Wednesday, January 17th, 2024

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Hello Stock Traders,

2023 wasn’t exactly sunshine and rainbows for healthcare stocks. But like a resilient patient bouncing back from illness, analysts are predicting a promising comeback in 2024. And guess who’s leading the charge? None other than biotech and medical technology.

Let’s rewind to 2023, a year etched in the memories of biotech startups with the grimness of a bad lab experiment. Fundraising went drier than a petri dish left in the sun, forcing research and development to tread water amidst rising interest rates.

But just as you thought the sector was flatlining, BAM! Mergers and acquisitions surged back to life like a Frankenstein monster with a surprisingly lucrative business plan. January alone has witnessed a $9.6 million transfusion of deals, jolting the sector back to life.

Sure, healthcare underperformed last year, lagging behind the broader market like a weary jogger stuck behind a marathon runner. But Citi Global Wealth Investments sees silver linings, urging investors to remember the sector’s inherent toughness. Even during the past three global economic recessions, healthcare kept chugging along with positive earnings growth. It’s like the ultimate medical marvel – a recession-proof industry!

As the economic tides shift, Citi believes healthcare is poised to ride the wave of unstoppable trends. Think demographic shifts – an aging population with growing healthcare needs – coupled with the magic of artificial intelligence. It’s a potent cocktail for growth, promising to extend far beyond the sugar rush of GLP-1 weight-loss drugs that dominated headlines last year.

So, is healthcare ready to reclaim the crown? Citi thinks so. They predict an earnings recovery in 2024, fueled by these very trends. Now, where exactly should you park your investment dollars?

Citi is particularly drawn to the bargain basement valuations in medical technology and tools. Think of them as the sturdy shovels and picks fueling the gold rush of drug development. Some even collaborate directly with biopharmaceutical companies, shaping medicine one pill bottle at a time, while others craft ingenious devices that battle internal foes like heart disease and diabetes. And don’t forget the rising stars of robotics-assisted surgery – their futuristic tools are already sparking excitement among investors like Trent Masters of Alphinity.

But what about biotech? Citi paints a picture of “high-risk, high-reward,” definietly a ride for your investment portfolio. But if you’re brave enough to weather the potential dips, the eventual interest rate cuts could propel your profits stratospherically. Biotech names like Biomea Fusion, Alnylam Pharmaceuticals, and Immunovant could be your potential rocketships to the moon.

Another analyst prefers a slightly less hair-raising journey, offering Biogen as one of his top picks for 2024. He predicts full-year sales for Biogen’s Alzheimer’s treatment, Leqembi, turning what was once a shaky prospect into a steady cash cow. Plus, there’s an injectable version in the works, ready to revolutionize treatment with its long-term convenience. And let’s not forget Biogen’s potential for acquisitions and even becoming an acquisition target itself – a company with options, as they say.

For those seeking a smoother, ETF-style ride, Matt Orton of Raymond James Investment Management recommends the iShares U.S. Medical Devices ETF. He points out the remarkable recovery of medical device companies after the GLP-1 dust settled, highlighting names like DexCom, Intuitive Surgical, and Abbott Laboratories. This ETF, Orton argues, is your one-stop shop for riding the medtech wave without picking individual winners.

Whether you’re a thrill-seeking biotech adventurer or a cautious ETF explorer, healthcare appears to be fertile ground for your investment seeds in 2024. Just remember, while the potential returns are exciting, it’s always wise to do your own research and invest according to your individual risk tolerance. 

–James

Up next: The U.S. is pumping out more oil than ever, but with fewer rigs – is this the future of the industry, or just a temporary blip?

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The American oil scene is a curious paradox. Crude production is gushing at historically high levels, surpassing even the heady days of 2020, yet the number of drilling rigs dotting the landscape has shrunk by nearly a third since then.

It’s as if these rusty giants have traded brute force for a touch of technological finesse. So, how is Uncle Sam pulling off this seemingly impossible feat? Let’s dive into the wellspring of this oil boom.

First, a quick flashback. Remember the shale revolution of the early 2010s? Fueled by a potent cocktail of high oil prices, tax breaks, and innovative drilling techniques like horizontal drilling and fracking, the U.S. oil spigot went from a gentle trickle to a torrent. Fast forward a decade, and the spigot’s still cranked wide open, even with fewer rigs operating.

This apparent magic trick boils down to three key factors:

1. Efficiency Wizards: Imagine a well as a straw slurping oil from a vast underground milkshake. In 2010, that straw was short and stumpy, reaching only a small portion of the milkshake. But then came horizontal drilling, the equivalent of poking a long, bendy straw through the milkshake, extracting much more with each sip.

Efficiency also soared thanks to fracking, which cracks open the milkshake reservoir, making it easier to slurp up the good stuff. The result? In the Permian Basin, the heart of American oil production, average well lengths tripled and oil extracted per rig skyrocketed sevenfold! It’s like these wells learned to work smarter, not harder.

2. New-Age Drillers: Remember those clunky calculators they used in the Jurassic Park movies? Forget that. Today’s oil companies are channeling their inner Tony Stark, embracing artificial intelligence and machine learning to optimize exploration.

Imagine these technologies whispering sweet nothings to the earth, coaxing it to reveal its oily secrets. And it’s working. As Imre Kugler, an oil expert at S&P Global, puts it, “oil E&Ps are becoming technology companies.” Pretty cool, huh?

3. Rig Counts Don’t Tell the Whole Story: Sure, the number of rigs has shrunk, but they’re like Olympic athletes now – faster, stronger, more efficient. Kugler points out that rigs today drill 10% more than they did two years ago. So, while there may be fewer players on the field, each one is scoring touchdowns at a record pace.

Still, this oil fiesta may not last forever. Chris Duncan, another oil guru, warns that efficiency gains might be nearing their peak, with aging fields potentially yielding less bountiful harvests.

Add in rising costs for oil-field services, and you’ve got a recipe for potential slowdown. Plus, the price of oil, that fickle mistress, will play a crucial role. While $70 a barrel seems to be the sweet spot for producers, a sustained dip could dampen their drilling enthusiasm.

So, where does this leave us? The U.S. oil production story is one of ingenuity and adaptation, a testament to American know-how. But like any good thriller, it also has its share of suspense.

Will efficiency gains continue to defy gravity? Will oil prices stay high enough to keep the party going? Only time will tell, but one thing’s for sure: this ain’t your grandpappy’s oil boom. It’s a leaner, meaner, tech-powered machine, and it’s rewriting the rules of the game. 

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