Weekly Briefing 9/20/20

This stock will help you navigate the New Bull Market

In almost every single bull market, stock prices have risen as a result of new technological innovations. In the 1920s, it was the automobile. The 1980's were dominated by the personal computer, followed by the .COM bubble of the 1990's. In March, we witnessed an end to a ten-year bull market driven by FANG. A question many forward-thinking investors now ask themselves is what will drive this new bull market?

Ilumina (ILMN) is a biotech company that specializes in genome sequencing. This technology allows doctors to map a patient's genome, and identify hereditary diseases and mutations like cancer before they surface. While Illumina has been in business for 22 years, the amount of money one would have to pay when this technology was new was too steep to be used by mainstream medicine. However, Moore’s law has proven that the price and quality of services will only improve over time.

Created in 1965 by one of Intel's founders, Gordon Moore, Moore’s law states that the number of transistors in a computer would double every year. Thus far, this prediction has proved to be wildly accurate and serves as a benchmark goal for chip companies. In biotech, substantial computing power is needed by doctors to read an entire genome. In the last 20 years alone, Moore’s law has advanced at such a rate that the initial price of mapping a genome dropped from $100,000,000 to less than $1,000. Based on the law of supply and demand, the cheaper genome sequencing becomes, the demand for it will increase. As the innovation cycle in our new bull market advances, you can expect lower prices in genetic sequencing and radical changes to how modern medicine functions.

As genome sequencing becomes more accessible, insurance companies will protect their bottom line by covering this service during annual checkups. Naturally, this represents a net benefit to insurance companies, as they will be able to reduce risk and avoid shelling out large premiums to their customer's healthcare providers. Within the next ten years, genome mapping will become a mainstay in modern medicine and the world economy.

As of right now, Illumina has a sterling balance sheet with $36 billion in assets and $46 million in liabilities. As of their Q2 earnings announcement, their revenue is $1.49 billion. As a frame of reference, in 2019 ILMN’s total revenue was $1.685 billion.

Dr Nathaniel Heintz’s lab of Rockefeller University was credited for advancing ILMN’s genome test kit. The Rockefeller family, through its many trusts and entities, owns a large 9-figure position. They have made a fortune by investing in the pharmaceutical and biotech sectors. Over the past 4 years, the family has moved more and more of its investment fortune into biotech, sensing where the next big boom will come from as we approach a new frontier of scientific innovation during the next decade.

For less company-specific risk, yet still harvesting gains from this explosion in biotech and pharmaceuticals, one can look to ETF's such as XBI and IBB.


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Important Disclosures: Investing in the financial markets can involve considerable risk, including loss of principal. Past performance is not necessarily an indication of future performance.  Actual clients may achieve results materially different from the results portrayed.  All material is for informational and educational purposes only and is not investment advice and is not meant to suggest that any securities are suitable investments for any particular investor.  All information reflects our own actions, beliefs, and processes for purely informational purposes. HEDGE FUND Z LLC IS A FINANCIAL BLOG FOR THE SOLE PURPOSE OF EDUCATION.  HFZ does not represent themselves as acting in the position of an investment advisor or investment manager for funds that are not under their direct control and fiduciary responsibility. 


Third party quotes and information may not be representative of the experience of HFZ customers and do not represent a guarantee of future performance or success. Many of the results displayed on our website were achieved using leverage, such as 2x or 3x leveraged ETF's or equity options 


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