as the likelihood of protracted conflicts, as well as the potential increase for infectious diseases increasing as a result of population migrations, this company has the potential to deliver some interesting surprises.   It is a speculative play but does have some staying power with rising cash levels on its balance sheet.  

The big bet is on the escalation of global conflicts that require increased use and thus testing and safety of the blood supply. If Cerus can get the red blood cell Intercept system approved, it could mean a significant increase in its revenues. Currently, the company has just received Medicare and Medicaid approval (CMS) for upgraded billing codes if a hospital uses INTERCEPT for its plasma and platelet testing and pathogen inactivation. This certification allows the user to charge a higher premium for its blood products.

CERS gets a +7 EBIS rating because it has yet to turn a profit. Yet, given the low price of the stock, and the huge potential, especially in the current market, it’s a great speculative play since it meets most of the criteria for an EBIS stock.   And although it’s a highly speculative bet, this is one of those companies that could turn the corner fairly rapidly under the right set of circumstances. Thus, we see little risk in owning a small position, monitoring the company closely, and adding to the position over time as things develop.

Here are the EBIS details:

The EBIS Score for Cerus Corp. (CERS) is + 7 (HOLD) based June 30, 2015 data.  

  • Cash on hand: (+1) Cerus reported $50.8 million in cash compared to $22.8 million in December 2014.
  • Cash on Hand growth (year over year) (+1): The year over year cash more than doubled.
  • Revenues (present or not): (+1): Cerus reported $8.45 million in revenues in its September quarter compared to $9.587 million a year earlier. The decrease is largely attributed to currency translation and slowing business in Europe. The company is expanding its market share in the U.S.
  • Revenue growth (10% or greater)(+0): Revenues shrank by 10% on a year over year basis for the September 2015 quarter.
  • Trailing Total Liabilities/Current Assets (<1=+1 , >1=0): (+1) CBM has a 0.31% ratio, which means that it cover all its expenses in the case of a catastrophic hit to the company and still have money to regroup.
  • Earnings (Present or Not Present): (0): CERS has no earnings.
  • Net Income Growth (Year over Year): (0): CERS has no earning s growth.
  • Products on the market: (+1): CERS has products on the market and is making strides in expanding its market share.
  • Pipeline Strength: (+1): CERS has one key product in late development stages in its pipeline.
  • Late Stage Clinical Trials and Product Launches: (+1): CBM has several important products in critical stages

The EBIS system consists of eleven fundamental criteria that are updated every quarter after the earnings results for each company are published. Each criterion gets a value of +1 or zero. A total of 8 or more points earn a Buy rating. A total of 5-7 points earn a Hold rating. Less than 5 points delivers a Sell or Avoid rating. EBIS was introduced in the June 15, 2015 issue of the Biotech Report.

Portfolio Update: Meridian Bioscience Gets Expanded FDA Approval for Whooping Cough detection Test Potentially Expanding Market Share and Customer Base

Our EBIS portfolio has been more volatile of late. Generally speaking it makes sense to see if these stocks develop some type of sideways pricing action before adding to any position aggressively. Details below:

DYAX Corp (DYAX) – POSITION CLOSED – Speculative Buy changed to limit price of $25 on October 5, 2015. Original recommendation: September 21, 2015. DYAX bought 10/7/15 at $22. 11/6/15 closing price was $34.52. Trade return: 56.9%.

Cambrex Corp. (CBM) Buy Range $45-47. Bought 10/20/15 – 11/20/15 closing price $50.18. Sell Stop raised to $47 on 11/9/15. Dr. Duarte owns shares in CBM.

Alert- Masimo Corporation (MASI) – Buy at $40-44. Buy issued July 20, 2015. MPP: $40.65). 11/20/15 closing price: $41.72. Stop Loss raised to $38 on 11/9/15.

Update: MASI beat earnings on 11/5/15. Earnings came in at 36 cents per share on revenues of $152.6 million. Analysts estimated an average of $149.31 million in revenues and 31 cents per share in earnings. MASI beat expectations and gave upward guidance for the future. The company recently received good marks on its anesthesia monitoring equipment at the recent American Society of Anesthesiologists meeting in San Diego.

Masimo manufactures equipment modules that monitor vital signs during difficult clinical and logistical circumstances.   Masimo pioneered Signal Extraction Technology (SET) a process that lets the pulse oximeter measure the oxygen content of blood without punctures of arteries at states of low blood pressure, where it become a most critical piece of data.

This is the second straight quarter that the company beat expectations. The company raised its full 2015 guidance to total revenues of $621 million, up from $608 million and earnings per share from $1.48 to $1.51.   The stock remains well within its buying range of 40-44 and keeps a 9.5 EBIS rating based on its June 2015 quarter. MASI is a well run company with plenty of cash on its balance sheet and a growth agenda. We like Masimo because it has innovative products, an excellent growth rate, and a nice stash of cash on its balance sheet which it could use to make acquisitions or to plow into research and development.

Meridian Biosciences (VIVO) Buy range $18- 21; 11/20/15 closing price $19.25. Dr. Duarte owns shares in VIVO. Stock initially recommended on June 29, 2015.

Meridian made news on Friday the 13th of November when it disclosed a minority stake in Oasis Diagnostics a company that specializes in diagnostic tests that use saliva as the medium for testing. On November 18th the company received FDA approval for an expanded use of its Illumigene whooping cough testing product, a move that will expand Meridian’s market share and customer base. There were 33,000 whooping cough infections reported in 2014, a 15% increase compared to 2013.

Meridian delivered a mixed earnings report on November 5, 2015, beating on revenues at $47.5 million and missing on its net income by one cent at 20 cents per share. Estimates averaged $46.64 million in revenues and 0.21 cents per share for earnings.   This was a reversal of the previous quarter. The stock paid a 20 cent dividend on 11/12/15 and yields 4.4%.

VIVO develops, manufactures, and markets diagnostic testing kits focused on gastrointestinal infections, virus detection, and parasitic illnesses. It also produces reagents and key testing and DNA amplification and enzyme related materials used in research. It has recently released a new product, the Para Pak single vial transport system for parasite testing which simplifies the transport of samples to the lab by using one vial instead of the more complicated multiple package systems that are currently on the market.

Alert: Emergent Biosolutions – Downgraded to HOLD based on technical trends and sluggish sales, which suggests possible earnings and revenue problems in the future. Sell stop adjusted.

Emergent Biosolutions (EBS) (Buy 5/11/15 MPP* $30.63 – 11/20/15 Closing price $37.35 – Sell stop at $33 issued 11/16/15) Dr. Duarte owns shares in EBS.

EBS continues its momentum run but retains its HOLD rating. This remains a defense play given its niche in bioterrorism related vaccination. The company is also selling treatments for chemical weapons related injuries overseas, but not yet in the U.S. The company reported its latest earnings on November 5 after the close and beat expectations delivering 83 cents per share in net income on revenues of $164.9 million. Estimates average $151.42 million in revenues and 56 cents per share.   EBS has a history of positive surprises. The company reported earnings of 36 cents per share for its second quarter of 2015 beating analyst estimates of 26 cents. Revenues climbed 14% from the year-ago period to $126.1 compared to an estimate of 124.25 million.   The company also announced that it will spin off its biosciences unit, whose focus is oncology to investors.  

Sales of BioAnthrax, a preventive anthrax vaccine and is working on a new generation of the vaccine were strong in the quarter while overall bio-defense sales slumped. Dr. Duarte owns shares in EBS.

Update: Trend Following ETF Model

Alert – New Entry point established for PowerShares Dynamic Biotech ETF (PBE) – Bought at $48 on 10/23/15 – 11/20/15 closing price $50.87. Buy Range: $49-51. Sell Stop at $46.

Alert – ProShares Ultrashort Biotech ETF (BIS) was stopped out at $32. Buy at $34-36. Sell stop at $30.

Alert– ProShares Ultrashort Biotech ETF (BIS) was stopped out at $32. ProShares Ultrashort Biotech ETF (BIS) – (Buy issued 7/27/15 @ MPP*$27.99. 10/27/15 closing stopped out at $32 – Return + 14.3%.

*MPP – Median Purchase Price

News Update and Analysis – Is Obamacare Really Dead?

When United Healthcare (UNH), last week, told analysts that it was considering pulling out of Obamacare in 2017, the knee jerk response from the market and the law’s opponents was to sing a requiem for Obamacare and to sell health insurance stocks. And while there have been numerous reports and editorials that conclude that Obamacare is dead in the water, investors should beware of making big bets on this new development just yet. Our analysis suggests that although the Affordable Care Act is wounded, we have yet to hear from the White House in any meaningful way on this subject.  

Let’s look at this from the point of view of someone who deals with the ACA on a daily basis, the author. At the center of the ACA’s potential demise is one simple concept. There isn’t enough money or capacity in the U.S. health care system to pay for or deliver on the promises that the ACA made and the expectations it created.   The system, as it is, is simply incapable of providing the promised services to all that are “eligible.” That’s because there aren’t enough doctors, nurses, and other ancillary personnel available and there aren’t enough hospitals, clinics, and doctors’ offices to deliver the care. It’s not because the system is inadequate. The U.S. has the finest health care system in the world. Just get really sick somewhere else and see what happens if you want to test the theory. The issue is that the U.S. healthcare system (or any other healthcare system in the world) was not built on the assumption that everyone would have, want or need access to healthcare all at once 24/7. That’s because, no matter what the wellness advocates may say, health care in the present is about addressing illness, with a heavy emphasis on big bad diseases like heart disease, diabetes, cancer, and major trauma. And because during normal, ordinary, peaceful times, only a small section of the population is gravely ill, this type of system is able to handle the rigors of operation. No one that we know of bothered to explain that to the architects of the Affordable Care Act. If they had, maybe they would have spent a lot of money on building more hospitals, educating more doctors and personnel, and building a whole new system from the ground up instead of trying to transform an apple system into an orange system overnight.

Consider this parallel. When grocery store chains such as Kroger or Safeway donate food to the hungry, during Christmas, they use charitable, donation driven mechanisms to deliver food to homeless shelters and food banks. There are two components. The grocery store donates its surplus and returned food items, packaging them in bags. Customers who wish to be charitable buy food bags or vouchers that are then delivered to the hungry via homeless shelters, food banks and other charitable entities. But even then, not every hungry person gets fed. Not because the system is faulty, but because the system is built on reasonable assumptions. From a business standpoint, if Kroger and Safeway gave all the food in the stores away they would be out of business.   Thus, the architects of this system have reasonable assumptions and the system meets expectations. More homeless and poor people eat during Christmas than they would under normal circumstances.

Yet, Kroger and Safeway have a built in safety net mechanism for cutting their losses. For one they donate surplus food that was going to go in the trash can. They also get a tax break for the donation, and customers subsidize the operation. That’s three levels of risk management, which makes for a more sound and cost effective operation. Obamacare has no such built in safety net mechanisms in place that are operable. The ACA backstopped the insurance companies, in principle by creating a fund that would cover losses. It also enticed hospital systems to participate with the promise of increased patient volumes and an expected increase in income derived from seeing more patients who would be financed by the insurance companies and the government as a last result. Yet, it neglected to enlist the help of doctors in private practice, those who have the largest incentive to make the system work because they make their living taking care of patients without a guarantee of income. And it neglected to account for the possibility that some subscribers would not, or could not pay for the insurance premiums. It also underestimated the number of people who would actually sign up for insurance. And don’t forget the debacle related to the operation of Healthcare.gov.

But the architects missed these points. Instead, they saw the key to success being the relationship of hospitals and insurers, both large and highly slow to change bureaucracies, which to make matters worse, are adversaries as they both compete for the same financial pie. According to the ACA’s design the insurance companies would have money promised by the government to cover potential losses from insuring high risk patients, and the hospitals would receive a larger portion of payments from the insurance companies. What could go wrong?

The net effect was that hospitals bought doctor practices to deliver the care of the expected higher volumes of patients. This was done under the assumption that institutionalized doctors following precise guidelines, and helped by electronic medical records, instead of following their clinical judgment while focusing on preventive care instead of addressing current symptoms of disease would lower costs.   Guess what? Hospital doctors cost more than private office doctors, see fewer patients and have less interest in working hard, since they have guaranteed salaries. Much of that is because the electronic medical records require more time to address than actually talking to and examining patients. So a good doctor that can see and treat 20 patients per day in his office now can see 12 patients a day in the hospital clinic, and in many cases spend more time typing or talking to a computer than actually seeing patients and treating disease. And the costs of hospital based medical practices are higher. That’s because hospitals charge a doctor fee and a facility fee for services. Thus, a $110 private office fee became a $350 hospital “office” fee, for the same service, $110 for the doctor and $240 for the overhead. Yet, the doctor, at his office receives $110 from the insurance company including the overhead.

And there is more. Some of our insurance sector sources also recently told us that one of the reasons that the private insurers have lost money was because many received only one or two premium payments from their ACA subscribers. The insurers allowed services to be delivered to these subscribers, and to some degree paid for those services to providers. Now the subscribers are gone and the projected twelve month premiums turned out to be one month premiums, leaving an 11 month premium loss on the books. And the insurance fund, created to backstop the potential losses to the insurers is underfunded by an estimated 90%.

Thus, generally speaking, the assumption that Obamacare is dead makes sense when taken at face value and when evaluated by traditional means. It is well known 12 out of the 23 cooperatives through which plans were sold to the public are bankrupt and private sector insurances that sold Obamacare plans are losing money from the ACA plans. That has cost taxpayers $1.2 billion. People are unhappy about their coverage, their high deductibles, rising premiums and the lack of access to doctors.

And without Draconian edicts from the government, where practitioners are forced, by law or executive order, perhaps at gunpoint, to work for no payment, those people who qualify won’t have access to care, other than through charitable or emergent means.   There is anecdotal evidence also that some hospital systems are cutting doctor salaries due to a “lack of production” on the part of the physicians. Many of these “unproductive” physicians are likely to retire sooner rather than later further cutting access to care.

So, in a normal world, the conclusion would be that Obamacare is on its last legs. But, this is not a normal world or one in which what once made sense works in traditional ways. Chaos Theory is built on the premise that life is predictably unpredictable. It is now operating on steroids. Think ISIS, the refugee crisis and the 2016 election cycle. And that means that the old “one plus one equals two” mentality that markets often use to buy or sell assets is not fully operational.

What’s our point? If conventional logic is operational, Obamacare should go bust. It’s clear that the ACA is insolvent and inoperable beyond very limited means under its current incarnation. But these are not conventional times. Thus, the real question is whether conventional wisdom will ever operate again. Stay tuned. Pay attention. Remain flexible. Sleep…if you can…

 

NASDAQ Composite Index:                                                                       

Friday, November 20 = 5,104.92                                                  

Year to Date = + 8.0%                                        

Trailing 4 Weeks = + 3.6%

Trailing 7 Days = + 1.0%           

 

Weekly Portfolio Performance 

   

STI Portfolios

  
 

INVESTMENTS

 

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stock

symbol

13-Nov

20-Nov

Return

1

Apple

AAPL

$112.34

$119.30

6.20%

2

AT&T

T

$32.31

$33.66

4.18%

3

Cisco

CSCO

$26.21

$27.57

5.19%

4

Micron

MU

$15.00

$15.43

2.87%

5

Microsoft

MSFT

$52.49

$54.19

3.24%

6

Qualcomm

QCOM

$51.94

$49.62

-4.47%

7

Ricoh

RICOY

$10.68

$10.69

0.09%

8

Verizon

VZ

$44.23

$45.39

2.62%

9

Western Digital

WDC

$60.23

$61.71

2.46%

 

Portfolio Average

   

2.49%

      
 

NEXT WAVE

 

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stock

symbol

  

Return

1

FireEye

FEYE

$22.25

$23.48

5.53%

2

Lattice Semiconduictor

LSCC

$4.88

$5.77

18.24%

3

Marketo

MKTO

$29.42

$29.64

0.75%

4

New Relic

NEWR

$34.65

$37.73

8.89%

5

Nice Systems

NICE

$60.76

$64.55

6.24%

6

Nimble Storage

NMBL

$20.87

$10.05

-51.84%

7

Paycom S’ware

PAYC

$41.04

$42.19

2.80%

8

Qualys

QLYS

$35.95

$38.96

8.37%

9

Splunk

SPLK

$59.00

$60.54

2.61%

10

Tableau Software

DATA

$93.58

$93.59

0.01%

11

Varonis Systems

VRNS

$15.70

$16.83

7.20%

12

Zendesk

ZEN

$22.64

$24.94

10.16%

 

Portfolio Average

   

1.58%

      
 

MEDICAL PROFITS

 

(adj. close)

(adj. close)

 
 

stock

symbol

  

Return

1

Alnylam Pharma

ALNY

$102.57

$102.61

0.04%

2

Cambrex Corp.

CBM

$48.97

$50.18

2.47%

3

Celldex

CLDX

$14.23

$16.19

13.77%

4

Cerus Corp.

CERS

$5.20

$5.06

-2.69%

5

Ekso Bionics

EKSO

$1.25

$1.31

4.80%

6

Edwards Lifesciences

EW

$153.27

$157.68

2.88%

7

Emergent Biosolutions

EBS

$36.55

$37.37

2.24%

8

Greatbatch

GB

$54.14

$54.93

1.46%

9

Masimo

MASI

$41.14

$41.72

1.41%

10

Medivation

MDVN

$41.09

$40.08

-2.46%

11

Meridian Biosciences

VIVO

$18.99

$19.25

1.37%

12

OmniComm

OMCM

$0.18

$0.16

-11.11%

13

Parker-Hannifin

PH

$99.85

$103.73

3.89%

14

PowerShares Dynamic Biotech

PBE

$49.68

$50.87

2.40%

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