A Report from Marc Robins CFA
April 20, 2018
Aethlon Medical Page 5
H-Source Page 1
Akers Bioscience Page 1
See Page 22 to register for the
Fourth Annual Robins Equity Roundup Catalyst Research Management Group – RIA 1730 SW Skyline Blvd., Ste 103 Portland OR 97221 800-2-Robins, (800)-276-2467) marc@catalystresearch.com
1
A Report from Marc Robins CFA
My Bad!
ometimes writing just doesn’t go the way you think it will: Columns seem like Britannica entries and reports seem like…. Well, some dissertation from John Stuart Mill. I want you to know that this edition of the newsletter began back in December. I started the feature story called, Plagiarism, but darn Akers--one of the stories included in this piece, did a jumping gyration with its price between the middle of December and mid-January. It essentially made me switch horses in the middle of the stream. My next piece, I Love It When A Plan Comes Together, was started and three-quarters completed when that company held a small underwriting and just forced me to push out any more work on the topic. Lastly, I had the normal Robins affliction—diarrhea of the digits. I just couldn’t stop writing. The good news is that we should have three, really good writeups lickity-split.
S
Thank you for subscribing. MR
April 20, 2018
Plagiarism Is Not a Bad Thing; Especially if the work comes out as a theme and a different variation A
long-time and well-read stock-picker friend of mine recently emailed me a copy of a highly-regarded, name brand, investment newsletter. The main article not only grabbed my attention, it spirited me back to the late 1980s. Using 20/20 vision, the equity market then might have been better characterized as a “turkey shoot” because of the many acquisitions that occurred rather than experiencing an investment arena where capital was placed to grow, and this buy-out frenzy was a trend of activity that was enjoyed well into the 1990’s. The recent article made specific note of the ‘billions and billions and bil-
H - Source
lions’ of dollars that are now, most likely, to be repatriated back to the USA, because of the much lower tax rate now affecting dollars returning from overseas. Its core focus was how that horde of treasure would, undoubtedly, be put to use when home. The article’s simple answer was more acquisition activity. If you can recall back to the 1980’s, LBOs and buy-outs were utterly rampant at the time. The Wall Street buccaneers and greenmailers were running amok and deal-sizes, which started the decade with relatively modest sized take-overs and tightly valued price rules, had grown into Continued on page 2
Akers
T
his operating up-start is about to help enhance and strengthen hospital balance sheets all across the country, while also reducing the “medical rummage” that clutters the building’s hallways and basements. Moreover, the same new transaction system is likely to revolutionize the process that hospitals use when buying new supplies, equipment, diagnostics, devices and even some drugs as well. This shift, nearly Continued on page 7
I
really like Akers because they are responsible for advancing one of the most potent methods of lowering the costs of administering healthcare while speeding-up the delivery of an often critical component of the service package. Indeed, I think this business can do several hundred million dollars of Continued on page 13
2
A Report from Marc Robins CFA Continued from page 1 unimaginable buy-outs valued in the billions of dollars and practically any measure of value was accepted to swing a deal. Dick Rubenstein, of Thompson-Rubenstein, a local money management outfit, commented in the late 80’s, on how all these closing transactions with untold billions would foment further and even more tremendous demand for stocks. It was becoming a market that enjoyed even more participants and money vying for fewer stocks to be bought. It was a freshman textbook case of supply and demand: there was more and more money in the market and fewer and fewer public names to invest in. The resulting conclusion of the 30-year-old thesis was….Prices had to go up! In other words, the big fish ate the middle-sized fish. But with all the money left over, it would mean that the middle-sized fish would look to swallow-up the little smaller fish and so forth and so forth. Best of all, there would those who made significant “killings” with their original holdings, and “extra” investable cash would no doubt be left over only to be put back to work….again, in the stock market. Amazingly, that is what happened and the original buy-outs (at least in my coverage universe) Hyster, Fred Meyer, PayLess Northwest, Medford Crop, Harry and David, worked to spawn the next series of buy-outs (Pacific Lumber, Longview Fibre, Crown Zellerbach, etc.) Money that leaked out of the buy-out circles seeped into supporting other stocks or found much of its way into the secondary and tertiary stocks. Eventually, all the cash “generated” by the buy-outs and take-overs, flowed to other, smaller names and we had an even better and bigger market. This is pretty much what happened all throughout the remainder of both the 80’s and into the 90’s. (Granted, this was not Catalyst Research Management Group – RIA 1730 SW Skyline Blvd., Ste 103 Portland OR 97221 800-2-Robins, (800)-276-2467) marc@catalystresearch.com
April 20, 2018 the only factor that occurred that propelled rising equity prices, but it should be considered a major contributing factor.) So, here we are almost about to broach a new decade in the 21st Century. We have had a great stock market for practically the entire decade to date (the low of the SnP was February, 2009 and it’s been almost non-stop growth since then). We also have had a fantastic new tax program installed, which to be really well appreciated by all, is going to be a lot like manure (It’s only good if the benefit is spread around). So, it is highly likely that when the boodles and oodles of dollars (had to use Boodles because of the significance of billions) are stateside, if they haven’t already started to meander home, are going to be very much appreciated by all, with new investment, construction and yes, buy-outs! So, the purpose of this report is that I want to strongly suggest that medical buy-outs, acquisitions and “technology partnerships” by major drug companies or medical-arts businesses, which are repatriating dollars, are going to follow over-whelming smaller, developing entities. Here is my thinking as to why we are about to enter “FTS II” (that is Financial Turkey Shoot II.) First, medical art companies have tremendous hordes of cash to bring home and put to work. Given the cash hordes plus their current domestic treasure, whole company acquisitions make sense compared to piecemeal moves of expansion. Second, medical art operations are always looking for new technologies, devices, drugs or even lines of products to buy and having this repatriated cash home, will just “burn the proverbial hole” in their respective pocket treasuries. Third, because of the absolutely horrendous cost of advancing a new drug, or even a device, and the decade+ length of time to develop, buy-outs just Continued on page 3
3
A Report from Marc Robins CFA
April 20, 2018
make sense for industry participants. Lastly, there are always good medical areas in which to advance health, longevity, or stubborn diseases that just won’t be “cured.” And given the temporary adoption of Obamacare, the ability to provide better healthcare more effectively and less expensively really creates another new realm of medical development that is extraordinarily attractive. (This last aspect of care is an important, valuable, new hallmark of care delivery and one we are actually going to focus on in this report.) Best of all, we have two factors that make this whole reshuffling of the medical service cards even more interesting in the arena. The upheaval in pricing and service caused by Obamacare (I’m still working on seeing the Doctor that I was promised being able to “keep.”) The second major shift that is underway— and not all observers may have noticed this phenomenon—is the appointment of Dr. Scott Gottlieb as the new commissioner of the FDA. Although only operating from that position since May 2017, major changes have been occurring at the agency to help move that staid, almost antiquated, organization into the new millennium. So, what have I plagiarized? Well, nothing was really….copied, per say….but rather borrowed
from Dick Rubenstein: I think we are about to have another “crowding” of the equity market with all that money coming back from overseas. And yes, I think it will affect the medical arts industry the most. And yes, I think that no segment of the arena will be left out. And Yes, I think it will reach down into the much smaller market cap equity region of the industry because some of the greatest scientific and operating advances are occurring and ethical drug makers, in particular, are not afraid to prospect in areas still under development. To be more accurate, this phenomenon that is very likely to occur is best described by Mark Twain’s great quote, “History doesn’t repeat itself, but it does rhyme” and I think we will experience it during the next five years in symphonic splendor. How’s this all going to work?! What ignites this blast-off to the moon?! Of the thirty top names in the Fortune 500 with the largest amounts of cash horded overseas, there exists somewhere close to $1.4 trillion of cash. But even more interestingly is the cash hordes held by the pharmaceuticals and therapeutic firms. Here is a chart of the medical companies and their respective cash troves overseas…
“History doesn’t repeat itself, but it does rhyme” ~Mark Twain
MAJOR PHARMACEUTICAL OR THERAPEUTIC COMPANIES
Pfizer MERCK Johnson & Johnson Lilly Amgen Bristol-Myers Squibb AbbVie Abbott
DOLLARS OF CASH THAT IS OVERSEAS
$74 Billion $60 Billion $53 Billion $26 Billion $24 Billion $24 Billion $23 Billion $23 Billion
4
A Report from Marc Robins CFA Incidentally, the gross amount is about $310 billion or a figure approaching half the market cap of Apple. Now, this next step to my logic, regarding the investment thrust of this article, is one has to now believe that once the money is safely back in the States after-tax (So, we are still talking about $260 Billion), is that the pharma firms will spend it on acquiring whole companies to add technology, new compounds/ drugs or even new fields of science. Given a recent sampling of acquisitions that have occurred in the pharma M&A arena, I would suggest that nothing, acquisition-wise, is out of the realm of possibilities and certainly, given the cash stores we ain’t seen nothing yet! In other words, my chart below is the “voila” evidence that FTS II is all but inevitable. Below are some notable acquisitions and mergers within an industry that is trying to salvage poor lab results, tough competitive pressures and a regulatory agency which is just now, slowly learning how to move in the 21st century… So, we have learned that money (cash!!!) seems to be no object. Also, it appears that nearly every aspect of the healthcare industry has value “in the eyes of the (cash) “beholder.” That said, the next question is what companies might be targets if not this year, possibly in a couple of years because the quest for growth and technologies hasn’t slowed during the last 25 years and probably won’t slow in the next 25 years….certainly the next five. Here’s our list of candidates in alphabetical or
April 20, 2018 der. These are all companies that Robins Management has had interests in (meaning that we have looked over the technology, met with managements and are providing our (“educated”1 ) man-on-the-street knowledge about what the operations may be worth and their attractiveness, longer-term. One must recognize that these “ultimate target values” are filled with incredible blue sky, but hey(!) we are discussing the pharmaceutical arena and they pay typically top dollar for new drugs, technologies and cures. BE FOREWARNED THAT MOST OF THE STOCKS MENTIONED IN THE TWO PARTS OF THIS ARTICLE ARE OWNED EITHER AS POSITIONS IN MY OWN PORTFOLIO OR THE FAMILY’S PORTFOLIO AND /OR EVENTUALLY BY CROWN CAPITAL LP, FUND #1. PLEASE ASSUME WE ARE BUYING MORE OR ESTABLISHING ALL OF THE INCLUDED EQUITIES. ALSO, PLEASE UNDERSTAND WE MAY SELL OR TRADE IN AND OUT OF POSITIONS TO OWN MORE OF THE SAME NAMES MENTIONED OR INTO DIFFERENT NAMES AS PART OF THE NORMAL, PORTFOLIO BALANCING PROCESS. BECAUSE OF PRACTICES CREATED AS PART OF THE 2000 DOT. COM MELTDOWN, THE RRR WILL PROVIDE SUBSCRIBERS AND READERS SUFFICIENT NOTICE OF OUR CHANGING THE OFFICIAL INVESTMENT RATING BEFORE WE TAKE COMPLETE ACTION ON A PORTFOLIO POSITION.
VALUE PAID IN 2018 $S YEAR PURCHASER TARGET (BILLIONS OF US DOLLARS)
2016 Bayer Monsanto $67 2016 Shire Baxalta $33 2016 Quintiles ImsHealth $18 2017 JNJ Actelion $30 2017 Gilead Kite Pharma $12 2018 Sanofi Bioverativ $12 2018 Sanofi Ablynx $4.5 2018 Celgene Juno Therapies $96
19
A Report from Marc Robins CFA
April 20, 2018
“Rare is the book by a Wall Street veteran that strikes the balance between educational and entertaining. Marc Robins is a lively writer who identifies and penetrates the attributes that investors should be seeking when identifying their next ten-bagger.” Matthew P. Kaufler, CFA Retired Portfolio Manager and Analyst
“If there is such a thing as a good junkie, Marc Robins is your man. His investment acumen and witty conversational writing style makes this book a must read for all small cap investors. You will be both entertained and educated. I promise you will learn something new.” Michael Corbett CEO/CIO Perritt Capital Management
Pre-order your copy of
Confessions of a Ten-Bagger Junkie by Marc Robins today!
Name: Address: City: State: Zip:
Mail a check or money order for $34.90 ($29.95 + $4.95 for shipping and handling) along with your name and address to: 1730 S.W. Skyline Blvd. Suite #103 Portland, Oregon 97209
22
A Report from Marc Robins CFA
Conference is free to attend for Money Manager, Brokers and Private Investors.
April 20, 2018
Fourth Annual Robins Equity Roundup September 24 - 26, 2018 Portland, Oregon
Presenter/Sponsor Registration Conference Presenter: $4,000.00 ($1,000.00 nonrefundable deposit to reserve space. Balance due on or before September 15, 2018) Company:_________________________________________________________ Contact Name/Title:_________________________________ Contact Name/Title:_________________________________ Address:_____________________________________________________________________________ ______________________________________________________________________ Email:___________________________ Telephone:_______________________ Conference Sponsor: Name:_____________________________________________ Contact Name/Title:__________________________________ Contact Name/Title:__________________________________ Address:_____________________________________________________________________________ ______________________________________________________________________ Email:___________________________ Telephone:________________________ Sponsorship: Breakfast Buffets: _____$2,500 for all. _____$1,000 for co-sponsor (limit 3) Lunches Buffets: _____$2,500 for all. _____$1,000 for co-sponsor (limit 3) Booklet Sponsorship Full page: $500 Half page: $250 Quarter page: $125 Send Registration and Payment to: Catalyst Research Management Group, RIA Robins Equity Research Roundup 1730 SW Skyline Blvd., Suite 103 Portland, Oregon 97221 Wire instructions: Umpqua Bank Group ABA: 123205054 Account: Robins Management Inc., dba Catalyst Research Management Account #: 4870579119 Questions: Email and Telephone: - marc@Catalystresearch.com - 503-445-2490 Email and Telephone: - loristudio6@gmail.com - 541-910-7482 Shilo Inn Reservations: 800-222-2244 503-641-6565 Group: Robins Equity Research Roundup / Catalyst Research Management Group
Save the Date!! Fourth Annual Robins Equity Roundup September 24 - 26, 2018 Portland, Oregon Company Presentation Opportunities Still Available Call Lori Today to Reserve Your Spot on the Stage 541-910-7482