Deficits, Gene Therapy, S&P Earnings Growth – Things I Learned This Week – April 15, 2018

Article: Deficits Won’t Matter – Until They Do, Barron’s

  • We are entering unchartered territory with the budget deficits in the U.S.
  • For the past three months, retail sales have fallen. This has happened only five times outside of recessions, according to Liscio Report.
  • Slowing spending growth and rising inflation suggest the worst of all possible worlds.
    • The Fed remains focused on the latter, while investors are ignoring the former.

Article: Gene Therapy’s Big Endorsement, Barron’s

  • Replacement gene therapy company AveXis (Ticker: AVXS) accepted an $8.7 billion or $218 a share, takeover bid from Novartis (NVS).
  • The deal is good for Regenxbio (RGNX), which makes the viral delivery mechanism for AveXis’streatment for severe spinal muscular atrophy.
  • Gbola Amusa, an Analyst at Chardan: “Regenxbio is the platform and AveXis is the product”

Article: Can Soaring Earnings Rescue The Market? – Barron’s

  • Corporate tax breaks have given a short-term boost to earnings this year.
  • GDP has been strong so far this year.
  • Subsequent years aren’t looking good, with average GDP growth projected to be 1.7% for the next nine years according to CBO prediction.
  • Industrial companies should do well late in this bull market.
  • Healthcare related stocks such as Becton Dickinson (BDX) should continue to do well given the secular demand trend in healthcare.
  • In my opinion, we may be entering a phase in the economy where we experience very low growth, high inflation, and high-interest rates.  Scary!

Article: This Small-Cap Value Fund is a Good Buy Now, Barron’s

  • Royce Special Equity Fund (Ticker:RYSEX)
  • “Dreifus eschews traditional valuation metrics like price/earnings ratios that are dependent on the market. Instead, he uses those based on actual transactions, such as earnings before interest and taxes divided by enterprise value, looking for companies where that ratio is higher than the cost of borrowing to buy the company.




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