💸 Here is Today's High Conviction Idea 💸

What is a High Conviction Idea?

High Conviction Ideas can be individual stocks, equity ETFs (representing indices, sectors, or geographies) or bond ETFs. All ideas will be tradable on US exchanges. For each idea you can expect to see the following supporting information where relevant; fundamental thesis, valuation, catalyst for growth and/or multiple expansion, cash flow, and technical analysis. Here is a write up on Moderna purely for illustrative purposes, this is not a high conviction idea.

Example: (this is not a high conviction idea)

What: Moderna (MRNA) – Moderna is a biotechnology company that is focused on creating a medicines based on messenger ribonucleic acid (mRNA) for both the treatment and prevention of disease.

Why: On 12/13/22 the company announced a mid-stage trial that showed the combination of its experimental melanoma vaccine and Merck’s immunotherapy Keytruda lowered the risk of skin cancer’s recurrence or death by 44%. On 1/17/2023 MRNA released data on their phase 3 trial for an RSV vaccine in older adults. The trial showed 84% efficacy vs analyst expectations of 70-80% and was well tolerated without significant safety concerns. RSV causes death in about 14,000 adults over the age of 65 annually. In our opinion, this is the second endorsement of Moderna’s technology following the well-known Covid-19 vaccine. In our opinion, many investors have been waiting to see another validation of the technology. The company has many more early trials engaged for other diseases.

Supporting Data: MRNA trades at a modest 7.8 x earnings, a significant discount to other biotech companies and the S&P 500. The more Moderna proves its technology and sees positive outcomes in clinical trials the fuller revenue and earnings estimates get for out years. Further, MRNA’s balance sheet is in great shape as assets exceed liabilities by more than 2:1. Mike Yee of Jefferies recently updated the stock to a “buy” after the release of the data cited above. In our opinion, Mike is one of the better biotech analysts on Wall Street.

Moderna (MRNA) 2 Year Chart with Potential Triple Bottom Indicated

Chart Analysis: On the chart, we see a triple bottom that occurred at around 115 (gray arrows) and we see the 50-day (green) moving up through the 200-day moving average (yellow). For those familiar with technical analysis the 50-day moving up through the 200-day is known as a golden cross and is a bullish signal.

Macro Thoughts: With the world potentially headed toward recession in 2023 healthcare is always a sector of interest for PM’s given its noncyclical, defensive nature. While many pharmaceutical stocks are trading near all-time highs, Moderna has pulled back significantly from its all-time high of $484.47 on 8/9/21, as the stock currently trades around $190. The unique trait of Moderna is it has the ability to draw several types of asset managers. Moderna can qualify as an investment for Value, Growth, and GARP (Growth at a Reasonable Price) disciplines, making it a very unique situation in the marketplace. When you have multiple buyers from different disciplines competing to accumulate the same stock, it is very likely a re-rating can occur.

That is our Highest Conviction Idea for today. Thank you for tuning in. Good luck & good trading.

Cheers!

Frank & the team at Grinnell Capital